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FINANCE: Congress Balks at Steep Foreign Aid Increase

Emad Mekay

WASHINGTON, Apr 5 2006 (IPS) - The U.S. Congress is poised to refuse a hefty funding boost for an international aid programme that the George W. Bush administration argues is key to its agenda to “transform” nations around the world.

The Bush administration’s Millennium Challenge Corporation (MCC) was launched four years ago to reward governments in developing nations that agree to open up their economies and fight corruption. The White House has requested three billion dollars for the MCC for fiscal year 2007, a 1.3-billion-dollar increase over 2006.

But during a congressional hearing Tuesday in which Secretary of State Condoleezza Rice testified about her department’s need for an increase in foreign aid to boost her trademark of “transformational diplomacy”, leading lawmakers said that the sum was too great and signaled their intent to cut it.

Rice unveiled her strategy of “transformational diplomacy” in January, and said it would link foreign aid dollars, U.S. security, democracy and development overseas.

But development activists said they feared the overhaul was ideologically motivated.

The administration had sought three billion dollars in its fiscal 2006 budget request, but Congress appropriated only 1.8 billion. Bush had pledged to increase annual funding of the MCC to five billion dollars in the future.

Experts say Congress has approved less than the president’s request for the MCC every year since the programme was established and that the amounts actually disbursed on the ground may be much less.

A total of 23 countries have been designated as eligible for aid from the MCC, including Madagascar, Benin, Honduras, Nicaragua, Armenia and Georgia. The MCC can withhold account payments if a recipient country fails to meet its commitments to institute economic and political changes that satisfy U.S. officials.

In her testimony, Rice, who serves as the chairman of the MCC’s board of directors, said that the programme rewards “transformational states” and helps the spread of democracy.

Overall, the Bush administration had asked for 23.7 billion dollars for foreign aid in fiscal 2007, a 14.25 percent increase over fiscal 2006. This does not include supplemental appropriations.

But such requests come at a time when Congress and the administration have substantially cut domestic programmes in the areas of education, health care, science and agriculture in order to lower the country’s mushrooming deficit. Congress plans to cut 56 billion dollars in spending on current services over a five-year period.

Rep. Jim Kolbe, chairman of the Foreign Operations, Export Financing and Related Programmes Subcommittee, said that while he supported the MCC, he thought the requests were too high.

“At that large an increase, it would be very difficult to accommodate it in the current budget environment,” he said. “While this proposed increase reflects the administration’s view that it must respond to changing political conditions in the world, the subcommittee is not going to simply write a blank cheque to fund foreign operations.”

Another congressman said the foreign assistance expectations from the administration were unrealistic.

“I think anyone who believes that this Congress is going to vote for these kinds of increases in foreign assistance in the teeth of those kinds of decisions on the domestic front – I think if someone believes that, I will try to find three or four bridges I could sell. It just ain’t gonna happen, in my view,” said David R. Obey, a ranking member of the Appropriations Committee.

Congresswoman Nita M. Lowey said that the MCC and another programme that funds the fight against AIDS were important, but came at the expense of other development initiatives like family planning and child survival.

“They cannot transform societies, in my judgment, if other basic development interventions are starved for resources,” she said.

The State Department argues that the MCC has been successful, and that countries must adopt and adhere to policies that promote growth, reduce poverty and make assistance more effective.

During the hearing, Rice said that the MCC has signed five compacts worth over 900 million dollars and that at least six more compacts worth two billion dollars will be signed this year, along with an additional nine to 12 compacts totaling about four billion dollars during the rest of fiscal year 2007.

Late in March, John Danilovich, chief executive officer of the MCC, told Congress that if the three-billion-dollar budget request was not approved, nine countries currently eligible for the MCC, as well as any new countries that the board of directors selects in November, would be left without funding.

“It would be truly unfortunate if these already selected countries, who today continue to undertake significant political, economic, and social policy reforms, and those countries striving to be selected, find that meeting the criteria for eligibility will not be rewarded due to a lack of resources on our part,” he said.