Why the Government Should Shut Down USAID Permanently

Trump is shaking up the world of international development. On Trump's first day in office, he used an executive order to pause all foreign development for the next 90 days pending review. On February 1, the U.S. Agency for International Development (USAID) website was down. Last week, Trump announced that he is going to fire 95 percent of USAID staff, although it looks like a federal judge has at least been able to pause the order for the time being. All of this made me wonder about whether USAID should be shut down. I will start with some example of USAID mismanaging money to get the conversation going:

• Starting in 2015, USAID spent $280 million on a program intended to empower 75,000 Afghani women and help them find jobs in the Afghani workforce. How many women did USAID end up helping? According to a report from the Special Inspector General for Afghan Reconstruction (SIGAR), anywhere between 0 and about 60 women. 
• According to a SIGAR report, part of $1.46 billion in USAID funds that was meant to divert from opium production "inadvertently" funded poppy production. This on top of the $335 million in USAID for a power plant that was almost never used, $175 million spent on roads that were washed away within a month by a flood, and $7.7 million on an industrial park that had no power (SIGAR).
• As Bloomberg reported last year, USAID gave $29 million to an orphanage for Kenyan children. While it sounds noble to help orphans affected by AIDS, it also turned out that the orphanage who received this money embroiled in a major sex abuse scandal. 
• Then there is the matter of USAID funding the terrorist organization Hamas. The Middle East Forum identified $164 million in grants that went to radical organizations. The problem is bad enough where the USAID's Inspector General has expressed concern that there are lax vetting mechanisms with the oversight of aid going to Gaza. 
• USAID's Global Health Supply Chain program was a $9.5 billion program created to improve a country's ability to obtain medical supplies. It was supposed to be so effective that there would never need to be such foreign aid intervention again. What happened? Most shipments were not completed on time in the initial stages. Even when they got better with shipping items, there were still considerable delays. As this report from the Bureau of Investigative Journalism details, the program was riddled with fraud, undelivered supplies, and certainly did not help countries manage their own medical supplies and equipment supply chains.

Perhaps this list is damning enough. Perhaps we have to look at both the good and bad that USAID has done before making a determination. I am sure that proponents can highlight such program as its work in preventing and treating HIV/AIDS in multiple developing countries, the President's Malaria Initiative, or fighting tuberculosis. There is also USAID's Feed the Future program, which according to its own outcome monitoring, decreased extreme poverty from 7 to 36 percent. 

One could argue that USAID should still exist but still go under considerable reform, as the list of debacles above shows. However, I have a meta-argument about why we should not have an entire government agency devoted to foreign aid. When making this argument, I make the distinction between foreign aid and humanitarian assistance, the latter of which is a targeted, short-term form of aid (e.g., food, water, medical care, protection, shelter), typically in response to natural disasters or man-made disasters in war zones. 

As I detailed in 2016, trade liberalization does a lot better of a job of helping out those suffering in developing countries than foreign aid does. Furthermore, foreign aid has a negative impact on political institutions and democratization, as a World Bank study concluded (Djankov et al., 2007). As I have argued before, corruption erodes economic development. By using foreign aid to perpetuate weak political institutions, USAID undermines its long-term goals of bringing prosperity. 

As Cato Institute scholar Ian Vázquez points out, economic development is not a top-down process, as is implied by USAID's wealth transfers to poorer countries. The Cato Institute points out in its Handbook for Policymakers that foreign aid does not address the byzantine regulations and red tape, the trade protectionism, price controls, nationalization of industries, restrictions on investment, or inflationary monetary policy. As such, foreign aid keeps developing countries in a state of misery by continuing with poor policies, greater corruption and debt, and the inability to tackle the given country's problems head-on, particularly those problems that USAID proponents believe justify USAID's continued existence. 

It does not matter that the USAID budget is less than one percent of the $6.75 trillion U.S. federal budget. Since foreign aid is not accomplishing its goals, the agency should be nixed, shut down, cease to operate. Humanitarian assistance should be provided by the State Department. As for trying to use foreign aid to promote democracy or try to improve economic development, that is the sort of work that should not be part of U.S. foreign policy because it is a waste of taxpayer dollars.