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

Southern Economic Journal, Jan, 2001 by Robert K. Fleck, Christopher Kilby

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.