Where do your diplomatic dollars go?

A quick look at the balance of State Department's funding over the last 25 years.

There are a lot of myths in the State Department community, and some of the biggest are about spending, staffing, and where the money actually goes. Proponents of diplomacy and development rightly argue that the International Affairs Budget (aka, diplomacy and U.S. foreign assistance/development assistance) is a very slim part of the overall budget. Critics argue that it has grown fast, without real impact to show. Diplomats in the trenches feel perpetually starved, unable to find money for anything from programs to coffee, and complain about how much worse it has gotten over the years. So what’s actually going on?

Point one: core diplomatic funding stayed relatively flat for 25 years.

In nominal dollars, the main diplomatic operations account (called diplomatic programs or previously diplomatic and consular programs) has roughly doubled since 2001. In inflation-adjusted terms, it has grown about 12 percent across that quarter century, from $5.0 billion to $5.6 billion in 2025 dollars. The account that funds what diplomats actually do has stood still for a generation.

Stacked area chart of the same foreign affairs accounts in nominal dollars, FY2001 to FY2025 — The same accounts in nominal dollars, on the same scale as the inflation-adjusted chart above: the stack Congress appropriated kept climbing even as purchasing power stalled.

Point two: The biggest growth area has been security.

Worldwide security funding grew dramatically. In 2000, once the response to the East Africa bombings had begun but before 9/11, dedicated embassy security funding was about a fifth the size of the main diplomatic operations account. After 9/11, the creation of our fortress embassies in Iraq and Afghanistan, and events in Benghazi, security grew rapidly, peaking in 2017 at nearly 1.4 times the size of the remaining diplomatic operations budget. In other words, security alone was more than half of our total diplomatic operations. Since that peak, flat budgets and the sharpest inflation in four decades have taken back more than a third of security’s purchasing power. Nobody made that decision; the erosion just happened.

Line chart comparing State Department dedicated security funding with core diplomatic operations from 2000 to 2025 in 2025 dollars. Security rises from about $1 billion to a $9 billion peak in 2017, crossing above the core operations line, then falls to $4.9 billion. Core operations stay roughly flat between $5 billion and $6.6 billion, ending at $5.6 billion. — Dedicated embassy security vs. core diplomatic operations, in 2025 dollars. Security peaked in 2017 at nearly 1.4× core operations; inflation has since taken back more than a third. Core series omits FY2010–13, when Iraq operations were folded into the account.

Point three: the other big area of growth has been foreign assistance money.

Foreign assistance, unlike diplomatic operations, outran inflation. In inflation-adjusted terms, it grew from roughly $30 billion in 2000 to about $50 billion in 2020, measured in 2025 dollars, before settling back to roughly $41 billion by 2025, and that was before the July 2025 rescissions.

Line chart of U.S. foreign operations funding from 2000 to 2025 in 2025 dollars. The line rises from about $30 billion to a $67 billion Iraq-reconstruction spike in 2004, settles near $50 billion through the 2010s, and declines to $41 billion by 2025. — Foreign operations funding in 2025 dollars: roughly $30 billion in 2000, about $50 billion by 2020, back to $41 billion by 2025. The 2004 spike is Iraq reconstruction; 2022–25 exclude the Ukraine supplementals.

IT funding deserves a footnote, because it tells the whole story in miniature. The Department’s appropriated technology account, the Capital Investment Fund, fell from a real-terms peak of about $360 million in 2002 to under $20 million in 2017. For two decades, expedited passport fees quietly subsidized the technology backbone and papered over that gap. Congress redirected those fees back to consular operations between 2020 and 2022, and the core IT appropriation has since been rebuilt to roughly $400 million. The recovery looks like new investment, but much of it simply replaces the fees that left.

Line chart of the State Department Capital Investment Fund from 2000 to 2025 in 2025 dollars, falling from a $363 million peak in 2002 to $17 million in 2017, then climbing to $389 million by 2025. — The Capital Investment Fund in 2025 dollars: a $363 million real-terms peak in 2002, $17 million by 2017, rebuilt to roughly $400 million as passport-fee funding shifted back to consular work.

In short, both the defenders and critics are right on some of their core points. Defenders are generally right that diplomatic funding is small and hasn’t changed. Diplomats are right that diplomacy has become overly securitized – though this is largely a reflection of the increased physical threat they’re under. And critics have a point that foreign assistance growth has outcompeted other needs within the international affairs budget.

None of that, though, says what diplomacy's future should be and what the right balance is. I'd steer people toward a few big questions.

Does this funding balance reflect the best way to advance our foreign policy today?

This is one of the toughest questions to wrestle with. When we look at the full range of our policy objectives–national defense and mutual defense with our allies, U.S. economic prosperity and trade, and securing democracy and liberty for the American people–is this allocation of resources the right balance at a high level? Do our front-line diplomats have access to the right programmatic funding, as well as the tradecraft, training, and tools/equipment necessary to do their jobs well? The answer is probably not, especially when we have adversaries who have been sharpening their toolkit over the last two decades.

Are there trade-offs we can achieve with a different physical presence around the world?

Our physical presence in Iraq and Afghanistan was long an outsized driver of our security costs. But every permanent embassy and consulate costs a lot to secure. There are a number of alternatives to consider: consolidating physical locations overseas, having more people deploy on TDYs to locations with periodic needs rather than establishing a permanent presence, and more.

Can the State Department find operational efficiencies?

Most State Department veterans have horror stories about things like filing taxi vouchers, which may take 5+ hours of staff time for a de minimis reimbursement. Kind of like expensive government hammers, those stories stand out, but they reflect a deeper opportunity to think about how the Department does business, using business process automation, AI, and process improvement to help work get done faster. (While clearance reform is always high on people’s minds, the management side has more dollars and more opportunities for savings!)

Part of this is also rethinking long-standing assumptions. One of my favorite post-COVID initiatives at State was the A Bureau’s reassessment of domestic office space needs. The reality is that the Department, even at headquarters and with a robust in-office presence, shouldn’t need one desk for every employee. One of diplomats’ primary jobs is meeting people, working out issues, and persuading them. They need to be in meeting rooms, at external meetings, at embassies, and beyond. In my final year at State, I was only really in my office when I had a meeting there.

The office-space story is small, but it shows what the bigger conversation looks like. Every account in this budget rests on assumptions about threat, about presence, and about how diplomats actually work, and most of those assumptions are ripe for re-examination after running unexamined for twenty years. The dollars then follow the assumptions. We’re in a unique moment for American diplomacy, where we can (and must) decide what it’s going to look like for decades to come. The money, even more than the policy direction, is going to shape that. So where do we need to invest? And how will it help us get this next chapter right?