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Hearing of the House Foreign Affairs Committee - Foreign Assistance Reform in the Next Administration: Challenges and Solutions

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Location: Washington, DC

Hearing of the House Foreign Affairs Committee - Foreign Assistance Reform in the Next Administration: Challenges and Solutions

REP. BERMAN: The committee will come to order, and I would every much like to welcome our expert panel of witnesses to the committee today to discuss the daunting task that the new administration and -- the next administration and the Congress faces; the reforming and rationalizing of the U.S. foreign assistance system.

It is painfully obvious to Congress, the administration, foreign aid experts and NGO's alike, that our foreign assistance program is fragmented and broken and in critical need of overhaul. I strongly believe that America's foreign assistance program is not in need of some minor changes, but rather it needs to be reinvented and retooled in order to respond to the significant challenges our country and the world faces in the 21st century.

This year our committee will review our foreign assistance program to look at what actions are needed to achieve coherency and effectiveness in the U.S. foreign assistance framework. We will hold a series of hearings on various aspects of foreign assistance reform, such as rebuilding U.S. civilian, diplomatic and development agencies, the role of the military in delivering and shaping foreign assistance, and improving America's image around the world.

These efforts will help inform the committee on the direction that Congress and the next administration should take in reforming the U.S. foreign assistance. Many experts are calling for a partnership between the Congress and the next administration to come together and work on improving our foreign assistance programs. I'm committed to this partnership and will do everything I can to ensure that it yields results.

Next year our committee intends to reform and rewrite the Foreign Assistance Act of 1961. That's assuming I have any input into what we do next year. That bill hasn't been authorized since 1985. This antiquated and desperately over burdened legislation -- it's over 500 pages long -- doesn't adequately provide the flexibility and necessary authorities for our civilian agencies to tackle global extremism, poverty, corruption, and other threats to our long-term national security goals.

As Congress and the next administration come together on rewriting this legislation, we must give greater attention to core development programs, particularly basic education, child survival, maternal health, cultural exchanges, and agricultural development programs.

Recently, there has been a few stark examples of poorly performing programs, which have resulted in waste, fraud and abuse, such as the U.S. reconstruction programs in Iraq and Afghanistan. Our foreign assistance programs have also been crippled by a lack of resources, coordination, and a lack of critical capacity and authorities necessary to support such programs.

As a result, there has been an ad hoc effort to reform our foreign assistance programs through new programs, such as the Millennium Challenge account, new mandates, and more congressional administrative directives. I welcome the effort to better coordinate our foreign assistance programs and to make those programs more accountable by providing merit-based assistance to good performing countries through the Millennium Challenge account.

However, I'm concerned that these efforts merely provide a stopgap to the problems which require broad reaching and long-term solutions. With over ten Cabinet departments and over 15 sub-Cabinet positions and independent agencies involved in implementing foreign assistance, our system has become plagued with poor oversight and accountability and a lack of meaningful coordination and coherency.

And I'm also concerned by the Department of Defense's rapid encroachment into foreign assistance. Astonishingly, the proportion of DOD foreign assistance has increased from seven percent of bilateral official development assistance in 2001 to an estimated 20 percent in 2006. DOD activities have expanded to include the provision of humanitarian assistance and training and disaster response, counter-narcotics activities, and capacity building of foreign militaries.

These activities should be carried out by the Department of State and USAID. The military is over burdened and over stretched, and they must focus on the security threats facing our nation. While the civilian agencies should coordinate their activities with the military to ensure coherency of effort, we should no longer rely on the military to be the diplomatic and development face of America around the world.

I'd again like to welcome our witnesses today who will address the various challenges facing the U.S. foreign assistance structure and their recommendations for moving forward in the next administration. And I'm going to yield myself an additional minute, and we'll do the same just to finish the last part of the statement.

I'm looking forward to the witnesses to get their assessment of the current system and the organizational and legislative obstacles facing the current system and their recommendations for organizational and legislative reform. Specifically, should Congress and the next president merge USAID completely into the Department of State? Should we upgrade USAID to a Cabinet level department for development or maintain the status quo? What should a foreign assistance reauthorization bill look like?

And I'd also like our witnesses to answer the question, how do we balance our national security objectives with our development goals in our foreign assistance programs, or are they mutual reinforcing? What roles should the U.S. military play in providing foreign assistance, and how do you propose to improve the capacity of U.S.-civilian agencies to respond to the challenges of the 21st century?

I now turn to my friend and ranking member, Ileana Ros-Lehtinen from Florida, for her opening statement.

BREAK IN TRANSCRIPT

REP. BERMAN: Introduction of really an exceptional panel to discuss the challenges and solutions of reforming our foreign assistance program.

Dr. Lael Brainard is the is the vice president and director of Global Economy and Development Program and holds the Bernard L. Schwartz chair in international economics at the Brookings Institution. Dr. Brainard served as deputy national economic advisory and chair of the Deputy Secretary's Committee on international economics during the Clinton Administration. Previously he served as associate professor of applied economics at the MIT-Sloan School. She received her masters and doctoral degrees in economics from Harvard University and has authored many studies on foreign assistance, global poverty, and international economics.

Steven Radelet is a senior fellow at the Center for Global Development and I think has been talking about this subject for a very long time because he's very familiar to the committee. He works on issues relating to foreign aid, developing country debt, economic growth, and trade between rich and poor countries. He was deputy and assistance secretary of the U.S. Treasury for Africa, the Middle East and Asian from January 2000 through June 2002. And in that capacity he was responsible for developing policies on U.S. financial relationships with the countries in these regions, including debt rescheduling, programs for the IMF World Bank, and other financial institutions.

Prior to that, Mr. Radelet was on the faculty of Harvard University where he's a fellow at the Harvard Institute for International Development, director the institute's macro-economic programs, and a lecture on economics and public policy. He served as an advisor to the Indonesian government, the Ministry of Finance and Trade in the Gambia, and currently serves as an economic advisor to the president and minister of finance of Liberia.

Raymond Offenheiser is the president of Oxfam America, a nonprofit international development and relief agency and the U.S. affiliate of Oxfam International. Before joining Oxfam America he served for five years as the Ford Foundation representative in Bangladesh, and prior to that, in the Andean and southern cone regions of South America. He has also directed programs for the Inter- American Foundation in both Brazil and Colombia and worked for Save the Children Federation, Mexico. Mr. Offenheiser holds a masters degree in development sociology from Cornell University and earned his bachelor's degree from the University of Notre Dame.

And we're all quite pleased to have our former colleague, the distinguished Congressman Jim Kolbe, to the committee. Congressman Kolbe currently serves as senior trans-Atlantic fellow for the German Marshall Fund of the United States. He advises on trade matters as well as issues of effectiveness, of U.S. assistance to foreign countries, on U.S.-E.U. relationships, and on migration and its relationship to development. He's co-chair of the Trans-Atlantic Task Force on Development and serves as an adjunct professor in the College of business at the University of Arizona.

For 22 years Jim Kolbe served on the House of Representatives for 11 consecutive terms from 1985 to 2007. While in Congress, Congressman Kolbe served for 20 years on the Appropriations Committee of the House and was chairman of the Treasury Post Office and Related Agencies Subcommittee for four years, and where we most worked with him, of course, on this committee was for the last six years. In Congress he served as chair of the Foreign Operations Export Financing and Related Agencies Subcommittee responsible for State Department, USAID and other foreign assistance programs.

I think it's fair to say -- although at no time during the six years you served as chairman of that subcommittee did the House Foreign Affairs Committee ever give you the benefits or problems of an authorization bill to work with. Congressman, we intend to change that. Congressman Kolbe graduated from Northwestern University with a B.A. degree in political science, received a masters in business administration from Stanford University.

I look forward to the witnesses' testimony, and Dr. Brainard, why don't you (start ?)?

BREAK IN TRANSCRIPT

REP. BERMAN: Well, thank all of you very much. That was really some wonderful discussion about these issues. I'm going to recognize myself for five minutes, and I'm not going to ask all the intricate questions. I'd like each of you to sort of help me solve the problem. Put aside the bureaucratic organization of this for a second. Put aside the serious interagency issues. I'll just give you my experiences. I've been chairman of this committee for a month-and-a- half or so, and the course of that time -- the first thing on my agenda was the reauthorization of PEPFAR and what is, as several of you have made reference, a program the U.S. helped lead the way on that has done an amazing amount in an effort to modernize -- and the compelling nature for addressing this issue.

Yesterday I met with a group of people who say the most important and serious issue we have to address is the issue of universal global education. We've heard references in this testimony to the value of child survival programs. Some people have come and talked to me about it. In the end for the larger purposes of ending poverty we have to create more science capacity in these individual countries. There's a great deal of attention paid to nutrition, and, of course, we see it now every day in the headlines, the whole issue of agricultural production, and in some ways I think as you pointed out, the craziness with some of our domestic policies in terms of agriculture and our desire to encourage agricultural -- better agricultural development in third world countries.

Mr. Offenheiser sort of says let the poor people -- I mean, I don't want to over simplify here, but in a way -- your point was listen to the people of these countries in your effort to deal with global poverty and global development in terms of (justice ?). I wonder off the top of my head -- I can't barely decide which is the most important. Does a group of people who don't have access to education able to understand the value that education could bring for them? So maybe this sounds elitist, but -- and it is Washington. It's hard to let go. But what is the metrics -- what is the method by which you think we should sort through all of this?

And yes, you can say well, Congress shouldn't be making calculated decisions about which ones to favor. Somebody else should. But somebody in the executive branch is doing it otherwise, or somebody in the bureaucracy that we create to do this decides what is the framework for making a sensible decision about how to balance all these on the surface absolutely compelling cases for giving whatever census we have to those particular issues? How do we balance all that out in the context of reforming foreign aid? And I'd be happy to hear any of you on the subject. Jim?

MR. KOLBE: Well, I'll just start very quickly with a quick comment. It was Mr. Offenheiser that said listen to the customer. What is the one agency that we have, that we've created, that really does that, that delivers aid in a different way? That's the Millennium Challenge Corporation. Now, you can't --

REP. BERMAN: Did he mean the government was the customer, or the --

MR. KOLBE: Yes, the country is the customer.

REP. BERMAN: I'm not sure --

MR. KOLBE: The country is the customer in this case.

REP. BERMAN: Okay.

MR. KOLBE: I think it's not always possible to listen. You have to listen, thought he government listens to people who are poor, who are in the communities and so forth, but in this case the customer is the government or the agency that you are contracting with. But I think the important thing is what has the Millennium Challenge Corporation done, and what kinds of projects have the countries chosen to ask for in the compacts that they've entered into and look at those, and they're quite starkly different than the kinds of things we do on a bilateral basis.

REP. BERMAN: Dr. Brainard, did you want to get into this?

MS. BRAINARD: Yeah, I think the --

REP. BERMAN: Let's hear from all of the three of you as well.

MS. BRAINARD: The question that you raised goes right to the heart of the difficulty of the challenge, but the reason that I think at the end of the day we need to take on this challenge. We have scarce resources. There are more challenges out there than we can possibly address. I think as we have looked at this issue of public support in particular, we are always struck that public support is much stronger when it can see a challenge visibly, and so HIV-AIDS is something that is easy to mobilize against 'cause you can put a face on that. Global education -- I think over time people have gravitated towards that. General growth is a lot harder to get a lot of people excited about, and it really is the burden and the difficulty of sitting here and making those kinds of tradeoffs between what there is a lot of support for and what at the end of the day we should be prioritizing strategically.

I actually think that that is the purpose of a national development strategy. I think one radical idea is that we should do what we're good at and perhaps let others in the international community or the private sector or NGOs do things that the government may not be so good at. I think we've actually been pretty good at global health, for instance. We have an amazing science infrastructure to bring to that task. There are other things maybe we're not so good at.

So at the end of the day it is critical to make tradeoffs. Right now we're not making those tradeoffs. I think that is in a nutshell the difficulty, that the funding process is responsive to mobilization in a way that doesn't bring all the different pieces together at an overarching whole of government level, and that is the fundamental change that needs to happen.

REP. BERMAN: Anyone else?

MR. OFFENHEIMER: I think at the heart of this discussion goes back to I think something that each of us have mentioned in one way or another, is the need for an overarching national development plan, in other words, something equivalent of what the Defense Department has for its -- you know, define its strategic objectives for national defense. We need something that robust, that big, that visionary to guide this process in a much more streamlined way.

What tends to happen now is we tend to have a variety of sectoral constituencies all doing good work and all addressing critically important problems. But we're not necessarily doing that work overseas in a coherent and well ordered way. So, for example, you might just take the PEPFAR program in some countries because it operates, you know, in some ways parallel to other activities of our development establishment. You might have 85 percent of our foreign aid investment in a particular country like Kenya be entirely PEPFAR- related at a time when you might be asking should we be doing more work on government, citizen participation, so on and so forth?

At Oxfam, we actually have come to feel like the core of whatever strategic vision that we might offer should have sort of three leg -- be a three legged stool in which what we're really looking to do is develop effective states, focus on the institutional capacity of the states. I think the work that's been done in Afghanistan, for example, toward that end -- it's a long journey, but that's been a lot of what's been going on. Develop active citizenship and enable citizens to actually hold their government accountable for the kind of funding expenditures that governments are making and the kind of programs that governments actually have, because in effect governments at the end of the day have to deliver the public goods to citizens. Foreign aid programs are never going to have enough money to do that effectively and provide the coverage that's really needed. And at the end of the day we need states and citizens interacting with each other in a responsible way to ensure that we get the kind of stable environments that are going to ensure the security that we're all looking for around the world.

And that has to be -- and the third leg of the stool of course is markets and equitably markets, markets in which, you know, all citizens have access and all citizens can participate. So effective states, active citizenship, and equitable markets is really at the heart of what might be considered a long-term development vision.

And then around that you begin to think about what are the particular institutional structures and modern institutional structures and modern institutional thinking that we want to bring to these questions, and then the sectoral components -- I think then we start looking at what is the country -- when this is our objective, what does the expression of the citizens of a country put forward to us through a poverty -- for example, the PRSP process, the Poverty Strategic Program plans for developing countries that have been on the table now for the last six or eight years. They are plans that have been consulted widely with their citizenry.

They're often times the basis for --

REP. BERMAN: Mr. Offenheiser, it's my fault because I asked these open-ended questions and, you know --

MR. OFFENHEIMER: (Laughs.)

REP. BERMAN: -- but I'm going to have to cut you off --

MR. OFFENHEIMER: That's fine.

REP. BERMAN: -- and Dr. Radelet, we'll have to get back to you, or you'll have to find a way -- insinuate your thoughts in somebody else's question.

MR. RADELET: (Laughs.)

REP. BERMAN: The ranking member.

BREAK IN TRANSCRIPT

REP. BERMAN: The time of the gentleman has expired.

I'm, before I recognize the gentleman from Georgia, I just, two quick observations.

One the response to Ileana Ros-Lehtinen's question, the ranking member, Mr. Kolbe talked about the administration buy in and I think, I certainly have to agree that getting them early and in the transition period and doing the things that you're doing now to get the folks who are involved around the candidates, focused and thinking about this a little bit I think is essential. I do have to say I Senator Biden based on my conversation with him and Senator Lugar are both very interested in taking this side. So I think there is a basis here for a bicameral, bipartisan and whatever two branches of the three are called, a relationship to try and prioritize this so.

The gentleman from Georgia, Mr. Scott, recognized for five minutes.

BREAK IN TRANSCRIPT

REP. BERMAN: The time of the gentleman has expired. I'm going to use this opportunity since we're just around here to ask a few more questions and I welcome Ileana or Joe if you want to also get more time.

So just want to take a couple of things you said and ask you to focus a little more. If the Millennium Challenge Account, Program, and by the way, Jim, those ambassadors who were in your office, how do we get into it, that once they get the compacts then come to my office saying, well we don't want any cut in the other foreign assistance either. So, but -- (laughs) -- so they're good at politics.

MR. : MCC was supposed to be additive, it's not supposed to supplant the other.

REP. BERMAN: But these ambassadors have not internalized that. But in any event, nor their representatives who come to the Hill.

So why, why not just take, all right, development assistance, one of the three pillars, just we'll do it all to this kind of mechanism. And the corollary I guess is since the answer is that's going to leave a lot of people out, what are the difficulties in doing valuable things in areas where we are competent to do it in authoritarian countries with weak governance mechanisms and that actually are sustainable and actually make life better over the long term, as opposed to a -- put aside the humanitarian crisis, if you try to fix it the moment, is there a role for aid to those countries and to the extent you do that, does that diminish the impetuous for pressures to improve the quality of governance and the advent of prodder democracy?

MR. : I think that we cannot have one size fits all in our approaches because the countries we're working with are very different and the approach that is most effective in well-governed democracies that are really trying to improve their institutions and implement good development policy, that's quite different from the authoritarian regimes that may not have those interests.

So I think we need to have the MCC for those kinds of countries where it makes sense to give them more discretion and to give those governments the responsibility of designing programs and have the faith that they'll do something that is effective for their own people.

But in other countries, that approach won't make sense. And I think in those places, we need less money, we should have more money for the MCC countries so that they have the incentive to get there, the length of commitment should be different for less well-governed countries, it should be a shorter commitment, MCC countries it should be a longer commitment. I think that in the more authoritarian countries we work through NGOs as opposed not so much through the government. And we have a smaller focus of activities in things where we might think that we decide actually and have some responsibility that we should be doing in health or education. Whereas in the MCC we have allowed those choices for the governments involved.

So I think we need a more differentiated approach and we can do that. We don't need a thousand approaches, but we certainly don't need one approach either. I think some differentiation along the length of time, the amount of money, how much responsibility we give to the governments involved, and who we work through NGOs or governments I think can afford us that flexibility.

REP. BERMAN: Dr. Brainard?

MS. BRAINARD: I also think that there is a continuum and you know, as the country becomes less well-governed, more money goes to building up civil society, to hold government accountable. There's a sort of inverse relationship between the amount of country ownership if you will and oversight.

But there should be a continuum and the kinds of programs that we do in MCC countries shouldn't be completely different from the ones that we do in countries that are not quite there yet. In particular, we should be able to work on economic growth all over the world. And right now I think part of the problem with having the MCC in a very different institutional environment and really not coordinated and integrated for instance with some of the AID programs is that you don't get that learning back and forth. And you don't get that coherence between for instance the health system work that we're doing and the economic growth that we're working in.

So over time, I would like to see more of the learning going through to other programs in terms of how to provide accountability, how to work with civil society organizations to ensure strengthening governance and as one of the arguments for integrating.

REP. BERMAN: My time has expired for this round and the gentle lady from Florida.

BREAK IN TRANSCRIPT

REP. BERMAN: Thank you.

One last issue for you to grapple over.

I'm a little unclear about what the present situation is and what the ideal is in terms of rebuilding AID capacity.

We've heard talk about loss of employees, is there a feeling among people who focus on this and maybe some of you have conflicts of interest in answering, that there's too much reliance, too much subcontracting because of AID's limited capacity on to NGOs and to people to monitor work that one part of rebuilding capacity in AID is to have them more directly involved in actually administering different aspects of aid programs?

MS. BRAINARD: The decline in staffing at USAID has coincided with a large increase in dispersements as you know so that I think on average about $2 million per staff person and even that way understate what they're actually doing because it's a smaller percentage of staff that are doing the contracting and procurement.

I think there is a general sentiment among the expert community that AID is become the sort of wholesaler of wholesalers and it's getting so far away from being actually able to implement and engage on the ground on some of these with subcontractors to the contractors that this is diminishing our civilian capacity.

I think this relates us back a little bit to this question earlier that was asked about well couldn't the state, you know, wouldn't it just require a secretary of state that cared about these issues to fix it. I think the answer is no. I think that the State Department's civilian staffing, promotion authorities, they're based on a very different model of what is needed. There is no internal reward system for people that have technical degrees that are nurses or understand sewerage systems. But you need that kind of --

REP. BERMAN: Well let me --

MS. BRAINARD: -- knowledge --

REP. BERMAN: Well let me just --

MS. BRAINARD: -- in AID.

REP. BERMAN: Let me interrupt you. I think you're the one who talked about vive engineers in AID. Do we want more engineers in AID because they can evaluate the logical programs or do we want more engineers in AID so they can be designing programs which require an engineering competence?

MS. BRAINARD: I think just briefly I don't want to take up too much time, to some degree you need engineers in AID both to evaluate, ultimately you're always going to have contracts, the question is how much contracts. But you do need the capacity to evaluate and in some cases, you're actually going to have engineers that are close to the design of projects in the field for projects that are very important. So I think you need them for both and you cannot have generalists doing procurement on issues that require technical expertise.

REP. BERMAN: Which is why the foreign service State Department model doesn't work in this area necessarily.

MR. : Yeah, I think --

REP. BERMAN: Mr. Offenheiser?

BREAK IN TRANSCRIPT

REP. BERMAN: Very good. That was a helpful series of answers.

Keep the record open for one week for written questions, members of the panel, very much appreciate your coming, sharing your thoughts. We're going to sort of bury ourselves in your testimony and call on you again one way or another to try and move forward on this.

Thank you. The hearing is adjourned.


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