New NPP Series: “On The Block”

Last week Congress returned to Washington, D.C. for it's “lame duck” session and began their final weeks of law making before the holiday season and the new Congress is inaugurated. With none of the twelve annual appropriations for Fiscal Year 2011 (which began on October 1). that fund the federal government yet approved, and the government running on continuing resolutions, questions about the budget loom large. A projected deficit of over $1 trillion has encouraged endless parties to offer up ways to cut federal spending.

NPP's new “On The Block” series looks at federal programs targeted for termination by budding budget cutters. One such program is the Overseas Private Investment Corporation (OPIC).

It might be expected that different ends of the political spectrum would suggest different programs to close down. Yet OPIC is taking hits from both sides – in proposals from the Heritage Foundation on the right, and from Rep. Jan Schakowski (D-IL) on the left. But what is OPIC, and why are multiple reports singling out this program that so few have heard of?

The Overseas Private Investment Corporation (OPIC) was founded as part of the Foreign Assistance Act of 1961. Its statutory goal is to “mobilize and facilitate the participation of United States private capital and skills in the economic and social development of less developed countries and areas, and countries in transition from nonmarket to market economies.” In other words, OPIC functions as a lender and loan guarantor to U.S.-based or owned companies that want to start a project in an underdeveloped country..

Is this just a fund for companies to ship jobs overseas? Not legally. OPIC is prohibited from providing its services for a project which would lower the company's U.S. workforce and substitute it with a foreign workforce producing the same thing (Sec. 231, paragraph k). Are the projects sweatshops or polluters evading U.S. regulations? Again, not legally. The program being funded has to be in a country recognizing and promoting labor rights (Sec. 231A, paragraph a) and should not harm the environment (Sec. 231A, paragraph b). BUT, and its a big one, a waiver clause allows the President to override these considerations if trade with the target country is in the U.S.'s economic interest, as George H. W. Bush did for Nicaragua in 1990.

With attacks from all angles, surely this program must be expensive, right? Rep. Schakowsky says OPIC costs $150 million a year. The Heritage Foundation says it runs more like $29 million. OPIC, in their FY2010 appropriations request, asked for the authority to transfer money from their noncredit account to their operating account, which would leave them with a surplus of $156.5 million. Even at the highest projected cost for this program, OPIC is a drop in the bucket compared to the $1.4 trillion dollar deficit.

OPIC supporters argue that the program promotes economic growth in underdeveloped countries, and helps develop new markets for U.S. products. Opponents argue that major U.S. corporations should promote their exports using their own resources.

Programs this small often go unnoticed. In some cases, good programs benefit because they “fly under the radar” of budget cutters. In other cases, poorly performing programs coast along without oversight. Greater transparency into the federal budget process helps taxpayers gather facts and make decisions about how their tax dollars are spent. We invite you to join us as we examine choices being made in Washington about how your tax dollars are being spent. And if you have questions about a specific program, let us know. We'll try and help you figure it out.

Look for our “On The Block” feature on the NPP website in the near future.