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Beth Schwanke was the senior policy counsel at CGD, where she led the Center’s engagement with the development policy community. Before joining CGD, she was an associate in the Federal Law and Policy group at the law firm DLA Piper and previously the legislative counsel for Freedom Now. Schwanke earned her BA with honors in English from Wellesley College and her JD with honors from University of Michigan Law School, where she was an associate and contributing editor of the Michigan Law Review.
The US Development Policy Initiative at CGD has created the Foreign Assistance Agency Briefs for policymakers, researchers, advocates, and others that work on these issues and these agencies. Each brief outlines each agency’s mission and role, structure, historical budget, programs, and mechanisms for delivering foreign assistance.
The Trump Administration’s skinny budget is a bit of a public relations exercise in trying to have it both ways on the 150 Account, as observed by our colleague Scott Morris. We’re going to cut dramatically to “prioritize” Americans, but wait, it’s really just a minor reform and rightsizing to get rid of some duplications!
So we did some very rough calculations. What would the 150 Account from the “America First: A Budget Blueprint to Make America Great Again,” actually look like? It’s hard to say as it was light on details, but reading the budget tea leaves, we’ve developed a very rough cut of what we do and don’t know in the below interactive chart (click through on the columns to see specific funding areas).
Much of this should be taken with a hearty grain of salt since it involves assumptions that will inevitably be wrong. We assumed level funding where specific cuts were not indicated. This is very unlikely to be the case. As one example, the budget proposal says it “allows for significant funding of humanitarian assistance,” so we generously assume level funding with FY16. “Significant funding” will almost certainly mean less than level funding. However, there wasn’t a principled way to identify what those cuts might be (presumably the administration has not yet finalized these anyway). There is similarly hedged language throughout the 150 Account blueprint, indicating that just about everything would receive a cut in the final president’s budget request, even those programs where support is indicated.
Taking into account our generous assumptions, it looks as though slightly more than half of the Administration’s $39.1 billion budget request for the 150 Account is specifically identified in the budget request Just over 4 percent of the $18.1 billion worth of cuts are specifically identified in the budget request—and about half of that would be offset by the cost associated with the elimination of the Overseas Private Investment Corporation. This means we should expect deep proposed cuts to many of the remaining lines, including Economic Support Funds (ESF), Development Assistance (DA), and USAID Operating Expenses.
Now, as a reminder, Congress actually holds the purse strings and there has been strong pushback from key Members that these kinds of draconian cuts to the 150 Account won't fly. However, there’s no question that development and diplomacy will ultimately be receiving far more than a trim. We hope that Congress will make these cuts on the basis of evidence. Time for an aid review, anyone?
Thanks to Charles Kenny for the inspiration on the chart!
With major cuts to foreign assistance expected in the Trump administration’s budget preview later this week, CGD’s US Development Policy Initiative hosted experts from across the political spectrum to discuss what these cuts might mean. In a heated debate (well, at least for a think tank event), CGD’s Scott Morris, CAP’s John Norris, AEI’s Danielle Pletka, and Heritage’s Jim Roberts found a few areas of agreement, if more in the way of constructive suggestions to Congress and the Administration on ways forward:
An Evidence-Based Review before Cutting
There was a semblance of agreement among the panelists that any major budget cutting should be informed by a review of US assistance agencies and programs—designed to provide an evidence-based assessment for cuts. One area where smart cuts could be found according to both Norris and Pletka: big programs that were put forward more for diplomatic than development reasons and have failed to achieve development outcomes. This would include taking a hard look at our assistance, including presumably, foreign military financing, to Israel, Egypt, and Pakistan. Consideration of programs once thought to be sacred cows brought to mind Norris’s collaboration with then-CGD’s Connie Veillette on Engagement Amid Austerity, which included a country-by-country analysis of US economic and security assistance.
Shuffle and Cut the Bureaucracy
We heard a few suggestions of cutting special envoys and, as Roberts suggested, fully integrating USAID into State to save money and make US development assistance more effective. It was not clear was how much money this could save, though it’s presumably nowhere near the billions the Administration is looking to find. Norris called into question the effectiveness argument made to support integration, pointing out that when State has tried to insert itself into development programming, such as with Iraq or Pakistan, US efforts have often been at their least effective, and even counterproductive.
Use the Multilaterals
Morris made a valiant, if somewhat lonely, case for using the leveraging power of the multilateral institutions in US development assistance. While others argued this wasn’t politically viable, Morris acknowledged the challenge but noted the Trump administration would have a hard time reconciling its efforts to persuade the rest of the world to carry more of its fair share while walking away from the very institutions that help distribute burden-sharing.
Rethink our Instruments
US bilateral development programming is focused primarily on grants. Morris suggested now might be the time to explore a lending instrument, perhaps out of MCC. Tailoring our various development tools for a partner country’s needs and financing capacities could create gains in both efficiencies and effectiveness.
There are, of course, ideas for achieving efficiencies worth a look: food aid reform; cash transfers; and outcomes-based funding models All of which are likely to receive increased attention from CGD and others moving forward. But only so many efficiencies can be achieved, particularly with limited appetite for new instruments. So the immediate question for Congress and the administration to grapple with is will a 37 percent cut to diplomacy and development in exchange for a 3 percent budget increase to defense make Americans safer?
No one expects to hear much on development-related matters during next week’s hearing for Secretary of State nominee Rex Tillerson. While Russia will almost certainly dominate, I expect members of the Senate Foreign Relations Committee to raise questions on climate change and perhaps a few on ongoing humanitarian crises. But even if they aren’t asked outright, I’ll be listening closely to Mr. Tillerson’s testimony for answers to some fundamental questions about what we can expect from the next four years for US development policy.
Will the isolationist rhetoric that featured so prominently in the campaign be translated into administration policy?
Alliances and foreign policy positions considered non-partisan sacraments were thrown into question during the campaign and continue to be turned topsy-turvy. Will Mr. Tillerson be able to convince his boss—and will he want to—that “America first” requires constructive engagement with the rest of the world, including on climate change and through our multilateral institutions?
Is development still a pillar of US foreign policy?
There has been a bipartisan consensus that development is a critical pillar in American foreign policy alongside defense and diplomacy. In part, it’s been a value proposition—development assistance is a cheap investment in American economic and security interests. But it’s also been a values proposition—it’s the right thing to do. Will that consensus hold with the Trump administration? And if not, will it continue in Congress?
Will reform become a not-so-coded word for cuts?
I can envision a set of smart, evidence-driven reforms for our development agencies. And then I can envision a money grab, pursued under the guise of “reform,” which undermines US development agencies and impact. Here’s hoping we end up with the first scenario.
Are big structural changes at State or our development agencies afoot?
There’s talk of moving USAID into the State Department, and certainly the potential for other moves to limit the aid agency’s budget and policy capabilities. I’m all for ensuring our development agencies are fit for purpose, but to do so will require far more than just a corporate org chart shuffle.
Evidence-driven policy or deal-making?
Our development agencies are making strides in doing and funding what works. Will an emphasis on sustainable results win the day, or are we moving toward a transactional view of development assistance?
Hints of development-related presidential initiatives or priorities?
We’ve seen a string of presidential legacies on development—from AGOA to PEPFAR and MCC to Feed the Future and Power Africa. Can we expect a development initiative from the Trump administration?
*CGD receives funding from ExxonMobil Foundation for research on women’s economic empowerment.
It’s a time of fundamental uncertainty about the future direction of US development policy, so let’s talk fundamentals.
1. Foreign assistance is not charity. It is in our direct national interest.
US development policy, including foreign assistance, is an essential tool to promote US security and economic objectives. Yes, the less than one percent of the US federal budget spent on foreign assistance may appeal to our altruistic side, but fundamentally it is about promoting US interests in the world. Presidents and Congresses past have strongly supported good development policy and spending on foreign assistance because, ultimately, it’s the smart thing to do for Americans.
We are safer as a country because we invest in development. US leadership on the Ebola outbreak helped contain the pandemic when it threated to spread rapidly around the world. Right now, US assistance to other countries is helping to control the spread of the Zika virus. US foreign assistance supports efforts to disrupt terrorist financing and defend populations around the world that are vulnerable to groups hostile to the United States. US support for efforts by the IMF and multilateral development banks to prevent and contain financial crises around the world safeguard our markets at home.
And it’s not just about Americans’ security in the face of threats. The economic success of poorer countries benefits us at home. Yesterday’s aid recipients are among today’s largest markets for US goods and services. In the years following the Korean War, South Korea, then among the world’s poorest countries, was a major recipient of US assistance. Today, South Korea has itself become a major donor and is one of America’s largest export markets. US exports to developing countries total more than $600 billion annually and are greater than US exports to China, Europe, and Japan combined.
2. Development works.
There has been a sea change in US development programs over the past decade toward a relentless focus on results—results measured in lives saved and poverty reduced; not just dollars spent. US taxpayer-funded programs have contributed to a reduction in child mortality rates of nearly half around the world. Under initiatives launched by President George W. Bush, the United States helped prevent 30 million new HIV infections and nearly 8 million AIDS-related deaths, and with US leadership, we are within reach of fully eliminating diseases like polio and malaria that have plagued humankind for millennia. Under more recent initiatives launched by President Obama, support for small farmers in poor countries helped reduce overall poverty and child stunting by up to a third in target countries. Another initiative is bringing electricity for the first time to homes and businesses in Sub-Saharan Africa, which will enable hospitals to operate more effectively, children to study at night, and women to move safely through their communities. Congress passed legislation earlier this year to ensure both programs continue.
3. US leadership matters on global threats.
The United States alone cannot be everywhere and do everything. That’s why US policy has already shifted toward multilateral solutions in recent years, whether in response to the threat posed by climate change, fast-moving pandemics, or humanitarian crises emanating from armed conflicts around the world. If the United States does not continue to lead in multilateral settings like the UN, the World Bank, the IMF, and the G20, no one else will.
CGD has had things to say over the years in each of these areas about how US efforts could be improved, based on our researchers' reading of the evidence. That’s the Center's job.
At the same time, in our view much of what CGD has had to say is based on a core premise that too often goes unstated. Namely, that US development policy, with bipartisan support, has made steady progress over many years as one of the more effective things our government does. It is, day in and day out, advancing US interests around the world and at home.
While we at CGD's Rethinking US Development Policy Initiative are often promoting changes and reforms to existing programs and policies, and may sound quite critical of the status quo in the process, we nonetheless recognize the fundamental value of what exists today—and that this status quo has vastly improved in the last decade and can continue to do so.
As a self-proclaimed “outsider” administration takes office in two months, we will be revisiting these fundamentals. We will be eager to engage with this administration on any and all good ideas to improve US development policy.
But we also see the need to bring evidence to bear in support of existing agencies, mandates, and missions. That’s why you will be seeing a new series of briefs in the months ahead that address basic components of US policy when it comes to development and identifying the core value of these things as we see them, informed by evidence and experience.
You can still count on CGD for the cutting-edge of research in development. But new research always rests on a base of existing knowledge, and right now, that base needs more of a spotlight.
CGD experts have penned memos on proposals to improve US development policy that we hope the next president will prioritize once in office. These are bipartisan ideas that could make a big difference for people in the developing world. The proposals come from our teams working on the US Development Policy Initiative, Global Health, and Gender.
You might recall that the GDC was off to a painfully slow start—first envisioned in the Presidential Policy Directive in September 2010, announced in February 2012, but without a first public meeting until April 2014. Still, from there on out, it produced several excellent blueprints that deserved considerable attention from the administration and the US development community. The Council should be commended for taking its mandate seriously, even if it wasn’t always clear the administration did the same.
This latest memo, titled “Progress to Date and the Way Forward,” includes exactly that. The assessment of progress to date is surprisingly candid. And the way forward includes recommendations for the last few months of the Obama administration, as well as the next one. These run the gamut from smart bureaucratic moves before President Obama leaves office (institutionalize Policy, Planning and Learning at USAID) to how to move beyond aid in a changed development landscape (specifics on expanding the role of and USG coordination with the private sector) to much-needed reforms of global systems (overhaul humanitarian relief—and use cash).
Recommendations of particular note include:
Establish a US Development Finance Bank. As the GDC has said before, and as CGD’s Todd Moss and Ben Leo have long championed, a USDFC with modern development finance tools can help nudge much-needed private sector investment into developing countries. Here’s how to make it happen.
Establish a Forest Foundation Fund. Yes, please! Tropical forests are a win for both climate and development. They are a cheap, proven carbon capture and storage technology that we already have. A new CGD book, Why Forests? Why Now? due out next month, shows that that halting tropical deforestation and allowing degraded forests to recover could mitigate up to 30 percent of current global greenhouse gas emissions. And as CGD researchers Frances Seymour, Jonah Busch, and Michele de Nevers tell us, this fund is ripe for a payment-for-performance structure.
Outcome-Based Financing. There’s a lot of lip service around paying for outcomes these days. And this is one area where I wish the GDC would have been a more forward leaning. They recommend “utilize Payment for Results and embrace a bigger push to utilize outcome-based financing as a regular part of operations” and note that the USG has increased its use of payment-for-results. But there could have been a stronger push to the agencies (USAID!) and the next administration on shifting more of our funding toward paying for outcomes.
What was missing?
The GDC couldn’t and shouldn’t have covered everything, but to me, there were two big gaps. First, it was surprising not to see more (anything) on global health, given that it is almost one-third of our foreign assistance dollars and that US leadership on global health security issues, from Zika to the next pandemic outbreak, will certainly be required. Many experts, including CGD’s own Amanda Glassman and Rachel Silverman, see a scaling-up of US global health security efforts as a critical priority for the next administration. Second, I had hoped against hope that we would see something on migration and its enormous potential benefits for development—not to mention domestic—gains. One recommendation the GDC might have considered: a USG lead for advancing labor mobility as a tool for development. Thought leadership from the GDC on both issues would have been welcome.
Cynics will disagree but I think there’s value in a President’s Global Development Council and that it can help to shape more thoughtful, impactful US development policy that goes beyond aid. I hope the next administration will continue it and the development community will do more to support it in both ideas and attention. Before moving forward, the next administration should do a review of best practices for presidential advisory boards. Several seem to expend greater energy on PR rather than providing the president with independent, big-think ideas and frank, actionable assessments. The GDC can certainly claim more of the latter, but the next administration must consider how to act on the recommendations it receives.
The Financing for Development conference in Addis Ababa in July represents one of President Obama’s last major opportunities to secure his development legacy. This memo offers 14 proposals from the Center's experts for commitments the United States Government should consider advancing for the Conference on Financing for Development. Each of the proposals has the opportunity to yield tremendous development impact, some as standalone USG commitments, and others as commitments ripe for broader cooperation.
(1) Seasonal foreign farm workers add dollars to the US economy—creating American jobs.
Michael’s economic analysis is a case study of North Carolina farm industry, based on data from the North Carolina Growers Association. Michael finds that in 2012, the 7,000 foreign farm workers added somewhere between $248 million and $381 million to North Carolina’s economy—creating one additional American job for every 3-5 seasonal foreign farm workers.
(2) Few US-born Americans take these temporary farm worker jobs, meaning that these foreign workers aren’t displacing Americans.
Michael finds that despite high unemployment in North Carolina (500,000 unemployed Americans in 2011), extensive advertising, and wages that are required by law to meet local wage rates, only seven American workers actually accepted these seasonal jobs and then stuck with them until the end of the season. That’s right: seven as compared to around 6,500 foreign workers that year.
It’s hard to dispute that seasonal foreign farm workers are good—and needed—for the US economy given these findings.
But are H-2A programs also good for the foreign workers?
Yes. Michael’s earlier work with Lant Pritchett and Claudia Montenegro finds that these jobs are an economic opportunity of a lifetime for most migrants—“estimating that the typical Mexican low-skill worker can earn three times as much in the US as in Mexico, even after accounting for international price differences.” Here’s Michael’s great summary of why foreign workers benefit from guest work opportunities entered in the Congressional Record by Rep. Tim Walberg (R-MI).
You might also be interested in a few other brief pieces of Michael’s work on the economics of immigration reform:
While global development is about much more than aid, US foreign assistance is, and will remain, one of the most visible tools for US development policy in many countries. The US government spends less than 1 percent of its annual budget — about $23 billion — on nonmilitary foreign assistance across the globe. These programs have consistently come under fire for failing to achieve measurable and sustainable results, ignoring local priorities and contexts, perpetuating bureaucratic inefficiencies and inflexibility, and repeating mistakes over time. A paradigm shift within US aid agencies is needed. In this brief, we outline concrete proposals that would address many of the traditional shortcomings of US foreign aid approaches.
A strengthened OPIC—more efficiently deploying existing tools at no additional budget cost—would (1) increase US commercial access in emerging economies, (2) reflect economic, social, and political priorities in developing countries, (3) promote flagship US initiatives during austere budget conditions, and (4) support stability in fragile or frontline states.
Early previews, from a $10 per barrel oil tax to a big boost for clean energy R&D, seemed to affirm that President Obama was going to use the final budget of his presidency to send a message. But while some observers dubbed the FY17 request the YOLO budget, the President’s impending freedom seems to have had little effect on the foreign affairs account. Given a “go big or go home” request would have found a tough audience in Congress, we’re not so much disappointed as uninspired. So with helpful tables and analysis already available (thanks, USGLC), we wanted to lay out some of the questions the budget raises (in no particular order). Add yours in the comment section below.
With no signs of moving away from OCO, how worried should we be?
The President’s request includes a total of $54.1 billion for the international affairs budget. Unfortunately, while the total funding is similar to the FY16 level, the percentage considered Overseas Contingency Operations (OCO) only seems to grow. It’s a troubling trend for those of us who worry that the off-budget line of “wartime” credit may not always be around to supplement a dwindling base budget. Since 2010, OCO has increased from 9 percent to nearly 28 percent of the total International Affairs budget. Heading into the latter half of a two-year budget deal, Congress seems unlikely to rein in OCO in the short term. For now, we’ll just keep our fingers crossed that the base has a chance to grow before the axe comes down.
Yes! Well, that was easy. But in all seriousness, both the Overseas Private Investment Corporation (OPIC) and USAID’s Development Credit Authority (DCA) would receive a substantial bump under the President’s FY17 request. Funding for OPIC’s operations would grow by 30 percent, allowing it to support $4.8 billion in loans, risk insurance, and loan guarantees. DCA would receive an increase to $10 million for its operations, or a 24 percent increase from current levels (much-needed additional staff!). The administration is also seeking transfer authority for $60 million to finance the subsidy cost of new guarantees. This all suggests growing recognition of the value of development finance in a development landscape where there is dramatically increased country demand for private investment. Yet, the real impact to be had on the development finance front is from updating outdated authorities for OPIC and consolidating duplicative efforts. Here’s hoping for some congressional leadership or that the next administration will take this on!
Will the passage of Electrify Africa mean a shot at increased appropriations for Power Africa?
The President’s Power Africa Initiative received the same funding request as FY16: $291 million from USAID and State and $9 million from OPIC. Congress appropriated $76.7 million in FY16. Now that the President has signed into law the Electrify Africa Act, we’re hoping Congress will continue to demonstrate its bipartisan love for expanding energy access in Africa by ponying up more funding.
Will this administration (and the next) step up engagement with Congress to fully fund our commitments to the multilateral development banks?
We’ve learned that US leadership in the international financial institutions is rarely top of mind for most members of Congress, including appropriators. Last year, Congress finally got on board with IMF quota reform. But the truth is we’re still behind on our multilateral commitments and will fall further behind under the president's budget. The overall FY17 request for multilateral assistance is $2.618 billion, a slight decline from FY16 at $2.629 billion. The administration rightly notes in its Congressional Budget Justification, that failure to meet multilateral commitments is “erod[ing] US leadership and influence, pos[ing] a threat to shaping the policy priorities of the MDBs and related funds, and hamper[ing] the ability of these entities to deliver results.” Despite the strong words, the budget request itself would see the hole grow deeper by over $200 million, with unmet commitments totaling a whopping $1.78 billion even if the president's request is met. It will be up to this administration, and the next, to make a strong pitch to Congress on the importance of the US role in these institutions. For some thoughts on how the next administration can leverage the power of multilateralism in US development policy, see Scott Morris’s proposal.
Where’s the love for GAFSP? (Is the acronym the problem?)
Feed the Future’s request level was maintained at $978 million from State and USAID. But the US contribution to the Global Agriculture and Food Security Program (GAFSP) has been reduced from $40 million in FY16 to $23 million in the FY17 request. GAFSP has previously been an especially effective leverage of US resources—what would a reduced contribution mean for Feed the Future’s effectiveness? And stay tuned to CGD for forthcoming analysis on Feed the Future.
Will Congress grant MCC concurrent compact authority?
MCC has made no secret of its interest in pursuing regional compacts, but for the agency to do so under current rules would require neighboring countries to reach the same stage of compact development at the same time, a situation that rarely occurs. Last year, appropriators chose not to give MCC the concurrent compact authority that would make piloting regional compacts a viable option, but signs suggest the hill may be warming to the idea. The House Foreign Affairs Committee advanced legislation in November that includes the authority. In early December, the Senate Foreign Relations Committee held a productive hearing on the future of MCC, where witnesses, including CGD’s Nancy Birdsall, agreed that the agency should be given the opportunity to test a regional approach. So while it will be interesting to see if MCC’s funding level reaches the $1 billion mark, we’ll be keeping a close eye on action as it relates to concurrent compact authority – whether it comes from authorizers or appropriators.
Can supporters fend off a prohibition on Green Climate Fund contributions?
Last year, environmental groups declared partial victory when the FY16 Omnibus emerged sans language prohibiting contributions to the Green Climate Fund (GCF). The multilateral fund, designed to support developing countries mitigate and adapt to climate change, emerged as one of many flash points during negotiations on the massive spending package. While the final product didn’t include any of the administration’s requested funding, it preserved sufficient transfer authority to allow the United States to make an initial payment toward its GCF pledge. The President’s FY17 Budget actually includes $750 million for the GCF – with $250 million channeled through Treasury and $500 million through State – a higher ask than the $500 million total requested in FY16. And hey, GCF, think about funding a CODAid approach for forests.
Will increased funding for Treasury’s work to boost Domestic Resource Mobilization encourage USAID to do more?
The Office of Technical Assistance at Treasury would receive $33.5 million—a $10 million increase over the FY16 enacted level and, per the CBJ, would be a “down payment on Secretary Lew’s commitment at the Financing for Development conference (Ethiopia, July 2015) to double OTA assistance by 2020 to support developing countries’ domestic resource mobilization and sound public financial management. Fantastic. USAID has been doing great things with domestic resource mobilization but has spent very little resources. Hopefully, FY17 will see more smart efforts from USAID on DRM.
Will Congress position the US government to address the next global health emergency?
Congress is staring down another request for emergency, supplemental funding to combat a global health crisis. Ahead of budget day, President Obama announced he would be asking for $1.8 billion to combat and respond to the Zika virus. While many unknowns remain when it comes to Zika and its potential causal connection to microcephaly, the fact that mosquitoes known to transmit the virus are endemic to parts of the United States has sparked significant concern, suggesting Congress may indeed deliver the $1.8 billion. But, as our colleague Amanda Glassman pointed out, outbreaks of viruses and infections are a challenge with which we are increasingly forced to grapple. The emergence of such threats can no longer be considered a surprise, even if we are unable to predict the exact nature, place, and time. Congress has an opportunity to put the US Government on a more sustainable course in responding to such threats by setting aside budgeted funding on a consistent basis to invest in global health preparedness at home and abroad.
Since its establishment more than 54 years ago, the United States Agency for International Development (USAID) has expanded into an $18-billion-a-year agency, operating in over 145 countries and in nearly every development sector. But USAID is often constrained in its ability to adapt to emerging development challenges due to differing political priorities among key stakeholders and resource constraints. This memo is the result of a roundtable discussion in July 2016 on how the next US administration, in close concert with Congress, can build upon and maximize the development impact of USAID.
President Obama delivered his 2014 State of the Union speech Tuesday, January 28. Before the speech, we polled CGD experts to find out what they hoped to hear from from the president's address. Check out their oratorical contributions below and read about the development-related decisions and policies they would like to emerge in support of the rhetoric.
You may not be surprised that development didn’t feature prominently in the president’s speech. However, we were pleased to hear references to inequality, the economic benefits of immigration, climate, and trade, if not necessarily with the development lens offered by CGDers below. We were also thrilled to hear the shout-out to Power Africa (oh, and to Mad Men).
President Obama will deliver his 2014 State of the Union speech Tuesday, January 28. We polled CGD experts to find out what they’re hoping to hear when the president addresses Congress and the nation. Check out their oratorical contributions below and read about the development-related decisions and policies they would like to emerge in support of the rhetoric.
“Last year I called for an end to extreme poverty in the world by 2030. That end is in our sights. But inequality is rising not only here in the United States, but in China and India, in Europe and in Africa. To achieve real progress in tackling this pernicious challenge, we need to put the fight against inequality on our global agenda, as well as our domestic one.”
The president is justifiably concerned with growing inequality and declining social mobility in the United States. In the developing world, inequality remains a serious problem and one increasingly associated with a worrying cycle in which high concentrations of economic wealth corrupt political systems, and in turn feed rent-seeking by privileged insiders. Protests this year in Turkey, and in Brazil and Chile (countries where inequality is falling but remains very high), and the rise of resurgent extreme right parties in Greece and Spain signal citizens' growing frustration with economic policies that seem to sustain rather than fight that cycle— whether intentionally or not. The president can send a critical message, at no cost in budget terms, about American democratic values and commitment to inclusive growth around the world -- simply by referring to inequality as a global political as well as economic challenge. Follow-up should include revisiting the position of the United States on the framing of a post-2015 development agenda, as well as revitalizing support at the upcoming G20 summit for toughening up measures on tax cooperation and reduction of cross-border tax abuses already agreed to by the G-8 last year.
“The US economy was built by the hard work of immigrants and today immigration is more important than ever. But Silicon Valley does not run on engineers alone. It also runs on nannies, janitors, farm workers, and dish washers. Immigration reform that creates safe, legal pathways for low-skill migration will contribute to the recovery and continued sustained growth of our economy, prevent future crises of unauthorized immigration, and foster global development in ways that go beyond traditional aid.”
Over the next decade the US economy will need more than 5 million new low-skill workers for jobs like health aids, nannies, food services workers, and landscapers—jobs that require less than a high-school education, and can’t be off-shored or mechanized. Over this same period, just 1.7 million Americans will enter the labor force, only a small fraction of them without a high school diploma. The country needs a way for economically essential migration to take place legally. Filling those essential jobs is critical for our economic recovery and continued economic growth, because they directly complement higher-skill workers and make all of us more productive. This is why immigration reform that includes a robust temporary low-skill worker program, like the W-Visa program in the immigration bill passed by the Senate last year, is good for the American middle class. Meeting American firms’ demand for these low-skill workers will prevent future flows of unauthorized immigration, and expanding opportunities for temporary work in the US will have development benefits that far out size what traditional aid can offer—and at no fiscal cost to US taxpayers.
“I am calling on Congress to pass legislation that will ensure continued US leadership in the IMF, a vital partner to America’s economic interests. Congressional inaction undermines US interests in an institution that plays a critical role in combatting deeply damaging financial crises globally, helps to ensure a level playing field for US workers and companies around the world, and works with us to root out the financial seeds of terrorism.”
The United States badly needs a win on the international economic stage. In a year when the global community decided to go big in support of IDA, the World Bank’s fund for the poorest, the United States decided instead to go big on the Global Fund to Fight Aids, Tuberculosis, and Malaria. As a result, a substantial chunk of the United States’ NPR-style matching pledge to the Global Fund went unmatched, and the champions of IDA this time around were countries like the UK and China (China!). But nowhere in the international economic sphere is the United States more visibly out of step with the rest of the world than on IMF reform, where the US is singlehandedly holding up a hard-won agreement due to congressional inaction. Just a few months ago, President Obama weighed in personally on behalf of the Global Fund, making a direct appeal to other donors. It’s time for him to put his voice to the need for Congress to act on the IMF.
“American taxpayers deserve to know the government spends their hard-earned money. My Administration has taken steps to make accessing data on government spending faster and easier, but we can do more. I will instruct the Office of Management and Budget to publish the full text of all government contracts and task orders online at USAspending.gov, in a fully searchable database, and to develop new guidelines consistent with the Freedom of Information Act that will provide specific guidance on commercial and national secret exceptions.”
US taxpayers fund government contracts with the private sector that are worth hundreds of billions a year. They have a right to know what they are paying for, and there is plentiful evidence that greater transparency in the contracting process can lead to better outcomes in terms of price and quality. A number of other countries from Colombia to Slovakia to the UK already publish government contracts online. In the United States, you can access government contracts using a Freedom of Information Act request, but it can be a long, painful process and the rules governing what counts as ‘commercial secrets’ within a contract are vague enough that the released, redacted document is sometimes more black marker than text. The US should join a growing global movement towards contracting transparency-–and an Executive Order could make it happen.
“Stopping the loss of tropical forests is one of the most urgent, affordable, and feasible actions the international community can take to avert catastrophic climate change. The United States will provide meaningful rewards to those countries and companies that demonstrate success in reducing deforestation.”
Greenhouse gas emissions from tropical deforestation are our emissions too: forests are being cleared to make way for production of the food, fuel, and fiber that US citizens consume. But there are practical solutions to decouple production from deforestation, including policies being put into place by the governments of forest countries to improve law enforcement and forest management, and commitments from private companies to rid their supply chains of deforestation. The United States should join Norway and Germany in allocating aid funding to reward governments that successfully reduce deforestation with “Cash on Delivery.” As part of its contribution to the Tropical Forest Alliance, the US should ensure that the Lacey Act--designed to prevent the import of illegally-produced forest products-- is fully funded and aggressively implemented, and that federal procurement standards are “greened” to create markets for products certified as deforestation-free.
“We will ensure that our anti-tobacco policies are supported—not subverted—by our trade policies, and strengthened by our investments in aid.”
The United States invests billions each year to address some of the most pressing health challenges around the world, but more can be done to ensure that US policies on international trade back up this commitment to global health. Globally, deaths from tobacco use each year exceed the number of deaths from HIV/AIDs, TB, and malaria combined. At home, the United States has enacted smart policies and made tremendous progress against tobacco-related deaths--efforts that should be ‘exported’ and replicated around the world. Failure to stand up to the big tobacco bullies will make it more difficult for these countries to enforce anti-tobacco policies like package warnings and advertising restrictions, and will undermine the United States standing as a leader in global health. Further, the United States should do more to ensure that organizations like the World Bank and the IMF that have a mandate to modify taxes and subsidies, support countries in increasing tobacco taxes and cutting tobacco subsidies, saving both lives and money.
“We know trade is vitally important to our economy, but it is also a critical tool to reduce global poverty. As the United States continues to make progress negotiating with our trade partners across the Pacific and the Atlantic, we must ensure that these agreements benefit US workers and consumers but do not undermine our efforts to promote development in low-income countries or weaken the multilateral trade system that is so crucial to global prosperity.”
Negotiations across the Pacific and with the European Union will no doubt dominate the US trade agenda this year. The greatest risk for smaller, poorer countries is that these “mega-regional” deals will weaken the World Trade Organization and leave those countries with no refuge from discrimination and bullying by more powerful trader partners. Some poor countries, particularly Bangladesh and Cambodia, could also see their exports fall as a result of more favorable market access granted to competitors that are included in these deals, such as Vietnam.
To guard against the risk of undermining multilateralism, President Obama needs to be equally committed to ensuring that ongoing negotiations and development of a work program at the WTO are successful. In particular, US negotiators should push for a food security package that reduces or eliminates rich country agricultural subsidies, reforms food aid, and develops new rules that give developing countries the tools they need to pursue food security goals without distorting global markets. And, to mitigate the potential for trade diversion, President Obama should work with Congress to reduce barriers to trade with the world's poorest and most vulnerable countries.
“My Administration will work closely with Congress to extend trade legislation with Sub-Saharan Africa, negotiate new investment treaties, and significantly expand our efforts to promote more US investment in this important region, particularly in the power sector. Increasing our engagement will yield benefits to US businesses and put more Americans to work. And I look forward to finding additional opportunities for partnership this coming August, when I will host the first ever US-Africa Summit with leaders from 47 African nations.”
This past week, the White House formally announced that President Obama will host leaders from 47 African nations in early August. The summit agenda will focus heavily on promoting trade and investment ties with the region. These interests reflect the continent’s rapid economic growth over the last decade and widespread improvements in macroeconomic management and governance (despite pockets of instability and ongoing challenges in places like South Sudan and the Central African Republic). In the interim, the Administration and Congress will be considering a number of important programs and policies. First, both branches will be determining whether (and how) to extend the African Growth and Opportunities Act, which provides preferential US market access for qualifying countries. Second, the Administration will continue efforts to conclude bilateral investment treaty negotiations with the East African Community. Third, the Administration will continue implementation of its Power Africa Initiative, which seeks to expand electricity access for 20 million households. A presidential reference to these three efforts will be important for either getting them over the finish line (in the case of AGOA and the US-EAC BIT) or putting pressure for early and concrete results (for the Power Africa Initiative).
Beyond this, the US government should also take further steps to promote greater trade and investment ties with Sub-Saharan Africa, including: (1) unleashing the Overseas Private Investment Corporation; (2) expanding select USAID programs focused on unlocking private capital for development, such as the Development Credit Authority; and (3) announcing a new strategy for improving the impact and coherence of US trade capacity building programs.
Attention presidential transition teams: the Rethinking US Development Policy team at the Center for Global Development strongly urges you to include these three big ideas in your first year budget submission to Congress and pursue these three smart reforms during your first year.