Foreign Aid: Coburn Focuses on Economic Growth, Corruption, and Results

COMMENTARY International Economies

Foreign Aid: Coburn Focuses on Economic Growth, Corruption, and Results

Jul 27th, 2011 2 min read
James M. Roberts

Research Fellow For Economic Freedom and Growth

James M. Roberts' primary responsibility is to edit the Rule of Law and Monetary Freedom sections of Index of Economic Freedom.

Senator Tom Coburn’s (R–OK) plan to reduce the federal deficit by $9 trillion over the next 10 years includes cuts to the State Department and Foreign Affairs budget of nearly $190 billion. Part of that calculus, in turn, adopts a strategy advocated by The Heritage Foundation to move away from the traditional development assistance model long used by the U.S. Agency for International Development (USAID).

In place of USAID’s tired and failing programs, Coburn urges a new approach that emphasizes a developing country’s commitment to good governance (as measured by perceptions of corruption), sound economic policies, as well as “ownership” of and accountability for the results of the foreign aid programs by the aid-recipient government. These are the core indicators used by the Millennium Challenge Corporation to qualify countries for U.S. taxpayer-funded assistance.

Rather than pursue USAID programs that encourage dependency, the goal of the MCC’s approach is to stimulate private-sector-led economic growth—the only sustainable pathway out of poverty to job creation and prosperity. Development theory experts have termed the positive results of this the “MCC Effect.”

Senator Coburn’s plan calls for gradual de-funding of USAID through consolidation of U.S. foreign aid in the MCC budget. Specifically, Coburn recommends reducing:

…[USAID’s] Development Assistance [annual budget] by $1.55 billion and allow projects that would have been funded through Development Assistance to compete for funding through the Millennium Challenge Corporation. Funding for the MCC would not be reduced. Full funding…would…remain for USAID’s Feed the Future Initiative…and the USAID FORWARD Initiative.

All told, Coburn’s consolidation of USAID’s Development Assistance funding with the MCC would save taxpayers $17 billion over the next 10 years.

This is a sensible approach and a good way forward for U.S. foreign aid policy. It is worthy of consideration by Congress as it confronts the need for massive budget cuts.