Congress Is Right about Honduras and Tunisia, But Wrong to Micromanage the MCC Board

Congress recently passed an omnibus appropriations bill providing funding for the remainder of Fiscal Year (FY) 2014.  MCC received $898 million and a finger-shaking from Congress about the agency’s threshold program, communicating to MCC through a couple of different provisions, “we don’t like the countries you’ve picked.”  While I also disagree with some of MCC’s recent choices for the threshold program, it’s too bad for the MCC to lose some of its flexibility, and I’m rather troubled by the precedent of Congress using legislation to negate a country eligibility decision made by MCC’s board of directors.  That smacks of micromanagement.

Overall, the FY14 appropriation is pretty good for the MCC.  It matches the President’s request, and is equal to its enacted levels for FY11 and FY12 (and is a bit more than the FY13 enacted post-sequestration level).  Beyond that, though, the bill and the accompanying joint explanatory statement have quite a bit to say about the threshold program, and it’s not all positive. 

Four countries are currently eligible for the threshold program—Honduras, Tunisia, Nepal, and Guatemala.  Congress clearly disagrees with two of those selections, Honduras and Tunisia.  I’m sympathetic.  The threshold program is intended to help a country gain compact eligibility by giving it a chance to demonstrate that it can tackle tough reforms that address policy constraints to growth in partnership with MCC (as it would have to do as part of a compact).  With that in mind, both are deeply questionable picks. 

Honduras was selected for the threshold program in FY11, right after completing its first compact.  Though the compact was implemented well, with strong government commitment, Honduras was passed over for a second compact.  It no longer passed the hard hurdle Control of Corruption indicator and it was dealing with the aftermath of its 2009 coup.  I’m guessing that these policy issues were the binding constraint to a second compact, much more than any uncertainty about how well Honduras might implement policy reforms in partnership with the MCC.  So, to my humble eye, the case for a threshold program for Honduras is pretty weak.    

Tunisia is even more questionable.  At the time it was selected (in September 2011), MCC already knew that for the coming fiscal year (FY12), Tunisia would no longer be in the competition pool for compact assistance.  Its income level would be too high to be a candidate country.  In other words, the likelihood of the threshold program ever contributing to Tunisia’s compact eligibility was essentially zero when it was selected.

The appropriations bill contains language that reacts to both of these picks by saying:

1. No threshold programs for countries that have already completed a compact.  Technically this is a moot point because, as an appropriations bill, it applies only to countries that would use FY14 funds.  So Honduras’ program won’t be affected (it uses prior years’ funds).  And no new threshold countries were selected during the FY14 selection process, which already occurred.  However, Congress’ intent will likely carry into future appropriations.  Yes, it’s hard to justify entering into a threshold program immediately after a first compact ends.  But, why would Congress block the MCC from pursuing a threshold program at a later date, such as several years after a country has completed a compact?  It would be too bad for MCC to lose the flexibility to do so just because of what looks like congressional irritation with a specific case.



2. No threshold programs for countries selected in previous years if their income is now too high to be an MCC candidate country.  This means no threshold program for Tunisia.  Now, I am the first to say that MCC shouldn’t have picked Tunisia.  But this provision is troubling for the precedent that it sets in terms of Congress using legislation to negate eligibility decisions made by MCC’s board.  It could have been worse.  At least Tunisia wasn’t mentioned by name in the bill (even though explanatory statement language pretty clearly explains that it was the target of the provision).  But will Congress find a way to legislate eligibility decisions in the future, either broadly, as they did this time, or—taking it further—for specific countries that certain members dislike or favor?  I sincerely hope not.

The takeaway is that, while the Hill isn’t necessarily wrong to object to these two cases, Congressional mandates are a blunt tool and not the most constructive way to address their concerns.  MCC’s eligibility decisions may not always be the right ones, but they should be left to MCC’s board.