Foreign Aid and Domestic Politics: Voting in Congress and the Allocation of USAID Contracts across Congressional Districts.

• Author: Fleck, Robert K.
• Position: Research information - Statistical Data Included

Robert K. Fleck [*]

Christopher Kilby [+]

This paper investigates the relationship between congressional support for foreign aid and the distribution of United States Agency for International Development (USAID) contract spending across congressional districts within the United States. The extent to which such a relationship matters has become increasingly important in recent years, as the end of the Cold War and the advent of the Republican-controlled Congress have eroded the traditional base of support for foreign aid. We develop a model to illustrate how the distribution of contract spending could be used to increase support for foreign aid, but at the expense of development impact, in effect trading quality for quantity. Data on domestic foreign aid contract spending and votes in the 104th Congress House of Representatives allow us to test whether the geographic distribution of USAID contract spending within the United States is consistent with a systematic attempt to build support for foreign aid in Congress. Econometric results provide little e vidence of such attempts, apparently because voting on this issue is insensitive to the distribution of contract spending.

1. Introduction

   Although U.S. foreign aid historically has catered to national security, commercial, and humanitarian interests, in recent years aid agencies have increasingly focused on domestic commercial benefits when presenting their case to lawmakers. The United States Agency for International Development (USAID) describes itself as a provider of "direct economic benefits" to "almost every state in the Union," a claim that it supports with state-by-state data on its Web site (USAID 1998b, c). This direct appeal to commercial interests is not surprising given the demise of the Cold War--era foreign aid coalition and the advent of the Republican-controlled Congress. After the fall of the Berlin Wall, a Democratic Congress presided over a substantial decline in foreign aid spending. A Republican Congress in 1995 shifted the debate from simply cutting spending to dismantling agencies. Although USAID survived, it has been forced to reorganize, drastically reduce its size and scope, and campaign actively for funding.

   This paper examines the domestic political economy of foreign aid, investigating the relationship between support for foreign aid in the House of Representatives and the geographic distribution of USAID contract spending across congressional districts within the United States. We develop a theoretical model to illustrate how manipulating the distribution of contract spending could increase political support for foreign aid, though at the expense of development impact, in effect trading quality for quantity. Data on domestic foreign aid contract spending and votes in the 104th Congress House of Representatives allow us to test whether the distribution of USAID contract spending within the United States is consistent with a systematic attempt to build support for foreign aid in Congress. The foreign aid literature posits a quality-quantity trade-off; this paper provides a theoretical model of a mechanism through which such a trade-off might operate and econometric evidence of its magnitude.

   Anecdotal evidence and univariate statistics do appear to link spending and support for aid. In addition to USAID's sales pitch, other anecdotal evidence includes American firms lobbying Congress for profitable foreign aid policy (Morgan 1995), members of Congress pressuring USAID to obtain contracts for their constituents (Fiorina 1989, pp. 64-5), and, despite its bidding process, USAID influencing contract awards (Kamen 1996). In the votes we analyze, House Democrats are five times more likely to vote in favor of aid, and they enjoy two times as much USAID spending in their home districts as do House Republicans. Republican members of the Foreign Operations Subcommittee of the House Appropriations Committee are three times more likely to vote in favor of aid and get three times as much USAID spending as do other Republicans.

   However, multivariate analysis of USAID spending data covering over 1000 contractors and 3000 contracts points to a different conclusion. We find only weak links between congressional voting and the geographic distribution of contract spending. After accounting for differing levels of contractor qualifications across congressional districts, the level of contract spending does not depend substantially on the representative's position on foreign aid (strong supporter, swing voter, or opponent) or on other political variables, such as committee membership, tenure, or party. The apparent explanation for this is that aid contract spending has little influence on congressional voting. Controlling for party, general liberal-conservative divisions in Congress, and constituency characteristics, the level of contract spending in representatives' home districts does not substantially influence their voting positions. Washington-area "Beltway" Republicans are the exception, as their districts receive high levels of con tract spending, and they vote in favor of aid much more often than do typical Republicans.

   These results shed light on the emerging post--Cold War aid regime. Although USAID activities do provide "direct economic benefits" to "almost every state in the Union," there is little indication that USAID systematically manipulates the allocation of contracts in an attempt to garner political support. This is the rational outcome. Given that the geographic distribution of USAID contracts appears to be an ineffective tool for strengthening political support for foreign aid, efforts to forge a new coalition around commercial interests are unlikely to succeed. The stylized fact of a "quality-quantity" trade-off does not hold in this case; manipulating the geographic distribution of USAID contracts--thereby including less qualified contractors--is unlikely to increase aid funding.

   The paper proceeds as follows. Section 2 provides historical and institutional background. Section 3 develops the theoretical model of spending. Section 4 presents the empirical analysis. Section 5 concludes.

2. Political Coalitions and Support for Foreign Aid

   The amount of foreign aid, as well as how and where that money is spent, depends critically on the degree to which aid spending serves a variety of interests and thereby helps to maintain a coalition. From the end of World War II to the end of the Cold War, support for foreign aid relied heavily on national security and domestic economic interests as well as humanitarian concerns. National security was an explicit objective of foreign aid and an essential factor in maintaining foreign aid budgets (Krueger, Michalopoulos, and Ruttan 1989; Griffin 1991; Zimmerman and Hook 1996). [1] Similarly, the desire to serve domestic economic interests was explicitly acknowledged. Presidential administrations routinely highlighted domestic economic benefits of foreign aid. [2] Even at such watershed points as Truman's Point Four program and Kennedy's establishment of USAID, presentations to Congress emphasized economic advantages to the United States (Daniels 1951; Reeves 1988).

   USAID has explored ways of strengthening this coalition. In a 1984 volume, Rice and Donald (coeditors of USAID's Development Digest) discuss "constituency-building" through development education and strengthening ties with private voluntary organizations, universities, the banking community, and other commercial organizations (Rice and Donald 1984). Another angle considered by USAID is the potential importance of the geographic distribution of contract spending. As far back as the 1970s, USAID tracked contract spending by congressional district (Rice and Donald 1984, p. 352). More recently, it has established a database to substantiate its claims of providing widespread benefits to American firms and workers. [3]

   The coalition of groups with humanitarian, commercial, and security concerns has created an uncomfortable partnership with often conflicting objectives (Wood 1996; Zimmerman and Hook 1996). Among advocates of humanitarian aid, the ability to build political support for foreign assistance based on security and domestic economic interests is viewed as a double-edged sword. Practices that promote donor interests--such as tying aid to purchases of the donor country's goods and services and the use of mixed credits--clearly reduce the real value of aid to the recipient relative to dollar amounts (Jepma l991). [4] Other donor-driven biases, such as intensive use of capital and imports, further reduce the development effectiveness of aid (e.g., Tendler 1975; James 1995). There is a quality-quantity trade-off when linking aid to the donor country's economic interests increases the total aid budget but reduces the value to the recipient of a dollar's worth of aid (Jay and Michalopoulos 1989).

   The fall of the Berlin Wall generated considerable uncertainty within the development establishment about the future of foreign aid. Some predicted a boon from the peace dividend and new opportunities in Eastern Europe and the former Soviet Union. [5] Others foresaw a withering of foreign aid as the national security motive for aid diminished. [6] This uncertainty ended with the success of conservative Republicans in the 1994 congressional elections: The number of USAID staff fell by over 3,000, the number of countries with USAID programs was projected to fall by 45, and the number of foreign missions was projected to drop by 40 (Lippman 1996). [7] According to USAID, "U.S. foreign assistance programs are at the lowest levels, in real dollar terms, that they have been in over 50 years" (USAID 1998b).

   The real crisis for American foreign aid began in 1995. Republican control of Congress brought outspoken opponents of foreign aid into key committee positions. In the House, Sonny Callahan (R-Ala.)--an admitted aid neophyte who campaigned...