MCC Faces Drastic Cuts as Congress Unveils '09 Budget

Bad news for the Millennium Challenge Corp.: Congress is likely to slash 2009 funding for the Bush administration's brainchild by 40 percent this week, from $1.5 billion in fiscal 2008, according to documents released by House appropriators on Monday.

The House is expected to vote Wednesday on a broad 2009 spending package that includes $875 million for MCC. Approval by both chambers - as well as President Obama - is likely.

According to a House Appropriations Committee release, funding was cut because of "slow program implementation, [which is] making funds in this bill sufficient to move forward on new compacts."

MCC did not immediately respond to a request for comment on the cuts.

The White House is expected to unveil its 2010 budget request in the coming days, and it is not clear at this point whether Obama is ready to abandon the agency, whose beneficiaries tend to be free-market democracies.

If the Senate had its way, funding would have been cut even more, to $254 million.

"We have reduced funding for the Millennium Challenge Corporation, but his should not be misinterpreted as a lack of support for the MCC," Sen. Parick Leahy said after the Senate Appropriations Committee passed initial budget language last July. "We want it to succeed, and we intend to fund future compacts. But with a pipeline of $7.5 billion and just $235 million disbursed, it makes sense first to process the billions that have already been appropriated. We want to see more results before we sign new compacts."

The development community has been speculating about MCC's fate since Obama took office. Some have speculated that the government corporation's focus on on free-market democracies was more in line with the Bush doctrine of spreading democracy than Obama's "smart power" approach. Others have speculated that the agency would be swallowed by the State Department.

Still, the funding cuts should not be interpreted as a death notice for the agency. Secretary of State Hillary Clinton has expressed support for MCC, as have prominent figures in the development community. Also, the cuts are not that surprising giving the tight fiscal environment.

Also part of the 2009 budget are:

  • $36.6 billion in discretionary funds, allocated for the State Department, U.S. Agency for International Development, and foreign economic and military aid programs.

  • $808.5 million, up $178 million from 2008, for USAID, to add 300 foreign service officers.

  • $7.1 billion towards global health initiatives, including $5.5 billion for HIV/AIDS prevention and treatment ($600 million specifically for programs through the Global Fund to Fight AIDS/HIV).

  • $1.5 billion to the International Development Association.

  • $971 million for refugee assistance, up $104 million from last year.

  • $350 million for disaster assistance, up $30 million from last year.

  • $300 million for safe water programs.

  • $340 million for the Peace Corp, up from $9 million in 2008.

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About the author

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    David Francis

    David is a Washington-based journalist and former Devex staffer who spearheaded Devex's "Obama's Foreign Aid Reform" blog. He has written for the Christian Science Monitor, Pittsburgh Post Gazette, SportsIllustrated.com, San Francisco Chronicle, Foreign Policy magazine, and the Washington Monthly. David holds an undergraduate degree from the University of Chicago and a graduate degree from Georgetown University.