Tag: Marco Rubio

USAID

“When Marco Rubio testified during his confirmation to become Secretary of State, he said that one of the things that frustrated him the most about the U.S. Agency for International Development was that it didn’t ‘brag’ enough to show other countries ‘what the United States is doing to help their societies.’

“The comment followed years of praise from Rubio for the billions of dollars in lifesaving aid that USAID distributed overseas to boost America’s image and counter the influence of rivals such as China.”  “Washington Post: Marco Rubio on USAID”

From my own experience, I agree with Rubio. After retiring from the International Monetary Fund in 2003, I had a contract from USAID from May 2004  – Sept 2005 to help the Central Bank of Iraq establish financial markets important for monetary policy as well as its capacity to formulate and implement monetary policy. Under this contract I reported to and was supervised by the US Treasury. I have also worked closely with USAID banking supervision contractors (BearingPoint and Deloitte) in Afghanistan, Bosnia, Kosovo, and South Sudan, all post conflict countries. They did an outstanding job, and I am sure that I was well worth the money I earned as well.

Quite aside from the insanity of suspending payments and projects in midair, wasting millions of dollars (and lives) in the process, the proper question of our government is whether these projects (or which of these projects) serve American interests and do so more effectively than would alternative uses of the same money. “As Secretary of State Marco Rubio has said, ‘Every dollar we spend, every program we fund, and every policy we pursue must be justified with the answer to three simple questions: Does it make America safer? Does it make America stronger? Does it make America more prosperous?’” “State Department: Implementing the president’s executive order on reevaluating and realigning United States foreign aid”

A proper answer to those three objectives should take a long run perspective. America is safer and more prosperous when the rest of the world (our trading partners) is also more prosperous. We are stronger when we have earned the rest of the world’s respect and cooperation. USAID, by providing humanitarian and development assistance to other countries, gains their respect and gratitude, which promotes their cooperation. When President John F Kennedy established the USAID in 1961 he made this case calling it American soft power. Following Congress’s adoption of the Foreign Assistance Act in September1961, Kennedy consolidated several foreign aid agencies into the USAID in order to improve coordination and efficiency.  It is fair to ask whether this is the most efficient way of packaging these activities and coordinating them with other departments. https://www.youtube.com/watch?v=QLzwsc3XGNA

USAID has missions in over 100 countries. Congress authorizes USAID’s programs in the Foreign Assistance Act, which Congress supplements through directions in annual funding appropriation acts and other legislation. As an official component of U.S. foreign policy, USAID operates subject to the guidance of the president, Secretary of State, and the National Security Council.

Of USAID’s total budget of almost $8 billion in 2001 and $34 billion in fiscal 2024 (less than 1% of total federal budget), one third goes to public health and the rest to disaster relief, and economic and government capacity building. Its programs to treat HIV and malaria have saved millions of lives, largely in Africa, over the last two decades. It played a major role in implementing George W Bush’s “President’s Emergency Plan for AIDS Relief (PEPFAR) which saved over 25M lives globally. “State Department: About US PETFAR” It played an important role in ending smallpox and increasing global literacy.

When I asked several USAID staff what they considered the agency’s greatest successes they sighted South Korea which is now a major US trading partner, and Columbia which has risen from a failed state to a secure middle-income country and a major US trading partner. But we can no longer access the details of these programs as USAID’s website was taken down February 1.   

Those lives saved, plus the technical assistance in governance, infrastructure, and building stronger economies has raised incomes in these countries and their sales to and purchases from the US and other countries abroad (trade). As the U.S. benefits economically from these stronger economics, American citizens are also kept safer.  With stronger economies comes stability for citizens to live peaceful, prosperous lives, turning away from the perils of extremism and increasing security on the ground. Thus, American aid has not only gained respect, good will, and cooperation from the aid recipients but increased trade, income, and security in the US as a result. In a statement made by then U.S. Senator Marco Rubio, he highlighted that six of the United States’ ten largest trading partners had graduated from assistance provided by the U.S. Agency for International Development (USAID). In a 2015 Senate Foreign Relations Committee hearing, for instance, Rubio said USAID “not only is doing what is right, but we are also furthering our national interests.” “Washington Post: Marco Rubio USAID”

The mean average managed foreign assistance disbursed in the fiscal years 2001 to 2024 by USAID was $22.9 billion in inflation adjusted to 2023 dollars; 2023 was an exceptional year because of an extra $16 billion of funds for Ukraine. America’s military budget over this period was almost $850 billion dollars per year. Since 9/11, the United States has spent an estimated $8 trillion on wars and counterterrorism efforts globally. This figure includes direct military operations in Afghanistan, Iraq, Syria, and other countries, as well as related costs like veteran care and interest on borrowed funds to finance the wars. Over 7,000 American servicemen died in these wars and deaths many multiples of that were suffered by our allies and our enemies over that period. Total Defense Department expenditures over this period were $14 trillion compare with USAID’s expenditures of 0.6 trillion with many lives saved and almost none lost. The State Department’s annual budget ranged from $50 to $60 billion over the same period. Soft power is clearly a bargain for the American taxpayers seeking a safer, stronger, more prosperous America. Why does President Trump want to shut it down?

Not all projects have been successful in achieving their objectives. But many claims of waste and corruption are not supported by facts:

“In 2025, the Trump administration accused USAID of ‘wasting massive sums of taxpayer money’ over several decades, including during Trump’s first presidency from 2017 to 2021. The administration highlighted a list of twelve projects, totaling approximately $400 million—less than 1% of USAID’s annual budget—dating back to 2005. Among the examples cited were $1.5 million for LGBT workplace inclusion in Serbia, $2.5 million to build electric vehicle chargers in Vietnam, $6 million for tourism promotion in Egypt, and ‘hundreds of millions of dollars’ (the largest item) purportedly allocated to discourage Afghanistan farmers from growing poppies for opium, which allegedly ended up supporting poppy cultivation and benefiting the Taliban. Fact checkers found that these claims were largely false, ‘highly misleading,’ or wrong.” “Wikipedia: United States Agency for International Development” 

For another example, claims that USAID funded major media organizations like Politico or BBC News were false. Payments were for subscriptions or grants to independent media projects, not direct funding of news operations. 

But neither USAID nor any other government agency is perfect. Some functions should be eliminated and others automated or streamlined and oversight strengthened. But in order to properly review its programs and operations most operations should continue until a broad consensus is achieved on what reforms are desirable how they can must efficiently be executed. For functions that survive: “’The end goal is replacing much of the human workforce with machines,’ said a U.S. official closely watching DOGE activity. ‘Everything that can be machine-automated will be. And the technocrats will replace the bureaucrats.’”  “Washington Post: DOGE Musk goals” These are worthy goals.

This “convinced Democratic lawmakers and financial columnists, who have long promoted the analogy between citizens and consumers, that DOGE could be a good idea. ‘Streamlining government processes and reducing ineffective government spending should not be a partisan issue,’ announced Congressman Jared Moskovitz (D-FL) when he joined the DOGE caucus in December. ‘If Doge can actually unleash digital reform in the US government, and in a non-corrupt manner, that would be an unambiguously good thing,’ Gillian Tett wrote last month in the Financial Times.”   “Speed-up-the-breakdown”

But suddenly suspending programs and payment while undertaking a review is the wrong approach. To take but one example, Trump’s foreign aid freeze is having unintended effects in Latin America, including halting programs aimed at stopping the flow of fentanyl. Trump has vowed to impose tariffs unless Mexico stops the trafficking of fentanyl, a major killer of young adults in the US, but the aid freeze has halted funding that Mexican authorities rely on to destroy clandestine labs, Reuters reported. Countries across Latin America are scrambling to respond to the cuts, which have dealt a blow to humanitarian programs designed to slow migration to the US — which Trump has also promised to crack down on — as well as conservation efforts in Brazil and coca eradication in Peru.

USAID’s budget and the projects it finances generally arise from the recommendations of USAID Missions in the countries it operates in accordance with the development objectives captured by the respective Country Development Cooperation Strategy (CDCS) created in concert with the host government and civil society. Almost two-thirds of its employees are locally employed staff, many from the upper echelons of the political and social classes of that country, which means stronger ties and partnerships for USAID and the host country government political figures. Some of these local staff go on to join the host country government as Members of Parliament, establishing connections between the USG and the host country government that are unmatched in terms of influence. USAID operates with an understanding of the local institutions and culture that is deep and strongly influences the projects it recommends. These recommendations are reviewed and vetted by multiple entities, including USAID regional bureaus, the State Department Office of Foreign Assistance, the Office of Management and Budget, and by the House and Senate Foreign Affairs and Operations Committees.  These oversight tools include USAID answering inquiries sent directly to regional USAID Bureaus by individual members of Congress  and through the Congressional Notification process, where every USAID project and dollar is reviewed through Hill briefings and questioning of USAID officials by Congress for its approval, which has full oversight of their execution, and gives Congress the ability to place “holds” on funding preventing obligations of funds to take place before answering their inquiries.

As with other government agencies USAID’s operations are reviewed by an independent Inspector General. USAID Inspector General Paul Martin was officially fired on February 11, one day after his office issued a critical report warning that nearly $500 million in food was about to go bad due to President Donald Trump’s freeze on the agency. Rather than the announcement coming from Secretary of State Marco Rubio, the current acting director of the USAID, it was announced by the White House Office of Presidential Personnel. Martin’s office published a six-page report the day before that argued that the recent pause on foreign assistance programs and the slashing of USAID staff has prompted ‘risks and challenges’ to the safeguarding and distribution of the $8.2 billion in humanitarian assistance. Among other things confidence in America health aid in many cases was shattered by its sudden suspension thus undermining its benefit to the US.

“One U.S. official credited Rubio with pushing for the 10,000-person agency to keep on the job roughly 600 staffers as essential workers instead of the 290 suggested by some Trump officials.” .”  “Washington Post: Marco Rubio on USAID”  Whether that is the right number or not (i.e. the staff needed to perform the functions that best serve American interests) the sledgehammer being swung by DOGE is not the right, and certainly not the cheapest, approach to determining it.

Conclusion

The government does more than is best for the country and many programs should be ended or reformed. Freezing them in order to undertake a review is the wrong approach. Lasting positive reforms must be a careful consultative process. The debate over a big bang vs a more gradual approach following the collapse of the Soviet Union is illuminating. Anyone who thinks they can work with a “blank slate” is a fool. Such an approach has never been successful.

The USAID has generally been very successful and should not be “shut down.” To date the DOGE approach has done harm to American standing, safety and prosperity and reduced taxpayer safeguards of who their money is spent rather than strengthened them. The USAID website has been removed thus eliminating the transparency of its operation to public scrutiny. The USAID’s Inspector General has been fired thus eliminating independent oversight, though the Supreme Court may overturn this executive action. The overall approach of DOGE to reform with worries about conflicts of interest is doing more harm than good.

Two approaches to American governance–The case of higher education financing

Hillary Clinton deserves credit for setting out her positions on individual policy issues so that we can have an intelligent discussion of their pros and cons. She is nothing if not a tireless policy wonk. Think of her exhaustive but failed effort to “fix the provision of health care in America” during her husband’s presidency. While the Clinton’s are Democratic Party centrist, they still embrace a top down government/regulatory approach to dealing with many of societies challenges/problems. Mrs. Clinton’s plans to make college affordable provide a recent example of this approach. It is thoughtful and balanced from a left of center, regulatory approach perspective. I prefer a difference, right of center, more market oriented approach.

I have not read Mrs. Clinton’s detailed proposal and rely completely on the following Washington Post summary: http://www.washingtonpost.com/news/wonkblog/wp/2015/08/10/clinton-proposes-a-350-billion-plan-to-make-college-affordable/

Background

Americans believe in equality of opportunity rather than equality of outcomes. We are not egalitarians. There is nothing we can do about the fact that each person is born with different predispositions and capabilities. But it has been a long-standing, broadly shared principle that everyone should have access to the education she is capable of. We have lived up to this goal very imperfectly. Tuition vouchers and school choice are moving us closer to this goal for K-12 by making the state’s financial contribution to education more equal for each student and subjecting schools to greater competition in producing good results. Unlike primary and secondary education, however, which in the United States is financed by the states (generally by municipalities), college is not for everyone. An important public policy issue is who should pay for higher education for those who do go.

When the government began to supplement private universities and colleges with state run, public ones, it generally funded the cost from tax payers charging only nominal tuitions, if any, to those attending. Milton Friedman and others pointed out that this resulted in a perverse redistribution of income from lower to higher income people. University graduates enjoy incomes two or three times the average of non-college graduates. In response to this criticism, state colleges and universities in recent decades have raised their tuitions in order to finance more of the cost of the education by its beneficiaries.

It is desirable for those from low-income families with the intelligence and desire to pursue careers requiring a college education to have that opportunity. This accords with our belief in providing an equal opportunity to all and increases our individual and national wealth by facilitating the maximum productivity of every citizen. But how can we best accomplish this goal without perversely redistributing taxpayers’ money to the better off? Along with higher tuitions, many universities offer financial assistance to such students in order to attract and graduate the best students. Having the best graduates enhances their reputations. A number of private organizations provide fellowship to promising low-income students. America is renowned for its extensive private charities. Many companies do the same, generally for the children of their employees. These have the substantial advantage over government bureaucrats of being closer to the beneficiaries of their largesse and thus better able to determine who in their communities will benefit the most from such assistance.

Determined students often work while studying and/or borrow from their families and friends (this was my approach). In business, future benefits from current investments are normally financed with borrowed money or by giving investors a stake in the outcome (selling shares in the hoped for profits). Unless they are family or friends, lending to someone with potential future human capital as collateral (i.e. lending to a student based on the expectation that she can repay out of higher future income) is a riskier proposition than, say lending to someone with a job to buy a car or a house (both of which can be use as collateral). So bank lending to college students was rather limited and expensive (interest rates high enough to cover the higher risks to the lender) until the government began to guarantee such loans.

Solutions

To address this problem, and building on the experience with financing college for veterans of World War II in the “GI Bill” of 1944, Congress adopted what became known as Pell Grants, financial aid to low-income students in undergraduate college programs, in the Higher Education Act of 1965. This Act also provided limited government loans, which over time expanded in various ways to include students from middle-income families (Middle Income Student Assistance Act of 1978) and studies at graduate and professional schools. Over time the scope and terms of government assistance continued to expand. Grad PLUS was added by that spend thrift George W Bush in 2006 to help finance graduate education. “For the first time, it gave professional and graduate-school students unlimited access to below-market-rate loans from the government, which, of course, borrows the money to begin with.”[1]

This has enabled more American’s to go to college– a potentially good thing. The increased demand for places in colleges is likely to increase the cost of supplying more (higher salaries for college professors in order to attract more into teaching), but hardly justifies what has happened. According to The Economist “Tuition fees have doubled in real terms in the past 20 years. Student debt has trebled in the past decade, to $1.2 trillion.” Seventeen percent of these loans are now in default or seriously delinquent. Many of these students have dropped out of school or not found the jobs they were trained for.

The government (Secretary of Education Arne Duncan) has established a number of programs to help and Hilary Clinton “proposes capping the repayment of college loans at a maximum of 10% of income over 20 years. If a loan is not paid off by then the government will pick up the tab. The estimated bill for her scheme…, comes to $350 billion over ten years.”[2] This may be sensible within the context of government aid. But this top down government approach suffers from a number of weaknesses. One is the propensity for such programs to grow as different special interests succeed in getting added to the list: “Despite all the talk about the government’s $1.1 trillion student loan portfolio, and the burden it represents for college students, some 40 percent of the money is owed by graduate and professional school students — who make up only 16 percent of all student-loan borrowers.”[3] Another is the inferior ability of government bureaucrats, with no financial stake in the outcome, to evaluate the appropriateness of each individual loan or grant. A third is the limited incentive for government to find new innovative ways to deal with the problems that invariably arise.

The policy challenge in my view is to bring more effective competitive pressure on colleges and universities to deliver more for less, to facilitate more careful and better informed decisions by potential students of what education they need and will benefit from and the best place for them to get it, and insuring at the same time that initial poverty does not prevent them from getting it.

Leaving the GI Bill aside as a special case, the arrangements for financing college and advanced degrees that existed prior to the Federal government’s involvement worked pretty well. Those of us needing financial assistance paid a great deal of attention to the cost and value of the educations we sought. We were also more careful about whether and what sort of higher education would benefit us. I have no doubt that the incipient revolution of on-line courses, perhaps supplemented with class room discussions, will dramatically reduce the cost of higher education without significantly sacrificing its quality. Everyone’s professors can be the best that exist. Universities will be forced by such competition to exploit these new technological tools to dramatically reduce the costs of their offerings. The very best students will still pay the premium to attend the University of Chicago’s of the world (pardon my bias). Hopefully they will be the best and not just the wealthiest.

Market based financing innovations are also more likely to come from basically private funding of education. The suggestion made by Milton Friedman in 1955[4] and repeated in Capitalism and Freedom in 1962 for sharing the risk of investing in higher education between the borrowing student and the lender is now being explored in the private sector. “Enter income-share agreements ( ISAs ), which are essentially equity instruments for human capital. Investors finance a student’s college education in return for a percentage of their future income over a fixed period. ISAs are not loans and there is no outstanding balance. If students earn more than expected, they will pay more, but they also will pay less—or nothing—if their earnings do not materialize.”[5] Sharing the risk in this way insures a financial interest by both borrowers and lenders that collage choices maximize the expected return to both. A lender, (especially loans made or guaranteed by the government) is not well placed to determine the career intentions of the borrower leading to what economists call adverse selection. Income sharing agreements overcome this problem because the student being financed has a large stake in making the best choices.

Government always has an important role to play. The issue is what the nature of that role should be. Private contracts such as loans or the ISAs described above require a legal framework of enforcement. Such framework for ISAs is currently rather unclear. Sen. Marco Rubio (R., Fla.) and Rep. Tom Petri (R., Wis.) recently introduced the Investing in Student Success Act, which would set basic standards for ISA contracts. In addition their bill would provide for the collection and publishing of information on the cost and average earnings of graduates of different colleges and fields, which would help students choose where and how to invest in their futures.

Clinton’s and Rubio’s approaches represent very different concepts of how government can most constructively contribute to our flourishing. I prefer the approach of a more limited, legal framework role for government.

[1] Charles Lane, Washington Post Aug 26, 2015 https://www.washingtonpost.com/opinions/how-student-loans-help-keep-expensive-schools-in-business/2015/08/26/e7d7f83a-4c11-11e5-902f-39e9219e574b_story.html

[2] The Economist, August 22, 2015.

[3] Charles Lane op. cit.

[4] Milton Friedman, “The Role of Government

in Education,” in Economics and the Public Interest ,

  1. Robert Solo, (Rutgers: Rutgers University

Press, 1955).

[5]   Miguel Palacios And Andrew P. Kelly, “A Better Way to Finance That College Degree” WSJ April 13, 2015, http://www.wsj.com/news/articles/SB10001424052702303456104579485801253355622