Spending by various departments and agencies on international programs is covered in this function, which includes the Department of State's conduct of foreign relations, economic and humanitarian aid given to developing countries, military and other assistance to other nations, radio and television broadcasting and exchange programs, and financial assistance for the export of U.S. goods and services. The Congressional Budget Office estimates that discretionary outlays for function 150 will total about $37 billion in 2007. Repayments of loans and interest income to the Exchange Stabilization Fund account for most of the negative amounts in mandatory spending for this function.

From 2002 to 2007, discretionary spending for international affairs will grow by $10.5 billion, or about 40 percent, CBO estimates. About one-third of that growth ($3.0 billion) derives from supplemental appropriations in 2003 and 2004 for the reconstruction of Iraq, but most of it ($6.1 billion) is for three areas: the conduct of foreign relations and protection of U.S. diplomatic missions overseas, the strengthening of coalition partners in the wars on terrorism and illegal drugs, and overseas HIV/AIDS prevention and treatment programs.

The Export-Import Bank (Eximbank) and the Overseas Private Investment Corporation (OPIC) provide a range of services to U.S. and foreign companies to promote U.S. exports and private investment overseas. Eximbank offers subsidized direct loans to U.S. exporters and foreign importers, guarantees of private loans that finance those exports, and insurance against the risk that foreign buyers will not repay the loans for the exported goods (export credit insurance). The aim is to increase exports of U.S. goods and thereby increase the number of jobs in the United States. OPIC offers private U.S. firms subsidized financing for foreign investments and insurance against political risks to those investments, including nationalization. The aim is to support economic development in some countries that are "strategically important" to the United States. Appropriations in 2007 for Eximbank and OPIC are $100 million and $63 million, respectively.

This option would eliminate new activity by Eximbank and OPIC, although they would continue to service their existing portfolios. This change would save $13 million in outlays in 2008 and more than $250 million over five years.

The main rationale for implementing this option is that the activities of those agencies may not provide net public benefits to the United States. The subsidies that Eximbank and OPIC convey to foreign firms and some exporters deliver benefits to foreign consumers and selected U.S. firms. To the extent that subsidized U.S. exports increase, changes in foreign exchange rates raise prices and reduce sales of unsubsidized U.S. exports. Thus, the long-term effect of Eximbank subsidies may be to change the composition rather than the level of U.S. exports or the number of U.S. jobs. Furthermore, OPIC's subsidies to nations of strategic importance to the United States tend to overlap with and duplicate those provided by the U.S. Agency for International Development. They may also retard the development of local financial institutions and markets in those countries.

An argument against this option is that the Eximbank may play a role in leveling the playing field for some U.S. exporters by offsetting the subsidies that foreign governments provide to their targeted industries, thereby maintaining the composition of sales of U.S. goods. By subsidizing U.S. investment in developing and transitional economies, OPIC may also effect some marginal increase in investment in those economies.