Foreign Aid Set to Take a Hit in U.S. Budget Crisis

America's budget crisis at home is forcing the first significant cuts in overseas aid in nearly two decades, a retrenchment that officials and advocates say reflects the country's diminishing ability to influence the world.

As lawmakers scramble to trim the swelling national debt, both the Republican-controlled House and the Democrat-controlled Senate have proposed slashing financing for the State Department and its related aid agencies at a time of desperate humanitarian crises and uncertain political developments. The proposals have raised the specter of deep cuts in food and medicine for Africa, in relief for disaster-affected places like Pakistan and Japan, in political and economic assistance for the new democracies of the Middle East, and even for the Peace Corps.

The financial crunch threatens to undermine a foreign policy described as "smart power" by President Obama and Secretary of State Hillary Rodham Clinton, one that emphasizes diplomacy and development as a complement to American military power. It also would begin to reverse the increase in foreign aid that President George W. Bush supported after the attacks of Sept. 11, 2001, as part of an effort to combat the roots of extremism and anti-American sentiment, especially in the most troubled countries.

Given the relatively small foreign aid budget -- it accounts for 1 percent of federal spending over all -- the effect of the cuts could be disproportional.

The State Department already has scaled back plans to open more consulates in Iraq, for example. The spending trend has also constrained support for Tunisia and Egypt, where autocratic leaders were overthrown in popular uprisings. While many have called for giving aid to these countries on the scale of the Marshall Plan that helped rebuild European democracies after World War II, the administration has been able to propose only relatively modest investments and loans, and even those have stalled in Congress.

"There is a democratic awakening in places that have never dreamed of democracy," Mrs. Clinton said on Friday. "And it is unfortunate that it's happening at a historic time when our own government is facing so many serious economic challenges, because there's no way to have a Marshall Plan for the Middle East and North Africa."

With the administration and Congress facing a deadline for still deeper cuts in spending, government programs across the board face the ax, from public education to the military, but proposed cuts to the State Department and foreign aid come on top of an $8 billion reduction in April, the single largest cut to any one department under the deal that kept the government from shutting down.

Representative Kay Granger, a Republican from Texas and chairwoman of the House appropriations subcommittee overseeing foreign affairs, said that the budget crisis was forcing "a fundamental change" in how foreign aid is spent. Lawmakers and officials, she said, needed to prioritize spending according to American national security interests and justify those decisions to Americans who are generally skeptical of foreign aid.

She recalled a State Department envoy's informing her of $250 million in relief to Pakistan after last year's devastating floods. "I said I think that's bad policy and bad politics," she said in an interview at her office on Capitol Hill. "What are you going to say to people in the United States who are having flooding?"

Spending on international affairs, including foreign aid and the State Department's operating budget, reached $55 billion in the 2010 fiscal year, Mr. Obama's first full year in office, but declined by the end of the 2011 budget to $49 billion.

The administration proposed spending $59 billion in the fiscal year that began on Saturday, including $8.7 billion in a