The Impact of FY2008 Funding Options on the MCA: From Saving Face to Saving the Program

November 16, 2007

The FY2008 budget round has been contentious, with Congress and the White House at odds over spending in almost every bill. With little movement to settle the funding and policy differences between the House and Senate versions of a $34.2 billion State, Foreign Operations and Related Programs bill (which contains the International Affairs budget), it will likely become part of a comprehensive omnibus bill. Foreign assistance -- particularly that for development -- will then likely be vulnerable to across the board cuts during budget negotiations. Particularly vulnerable will be the Millennium Challenge Account (MCA), one of few U.S. foreign aid programs specifically targeted to long-term development objectives but whose slow disbursement has irritated Congress.

In a new MCA Monitor Analysis, senior policy analyst Sheila Herrling examines the current state of play of the MCA budget and the impact of various funding and policy differences, including an amendment introduced by Senator Lugar to change the MCA’s compact funding obligations policy, on the MCA and the countries working hard to make the grade. She argues against the Lugar amendment because it erodes key innovations that distinguish the MCA from other aid programs: the "MCA Effect" of leveraging country policy reforms; the predictability of aid; and accountability to the sitting Congress. She also presents a path forward for Congress and the administration to address the real issues hindering MCA implementation.

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