A Billion Dollar Budget for MCC?

Will MCC finally be a billion dollar agency again?  The President’s FY2017 budget request hopes to boost the agency out of the $900 million(ish) rut it’s been in for the last six years. 

I’ve never supported the theory that bigger is always better, even for MCC, an agency that takes important principles like country ownership and a focus on results further than other US foreign aid agencies.  Program quality, including the likelihood interventions will efficiently address constraints to growth, and program results are more important than dollars spent.  In fact, some compacts in the past may have been stronger had they been smaller (and not included projects with weak or no economic justification), which suggests the possibility that a bigger MCC budget could ultimately dilute quality.  Nonetheless, for the countries currently developing compacts, there’s reason to believe that MCC may be leaving good projects on the table because of budget constraints. And since large-scale infrastructure projects—an unmet need in many countries and a key strength of MCC’s—can be hard to scale down in an incremental way, they may be especially at risk.  If MCC is confident in the availability of sufficient high-quality projects in Nepal and the Philippines (the two countries that would get the bulk of FY2017 funds), a modest increase to the agency’s budget makes sense.

Beyond the Bottom Line

MCC’s Congressional Budget Justification (CBJ), submitted alongside tables of funding levels and other budget documents, provides an opportunity for the agency to discuss key priorities or signal new directions.  Two things in the FY2017 CBJ particularly caught my eye:

• A request for concurrent compact authority: This change would enable MCC to pursue smart, regionally-focused investments in neighboring countries. And with few authorization bills moving, the agency is again eyeing the appropriations process as an avenue for advancing the proposal.  I was pleased to see the CBJ begin to answer some questions I’ve had about how key aspects of MCC’s model—choosing projects based on economic analysis, and selecting (or suspending, if necessary) countries based on their policy performance – would be applied in a regional context.
   
• A better explanation of the threshold program and a request for more flexibility: For some time I’ve argued (here and here) that the current construction of the threshold program doesn’t meet its stated objective of helping countries become compact-eligible (a frankly unrealistic goal).  In the CBJ, MCC stops twisting itself in knots trying to explain the link, calling it simply and sensibly a “potential gateway to compact eligibility.” The agency also outlines more reasonable expectations for the program, which are, essentially, to support reforms in sectors critical for growth and lay the foundation for follow-on investments while testing the waters for a larger partnership.  MCC also asks Congress to lift a restriction that prevents it from entering into threshold programs with countries that have completed compacts. While a threshold program makes little sense for a country that just completed a compact, it could be useful in countries whose compact concluded years earlier, especially if there has been a change in government.

When it came to a few other points, I found myself scratching my head.  The preview of an upcoming strategic plan was more buzzwords than substance, leaving me hoping for more from the actual plan.  And talking about “enhance[ing] the stability of strategically important regions” in reference to the agency’s mission (which is intentionally singular and focused on poverty reduction through growth) smacked of mission creep. But all in all, the budget justification appears strong—strong enough to support a billion dollar budget if Congress decides to deliver the full request.