Clinton Administration is asking Congress to increase bilateral
economic and development assistance in fiscal year (FY) 1999 by
$531 million--almost 6.4 percent more for a program that
historically has been ineffective. The Administration's request is
unjustified. Numerous studies of the economies of countries that
received U.S. economic aid for the past 35 years consistently
demonstrate that economic assistance impedes economic growth. It
neither advances U.S. foreign policy objectives nor encourages
countries to reduce their trade barriers or increase their imports
of U.S. goods and services. Appropriating more money for such an
unproductive effort would be a serious mistake. Until last year,
Congress had established a three-year trend of reducing economic
and development assistance. Instead of expanding the international
welfare program by pouring even more tax dollars down the foreign
aid drain, Congress should reduce funding for bilateral economic
assistance and adopt measures that eventually would eliminate the
development assistance programs.
The Aid Dilemma
Although supporters of development
assistance will argue that such aid helps less-developed countries
improve their economies, facilitates U.S. foreign policy
objectives, and increases U.S. exports, none of their claims are
accurate. Instead of helping to achieve these goals, bilateral
economic and development aid has failed to help recipient countries
improve their economies; promote U.S. interests; or create open
markets for U.S. products.
example, the Agency for International Development (AID), which
oversees most U.S. bilateral economic and development aid programs,
has not achieved its lofty self-declared mission of "reducing
global poverty" and encouraging economic development. For example,
of the 67 countries that received U.S. foreign economic aid for
over 35 years, 37 experienced growth in their economies of less
than 1 percent per year when they received aid. Their economies
were essentially stagnant. Even worse, more than half of these 37
countries--19--are poorer today than before they received U.S.
Recently, both houses of Congress passed
legislation to authorize the U.S. foreign aid program. If President
Clinton signs it, the legislation will become the first successful
authorization bill since 1985. These bills face considerable
obstacles, however, such as a House prohibition on funding
international organizations that promote or fund abortions. The
Clinton Administration vehemently opposes this prohibition, but the
House leadership appears committed to it, which will force a
showdown between Congress and the President. And despite such
notable achievements in the authorization bills as the elimination
of the Arms Control and Disarmament Agency (ACDA), the Senate and
House versions fail to curtail economic assistance programs.
What Congress Should Do
than send good money after bad, Congress should supplement such
authorization bills with legislation that would reduce and
eventually eliminate economic development assistance and AID.
Specifically, to reform, Congress should:
1. Reduce funding for the ineffective
Countless White House and congressional reports have
criticized AID for its ineffectiveness in achieving its goals. Two
bipartisan studies in particular have called for abolishing AID:
the 1989 Hamilton-Gilman Task Force Report and the 1992 Report of
the President's Commission on the Management of AID
Programs. Although these reports do not call for ending development
assistance, they do recommend that an alternative institution be
responsible for overseeing U.S. development aid programs. The
latter report, for example, recommends moving this function into
the Department of State.
Last year's increase reversed Congress's
three-year policy trend of reducing foreign economic and
development aid by increasing it from $7.87 billion in FY 1997 to
$8.3 billion in FY 1998. Thus, the Clinton Administration's FY 1999
request would increase the bilateral economic assistance budget to
$8.83 billion. Although the best long-term solution would be to
adopt an authorization bill that eliminates AID altogether (as was
done with ACDA), Congress should begin by reducing funding for AID,
its operating expenses, and many of its programs--most
particularly, development assistance. At the very least, Congress
should not fulfill the Administration's request for more money for
2. Adopt a long-term policy for
eliminating development assistance
Congress should consider and pass legislation to reduce
and eventually eliminate development assistance. One such bill, the
International Responsibility and Self-Sufficiency Act of 1998 (H.R.
3256) sponsored by Representative Gerald Solomon (R-NY), would
require the Department of State to use an "index" to measure the
level of economic freedom in foreign aid recipients. To assign each
country a score, the Department of State would be required to
analyze over 50 independent economic criteria that influence
economic growth, such as the rule of law, barriers to trade and
investment, and the existence of competitive and efficient
financial systems. Once their scores were assigned, the countries
would be grouped into four categories: "free," "mostly free,"
"mostly unfree," and "repressed." Each country would qualify for
economic assistance for a specified period, not to exceed five
years. Except for new countries or countries progressing toward
economic reform (which could receive aid for slightly longer
periods), all recipients would lose economic aid after five years.
The bill exempts disaster assistance and humanitarian, military,
security, and most democracy-building aid.
considering the Clinton Administration's request, Congress should
determine the direction it should take on foreign economic aid over
the next few years. When Republicans took over Congress in 1994,
they promised to cut government spending on wasteful programs.
Clearly, international welfare does not work; it creates
dependency; and it has nothing to do with the commitment of the
United States to the world or its leadership role. Congress either
can restore the trend it established in 1995 by reducing spending
on such unproductive economic aid or further can entrench the
policy reversal it made last year by increasing funding for AID.
Given the convincing evidence that AID's programs do not work,
Congress should reduce funding for AID and adopt legislation that
would eliminate all economic and development assistance over the
next five years. Otherwise, Congress only will pour more of
Americans' hard-earned tax dollars down the international welfare
--Bryan T. Johnson is a former Policy
Analyst in International Economic Affairs, and Brett D.
Schaefer is Jay Kingham Fellow in International Regulatory
Affairs, at The Heritage Foundation.