USAID vs. DFC: Who Gets the Billions – Innovation Dialog with Steve Hoffman

The proposal to move funding from USAID to DFC signals a shift in American foreign policy. What is the difference between USAID and the U.S. International Development Finance Corporation (DFC)? Who is Benjamin Black, President Trump’s pick to lead the agency? How will this shift impact non-profits and America’s “soft power”? Who benefits, and who suffers from the transition to the for-profit model?

For the latest edition of Innovation Dialog, Diana Ding (CEO and Founder, Ding Ding TV and Silicon Valley Community Media) spoke to Steve Hoffman (an entrepreneur, angel investor, AI expert, and author). They discussed this major policy shift that could reshape how the U.S. supports foreign nations. This episode provides a deep dive into the topic that is an intersection of economics, politics, and humanitarian values. Likewise, it raises important questions about America’s role in the world.

Steve Hoffman provided some background on Benjamin Black, who is President Trump’s pick to lead the U.S. International Development Finance Corporation (DFC). In January, Black, together with tech entrepreneur and Palantir co-founder Joe Lonsdale, wrote a Substack criticizing USAID and stating its $40 billion budget should be re-routed to DFC. Black has a Wall Street background and managed several financial institutions. Most recently, Black ran an alternative credit fund, which, according to Hoffman, is similar to a private equity firm. Before that, he worked with hedge funds and firms on Wall Street. Black is a proponent of private investment.

As Steve explains, President Trump hopes to replace USAID with the U.S. International Development Finance Corporation (DFC). USAID served as a pillar of American foreign policy for decades. It helped with humanitarian efforts and the development of impoverished countries. It was a way to build the American reputation.

Diana wanted to know why some people want to move the money from USAID to DFC and why it is a big deal. According to Steve, it is a completely different approach to U.S. foreign policy. He said: “Trump is America first. And when he says America first, he usually means American corporate interests first. And by appointing Benjamin Black, he is basically saying: “We want to take a Wall Street guy and put him in charge of how we distribute money overseas, especially soft money.”

The DFC approach will differ significantly from the USAID approach. USAID primarily focused on the humanitarian aspect. More often than not, that meant humanitarian aid in times of natural disasters. Likewise, USAID also spent money on projects (both for-profit and non-profit) that promoted American interests.

President Trump made it clear he views these types of humanitarian efforts as a waste of money. Benjamin Black’s views are the same. They want to take that money away from the humanitarian and non-profit sectors and reroute it into for-profit projects.

Diana wanted to know if this was legal and who had the power to approve or block it.

It is Trump who can issue an executive order that changes the policy. He can put some funding on hold for review. Trump does not want to deal with Congress and thinks he should have the ultimate authority. But Congress must approve the executive order. President Trump is pushing hard for his vision of reshaping the government and does not want to go through the regular channels of approval. However, it is Congress that holds the purse strings.

Because Congress is Republican-controlled, Steve believes it will align with the President. However, if Congress changes during the mid-term elections, we could see a different scenario. Congress has a say in whether the transfer of money from USAID to DFC is legal or illegal. The courts will decide in case of a conflict.

Many businesses and agencies work with USAID. Diana asked how this change would affect them or if they would lose funding.

President Trump already ordered a halt to USAID funding, which means many non-profit and humanitarian groups cannot provide medical care, food assistance, and other life-saving measures. Steve did not mince words and said: “It’s been a disaster.” It is tough on the NGOs. But it is even harder on the people who depend on the aid to survive. Nobody got much heads up or time to prepare for this radical change.

This tarnishes the American reputation. The United States is the most powerful country in the world and a leader who looks out for its allies and partners overseas, especially when it comes to funding humanitarian efforts.

Diana asked what Steve thinks will happen in the future. From Steve’s perspective, the trend does not look good. USAID is an organization that has been a pillar of American policy and soft power. He said: “We use military, and we use force. But we also need to balance that out with soft power.”

DFC’s mission under Benjamin Black is to invest in for-profit enterprises, not NGOs and humanitarian agencies. As Steve explains, if you are a for-profit organization, you are limited in what you can do. For example, for-profits cannot distribute huge amounts of food aid when natural disasters happen. It does not benefit the people on the ground who need assistance quickly.

It does, however, benefit investors. Given Black’s Wall Street background, it will help his cronies. According to Steve, the move from USAID to DFC, means we are de-risking investments overseas, most notably in natural resources (for example, minerals and oil). It means we are using U.S. government money to make it more profitable for big investors and corporations to do business overseas with our partners.

Some of the countries may benefit from these investments. If you make sound investments and the U.S. government helps subsidize or de-risk them, that can benefit both the wealthy investors who are putting the money in and the countries.

However, that leaves a gaping hole in American foreign policy, where the United States is committed to helping people with no investment return. As Steve said: “There’s no ROI except the ROI of showing that the U. S. is a compassionate country, showing that the U.S. will help out other countries when they are really in need when they are suffering from devastation and other things. We are missing this, and to me, that reflects very badly on the U.S. And in the end, it could end up hurting us more than helping us.”