Washington's definitions of "domestic policy" and "foreign policy" haven't kept up with the real world. When you hear the term "domestic policy" in the Beltway, it means economic policy, health-care reform, financial regulation, energy. "Foreign policy" means, broadly speaking, our policy towards the countries we are already at war with, or are considered likely to eventually go to war with. But the actual policies don't break down so neatly.
"The domestic/foreign distinction is completely misleading," says Heather Hurlburt, director of the National Security Network. "It keeps you from having intelligent conversations. There's a whole set of issues that structurally don't get seen if everything is a domestic or a foreign issue."