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Five Ways Foreign Aid Could Cost Less While Doing More (Washington Post)

May 18, 2011
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Connie Veillette's 5 ways to reduce the cost of foreign aid was featured in a Washington Post column by Ezra Klein.

From the Article

When it comes to the budget, nothing gets a rawer deal than foreign aid. Americans think foreign aid accounts for up to a quarter of our total spending when it should only be a tenth. In reality, it’s less than 1 percent of the federal budget. But even though we’re actually spending less than Americans think we should, the perception that we massively overspend makes it easier for politicians to slash foreign aid whenever they need to make some budget cuts. And so the foreign-aid community knows that when we move into a period of austerity, we’re moving into a period that’s going to be particularly bad for them.

But it doesn’t have to be all bad, argue John Norris and Connie Veillette from the Center for Global Development. A lot of the money we spend on foreign aid is wasted on inefficient regulations or undermined by counterproductive subsidies. If the House GOP’s anti-government, anti-spending mood could be directed against some of these impediments, that’d actually be a good thing for foreign aid. And Norris and Veillette have five places where they can start:

1) Shipping American: In 1954, we mandated that 75 percent of all food aid be shipped on American vessels. But sometimes there aren’t American ships going where we need them to go at the moment we need them to go there. So either we have to wait to deliver urgently needed supplies or we overpay. Estimates of the unnecessary cost from this regulation are in the $150 million to $200 million range. Worst of all, “there have been repeated instances where the U.S. government has been unable to buy the best-priced agricultural commodities or the most appropriate ones for a particular humanitarian situation simply because U.S. flagged ships were not available at the port where these commodities were located.” Getting rid of this regulation would save taxpayers hundreds of millions of dollars, and would make it easier, faster and cheaper for us to deliver aid.

2) Buying American: Under the terms of the Food for Peace law, all food aid has to be purchased from American producers. That’s good for American producers, but bad for people starving 3,000 miles away, who might be able to get food quicker and cheaper if we were willing to use our scarce aid dollars to purchase from one of their neighbors. In fact, a 2009 Government Accountability Office report tried to put some numbers to that claim and “concluded that the local or regional procurement of food would reduce costs by 25 percent and reduce delivery times from an average of 147 days to 41 days.”

3) Food is to be eaten, not resold: There’s a rule on the books allowing “private voluntary organizations” to resell the food aid we give them to support their other activities. It’s essentially a way of subsidizing developmental organizations, and it’s popular: About 60 percent of non-emergency food aid is resold. But it’s an expensive, counterproductive subsidy. First, it hurts local farmers who’re competing with subsidized American crops that are being dumped into their markets en masse. Second, it’s expensive: The PVOs make only 50 to 70 cents for every dollar the food aid costs taxpayers. If we just gave the PVOs the dollars directly, it’d be cheaper for us, better for them and better for the local farmers.

4) Get rid of ag subsidies: We spend billions subsidizing our farmers every year so that their goods are cheaper on the world market. That also means we’re spending billions to make everyone else’s crops look more expensive — such as those grown by poor farmers. Getting rid of agricultural subsidies would save us billions and make it much easier for farmers in developing countries to make a living.

5) Eliminate aidmarks: Members of Congress attach the equivalent of earmarks to foreign aid, micromanaging how and where the money is spent and forcing the relevant agencies to waste time developing comically detailed spending plans incorporating all of these demands. This is a longtime problem, and in the 1990s, Republican Bob Livingston, then-chairman of the House foreign operations subcommittee, came up with a solution: Replace the word “shall” with the word “should.” That would turn it from an order into a suggestion and “allow agency experts to put resources where they are needed most” while still “taking congressional preferences into account.”
Notably, these reforms would save us money, be pro-market, reduce interest-group control over foreign aid and help our dollars stretch further and work faster. They are, in other words, exactly the sort of foreign-aid improvements that you might imagine Republicans would support. So how about it, folks?

Read the Article

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