Opinion: The hidden cost of cuts — how slashing foreign aid is wasteful and ineffective

    A USAID-supported organization that had been distributing supplies conducts a briefing in Nepal. Photo by: Kashish Das Shrestha / USAID / CC BY-NC

    Normally when foreign aid advocates talk about the ramifications of budget cuts, we describe the community health programs that aren’t funded or humanitarian crises that won’t be fully addressed. While these are sad casualties of funding cuts, U.S. President Donald Trump’s recently released budget request for fiscal year 2021, which yet again severely slashes foreign assistance, will result in less obvious consequences as well. These include wasted taxpayer dollars, missed opportunities, efficiency losses, reputational costs in a time of competition between the world’s great powers, and damaged partnerships — including with the private sector.

    When steadily and thoughtfully funded, U.S. development assistance can be a highly effective investment in U.S. interests abroad. Low- and middle-income countries account for nearly half of U.S. exports, and targeted U.S. investments in development have transitioned countries such as Costa Rica, Indonesia, and Poland into American allies and trade partners.

    On the ground, U.S. assistance is implemented by a constellation of partners that know firsthand the problems associated with cuts and delayed funding. Several of these organizations, along with think tanks and other global development advocates, have recently reviewed the impact that this era of funding uncertainty has on programs.

    Studies from two organizations in particular — Catholic Relief Services and Publish What You Fund — found that the mere proposal of sudden or drastic cuts, such as those in the latest of the president’s budget requests, results in lost staff time preparing for contingency emergencies, inefficient program implementation, and a hit to U.S. credibility.

    When funding for a program is suddenly in question, these studies found that time, money, and impact is lost as program managers attempt to plan for all scenarios that may arise due to resource uncertainties. Instead of maintaining a sharp focus on efficiently implementing a community investment that Congress has prioritized, U.S. government staff on the ground exhaust valuable time on contingency planning while program implementers slow operations, often resulting in fewer outputs at the same running costs and sometimes even the dismissal of local staff.

    If sudden, unplanned cuts are actually enacted, these studies found that they can undermine the achievements of U.S. programs and investments and potentially reverse progress that has been made.

    Catholic Relief Services studied the case of a program in Sierra Leone that was designed to help feed and train people emerging from the Ebola crisis but was abruptly canceled after 10 months. About 30,000 people in need who had begun to receive nutrition and agricultural assistance were cut off, and companies that had begun investing in the region pulled out. Instead of funding a program that ultimately supports American interests in the region, the closure wasted $4 million of taxpayer money.

    These studies have found that in these scenarios, the reputation of the U.S. is harmed. In Sierra Leone, the early closure “shattered the trust that existed among community members and their leaders. Farmers’ and women’s groups had invested their own money, time and energy into preparing for the five-year project.” Loss of trust or willingness to partner can also occur when the U.S. cancels a funding agreement with a private sector partner, just at a time when private sector engagement is sorely needed in global development.

    Local governments, partners, and private sector actors witness the dysfunction, and the research shows that, as the U.S. stumbles to efficiently and fully fund programs, China and other emerging donors could step in to fill the gap. In Cambodia, as the U.S. suddenly proposed cutting agricultural programs, stakeholders “across the spectrum were highly confident that China would eventually fill any financing gap that the US left behind.”

    This creates the situation of an administration actively undermining its own policy priority of countering China’s appeal to developing countries. While money can always be spent more efficiently and effectively, having access to financial resources is still necessary if you wish to make a competitive offer.

    Of course, not every proposed international program can be funded. This is not a rebuke of all types of funding reductions. There are ways to thoughtfully prioritize funding decisions based on evidence, analysis, data, and program evaluations in order to maximize the effectiveness of meaningful American investments. The Obama administration, for example, phased out Feed the Future programs and global health initiatives in a number of countries and attempted to trim down programs with little impact, while choosing to expand and focus investments in areas that had the most need and the greatest ability to use the aid effectively.

    The current administration should take this thoughtful approach with programs such as Food for Peace, where reform — rather than outright elimination — would be more meaningful and cost-effective. This is a call for the Trump administration to understand that bluntly slashing foreign aid programs is inefficient, ineffective, and wasteful.

    The views in this opinion piece do not necessarily reflect Devex's editorial views.

    About the authors

    • Larry Nowels

      Larry Nowels is a co-chair of the Modernizing Foreign Assistance Network. He currently works as a consultant, recently working with a number of foundations and global development advocacy organizations, including the William and Flora Hewlett Foundation, the U.S. Global Leadership Coalition, the ONE Campaign, and Advocates for Development Assistance. Previously, he was a specialist in foreign affairs at the Congressional Research Service. During his 33-year career at CRS, he wrote extensively on U.S. foreign assistance policymaking, including the congressional role in legislating and overseeing American foreign aid programs. Nowels attended the University of Redlands, University of Salamanca, American University School of International Service, and the National War College.
    • Conor Savoy

      Conor Savoy is the executive director of the Modernizing Foreign Assistance Network. He has over a decade of experience working on issues related to U.S. foreign policy and international development. Prior to joining MFAN, he was the director of Policy and Advocacy for the Global Innovation Fund, a social-first impact investor. Previously, he served as deputy director of the Project on Prosperity and Development at the Center for Strategic and International Studies. At CSIS, Conor helped build an innovative research program focused on the evolving role of the private sector in international development. He remains an active senior associate (nonresident) with his former program at CSIS. Earlier in his career, Conor worked as a researcher at the Council on Foreign Relations, concentrating on U.S. foreign and national security policy. He holds an M.A. in International Relations from Boston University and a B.A. with honors in History from George Washington University.