Radelet Urges Deep Structural Reform of U.S. Foreign Aid in Congressional Testimony

July 09, 2007

Steve RadeletCGD senior fellow Steve Radelet has called for deep structural reform of U.S. foreign aid programs in recent testimony before the Senate and House subcommittees that oversee U.S. foreign assistance.

Radelet said that the deep structural reforms needed to make U.S. assistance more effective could include drafting a national foreign assistance strategy, rewriting the 1961 Foreign Assistance Act, and creating a new Cabinet-level Department for International Development. Radelet also urged continued congressional support for the Millennium Challenge Account (MCA), an initiative announced in 2002 that pioneered a new approach in allocating foreign aid.

"Strong foreign assistance programs are vital to strengthening our foreign policy and restoring U.S. global leadership," said Radelet, a former deputy assistant secretary of Treasury who served in both Democratic and Republican administrations. "However, we significantly under-invest in foreign assistance programs, and we have structured these programs in ways that weaken, rather than strengthen, their impact."

Radelet's congressional testimonies, first before the Senate Foreign Relations Subcommittee on International Development on June 12 (U.S. Foreign Assistance Reform), and then before a subcommittee of the House Committee on Foreign Affairs on June 28 (Millennium Challenge Account in Africa), both made the case that effective foreign assistance programs are crucial to U.S. interests.

The testimonies come at a key juncture in the U.S. foreign aid reform process. Henrietta Holsman Fore awaits confirmation as the new director of foreign assistance, following Ambassador Randall Tobias' resignation in April. Congress seems unlikely to approve many of the administration's proposed revisions in the FY08 foreign aid budget. And the MCA faces significant budget cuts, with $600 million still being debated in both houses of Congress.

Senator Menendez (D-NJ), Chairman of the Senate Foreign Relations Subcommittee on International Development, Foreign Assistance, Economic Affairs and Environmental Protection, opened the June 12 hearing with a stern message.

"Let me be clear: if USAID and State simply move full speed ahead with this reform process, and make only minor changes around the edges, then the Administration will have serious problems with Congress," he said. "I am officially putting the Administration on notice that you simply cannot go forward with this process in the non-transparent, top-down way it was handled in the past." (Read Senator Menendez's opening remarks.)

Radelet argued that reforms need to be both deeper and more comprehensive than those currently proposed. "As designed the reforms are only partial and do not go far enough to substantially strengthen our foreign assistance programs and to meet today's most important foreign policy challenges," he said.

"Deeper reforms are necessary that incorporate a larger share of assistance programs, involve Congress in changing existing legislation, more deeply change executive branch administrative structures, and guard against the possibility of the politicization of foreign assistance programs."

Following the June 12 testimony, Senator Lugar (R-IN) asked Radelet to submit answers to several questions for the congressional record on revising the Foreign Assistance Act and on Radelet's call for the U.S. to join the International Initiative on Impact Evaluation (3IE), a new international entity that grew out of CGD analysis on the lack of high-quality evaluations of social sector programs in developing countries.

CGD vice president Ruth Levine, who has spearheaded CGD's efforts on 3IE, wrote the response to Senator Lugar on the need for rigorous impact evaluations. Levine pointed out that the U.S. has spent billions of dollars on development programs without systematically gathering information on what works. "It is disappointing to recognize that we know relatively little about the net impact of many important approaches," she wrote. "Instead, the focus has been on how much money has been disbursed and how many outputs have been generated." The 3IE is designed to help address this evaluation gap.

Radelet's June 28 testimony before the House Foreign Relations Subcommittee on Africa and Global Health focused on the MCA. In response to concerns that the MCA may not be meeting its full potential and is perhaps displacing other traditional development assistance, Radelet reminded the committee: "The MCA was designed and introduced in response to the debates about and criticism of aid. In short, it was aimed at partially resolving the twin problems of both the small levels of U.S. foreign assistance and the broad concerns about its lack of effectiveness."

Radelet examined and rejected as off-base three common critiques of the MCA: that it selects the wrong countries, it focuses on the wrong substantive areas, and that it cannot spend the funds that have already been appropriated.

He also addressed three critiques that have more merit: that the pace of implementation has been too slow, that it should focus on low-income countries and not middle-income countries, and that the restriction limiting countries to one five-year compact slows progress and adds to program complexity. He urged continued congressional support to help address these problems.