U.S. Aid: Who Holds the Purse Strings?

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Andrew Natsios, administrator of the U.S. Agency for International Development

Taking center stage at this week's G-8 summit in Canada, President Bush will offer $500 million to fight HIV and AIDS in Africa. But behind his proposal lies a bureaucratic battle — and a story that speaks volumes about turf wars in Washington.

Trouble first surfaced several weeks ago, sources tell TIME, when Bush met in the Oval Office with HHS Secretary Tommy Thompson and America's top official for economic assistance, U.S. Agency for International Development head Andrew Natsios . As Thompson discussed the new HIV-AIDS plan, Natsios grew upset and insisted that his agency should play the lead role. Bush, who is famously impatient with internal bickering, was visibly irritated by the turf skirmish, and sharply instructed Deputy National Security Advisor Gary Edson to resolve the dispute.

Natsios is responding to widely held misgivings about USAID. The Bush administration's new approach to foreign aid is based on making more effective use of U.S. tax dollars sent overseas. And many officials, notably Treasury Secretary O'Neill, have pointed to the failures of the past and argue that a radically different approach is the only way to justify increasing U.S. aid contributions — which are the lowest on a per capita basis of any major industrial nation.

A few days after the Oval Office meeting, discord struck again. This time, Secretary of State Colin Powell asked Treasury secretary Paul O'Neill about his tour of Africa, which made front-page news largely because of O'Neill's travel companion, Irish rock star Bono. Again, Natsios grew upset, asserting his agency's prerogative to manage U.S. foreign economic assistance. At another point, Natsios told a group gathered for one of Powell's morning staff meetings that Bush wanted AID to handle foreign aid.

None of this bickering helps the White House in crafting its message. The HIV-AIDS initiative will be a centerpiece of Bush's presentation before the G-8. Africa is a focus of the summit, and Bush has just announced he will visit the continent next year as he prepares a major, 50% increase in the flow of U.S. economic assistance around the world. A USAID spokesman insists internal differences over the money are being resolved amicably and that the agency's role will not be diminished.

But the failures of the past are often associated with USAID, the agency through which much of U.S. development assistance is funneled. That grim history is evident in the administration's latest proposal, which calls for more than $10 billion in new foreign aid by the end of fiscal 2006 as part of Bush's so-called "Millennium Challenge Account". The funds will be managed largely by the Treasury and the State Departments, not by USAID. "The agency looks like it is loosing out on new funding, and that is why Natsios has mounted a turf battle," explains an influential congressional staffer. Adds a senior U.S. official: "Given the record of foreign aid failures that this administration wants to change, there is considerable support at the cabinet level for getting away from AID and letting other parts of the government take charge."

For African nations, of course, the issue is not which part of the U.S. government offers them funding, but how much they receive. Four countries headed by South Africa have come up with a proposal called the New Partnership for African Development (NEPAD), presenting ambitious goals that will require $64 billion a year in new money, most of it from outside the continent.

NEPAD's agenda has been compared to the Marshall Plan that rebuilt Europe after World War II, with the important distinction that it was drawn up within Africa, not imposed from the outside. The plan targets HIV/AIDS and education and predicts economic growth of seven percent annually over 15 years for recipient countries, which will be selected based on their willingness to clean up corruption and promote democracy. For the U.S. to play a major role in NEPAD, however, the Bush administration will need to convince Congress that the money will be well spent. And that pointed proviso, unfortunately for Natsios, could mean a dramatically diminished role for USAID.