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An Open Letter to Congress: Make Foreign Aid Accountable to Taxpayers!

April 21, 2008

Dear Member of Congress:

On behalf of the 362,000 members of the National Taxpayers Union (NTU), I write to express concern over reports about the use of tax dollars to fund questionable foreign aid grants.

The Bush Administration established the Millennium Challenge Corporation (MCC) to provide funding to nations meeting certain requirements for progress in the areas of political and economic reforms, which include stopping corruption, protecting property rights, and respecting the rule of law. Most recently, for example, Mongolia has been slated to receive nearly $300 million in MCC grants over the next five years.

Unfortunately, Mongolian treatment of business and legal institutions has been backsliding in recent months, with the government browbeating Western interests to relinquish control of commercial enterprises. While Mongolia is using intimidation and force to drive out Western business, it has no qualms about turning natural resources over to Russia, another nation with questionable business and legal practices.

While it is unacceptable that Mongolia ignores the requirements set forth by the MCC, it is even more disturbing that the U.S. government continues to fund programs that effectively help nations undermine the market-based processes that could free them from their dependence on foreign aid.

Throughout NTU's nearly 40-year history, we have held that government-backed development enterprises, as well as direct foreign aid, are rarely appropriate venues for U.S. tax dollars. Removal of tax and trade barriers for private firms doing business abroad is a far better long-run strategy for helping free-market economies to flourish around the world. Indeed, this is the mission of the World Taxpayers Associations (WTA), a consortium of citizen groups from more than 45 countries, to which NTU belongs.

Nonetheless, if policymakers are to insist on aid programs, then they have a special responsibility to taxpayers to practice maximum possible oversight. After all, private firms bear responsibility for voluntary management decisions -- good or bad -- involving the money of their investors, who in turn can take their resources elsewhere if they are averse to risks. Taxpayers do not have this freedom of choice over the involuntary extractions they must send to Washington.

The MCC therefore has a duty to encourage grantee nations to protect property rights, uphold legal contracts, and promote sound business and investment decisions. MCC credibility is vulnerable when countervailing actions by its recipients go unchecked. I urge you to consider this fact in deliberations about the program when the Foreign Operations Appropriations bill is reported from committee.


Pete Sepp
Vice President for Policy and Communications