Foreign aid more about helping friends at home: Column

Jared Pincin and Brian Brenberg | USATODAY

U.S. foreign food aid programs have become a buffet for special interest groups. Not only have these well-intentioned programs misused taxpayer money, but they are actually harming the poor around the world.

Several presidents have tried to reform U.S. food aid initiatives and failed each time. In his recent budget proposal, President Obama also attempts to curb this waste but he too will likely fail. Why? He faces a powerful combination of lobby groups and politicians fighting for the biggest serving of cash.

Even before the president officially released his budget, 70 businesses and interest groups, including the USA Rice Federation, the National Association of Wheat Growers and USA Maritime lobbied the president to drop the food aid reforms, citing domestic economic benefits.

Cronies never miss an opportunity to feast on taxpayer dollars -- even if it means taking from those who are most vulnerable.

The United States is the largest donor of international humanitarian aid, contributing roughly $8 billion in emergency food aid over the past five years. But a significant portion of that food aid is "tied," which means the food must be sourced from U.S. suppliers and transported on U.S. ships, even if cheaper alternatives exist. The benefits of tying go to politically-connected companies in the U.S. at the expense of aid recipients. It's a prime example of cronyism at work.

For example, the Cargo Preference Act of 1954 dictates that 75% of all U.S. food aid must be shipped on private U.S. commercial vessels, on which 75% of the crew are U.S. citizens. Additionally, according to the Maritime Security Act, 25% of bagged food aid slated for shipment must be coordinated from ports in the Great Lakes.

These policies translate into big gains for U.S. shipping interests, but an enormous loss for taxpayers and aid recipients. A report, "Food Aid and Agricultural Cargo Preference," by researchers from Cornell University, finds that meeting the Cargo Preference Act requirements costs U.S. taxpayers $140 million every year in additional shipping costs. Furthermore, the authors estimate that if the Act's requirements were lifted, the U.S. could double its non-emergency food aid to Africa.

Food aid "monetization" is another source of waste. Under this $300 million program, the government buys American grown food, sells it in developing countries, and then gives the proceeds to international charities. It's a great deal for U.S. farmers, but according to a Government Accountability Office report, the cost of procuring, shipping and selling the food totaled $219 million over the course of three years. There are certainly more effective ways to help the poor than putting the interests of U.S. agribusiness and shipping companies first.

Even though reforming such tied aid programs would help the needy and save money for U.S. taxpayers, Congress is unlikely to change the system. Foreign aid is a lucrative business for interest groups, which aggressively lobby political leaders for pieces of the foreign aid pie, i.e. contracts. Elected officials often reward these powerful industries or companies in exchange for help with re-election, sometimes even lobbying on their behalf. Citing the same concerns as the industry groups above, members of the Senate Committee on Agriculture, Nutrition and Forestry, including Chairwoman Debbie Stabenow (D-Mich.) and ranking member Thad Cochran (R-Miss.) sent President Obama a letter opposing the food aid reforms. With this type of relationship, politicians and interest groups win while those in need lose.

A paper slated for release in the September 2013 issue of the journal Oxford Development Studies (Jared Pincin, "Political Power and Aid Tying Practices in the Development Assistance Committee Countries") shows that as competition for elected office intensifies, tied aid increases both absolutely and as a percentage of total aid.

In other words, the hotter the political climate, the greater the incentive to vote for foreign aid that helps political friends at home.

The goal of foreign aid should be to assist the needy, not to protect special interests or serve the re-election goals of politicians. Reforming tied aid programs would save money for taxpayers here in the U.S. and help promote economic development abroad. A more prosperous world is a better world, and routing out cronyism will help get us there.

Jared Pincin and Brian Brenberg are assistant professors of economics at The King's College in New York City.

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