According to an article by The Independent, there are two sources for the funding of abstract expressionist art by the CIA: Donald Jameson - a CIA officer - and Tom Braden - former chief of the International Organizations division (IOD), which is 'the CIA office that "ran" the Congress for Cultural Freedom and Encounter magazine' (according to cia.gov).
Jameson states that the purpose was to make socialist realism look bad. It should be noted that socialist realism should not be confused with social realism, which is what OP refers to.
Until now there has been no first-hand evidence to prove that this connection was made, but for the first time a former case officer, Donald Jameson, has broken the silence. Yes, he says, the agency saw Abstract Expressionism as an opportunity, and yes, it ran with it.
"Regarding Abstract Expressionism, I'd love to be able to say that the CIA invented it just to see what happens in New York and downtown SoHo tomorrow!" he joked. "But I think that what we did really was to recognise the difference. It was recognised that Abstract Expressionism was the kind of art that made Socialist Realism look even more stylised and more rigid and confined than it was. And that relationship was exploited in some of the exhibitions.
[Tom Braden: ] "We wanted to unite all the people who were writers, who were musicians, who were artists, to demonstrate that the West and the United States was devoted to freedom of expression and to intellectual achievement, without any rigid barriers as to what you must write, and what you must say, and what you must do, and what you must paint, which was what was going on in the Soviet Union. I think it was the most important division that the agency had, and I think that it played an enormous role in the Cold War."
He confirmed that his division had acted secretly because of the public hostility to the avant-garde: "It was very difficult to get Congress to go along with some of the things we wanted to do - send art abroad, send symphonies abroad, publish magazines abroad. That's one of the reasons it had to be done covertly. It had to be a secret. In order to encourage openness we had to be secret."
In 1958 the touring exhibition "The New American Painting", including works by Pollock, de Kooning, Motherwell and others, was on show in Paris. The Tate Gallery was keen to have it next, but could not afford to bring it over. Late in the day, an American millionaire and art lover, Julius Fleischmann, stepped in with the cash and the show was brought to London.
The money that Fleischmann provided, however, was not his but the CIA's.
The Independent concludes:
Would Abstract Expressionism have been the dominant art movement of the post-war years without this patronage? The answer is probably yes. Equally, it would be wrong to suggest that when you look at an Abstract Expressionist painting you are being duped by the CIA.
And the BBC quotes David Anfam - an art historian:
He says it is “a well-documented fact” that the CIA co-opted Abstract Expressionism in their propaganda war against Russia. “Even The New American Painting [exhibition] had some CIA funding behind it,” he says. According to Anfam, it is easy to see why the CIA wished to promote Abstract Expressionism. “It’s a very shrewd and cynical strategy,” he explains, “because it showed that you could do whatever you liked in America.” By the ‘50s, Abstract Expressionism was bound up with the concept of individual freedom: its canvases were understood as expressions of the subjective inner lives of the artists who painted them.
As a result, the movement was a useful foil to Russia’s official Soviet Realist style, which championed representative painting. “America was the land of the free, whereas Russia was locked up, culturally speaking,” Anfam says, characterising the perception that the CIA wished to foster during the Cold War.