POMED Notes: HFAC Hearing on USAID and MCC FY2012 Budget

The House Foreign Affairs Committee held an open hearing on the future of foreign assistance along with USAID and Millennium Challenge Corporation FY 2012 budget requests. The committee, chaired by Rep. Ileana Ros-Lehtinen (R-FL) and with ranking member Congressman Berman (D-CA) in attendance, requested the testimony of two individuals: Daniel Yohannes, Chief Executive Officer of the U.S. Millennium Challenge Corporation and Dr. Rajiv Shah administrator of the U.S. Agency for International Development.

For full notes, continue below.  For pdf version, click here.

Rep. Ros-Lehtinen (R-FL) opened by asserting that our government’s vast annual deficit and the public debt along with the shrinking number of dollars is an extraordinary concern and crisis at the federal, state and local government level: “With such stories in mind it is easy to understand why Americans are demanding why we scrutinize spending both domestic and foreign.” She stated that the increases in USAID’s budget over past years cannot continue. Rep. Ros- Lehtinen argued that “if we cut our development assistance funding we can move it to development credit funding which leverages 28 dollars in private funding for every 1 dollar of government funding spent.” A goal of hers, she stated, was to increase private capital to support development which will help cut government costs. In regards to corruption she stated: “We shouldn’t be giving aid to corrupt unaccountable governments to begin with, the focus should be from the grassroots up […] we need to ensure maximum return on our investments.” In closing she stated that economic growth is the only way that stability can be achieved once our development assistance ends and that we must work to decrease aid dependency.

Rep. Berman (D-CA) applauded Dr. Shah, stating that in the year since Dr. Shah last met with HFAC he has effectively launched a reform project called “USAID Forward” and has taken aggressive steps to promote other reforms: “Given that the MCC was created by Republicans, I find it astonishing that H.R. 1 slashes funding by nearly 30 percent to this program.” Following the completion of the MCC’s first two compacts in Honduras and Cape Verde, Rep. Berman argued that there is now an opportunity to assess the final value of the MCC.  Rep. Berman stated that no area of the budget should be excused from scrutiny, but he also stated that he was worried that misinformation about foreign assistance would lead to poor policy.  According to data Rep. Berman presented, the average American believes that 25% of the U.S. budget is spent on foreign aid and also that it should be about 10%.  He went further to state that even in this time of economic distress people still believe we should be spending about 10 times more on foreign assistance than we actually are. He argued that these misconceptions must be addressed and that the “truth is that addressing hunger, disease, and misery abroad helps makes the United States safer.” In closing he argued that, “countries that descend into chaos and anarchy provide training grounds for terrorists” and that transition to democracies can provide greater security than using money for weapons, all reasons why foreign aid should continue to be supported and not cut.

Committee members were asked to make short opening remarks. Rep. Dana Rohrabacher (R-CA) stated that the United States must take a close look at the fundamentals of who we give our aid to.  Rep. Donald Payne (D-NJ) argued that we need to review how, “our so called friends treat us”, but we must also evaluate how our representatives behave on countries and that the cuts proposed go too deep. Rep. Steven Chabot (R-OH) stated that, “we’re broke and we’re trying to be responsible” and that he was interested in funding towards political parties from USAID especially in regards to the Muslim Brotherhood in Egypt (this issue was not addressed later by the panel). Rep. Gregory Meeks (D-NY) argued that the United States must look to Britain, “they had vision not to cut their foreign aid budget”, and he stated that if we slash funding now we will pay a great price in the future. Rep. David Cicilline (D-RI) argued that the commitments the U.S. makes in development foreign policy describe our values and promotes national security by making the world a safer place, this call was reiterated by Rep. Gerry Connolly (D-VA). Rep. Ann Marie Buerkle (R-NY) and Rep. Ted Poe (R-TX) argued that U.S. foreign policy must be accountable to U.S. taxpayer scrutiny.

Dr. Rajiv Shah began his testimony by highlighting the successful humanitarian responses currently being carried out by USAID in Japan, Egypt, Tunisia and Haiti. He stated that one year ago he was asked to increase private investment, technological initiatives, and seek to provide aid to those who need aid most. According to Dr. Shah these concerns were all addressed and moving forward USAID is seeking to streamline and increase accountability.  Dr. Shah asserted that USAID is increasing public private partnerships to create greater food security in Africa. He also stated: “We are seeking new ways to harness the power of technology for development,” citing USAID’s partnership with the Gates Foundation to create, “a mobile banking revolution in Haiti.” In support of the FY2012 budget, Dr. Shah argued that it provides innovative funding to programs as well as makes cuts in many specific programs, along with the reallocating funds to successful projects. He went on: “We are delivering benefits for the American people […] we are paving the way for American troops to return home quickly in Afghanistan.”  He also stated that USAID’s work strengthens U.S. economic security.

Daniel Yohannes stated that the MCC has been effective because Republicans and Democrats have worked together to ensure its success. He  stated that he brings a “banker’s role” to his work and that the clients are the American people, “the partners are the people we seek to help around the world, and the goal is to get the best return on the U.S.’ investments.”  Yohannes stated that he was pleased that the principals that the MCC was founded on are now central to the new administration’s global development strategy. In regards to accountability, he argued that the MCC measures whether or not a country has helped create policies that will promote economic growth. He finished by stating that he believes that engaging with developing countries in a targeted way is fiscally responsible and helps to attract private sector funding and development to end countries’ dependence on aid.

Rep. Ros-Lehtinen raised concerns for the U.S. Enterprise Funds proposed for Egypt, stating that serious issues with earlier enterprise funds over pay for executives led her to question why the U.S. should support another enterprise fund (this issue was not addressed by the panel). Rep. Berman asked the panel if the proposed cuts in H.R. 1 would have an effect on the goals of the MCC and USAID. In response Dr. Shah stated that the cuts in H.R. 1 including the cuts in the humanitarian account would be “absolutely devastating.” Yohannes stated that the proposed cuts would have a significant effect.