Health reform (aka Obamacare) is entering a new stage. The recent announcement by United Health Care that it will stop selling insurance to individuals and families through most health insurance exchanges marks the transition. In the next stage, federal and state policy makers must decide how to use broad regulatory powers they have under the Affordable Care Act (ACA) to stabilize, expand, and diversify risk pools, improve local market competition, encourage insurers to compete on product quality rather than premium alone, and promote effective risk management. In addition, insurance companies must master rate setting, plan design, and network management and effectively manage the health risk of their enrollees in order to stay profitable, and consumers must learn how to choose and use the best plan for their circumstances.

Six months ago, United Health Care (UHC) announced that it was thinking about pulling out of the ACA exchanges. Now, they are pulling out of all but a “handful” of marketplaces. UHC is the largest private vendor of health insurance in the nation. Nonetheless, the impact on people who buy insurance through the ACA exchanges will be modest, according to careful analyses from the Kaiser Family Foundation and the Urban Institute. The effect is modest for three reasons. One is that in some states UHC focuses on group insurance, not on insurance sold to individuals, where they are not always a major presence. Secondly, premiums of UHC products in individual markets are relatively high. Third, in most states and counties ACA purchasers will still have a choice of two or more other options. In addition, UHC’s departure may coincide with or actually cause the entry of other insurers, as seems to be happening in Iowa.

The announcement by UHC is noteworthy, however. It signals the beginning for ACA exchanges of a new stage in their development, with challenges and opportunities different from and in many ways more important than those they faced during the first three years of operation, when the challenge was just to get up and running. From the time when HealthCare.Gov and the various state exchanges opened their doors until now, administrators grappled non-stop with administrative challenges—how to enroll people, helping them make an informed choice among insurance offerings, computing the right amount of assistance each individual or family should receive, modifying plans when income or family circumstances change, and performing various ‘back office’ tasks such as transferring data to and from insurance companies. The chaotic first weeks after the exchanges opened on October 1, 2013 have been well documented, not least by critics of the ACA. Less well known are the countless behind-the-scenes crises, patches, and work-arounds that harried exchange administrators used for years afterwards to keep the exchanges open and functioning.

The ACA forced not just exchange administrators but also insurers to cope with a new system and with new enrollees. Many new exchange customers were uninsured prior to signing up for marketplace coverage. Insurers had little or no information on what their use of health care would be. That meant that insurers could not be sure where to set premiums or how aggressively to try to control costs, for example by limiting networks of physicians and hospitals enrollees could use. Some did the job well or got lucky. Some didn’t. United seems to have fallen in the second category. United could have stayed in the 30 or so state markets they are leaving and tried to figure out ways to compete more effectively, but since their marketplace premiums were often not competitive and most of their business was with large groups, management decided to focus on that highly profitable segment of the insurance market. Some insurers, are seeking sizeable premium increases for insurance year 2017, in part because of unexpectedly high usage of health care by new exchange enrollees.

United is not alone in having a rough time in the exchanges. So did most of the cooperative plans that were set up under the ACA. Of the 23 cooperative plans that were established, more than half have gone out of business and more may follow. These developments do not signal the end of the ACA or even indicate a crisis. They do mark the end of an initial period when exchanges were learning how best to cope with clerical challenges posed by a quite complicated law and when insurance companies were breaking into new markets. In the next phase of ACA implementation, federal and state policy makers will face different challenges: how to stabilize, expand, and diversify marketplace risk pools, promote local market competition, and encourage insurers to compete on product quality rather than premium alone. Insurance company executives will have to figure out how to master rate setting, plan design, and network management and manage risk for customers with different characteristics than those to which they have become accustomed.

Achieving these goals will require state and federal authorities to go beyond the core implementation decisions that have absorbed most of their attention to date and exercise powers the ACA gives them. For example, section 1332 of the ACA authorizes states to apply for waivers starting in 2017 under which they can seek to achieve the goals of the 2010 law in ways different from those specified in the original legislation. Along quite different lines, efforts are already underway in many state-based marketplaces, such as the District of Columbia, to expand and diversify the individual market risk pool by expanding marketing efforts to enroll new consumers, especially young adults. Minnesota’s Health Care Task Force recently recommended options to stabilize marketplace premiums, including reinsurance, maximum limits on the excess capital reserves or surpluses of health plans, and the merger of individual and small group markets, as Massachusetts and Vermont have done.

In normal markets, prices must cover costs, and while some companies prosper, some do not. In that respect, ACA markets are quite normal. Some regional and national insurers, along with a number of new entrants, have experienced losses in their marketplace business in 2016. One reason seems to be that insurers priced their plans aggressively in 2014 and 2015 to gain customers and then held steady in 2016. Now, many are proposing significant premium hikes for 2017.

Others, like United, are withdrawing from some states. ACA exchange administrators and state insurance officials must now take steps to encourage continued or new insurer participation, including by new entrants such as Medicaid managed care organizations (MCOs). For example, in New Mexico, where in 2016 Blue Cross Blue Shield withdrew from the state exchange, state officials now need to work with that insurer to ensure a smooth transition as it re-enters the New Mexico marketplace and to encourage other insurers to join it. In addition, state insurance regulators can use their rate review authority to benefit enrollees by promoting fair and competitive pricing among marketplace insurers. During the rate review process, which sometimes evolves into a bargaining process, insurance regulators often have the ability to put downward pressure on rates, although they must be careful to avoid the risk of underpricing of marketplace plans which could compromise the financial viability of insurers and cause them to withdraw from the market. Exchanges have an important role in the affordability of marketplace plans too. For example ACA marketplace officials in the District of Columbia and Connecticut work closely with state regulators during the rate review process in an effort to keep rates affordable and adequate to assure insurers a fair rate of return.

Several studies now indicate that in selecting among health insurance plans people tend to give disproportionate weight to premium price, and insufficient attention to other cost provisions—deductibles and cost sharing—and to quality of service and care. A core objective of the ACA is to encourage insurance customers to evaluate plans comprehensively. This objective will be hard to achieve, as health insurance is perhaps the most complicated product most people buy. But it will be next to impossible unless customers have tools that help them take account of the cost implications of all plan features and report accurately and understandably on plan quality and service. HealthCare.gov and state-based marketplaces, to varying degrees, are already offering consumers access to a number of decision support tools, such as total cost calculators, integrated provider directories, and formulary look-ups, along with tools that indicate provider network size. These should be refined over time. In addition, efforts are now underway at the federal and state level to provide more data to consumers so that they can make quality-driven plan choices. In 2018, the marketplaces will be required to display federally developed quality ratings and enrollee satisfaction information. The District of Columbia is examining the possibility of adding additional measures. California has proposed that starting in 2018 plans may only contract with providers and hospitals that have met state-specified metrics of quality care and promote safety of enrollees at a reasonable price. Such efforts will proliferate, even if not all succeed.

Beyond regulatory efforts noted above, insurance companies themselves have a critical role to play in contributing to the continued success of the ACA. As insurers come to understand the risk profiles of marketplace enrollees, they will be better able to set rates, design plans, and manage networks and thereby stay profitable. In addition, insurers are best positioned to maintain the stability of their individual market risk pools by developing and financing marketing plans to increase the volume and diversity of their exchange enrollments. It is important, in addition, that insurers, such as UHC, stop creaming off good risks from the ACA marketplaces by marketing limited coverage insurance products, such as dread disease policies and short term plans. If they do not do so voluntarily, state insurance regulators and the exchanges should join in stopping them from doing so.

Most of the attention paid to the ACA to date has focused on efforts to extend health coverage to the previously uninsured and to the administrative stumbles associated with that effort. While insurance coverage will broaden further, the period of rapid growth in coverage is at an end. And while administrative challenges remain, the basics are now in place. Now, the exchanges face the hard work of promoting vigorous and sustainable competition among insurers and of providing their customers with information so that insurers compete on what matters: cost, service, and quality of health care.

Editor's note: This piece originally appeared in Real Clear Markets. Kevin Lucia and Justin Giovannelli contributed to this article with generous support from The Commonwealth Fund.

       

       

       

       

       

The much-awaited rulings of the Permanent Court of Arbitration in The Hague—in response to the Philippines’ 2013 submission over the maritime entitlements and status of features encompassed in China’s expansive South China Sea claims—were released this morning. Taken together, the rulings were clear, crisp, comprehensive, and nothing short of a categorical rejection of Chinese claims.

Among other things, the court ruled China’s nine-dash line claim to the South China Sea invalid because of Beijing’s earlier ratification of the United Nations Convention on the Law of the Sea (UNCLOS). In a move that surprised many observers, the court also ventured a ruling on the status of every feature in the Spratly Islands, clarifying that none of them were islands and hence do not generate an exclusive economic zone (EEZ). Significantly, it ruled that Mischief Reef, which China has occupied since 1995, and Second Thomas Shoal, where China has blockaded Philippine marines garrisoned on an old vessel that was deliberately run aground there, to be within the EEZ of the Philippines.

In the neighborhood

Now that the rulings have been made, what are the implications and way forward for concerned states?

For the Philippines, the legal victory presents a paradoxical challenge for the new government. Prior to the ruling, newly-elected President Rodrigo Duterte indicated on several occasions that he was prepared to depart from his predecessor’s more hardline position on the South China Sea to engage Beijing in dialogue and possibly even joint development. He even hinted that he would tone down Manila’s claim in exchange for infrastructure investment. Given that the ruling decisively turns things in Manila’s favor, it remains to be seen whether the populist Duterte administration would be able to sell the idea of joint development of what are effectively Philippine resources without risking a popular backlash. This will be difficult but not necessarily impossible, given that the Philippines would likely still require logistical and infrastructural support of some form or other for such development projects. 

Since the submission of the Philippine case in 2013, China has taken the position of “no recognition, no participation, no acceptance, and no execution,” as described by Chinese professor Shen Dingli. Beijing continues to adhere to this position, and is likely to dig in its heels given the comprehensive nature of the court’s rejection of China’s claims. This, in turn, will feed the conspiracy theories swirling around Beijing that the court is nothing but a conspiracy against China. 

[T]he rulings are likely to occasion intense internal discussions and debates within the Chinese leadership as to how best to proceed.

Not surprisingly, in defiance of the ruling, China continues to insist on straight baselines and EEZs in the Spratlys. Away from the glare of the media however, the rulings are likely to occasion intense internal discussions and debates within the Chinese leadership as to how best to proceed. Many analysts have the not-unfounded concern that hawkish perspectives will prevail in this debate, at least in the short term—fed by the deep sensibilities to issues of security and sovereignty, and a (misplaced) sense of injustice. This would doubtless put regional stability at risk. Instead, China should do its part to bring the Code of Conduct it has been discussing with ASEAN to a conclusion as a demonstration of its commitment to regional order and stability, and the peaceful settlement of disputes. Beijing should also continue to engage concerned states in dialogue, but these dialogues cannot be conducted on the premise of Chinese “unalienable ownership” of and “legitimate entitlements” in the South China Sea. 

ASEAN will be hosting several ministerial meetings later this month, and the ruling will doubtless be raised in some form or other, certainly in closed-door discussions. For ASEAN, the key question is whether the organization can and will cobble together a coherent, consensus position in response to the ruling, and how substantive the response will be (they should at least make mention of the importance of international law to which all ASEAN states subscribe). For now though, it is too early to tell. 

U.S. policy

As an Asia-Pacific country, the United States has set great stock in the principle of freedom of navigation, and has articulated this as a national interest with regards to the South China Sea. There are however, three challenges for the United States as it proceeds to refine its policy in the region:

1. First, going by the attention it has commanded in Washington, it appears that the South China Sea issue has already become the definitive point of reference of America’s Southeast Asia policy. Southeast Asian states, on the other hand, have expressed their desire precisely that the South China Sea issue should not overshadow or dominate the regional agenda. Hence, even as the United States continues to be present and engaged on South China Sea issues in the region, equal attention, if not more, should be afforded to broaden the scope of their engagement. 
2. Second, in pushing back Chinese assertiveness in the South China Sea, the United States must be careful not to inadvertently contribute to the militarization of the region. There is talk about the deployment of a second carrier group to the region, and the U.S.S. John C. Stennis and U.S.S. Ronald Reagan are already patrolling the Philippine Sea. On the one hand, this is presumed to enhance the deterrent effect of the American presence in the region. Yet on the other hand, Washington should be mindful of the fact that China’s South China Sea claim is also informed by a deep sense of vulnerability, especially to the military activities that the United States conducts in its vicinity. 
3. Finally, in its desire to reassure the region, the United States has sought to strengthen its relations with regional partners and allies. This is necessary, and it is welcomed. At the same time however, Washington should also ensure that this strengthening and deepening of relations is undergirded by an alignment of interests and shared outlooks. This cannot, and should not, be assumed. 

       

The development community issued a collective sigh of relief last week when the U.S. Senate, after a seven-month delay, finally confirmed a new Administrator of the United States Agency for International Development (USAID). In addition to dealing with the many global development issues, Gayle Smith also has the task of making good on the Obama administration’s commitment to make USAID a preeminent 21st century development agency.

While a year might seem a short time for anyone to make a difference in a new government position, Gayle Smith assuming the lead in USAID should be seen more as the capstone of a seven-year tenure guiding U.S. global development policy.  She led the interagency process that produced the 2010 Presidential Policy Determination on Development (PDD), and has been involved in every administration development policy initiative since, including major reforms inside USAID.

The five items below are suggestions on how Smith can institutionalize and take to the next level reforms and initiatives that have been part of the development agenda of which she has been a principal architect.

Accountability: Transparency and evaluation

The PPD lays out key elements for making our assistance programs more accountable, including “greater transparency” and “more substantial investment of resources in monitoring and evaluation.”

USAID staff have designed a well thought out Cost Program Management Plan to advance the public availability of its data and to fulfill the U.S. commitment to the International Assistance Transparency Initiative (IATI). What this plan needs is a little boost from the new administrator, her explicit endorsement and energy, and maybe the freeing-up of more resources so phases two and three to get more and better USAID data into the IATI registry can be completed by the end of 2016 rather than slipping over into the next administration. In addition, the fourth and final phase of the plan needs to be approved so data transparency is integrated into the planned Development Information Solution (DIS), which will provide a comprehensive integration of program and financial information. 

Meanwhile, in January 2011 USAID adopted an evaluation policy that was praised by the American Evaluation Association as a model for other government agencies. In FY 2014, the agency completed 224 evaluations. The new administrator could provide leadership in several areas that would raise the quality and use of USAID’s evaluations. She should weigh in on the sometimes theological debate over what type of evaluation works best by being clear that there is no single, all-purpose type of evaluation. Evaluations need to fit the context and question to be addressed, from most significant change (focusing solely on the most significant change generated by a project), to performance evaluation, to impact evaluation.   

Second, evaluation is an expertise that is not quickly acquired. Some 2,000 USAID staff have been trained, but mainly through short-term courses. The training needs to be broadened to all staff and deepened in content. This will contribute to a cultural change whereby USAID staff learn not just how to conduct evaluations, but how to value and use the findings.

Third, evaluations need to be translated into learning. The E3 Bureau (Bureau for Economic Growth, Education and Environment) has set the model of analyzing and incorporating evaluation findings into its policies and programs, and a few missions have bought evaluations into their program cycle. This needs to be done throughout the agency. Further, USAID should use its convening power to share its findings with other U.S. government agencies, other donors, and the broader development community.

Innovation and flexibility

Current USAID processes are considered rigid and time-consuming. This is not uncommon to large institutions, but in recent years the agency has been seeking more innovative, flexible instruments. The USAID Global Development Lab is experimenting with what is alternatively referred to as the Development Innovation Accelerator (DIA) or Broad Agency Announcement (BAA), whereby it invites ideas on a specific development problem and then selects the authors of the best, most relevant, to join USAID staff in co-creating solutions—something the corporate sector has been calling for—to be involved at the beginning of problem-solving. Similarly, the Policy, Planning, and Learning Bureau is in the midst of redesigning the program cycle to introduce adaptive management, allowing for greater collaboration and real-time response to new information and evolving local circumstances. Adaptive management would allow for more customized approaches and learning based on local context.

Again, the PPD calls for “innovation.” As with accountability, an expression of interest and support from the new administrator, and an articulation of the need to inculcate innovation into the USAID culture, could move these endeavors from tentative experiment to practice.

The New Deal for Fragile States

Gayle Smith has been immersed in guiding U.S. policy in unstable, fragile states. She knows the territory well and cares. The U.S. has been an active participant and leader in the New Deal for Fragile States. The New Deal framework is a thoughtful, comprehensive structure for moving fragile states to stability, but recent analyses indicate that neither members of the G7+ countries nor donors are following the explicit steps. They are not dealing with national and local politics, which are the essential levers through which to bring stability to a country, and are not adequately including civil society. Maybe the New Deal structures are too complicated for a country that has minimal governance. Certainly, there has been insufficient senior-level leadership from donors and buy-in from G7+ leaders and stakeholders. With her deep knowledge of the dynamics in fragile states, Smith could bring sorely needed U.S. leadership to this arena.

Policy and budget

The PPD calls for “robust policy, budget, planning, and evaluation capabilities.” USAID moved quickly on these objectives, not just in restoring USAID former capabilities in evaluation, but also in policy and budget through the resurrection of the planning and policy function (Policy, Planning, and Learning Bureau, or PPL) and the budget function (Office of Bureau and Resource Management, or BRM). PPL has reestablished USAID’s former policy function, but USAID’s budget authority has only been partially restored.

Gayle Smith needs to take the next obvious step. Budget is policy. The integration of policy and budget is an essential foundation of evidence-based policymaking. The two need to be joined so these functions can support each other rather than operating in isolated cones. Budget deliberations are not just about numbers; policies get set by budget decisions, so policy and budget need to be integrated so budget decisions are informed by strategy and policy knowledge.

I go back to the model of the late 1970s when Alex Shakow was head of the Policy, Planning, and Coordination Bureau (PPC), which encompassed both policy and budget. Here you had in one senior official someone who was knowledgeable about policy and budget and understood how the two interact. He was the go-to-person the agency sent to Capitol Hill. He could deal with the range of issues that always unexpectedly arise during congressional committee hearings and markups. He could effectively deal with the State Department and interagency meetings on a broad sweep of policy and program matters. He could represent the U.S. globally, such as at the Development Assistance Committee (DAC) and other international development meetings.

With the expansion of the development agenda and frequency of interagency and international meetings, such a person is in even greater need today. USAID needs three or four senior officials—administrator, deputy administrator, associate administrator, and the head of a joined-up policy/budget function —to cover the demand domestically and internationally for senior USAID leadership with a deep knowledge of the broad scope of USAID programs.    

Food aid reform

The arguments for the need to reform U.S. food assistance programs are incontrovertible and have been hashed hundreds of times, so no need to repeat them here. But it is clearly in the interests of the tens of millions of people globally who each year face hunger and starvation for the U.S. to maximize the use of its resources by moving its food aid from an antiquated 1950s model to current market realities. There is leadership for this on the Hill in the Food for Peace Reform Act of 2015, introduced by Senators Bob Corker and Chris Coons. Gayle Smith could help build the momentum for this bill and contribute to an important Obama legacy, whether enactment happens in 2016 or under a new administration and Congress in 2017.

Gayle knows better than anyone the Obama development agenda. These ideas are humbly presented as an outside observer’s suggestions of how to solidify key administration aid effectiveness initiatives. 

      

Introduction

Ohio has already taken important steps to address the state’s ongoing foreclosure crisis, yet the crisis continues, causing distress for thousands of families and individuals, and destabilizing cities, towns and neighborhoods across the state. Therefore, the state, its local governments and private stakeholders need to do still more to deal more effectively with the crisis and its impacts on the state’s housing stock, cities and neighborhoods.

What is often termed the “foreclosure crisis” is actually a multi-dimensional crisis, in which the collapse of the housing bubble, the devastation caused by the lax and often irresponsible credit practices that accompanied and perpetuated that bubble, the resulting freeze on commercial and consumer credit, and the worldwide recession are interwoven, and can only with great difficulty be untangled. In Ohio, those forces are further exacerbated by profound changes to the state’s historical economic underpinnings. Ohio cannot solve the crisis by itself, but it can significantly mitigate its impact on people, neighborhoods, and towns and cities. These mitigating efforts will also help preserve the value of homes and neighborhoods in the state, and place Ohio in a stronger position to benefit from the future economic recovery.

The paper begins with a short summary of current conditions and the actions the state has already taken to address the wave of foreclosures, followed by a discussion of areas for future action. This discussion will address mitigating both the individual and community impacts of foreclosure, but will give particular emphasis to the critical issue of softening the blow of foreclosure on communities, which up to now has been less of a focus for state action.

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From gourmet coffee to online shopping and software, the Seattle region has a long history of bringing innovations to market. And with its environmental consciousness, Seattle consistently ranks among the greenest cities in the United States.

So it makes sense that the region is capitalizing on its sustainability ethos to sharpen its next competitive advantage: smart building technology.

The region’s desire to cement a new market capability was partly about jobs, given the Great Recession and its aftermath. But leaders were concerned about a more basic dilemma: How can Seattle get beyond the “two Bills”-- Bill Boeing and Bill Gates—to build the next generation of innovation and a platform for broad-based economic growth?

Given their existing strengths, firms and leaders in the Puget Sound region made a play to apply their expertise in cloud computing, big data, and information technology to increasing energy efficiency in the built environment. And this would be an export opportunity, too. Rapid urbanization worldwide is prompting global demand for new sustainable solutions and technologies, a market that Seattle entrepreneurs and workers could meet.

To effectively enter and lead in the clean technology market, the region needed to address some market failures, including providing proof of return on investment of new technology for hesitant adopters and investors and building a skilled labor force to staff the increasingly sophisticated industry.

After developing a business plan, the Puget Sound region is now in the midst of a three-pronged, collaborative Smart Buildings effort driven by public, private, and non-profit partners including Innovate Washington, Microsoft, the city of Seattle, South Seattle Community College, and the Puget Sound Regional Council.

First, a high-performance buildings pilot launched last year is demonstrating the efficacy and return-on-investment of energy efficient technology in a mix of buildings—the Seattle Sheraton hotel, a University of Washington medical lab, a Boeing industrial facility, and a city of Seattle office building. The buildings are providing on-site building operators access to a constant digital building performance dashboard. The dashboard helps raise alarms if a key part might break down during an upcoming major event and identifies whether a large ballroom’s temperature needs to be readjusted following a large convening.

“We’re not having to babysit the system as much,” explained Rodney Schauf, the Seattle Sheraton’s director of engineering.

In the first six months of participation in the program, the University of Washington building reduced its energy use by 9 percent and the Sheraton reduced its usage by 5.5 percent, according to Brian Geller, the executive director of the Seattle 2030 District, the city’s larger high performance building district.

Second, the Smart Buildings Center opened as hub for business collaborations, technology demonstrations, and evaluation for energy efficiency technology solutions. The center is also currently developing an initiative to harness K-12 school and public building energy data for greater efficiencies. The effort is aided by the Cleantech Open, which identifies, connects, and mentors companies participating in the center.

Finally, South Seattle College will launch a new Sustainable Building Science Technology Bachelor’s of Applied Science Program, with the inaugural class starting this fall. The program, which combines technical systems understanding with internship opportunities and management skills, has already received strong interest from prospective students.

With this coordinated and comprehensive effort—which has been aided by funds from a federal i6 Green Challenge grant, state matching funds, and other private support—the region is on its way to demonstrating that its sustainable image can also produce real economic gains.

The initiative featured here emerged from work supported by the Brookings-Rockefeller Project on State and Metropolitan Innovation. Brookings recognizes that the value it provides is in its absolute commitment to quality, independence, and impact. Activities supported by its donors reflect this commitment and the analysis and recommendations are solely determined by the scholar.

       

       

       

It can be hard to find good news lately in Ohio. Foreclosure filings are at record levels -- again. Income tax receipts plummeted by 35.6 percent from April 2008 to April 2009, and the downward trend continues in 2010. Unemployment remains high: The Cleveland region's jobless rate was 8.9 percent in December.

But the current devastation is only half the story. Ohio is in a paradoxical moment: The present is painful, but the future could be promising. And in another paradox, its manufacturing heritage is part of the reason why.

The pre-recession economy was driven by consumption, energy profligacy and financial bubbles. The next American economy must be very different: export oriented, low carbon and innovation fueled.

According to the World Bank, exports make up only 11 percent of the gross domestic product of the United States, compared to 40 percent in Europe, 40 percent in China, 36 percent in Canada, 22 percent in India and 16 percent in Japan. Only 4 percent of U.S. companies export. Less than 0.5 percent of U.S. companies operate in more than one country.

Ohio can lead the United States back into the export game, because the state still manufactures what the rest of the world wants, including medical instruments, electrical machinery and aircraft parts.

Brazil and China, two rapidly growing economies, are Ohio's third- and fourth-largest trading partners. The seven largest Ohio metros exported about $3.6 billion's worth of goods and services to Brazil, India and China in 2007 alone.

Cleveland is in the country's top quarter of large metros in terms of export intensity (the percentage of metropolitan-region output that is exported overseas). Every patient who comes from abroad to visit the Cleveland Clinic bolsters the region's service exports economy.

Low carbon is the second hallmark of the next U.S. economy, and it could spark a production revolution in Ohio and other manufacturing states.

The transition to a low-carbon economy is fundamentally about markets and products. We will need new energy supplies -- like wind and biomass -- and new machines -- like turbines and solar panels.

Also, we will need new kinds of batteries, new kinds of cars and energy-efficient appliances, smart meters and local food. All of these products could be designed, developed, built and grown in Ohio.

The state ranks seventh in the nation for total green-technology patents for 1998–2007, with strengths in batteries, hybrid systems and fuel cells.

According to a recent report by the Pew Center on the States, Ohio's number of clean-energy jobs grew by more than 7 percent between 1998 and 2007, even as the overall number of jobs in the state fell 2 percent.

Creating the products and services demanded across the globe, and those that fit with a low-carbon world, will take quantum leaps in innovation.

Already, the state is gaining some notice, attracting $46 million in venture capital investments in clean technology in 2008, more than triple the 2007 amount.

The state is in the top 10 nationally in science and engineering doctorates awarded, in academic research and development spending, and in small-business-innovation research awards, according to recent National Science Foundation data.

Cleveland's patent rate, another measure of innovative power, is above the national average.

We used to think that we could divorce innovation entirely from production, keeping the former here as we sent most of the latter abroad. But important innovations also emerge from the factory floor. Innovating more means producing more, and that production can take place in Ohio.

It is true that Ohio's job losses in manufacturing have been staggering, especially in the northeast corner of the state. But manufacturing doesn't have to be a millstone -- it can be a stepping stone toward the next economy.

It is this mindset that should drive Ohioans' policy decisions over the next year. It is not easy to raise spending on innovation, or vote for an additional $700 million for the Third Frontier, while pressing school districts and local governments to find more savings. But those hard choices will position Ohio for a stronger future.

The "Restoring Prosperity" report that the Brookings Institution and the Greater Ohio Policy Center released last week recommends 39 policies -- from rebuilding physical assets to reorganizing work-force supports to collaborating at the regional scale -- that can help Ohio strengthen its footing in an export-oriented, low-carbon and innovation-fueled world. Groups like the Fund for our Economic Future are already working to advance many of these ideas.

Yet just as important as the policies is the underlying message: Even as this economy falters, Ohio could benefit from the next one that's emerging. Your strengths are just as real and relevant as the current crisis.

       

As expected, on August 10, Prime Minister Recep Tayyip Erdoğan from the Justice and Development Party (AKP) decisively won Turkey’s first directly-elected presidential election. He received just about 52 percent of the votes, falling somewhat short of the 55 percent that the polls were predicting.

At a time when Turkey’s neighborhood is in a state of chaos and the country is deeply polarized, what will his next steps as president be? Will he transform Turkey’s political system from a parliamentary to a presidential one? Will he be able to simultaneously run his party, control the prime minister and be the president of Turkey? Will he be able to overcome the authoritarian and abrasive politics of the last two years and replace it with politics reminiscent of the mid-2000s characterized by consensus building and liberal reforms? Or will it be a case of more of the same?

Traditionally, presidents were elected by members of the Turkish Parliament, and had limited powers. However, Erdoğan has been aspiring for a strong presidency since AKP won close to half of the votes at the national elections in June 2011. While serving as prime minister, Erdoğan attempted to write a new constitution, but resistance from opposition parties together with the May 2013 Gezi Park protests and the December 2013 corruption scandal prevented him from achieving his goal. Consequently, his fallback plan has been to emerge triumphant from the 2014 presidential elections,use the presidential powers in the current constitution to its full extent and aim to get AKP to emerge from the parliamentary elections scheduled for June 2015 with enough seats, enabling him to see to the adoption of a new constitution. This new constitution would transform Turkey’s parliamentary system into a presidential one and give Erdoğan the possibility to run the country until 2023, the Republic’s centenary.

Erdoğan’s Opponents: İhsanoğlu and Demirtaş

Ekmeleddin İhsanoğlu and Selahattin Demirtaş were Erdoğan’s main opponents. Although neither constituted major challenges for Erdoğan, each represent something significant for Turkey. The left-leaning secularist Republican People’s Party (CHP) and right-wing Nationalist Movement Party (MHP) joined forces to support İhsanoğlu’s candidacy. İhsanoğlu, born and raised in Cairo, a prominent religious scholar, and a secretary-general of the Organization of Islamic Cooperation from 2004 to 2010, was seen as the best candidate to attract former AKP members, and votes from the wider conservative electorate. Though he lacked political experience and visibility in Turkey, he managed to receive more than 38 percent of the votes. This performance falls short of the 44 percent that CHP and MHP garnered at the local elections in March this year, but would still be considered as a respectable performance.

Demirtaş, a prominent figure amongst Turkey’s Kurdish minority population and a keen partner in government efforts to find a political solution to the Kurdish problem in Turkey, ran for presidency on a secular and somewhat leftist agenda, sensitive to the interests of especially minorities and women. He received almost 10 percent of the votes, one point short of most poll predictions, but almost twice the amount that his party, Peace and Democracy Party (BDP), received in March local elections. This suggests that Demirtaş received support not just from Kurdish, but also Turkish voters, a very significant development in terms of politics in Turkey.

How Has the Turkish Political System Worked in the Past?

With Erdoğan’s victory, Turkey is now at an important crossroad. Since World War II, Turkey has been a parliamentary system. The prime minister was the head of the executive branch of government and the president, elected by the parliament, held a ceremonial role. This changed after General Kenan Evren led the 1980 military coup d’état. In 1982, Evren introduced a new constitution that empowered the president with some executive powers intended to exert some control over civilian politicians. However, with the exception of Evren and his successor, Turgut Özal, subsequent presidents, Süleyman Demirel and Ahmet Necdet Sezer, refrained from using these constitutional powers in any conspicuous manner. So where did the notion of a directly-elected president come from?

The idea of a president elected directly by the electorate, rather than by the parliament, is an outcome of the military’s interference in politics in 2007. As the end of the staunchly secular and politically shy Sezer’s term approached, the military in a rather undemocratic manner, tried to prevent the then-Minister of Foreign Affairs, Abdullah Gül, from becoming president. The military and the judicial establishment deeply distrusted Gül’s, as well as the AKP’s, commitment to secularism. The government overcame the challenge by calling for an early snap election that AKP won handsomely, opening the way for Gül’s election as the new president. Furthermore, the electoral victory encouraged Erdoğan to hit back at the military by calling for a referendum on whether future presidents should be directly elected by the people or by the parliament. Erdoğan’s initiative received support from 58 percent of the electorate, thereby quite decisively demonstrating to his opponents the very extent of his popularity while allowing him to emphasize the “will of the people” as the basis of his understanding of democracy.

The Campaigns: Two Approaches to Turkey’s Future

The 2014 presidential campaign unfolded as a competition between two political approaches to the future of governance in Turkey. The first approach, represented by Erdoğan, calls for a narrow and majoritarian understanding of democracy based on the notion of the “will of the people” (milli irade) at the expense of constitutional checks and balances and separation of powers. In return for such an authoritarian form of governance, Erdoğan promises a prosperous Turkey that will grow to be the 10th largest economy by 2023 and become a major regional, if not global power. It is with this in mind that Erdoğan aspires for a powerful presidential system dominated by him alone. The second approach, especially pushed for by İhsanoğlu, advocates the maintenance of the existing parliamentary system and warns that a hybrid system where both the prime minister and the president is elected directly by the people, risks creating instability, tension and polarization within the country. He advocated for a president who would be above party politics and who would focus on protecting freedoms and the rule of law.

Does Erdoğan Have a Mandate?

What will Erdoğan do now? He is confident that he enjoys wide-spread popularity among the masses. However, it is difficult to conclude if the electorate went to the polls on Sunday with a referendum to change the political system in mind. If they did, then they did so with a rather slim margin. Nevertheless, it is likely that Erdoğan will interpret the results of the elections as an explicit approval of his political agenda, and will thus proceed to transform Turkey towards a presidential system. However, a number of challenges will be awaiting his project. The first and immediate challenge will emerge with respect to the next prime minister. As a prominent Turkish columnist put it, Erdoğan will want a prime minister who will always be “one step behind”. But will politics allow for this to occur? Can Erdoğan find a loyal and unquestioning prime minister? The current constitution requires the president to resign his/her political party affiliations. Once he takes up his position as president at the end of August, will he be able to continue to enjoy control over AKP from a distance? This is not a challenge to be taken lightly considering that there will be parliamentary elections in 2015 and the ranks of AKP will be quite restless both in terms of the selection of candidates, as well as the prospects of ensuring a victory at the polls. Lastly, with ISIS’s growing power, political instability in many neighboring countries, a troubled relationship with the European Union and the United States and continued bloodbath in Syria, keeping the Turkish economy on course may turn out to be Erdogan’s greatest challenge. The coming months are going to be critical in terms of whether Erdoğan will overcome these challenges and succeed in transforming Turkey’s political system. The outcome will illustrate if Erdoğan is actually bigger than Turkey or vice versa. However, whatever happens in the next few months, it will largely determine if in 2023, Turkey will celebrate its centenary as a liberal or illiberal democracy. In the meantime, the fact that Erdoğan plans to use a constitution that was drawn up under military tutelage to achieve his presidential ambitions is both ironic, but also not very promising in terms of Turkey’s democracy turning liberal.

Editor's Note: Ranu Nath, the Turkey Project intern in the Foreign Policy Program at Brookings, contributed to this piece.

       

The announcement of King Abdullah’s death puts Saudi Arabia in the hands of his designated successor, Prince Salman. Salman has his own health issues and faces an immediate crisis on the kingdom’s southern border in Yemen. Continuity will be Salman’s hallmark, including close ties to Washington.

Now King Salman, born Dec. 31, 1935, who is also defense minister, has been chairing cabinet meetings for several months and handling almost all foreign travel responsibilities for the monarchy since he became the heir in 2012. He has visited China, Japan, India, Pakistan, the Maldives, and France since becoming crown prince after the death of his predecessor, Prince Nayif. He has hosted a series of Saudi allies like Pakistani Prime Minister Nawaz Sharif and Egypt’s president, Abdel Fattah Al-Sisi, who paid their last respects quietly to Abdullah in the last week.

Before becoming crown prince, Salman was governor of Riyadh province for 48 years. When he became governor in 1963, Riyadh had 200,000 inhabitants; today, it has more than seven million. Salman presided over this remarkable transformation with a record for good governance and a lack of corruption. Since most of the royal princes and princesses live in Riyadh, he was also the family sheriff, ensuring any transgressions were dealt with smoothly and quietly with no publicity. He knows where all the bodies are hidden.

Salman also oversaw the collection of private funds to support the Afghan mujahideen in the 1980s, working very closely with the kingdom’s Wahhabi clerical establishment. In the early years of the war, before the U.S. and the kingdom ramped up their secret financial support for the anti-Soviet insurgency, this private Saudi funding was critical to the war effort. At the war’s peak, Salman was providing $25 million a month to the mujahideen. He was also active in raising money for the Bosnian Muslims in the war with Serbia.

Salman’s sons include the first Muslim astronaut, Prince Sultan, and the governor of Medinah, Prince Faysal. Another son, Prince Khaled, is a fighter pilot in the Royal Saudi Air Force and led the first RSAF mission against Islamic State targets in Syria last year. The family controls much of the Saudi media. All will now be up-and-comers.

Salman has his own health issues and has had a stroke. (Persistent rumors of dementia are denied by the palace.) His successor was announced in February 2013 to ensure continuity. Second Deputy Prime Minister Prince Muqrin was born Sept. 15, 1945 and was educated at the Royal Air Force College in England before becoming a pilot in the Royal Saudi Air Force. Later, he was governor of Medinah province and then head of Saudi intelligence. Muqrin is now crown prince.

Abdullah, Salman, and Muqrin are sons of the modern kingdom’s founder, Abdelaziz Ibn Saud, who had 44 recognized sons. The survivors and their heirs constitute the Allegiance Council, which Abdullah created in 2007 to help choose the line of succession. In practice it has only ratified the king’s decisions after the fact.

Muqrin is widely believed to be the last capable son of Ibn Saud. So now that Muqrin has ascended to the crown prince position the kingdom will face the unprecedented challenge of picking a next in line from the grandsons of Ibn Saud. That will raise questions of legitimacy not faced in the last century of Saudi rule.

Abdullah has been the de facto ruler of the kingdom since King Fahd suffered a debilitating stroke in 1995; he became king a decade later when Fahd passed away. A progressive reformer by Saudi standards, Abdullah gave the kingdom 20 years of stability. Salman is likely to provide continuity. The House of Saud values family collegiality and harmony highly. The two previous Saudi kingdoms in the 18th and 19th centuries were wracked by family internal squabbles which their foreign enemies exploited. Eleven of 14 successions were contested and the Saudis ended up in exile in Kuwait until Ibn Saud created the modern kingdom in 1902.

With the Arab world facing its worst crisis in decades, the royals will want to present an image of stability and strength. This is especially true with the collapse of the pro-Saudi government in Yemen, which will be Salman’s first crisis.

The Zaydi Houthi rebels who have all but disposed the pro-American government in Yemen this week have a slogan which reads, “Death to America, death to Israel, curses to the Jews and victory to Islam.” The collapse of President Abd Rabdu Mansour Hadi’s government, which openly supported American drone strikes in Yemen against Al Qaeda in the Arabian Pennisula for the last couple of years, puts a pro-Iranian anti-American Shia militia as the dominant player in a strategically important country. The Bab El Mandab, the straits between Asia and Africa, are one of the choke points of global energy and geopolitics. The leader of the Houthis gave a triumphal speech Tuesday and Iranian diplomats hailed his victory. The Houthis have fought a half-dozen border wars with the Saudis, who spent billions trying to keep them out of power.

The Houthis’ victory also ironically benefits AQAP by polarizing Yemen, the poorest country in the Arab world, between Shia and Sunni with AQAP emerging as the protector of Sunni rights. AQAP is fresh off its attack on Paris and has grown since 2009 into the most dangerous al Qaeda affiliate in the world. It is dedicated to overthrowing the House of Saud. Salman will have his hands full immediately.

This piece was originally published by The Daily Beast. 

       

       

Introduction:  The sinking of the Deepwater Horizon drilling platform and the resulting discharge of millions of gallons of crude oil into the sea demonstrated graphically the challenge of environmental protection in the ocean waters shared by Cuba and the United States.

While the quest for deepwater drilling of oil and gas may slow as a result of the latest calamity, it is unlikely to stop. It came as little surprise, for example, that Repsol recently announced plans to move forward with exploratory oil drilling in Cuban territorial waters later this year.

As Cuba continues to develop its deepwater oil and natural gas reserves, the consequence to the United States of a similar mishap occurring in Cuban waters moves from the theoretical to the actual. The sobering fact that a Cuban spill could foul hundreds of miles of American coastline and do profound harm to important marine habitats demands cooperative and proactive planning by Washington and Havana to minimize or avoid such a calamity. Also important is the planning necessary to prevent and, if necessary, respond to incidents arising from this country’s oil industry that, through the action of currents and wind, threaten Cuban waters and shorelines.

While Washington is working to prevent future disasters in U.S. waters like the Deepwater Horizon, its current policies foreclose the ability to respond effectively to future oil disasters—whether that disaster is caused by companies at work in Cuban waters, or is the result of companies operating in U.S. waters.

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During his presentation at the University of Michigan/Urban Land Institute Real Estate Forum, Christopher B. Leinberger discusses the impact walkable urbane places has and will have on metropolitan development patterns, the market reasons for this change and how to strategically manage it.

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What if there were a new economic engine for the United States that would put our people back to work without putting the government deeper in debt? What if that economic engine also improved our international competitiveness, reduced greenhouse gases, and made the American people healthier?

At a minimum, it would sound a lot better than any of the current offers on the table: stimulus from the liberals, austerity from the conservatives, and the president’s less-than-convincing plan for a little stimulus, a little austerity, and a little bit of a clean-energy economy.

The potential for just such an economic renaissance is a lot more plausible than many would imagine. At the heart of this opportunity are the underappreciated implications of a massive demographic convergence. In short, the two largest demographic groups in the country, the baby boomers and their children—together comprising half the population—want homes and commercial space in neighborhoods that do not exist in anywhere near sufficient quantity. Fixing this market failure, unleashing this latent demand, and using it to put America back to work could be accomplished without resorting to debt-building stimulus or layoff-inducing austerity. At least for the moment, Washington has an opportunity to speed up private investment for public good and launch what could be a period of long-lasting prosperity. It is a market-driven way to make the economic recovery sustainable while addressing many of the most serious problems of our time: the health care crisis, climate change, over-reliance on oil from countries with terrorist ties, and an overextended military.

Real estate has caused two of the last three recessions, including the Great Recession we’ve just gone through. That is because real estate (housing, commercial, and industrial) and the infrastructure that supports real estate (transportation, sewer, electricity, and so on) represent 35 percent of the economy’s asset base. When real estate crashes, the economy goes into a tailspin. To speed up the economic recovery now slowly underway, the real estate sector must get back into the game, just as it played a central role in the economic recoveries of past recessions. (Real estate also kept the high-tech recession in the early 2000s from being as serious as it might have been.) The United States will be condemned to high unemployment and sluggish growth if 35 percent of our asset base is not engaged. And hundreds of billions of dollars in potential investment capital is on the sidelines, waiting for the right market signals to be deployed.

We’re unlikely, however, to see a real estate recovery based on a continuation of the type of development that has driven the industry for the past few generations: low-density, car-dependent suburbs growing out of cornfields at the edge of metropolitan areas. That’s because there is now a massive oversupply of such suburban fringe development, brought on by decades of policy favoring it—including heavy government subsidies for extending roads, sewers, and utilities into undeveloped land. Houses on the exurban fringe of several large metro areas have typically lost more than twice as much value as metro areas as a whole since the mid-decade peak. Many of those homes are now priced below the cost of the materials that went into building them, which means that their owners have no financial incentive to invest in their upkeep. Under such conditions, whole neighborhoods swiftly decline and turn into slums. This happened in many inner-city neighborhoods in the 1960s, and we’re seeing evidence of it in many exurban neighborhoods today. The Los Angeles Times reports that in one gated community in Hemet, east of L.A., McMansions with granite countertops and vaulted ceilings are being rented to poor families on Section 8 vouchers; according to the Washington Examiner, similar homes in Germantown, Maryland, outside Washington, D.C., are being converted to boarding houses.

Many hope that when the economy recovers, demand will pick up, inventories of empty homes will be whittled down, and the traditional suburban development machine will lumber back to life. But don’t bet on it. Demand for standard-issue suburban housing is going down, not up, a trend that was apparent even before the crash. In 2006, Arthur C. Nelson, now at the University of Utah, estimated in the Journal of the American Planning Association that there will be 22 million unwanted large-lot suburban homes by 2025.

Meanwhile, the Great Recession has highlighted a fundamental change in what consumers do want: homes in central cities and closer-in suburbs where one can walk to stores and mass transit. Such “walkable urban” real estate has experienced less than half the average decline in price from the housing peak. Ten years ago, the highest property values per square foot in the Washington, D.C., metro area were in car-dependent suburbs like Great Falls, Virginia. Today, walkable city neighborhoods like Dupont Circle command the highest per-square-foot prices, followed by dense suburban neighborhoods near subway stops in places like Bethesda, Maryland, and Arlington, Virginia. Similarly, in Denver, property values in the high-end car-dependent suburb of Highland Ranch are now lower than those in the redeveloped LoDo neighborhood near downtown. These trend lines have been evident in many cities for a number of years; at some point during the last decade, the lines crossed. The last time the lines crossed was in the 1960s—and they were heading the opposite direction.

There are some obvious reasons for the growing demand for walkable neighborhoods: ever-worsening traffic congestion, memories of the 2008 spike in gasoline prices, and the fact that many cities have become more attractive places to live thanks to falling crime rates and the replacement of heavy industries with cleaner, higher-end service and professional economies.

But the biggest factor, one that will quickly pick up speed in the next few years, is demographic. The baby boomers and their children, the millennial generation, are looking for places to live and work that reflect their current desires and life needs. Boomers are downsizing as their children leave home while the millennials, or generation Y, are setting out on their careers with far different housing needs and preferences. Both of these huge demographic groups want something that the U.S. housing market is not currently providing: small one- to three-bedroom homes in walkable, transit-oriented, economically dynamic, and job-rich neighborhoods.

The baby boom generation, defined as those born between 1946 and 1964, remains the largest demographic bloc in the United States. At approximately 77 million Americans, they are fully one-quarter of the population. With the leading edge of the boomers now approaching sixty-five years old, the group is finding that their suburban houses are too big. Their child-rearing days are ending, and all those empty rooms have to be heated, cooled, and cleaned, and the unused backyard maintained. Suburban houses can be socially isolating, especially as aging eyes and slower reflexes make driving everywhere less comfortable. Freedom for many in this generation means living in walkable, accessible communities with convenient transit linkages and good public services like libraries, cultural activities, and health care. Some boomers are drawn to cities. Others prefer to stay in the suburbs but want to trade in their large-lot single-family detached homes on cul-de-sacs for smaller-lot single-family homes, townhouses, and condos in or near burgeoning suburban town centers.

Generation Y has a different story. The second-largest generation in the country, born between 1977 and 1994 and numbering 76 million, millennials are leaving the nest. They may sometimes fall back into the nest, but eventually they find a place of their own for the first time. Following the lead of their older cousins, the much smaller generation X (those born between 1965 and 1976), a high proportion of millennials have a taste for vibrant, compact, and walkable communities full of economic, social, and recreational opportunities. Their aspirations have been informed by Friends and Sex in the City, shows set in walkable urban places, as opposed to their parents’ mid-century imagery of Leave It to Beaver and Brady Bunch, set in the drivable suburbs. Not surprisingly, fully 77 percent of millennials plan to live in America’s urban cores. The largest group of millennials began graduating from college in 2009, and if this group rents for the typical three years, from 2013 to 2018 there will be more aspiring first-time homebuyers in the American marketplace than ever before—and only half say they will be looking for drivable suburban homes. Reinforcing that trend, housing industry experts, like Todd Zimmerman of Zimmerman/Volk Associates, believe that this generation is more likely to plant roots in walkable urban areas and force local government to fix urban school districts rather than flee to the burbs for their schools.

The convergence of these two trends is the biggest demographic event since the baby boom itself. The first wave of boomers will be sixty-five in 2011. The largest number of millennials reaches age twenty-two in 2012. With the last of the boomers hitting sixty-five in 2029, this convergence is set to last decades. In addition to the generational convergence, the Census Bureau estimates that America is going to grow from 310 million people today to 440 million by 2050.

An epic amount of money will pour into the real estate market as a result of population growth and demographic confluence. To be sure, unemployment and stagnant wages have eroded people’s buying power. Boomers have suffered steep declines in the value of their current homes and 401(k)s, and young people are leaving college with ever-larger student loan debts.

But Americans of all ages have saved and paid off debts since the recession began, and average household balance sheets should be significantly healthier five years from now. In addition, 85 percent of the new households formed between now and 2025 will be single individuals or couples with no children at home; unburdened by child-rearing expenses, they will have more income available for housing (and less desire to spend it tending big backyards).

Most importantly, the very act of moving to more walkable neighborhoods will free families from the expense of buying, fueling, and maintaining the two or more cars they typically need to get around in auto-dependent suburbs. Households in drivable suburban neighborhoods devote on average 24 percent of their income to transportation; those in walkable neighborhoods spend about 12 percent. The difference is equal to half of what a typical household spends on health care—nationally, that amounts to $700 billion a year in total, according to Scott Bernstein of the Center for Neighborhood Technology. Put another way, dropping one car out of the typical household budget can allow that family to afford a $100,000 larger mortgage.

The burgeoning demand for homes in walkable communities has the potential to reshape the American landscape and rejuvenate its economy as profoundly as the wave of suburbanization after World War II did. If anything, today’s opportunity is larger. The returning veterans and their spouses represented approximately 20 percent of the American population at that time; the current demographic convergence—77 million boomers plus 76 million millennials—comprises nearly 50 percent.

In the postwar years, America pushed its built environment outward, beyond the central cities, creating millions of new construction jobs and new markets for cars and appliances—a virtuous cycle of commerce that helped power American prosperity for decades (until, of course, it went too far, leading to the oversupply of exurban development that is acting as deadweight on the current recovery). The coming demographic convergence will push construction inward, accelerating the rehabilitation of cities and forcing existing car-dependent suburbs to develop more compact, walkable, and transit-friendly neighborhoods if they want to keep property values up and attract tomorrow’s homebuyers. All this rebuilding could spur millions of new construction jobs. But more importantly, if done right, with “smart growth” zoning codes that reward energy efficiency, it would create new markets for power-conserving materials and appliances, providing American designers and manufacturers with experience producing the kinds of green products world markets will increasingly want.

In addition to fueling long-term economic growth, the new demand for walkable neighborhoods could provide other benefits. One of the biggest drivers of rising health care costs is the expansion of chronic diseases like obesity, diabetes, and heart disease—conditions exacerbated by the sedentary lifestyles of our car-dependent age. All would be substantially reduced if Americans move into higher-density, transit-friendly neighborhoods in which more walking is built into their daily routine.

The potential environmental benefits are equally profound. A study conducted by the National Resources Defense Council concluded that simply conforming new construction to smart growth standards would reduce carbon emissions 10 percent within ten years, more than half the target set by the president and the stalled climate legislation. Similarly, the U.S. Green Building Council estimates that new sustainable developments could reduce water consumption by 40 percent, energy use by up to 50 percent, and solid waste by 70 percent.

We can reap these economic, health, and environmental benefits if the real estate market is allowed to follow the demand preferences of consumers. But that’s easier said than done. Markets don’t exist in a vacuum. They operate within rules and incentives set by governments. The rules and incentives that guide today’s real estate market were designed, for the most part, more than a half century ago to fit the demands of the postwar-era Americans who were looking for new homes with yards outside overcrowded cities in which to raise their families. For many years the government-insured mortgages provided to millions of GIs were regulated in such a way that they could only be used to buy newly constructed homes, not to purchase or rehab existing homes—an incentive that strongly biased growth away from cities and toward the suburbs. Cheap rural land outside cities became accessible and valuable to developers thanks to the building of the interstate highway system, 90 percent funded by the federal government. Using federal matching grants, suburban municipalities extended water, sewer, and electric lines to new subdivisions, charging developers and homeowners a fraction of the real costs of those extensions. Municipalities also crafted zoning codes, often in response to federal regulations that essentially mandated low-density development.

Today, even though consumer preferences have changed, most of the old rules and subsidies remain in place. For instance, federal transportation funding formulas, combined with the old-school thinking of many state departments of transportation, continue to favor the building of new roads and widening of highways—infrastructure that supports low-density, car-dependent development—over public transit systems that are the foundation for most compact, walkable neighborhoods. When developers do propose to build denser projects, with narrower streets and apartments above retail space, they often run up against zoning codes that make such building illegal. Consequently, few compact, walkable neighborhoods have been built relative to demand, and real estate prices in them have often been bid up to astronomical heights. This gives the impression that such neighborhoods are only popular with the affluent, when in fact millions of middle-class Americans would likely jump at the opportunity to live in them.

To meet this broad new demand, however, requires that entire metropolitan regions work together to chart a common vision for their communities. When that happens, all kinds of Americans, and not just coastal elites, choose walkable, transit-based growth.

Consider the recent experience of Utah, a state that voted 63 percent for John McCain and Sarah Palin. In 1997, in anticipation of the 2002 Winter Olympics in Salt Lake City, a coalition of local CEOs, elected leaders, developers, farmers’ associations, conservation advocates, and urban planners put together a process of public meetings to get citizens involved in developing a strategy to accommodate greater Salt Lake City’s fast-paced growth in a fiscally and environmentally sustainable way. That process, dubbed “Envision Utah,” led to a blueprint for development in the four-county region. The plan largely rejects further suburban sprawl in favor of a “quality growth strategy” of dense walkable neighborhoods built around transit stops.

The first step was the building of a seventeen-mile, twenty-three-station light rail line in Salt Lake City called TRAX. The line was highly controversial; many predicted it would be an underutilized boondoggle. But when the first phase opened in 1999, TRAX proved an immediate hit with the public—eventually some trains became so crowded with riders that their doors couldn’t close. In 2000 and 2006, voters approved tax increases to expand the system, including increased reach to several outlying suburbs, twenty-six miles of new light rail track, forty additional station stops, and eighty-eight miles of heavier commuter rail, reaching as far as Provo. Meanwhile, mixed residential-commercial developments have been constructed around existing stations in places like the formerly industrial suburb of Murray City.

Locally financed transit expansions are also underway in such wide-ranging places as St. Louis, Denver, Los Angeles, Montgomery, Alabama, and Broward County, Florida. From 2004 to 2009, 67 percent of light rail ballot measures passed. In 2008, the election year defined by the financial crisis, 87 percent of transit measures passed. In Seattle, a 2008 measure saw sponsors actually eliminate road funding so that the thirty-four-mile extension of the light rail system would pass.

The public, then, has made its desire for transit-oriented growth quite clear, and governments at the local and metropolitan levels have begun to respond. At the federal level, however, the policy machinery remains on autopilot, supporting a sprawl-based growth model that is beyond broken. What we need to do should be obvious: replace old federal rules and incentives that hamper the market’s ability to meet changing needs and preferences for housing with new ones that don’t, thus helping to rejuvenate the American economy. But these new policies will have to be produced in a political environment that, unlike in the postwar years, is hostile to government actions that add considerably to the federal deficit. And they need to be written quickly: the peak of the convergence is only three years away, and the economy needs a sustainable base from which to grow more quickly now.

Throughout human history, transportation has determined the pattern of real estate development, and so the place to begin is federal transportation policy. Fortunately, next year Congress will probably reauthorize the giant transportation law that determines most federal infrastructure spending—which, tellingly enough, is still commonly referred to in Washington as “the highway bill.” This will provide a golden opportunity to change federal policy in several fundamental ways. First, the biases in federal matching grants that favor roads and highways over every other type of infrastructure (sidewalks, bike paths, mass transit, and so on) must end. Second, the grants should be “scored” based on their economic, environmental, and social equity impacts—in particular, on the degree to which proposed transportation projects minimize travel times and distances for residents and enable compact, walkable, energy-efficient, and affordable development. Third, metro areas should be required, and given funding, to do what greater Salt Lake City did: create a blueprint for future growth. Those blueprints should then help guide which specific infrastructure projects get federal funding. In effect, this will shift the power to shape growth patterns away from congressional appropriators and state departments of transportation and to local citizens and local elected officials. And it will help ensure that actual consumer demand drives the process, rather than the current combination of antiquated federal funding formulas, congressional earmarks, and offstage machinations of conventional developers.

Many liberals might want Washington to cover most of the costs of this new infrastructure. That’s unlikely to happen in the current political and fiscal environment. Nor, frankly, is it necessary, or even healthy. Instead, scarce federal dollars should be used to attract private dollars, of which there are plenty. The Investment Company Institute reports that institutional investors are keeping a relatively stable $1.8 trillion in money market funds because money managers see no good long-term investment vehicles. A similar amount is sitting in the coffers of non-financial corporations.

The Obama administration has proposed one way to tap some of these private dollars: create an “infrastructure bank” that would leverage several private dollars for every federal dollar invested to build a project. In return, the bank and private investors would receive, say, a dedicated locally raised future tax revenue source. 

Another approach would be to revive a practice from the past. A hundred years ago, virtually every city of 5,000 or more had an extensive network of streetcars. These systems were typically not publicly owned. Instead, real estate developers, often in partnership with electric utilities, built and ran them, even paying municipal governments to rent the right-of-way. The developers made their money not from fares, which barely covered operations, but from the increased land values that the trolley extensions made possible. There’s no reason why similar deals can’t be negotiated today to fund various kinds of mass transit. In fact, the process has already begun in a few places. Developers are helping to pay for the extension of the Washington, D.C., metro rail to Dulles airport, while Microsoft cofounder Paul Allen’s real estate company and other property owners participated in the funding of the streetcar to his substantial property holdings just north of downtown Seattle. The federal government can help make such arrangements much more common by offering partial guarantees of the debt floated to build transit infrastructure.

Another way Washington can encourage walkable neighborhoods is through reforms of Fannie Mae and Freddie Mac. These two government-sponsored mortgage guarantors and underwriters went bankrupt and were taken over by the U.S. government—in large part because they overinvested in homes on the suburban fringe. But in recent years Fannie Mae has been experimenting with an interesting new product: “location efficient mortgages.” Instead of relying solely on credit score and income to determine whether a borrower qualifies for a mortgage, these loans use electronic map systems to take into account how much homeowners will have to pay for transportation. Research by Scott Bernstein of the Center for Neighborhood Technology suggests that location efficient mortgages may have lower default rates than conventional Fannie Mae loans. If that finding proves true, then it makes sense to expand the program, and to apply the same concept to household energy savings: Fannie, Freddie, and HUD’s Federal Housing Administration should factor in the savings from more energy-efficient homes and retrofits. And all these products should be available for more types of construction than just the single-family detached house.

In the past, big shifts in real estate patterns, from suburbanization to gentrification, have often made the lives of the poor considerably worse. To make sure that doesn’t happen as we move toward more walkable communities, federal action will also be needed. The Obama administration took a first step earlier this year by announcing that location efficiency will be a criterion for $3.25 billion in competitive HUD housing grants. That means that at least some walkable developments will be built to include housing for lower-income families, and more can be done along these lines using existing federal housing programs such as the Low-Income Housing Tax Credit.

But the truth is that federal housing policy can make only a modest dent in the affordability problem. As we’ve seen, what really drives development is transportation policy, and so the real lever of change is, again, the upcoming transportation bill. The bill should offer state and local governments a clear choice: if they want federal dollars for light rail and other transit systems, they must ensure that citizens at all income levels reap the benefits. That means changing local zoning codes to mandate that a portion of the housing in transit-oriented developments—say, 15 percent—be reserved for lower-income families. It also means that local jurisdictions need to remove ordinances that act as barriers to affordable housing—an idea long championed by many conservatives, including the late Jack Kemp. For instance, empty nesters ought to have the right to rent out unused bedrooms or turn part of their homes into separate rental units. Doing so is illegal in most municipalities today.

Ultimately, the biggest barrier to affordability is insufficient supply: homes in walkable, transit-oriented neighborhoods cost too much because there are not enough of them to satisfy the growing market demand. What’s needed, then, is a supply-side solution: build more such neighborhoods.

Can a set of policies like these ever get through Congress? After all, Republicans have long been ideologically hostile to mass transit. With their base now predominantly in exurban and rural America, most GOP lawmakers will look with skepticism, even disdain, at proposals to use government in ways that benefit cities and closer-in suburbs that tend to elect Democrats. And many Americans who live in rural or exurban areas feel the scorn that too many educated urbanites express for their lifestyle, and reflect that scorn right back.

Yet, as Utah shows, conservative Americans can rally behind mass transit when all the advantages are pointed out and the hidden costs of sprawl made clear. The threats to family life posed by long commutes and auto dependency are a building issue among evangelical Christians. Conservatives are often among the most acute critics of federal highway subsidies and the way they insulate consumers from the real cost of driving. The late Paul Weyrich, cofounder of the Heritage Foundation, served on Amtrak’s board and was an outspoken champion of passenger rail. As William Lind recently argued in the American Conservative magazine, it was hardly a triumph of free enterprise that America’s convenient and affordable streetcar and passenger rail systems, most of them privately owned, were put out of business by government-subsidized and -owned highways.

In the wake of the Great Recession there is also another huge pocketbook force at work: however they might lean ideologically, the best hope suburbanites have for reversing their depressed home values is for mass transit lines to be extended in their communities. Though not every suburb can be saved in this way, for many it represents the most practical long-term solution to their dilemma.

Ultimately, the strongest argument for these policies—one conservatives and liberals ought to be able to agree on—is that they would allow the moribund real estate market to function again, and in so doing would give the economy a dose of healthy growth. Indeed, assuming that a decisive package like the one above is passed, the private sector, awash in capital, may anticipate the demand about to be unleashed in our markets and start investing in real estate again. That is what happened in downtown Portland, Oregon, when a proposed $50 million streetcar led to $3.5 billion of private-sector development, much of it before the streetcar was built. America will be back in business. And good business is good politics.

But leading the transition to sustainability is also a strategic imperative for the United States. China and India need to figure out how to accommodate 700 million of their countrymen who will leave the villages and enter the cities over the next forty years. That’s more than twice the total American population. China is already building at a pace that will allow it to have 221 cities with more than 1 million residents—the U.S. has nine. The competition for energy and raw materials like copper, lumber, and steel under a business-as-usual scenario is extraordinary and will result only in increased levels of strategic conflict in the decades ahead, as recent congressional hearings on “strategic minerals” attests. By making a decisive shift and embracing sustainable communities, innovative American firms will have the domestic markets they need to develop and deliver the super-efficient products and services that will keep America secure and, through increased exports, help build our economy while reducing our trade imbalance.

Admittedly, the road to sustainability only begins with how we build and rebuild our communities. In addition to the ideas discussed here, there is much more we need to do to address the energy and material intensity of our economy in ways that will lead to better jobs, higher wages, reduced deficits, and greater national security. But at a time when the American people need a plan for long-term prosperity, and because real estate absorbs so much of our wealth, it is essential that we focus on pushing on the door unlocked by our demographic inheritance: the two largest population groups, half of our population, want communities that the market is not delivering due to out-of-date subsidies and policies.

The bottom line is this: despite the protests of orthodox adherents to liberal and conservative fiscal policy, it is now possible to unleash latent private-sector demand by implementing reforms that will end our subsidies to sprawl and focus our nation on sustainability. Neither stimulus nor austerity, this approach would provide a new economic engine for America that can set us on a secure and prosperous path for years to come.

       

Hong Kong has seemed quiet for the last four months. The foreign media moved on to other stories once last fall’s protest movement came to an end. But locally the debate over a new system to elect the territory’s chief executive has continued non-stop, and the situation is about to heat up again. On Wednesday Hong Kong time, the government will announce its proposal for electoral reform. Once it does, the pro-democracy opposition will face some difficult choices.

Here, in not too much detail, is a quick review of the background.

In 2007, the government of the People’s Republic of China, which has sovereignty over Hong Kong, announced it would accept an election of Hong Kong’s chief executive (CE) through universal suffrage for the 2017 election. It also said that candidates would be picked by a Nominating Committee. Pro-democracy politicians and the public at large, a majority of which supports a more democratic system, welcomed the universal suffrage part of this pledge but suspected that Beijing would use the Nominating Committee to restrict who got to run. What good is a one-man-one-vote election, they asked, if voters had to choose between candidates who are from the territory’s conservative establishment camp and will likely accommodate Beijing? (Good question.)

The following ensued:

• After several years of public debate, the Hong Kong government began a formal process consulting the public in December 2013. The key point of disagreement was over whether election candidates could emerge only through a Nominating Committee vote or through other mechanisms as well. Those who wanted other mechanisms believed that the Committee’s membership would be friendly to Beijing and pick candidates accordingly. Some of these skeptics were prepared to engage in civil disobedience to try to get their way.
• In late June 2014, the Hong Kong government announced the results of the consultation and the incumbent CE, C. Y. Leung, made a formal report to Beijing. This was the first step in a five-step process for constitutional revision, a process set by China. There is general agreement that Leung’s report understated the opposition to a nomination system that relied exclusively on the Nominating Committee.
• On August 31st, the Standing Committee of China’s National People’s Congress (NPC-SC) announced a decision on basic parameters for the new system (step two). Sure enough, it ruled out any supplementary nominating mechanisms. It also strongly suggested that the Nominating Committee would be constituted the same way as the 1,200-person Election Committee that had heretofore selected the CE and whose members were mostly friendly towards Beijing. The NPC-SC also limited the number of final CE candidates to two or three and dictated that each had to receive majority support from the Nominating Committee to become a candidate.
• The public response to the decision was sharply negative. The logical conclusion seemed to be that the new system was rigged in a way that Hong Kong voters have to pick among establishment candidates only, and that a pro-democracy aspirant had no way of getting nominated.
• In late September, students began a civil disobedience campaign that was marked by episodes of violence, and resulted in the occupation of three sets of major roadways in the territory. These lasted until early December, but the campaign did not persuade the government to back down on its basic approach.
• At the same time, the Hong Kong government, staying within the parameters Beijing announced on August 31st, began a second consultation process on its more specific reform proposals.

Why, you may ask, doesn’t Beijing just impose the system it wants? The reason is that it already committed that in step three of the five-step constitutional revision process, the government would introduce a bill in the Hong Kong Legislative Council reflecting its final proposal and that the legislature would have to approve it by a two-thirds margin. Even though the legislature is constituted in a way that gives disproportionate power to interests aligned with Beijing, the establishment camp currently does not have enough votes for a two-thirds majority. Consequently, the government must win over four or five moderate legislators from the democratic camp. In response, the more radical democrats have worked hard to keep the moderates committed to rejecting any government that is based on Beijing’s parameters, because it means that China gets to screen who gets to run. 

In light of this problem, the Hong Kong government did a clever thing. In the consultation document, it included the option of “democratizing” the Nominating Committee while remaining within Beijing’s basic parameters. It proposed to do this first by making the body more representative of Hong Kong society and reducing the proportion of seats held by business interests and groups otherwise linked to China. Second, it suggested a two-stage process of selection. In the first stage, the Nominating Committee would consider more “potential candidates” than the two or three that would ultimately be nominated to run in the election. To be picked as a potential candidate, an individual would need the support of only a minority of Committee members (how low was unspecified). This could increase the possibility of one or more democratic politicians emerging as potential candidates and then, in the second stage, at least one of them being selected as a final candidate. The result would be a competitive election.

Last week, Raymond Tam, the Hong Kong government’s secretary for constitutional and mainland affairs, indicated that something along these lines would be proposed by the government this Wednesday. He talked of using “the necessary legal room to maximize the democratic elements” and making the “entrance requirement" for potential candidates no higher than one-eighth of the membership. Additionally, there would be greater openness, transparency and accountability in the process of reviewing potential candidates within the Nominating Committee.

The devil, of course, will be in the details of the proposal (more on that later in the week). Moreover, Tam said nothing about making the Nominating Committee more representative of Hong Kong society. Did that element get set aside, and if so, what are the implications? If the membership of the committee is still biased in favor of the political status quo, would it matter if the process within the Nominating Committee is more competitive and transparent?

Whatever the proposal, the ball will then be in the pan-democrats’ court. Do they vote as a block to reject any process that allows the Nominating Committee to screen candidates? Do they then want to expose themselves to near-certain criticism that their recalcitrance denied the Hong Kong public the opportunity to vote for the CE? Or, do they take a chance on the more flexible approach that Tam is proposing, in the hope and belief that a pan-democrat will be screened in, which in turn would seem to set up a competitive election?

Read Richard Bush's response to the Hong Kong government's proposal for electoral reform »

      

Hong Kong’s next vote for Chief Executive (CE)—scheduled for 2017—offers a narrow pathway for improving democratic governance. The question is will a few of Hong Kong’s democratic legislators recognize the opportunity and make the necessary compromises.

As I saw in a trip to the city last week, discussions about reforming the election process are already well underway. Up until now, the CE has always been chosen by a 1200-person selection committee, mostly comprised of members willing to follow China’s lead on major political issues. Now under consideration is a plan to elect the next CE through a one-person, one-vote election (universal suffrage). The number of eligible voters would jump from 1,200 to around 5 million.

The caveat from Beijing has been that the candidates for that election would be selected by a nominating committee to be modelled on—you guessed it—the old selection committee. Pro-democracy politicians have sought a more flexible and open-ended process. It was public opposition to Beijing’s nominating committee that set off the Umbrella Movement protests last September and the 79-day occupation of several downtown thoroughfares. The democrats’ opposition to the current plan is important because the tabled proposal must receive support from two-thirds of the Legislative Council to pass, and the government doesn’t have the votes. It needs four democrats to cross the aisle and vote for the package.

Outsized importance

Hong Kong is a small place (7.25 million people), but what happens to the universal suffrage proposal has rather large implications. I have often thought that how China calibrates its choices concerning Hong Kong’s political system says something about what kind of great power it will be. This is not the defining issue of China’s revival as a great power, to be sure. How Beijing uses its growing power economically, diplomatically, and coercively is more important.

Yet most of the objects of China’s exercise of power, particularly in East Asia, are countries with informed, patriotic populations who care about the security and independence of their countries. (The only real exceptions are the islands of the East and South China Sea whose only inhabitants are seagulls.) So China will have to balance any temptation to promote its interests in more assertive ways with a sensitivity to popular feeling. Indeed, its recent “big country” mentality has caused a backlash in the “small countries” it has tried to bend to its will.

Shifting politics

So Hong Kong should be a good test of China’s sensitivity level. It is constitutionally a part of China. Its population is predominantly ethnic Chinese. The overwhelming majority of people accept their lot as Chinese citizens and would do nothing to upset the status quo. They are inherently pragmatic and understand, most of them, the benefits Hong Kong enjoys by being a part of China, including the rule of law and some political freedoms.

But a significant majority also want genuine electoral democracy. If China had granted that ten years ago, the gratitude would have been profound. But the delay has had deleterious effects. Hong Kong’s politics have become more polarized and radicalized. Political mistrust is deep and moderates have been marginalized, especially in the democratic camp. Meanwhile, the new Chinese leadership is placing greater emphasis on national security, and Beijing’s propaganda organs warn of “foreign forces” (e.g. the United States) working behind the scenes to destabilize Hong Kong.

So far, therefore, the interaction between the Chinese central government and the majority of the Hong Kong public has not gone well as it could have. Things will come to a head in a couple of weeks when the Legislative Council votes on the electoral reform proposal. The democratic camp maintains an apparently strong united front and says it will vote as a bloc against the package, which will mean that Hong Kong reverts to the past “small circle” election of the CE.

During my visit I found a couple of brave souls who believe the game is not over; the dominant mood, however, was one of pessimism. If the package goes down, there will likely be no protests, since radical forces have at least blocked what they hate, even as they didn’t secure what they wanted. If the package passes, however, there will likely be protests akin to those last fall, but not as prolonged. Whatever happens, there will be a big demonstration on or around July 1, the eighteenth anniversary of Hong Kong’s return to China. The size of that rally will be a barometer of the intensity of public feeling.

A “narrow pathway” to success?

There is a curious aspect about the package that Legislative Council will vote on. As I outlined in a Brookings blog post in late April, the proposal actually creates a narrow pathway for the democrats to first nominate and then elect one of their own as CE.

It would require, above all, a willingness on the part of at least four democrats to set aside their dissatisfaction with the undemocratic defects of the current proposal (and they do exist) and focus on the democratic opportunity that it presents. Later on, it would require the democrat camp to unite in supporting a moderate candidate who would not invite Beijing’s automatic rejection and who would have broad public support (and such individuals do exist). It should also have confidence that the majority of voters are on their side and would vote for that candidate. This is not a sure thing. The pro-Beijing members of the nominating committee will have the power not to name that person as a candidate—but rejecting a moderate, popular democrat would put them in a very awkward position.

The independent people that I spoke to in Hong Kong last week agreed with me that the current proposal creates this “narrow pathway.” But they also deplored the reality that the mutual mistrust between the democratic and pro-Beijing camps has become a serious obstacle to a sensible compromise. Radicals dominate the democratic camp. Their influence often constrains moderate democrats who might otherwise vote, as an act of conscience, for the package.

Beijing could have conducted its engagement with the Hong Kong public and the democratic camp in a much more skillful way. The priority it places on control of Hong Kong has outweighed its pledges to institute democracy. That has not changed, and it has contributed to the radicalization of Hong Kong politics. Yet the radicals, who would rather fight than win, are now providing Beijing with a pretext to take no chances.

      

       

Event Information

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Over the past few years, more than 600 Accountable Care Organizations (ACOs) have formed across the country, charged with the dual goals of improving health while also reducing health care costs. Increasingly, evidence on how public and private ACOs are progressing toward these goals is beginning to emerge. Based on these results, major regulatory changes are anticipated in the months ahead that will impact accountable care programs in Medicare, as well as future uptake within the private sector.

On October 20, the Engelberg Center for Health Care Reform hosted a half day forum to assess the latest evidence on accountable care, discuss strategies to overcome unique ACO challenges, and provide an overview of accountable care reforms. Sean Cavanaugh of the Centers for Medicare and Medicaid Services (CMS) provided keynote remarks on the latest Medicare ACO results and potential changes to the Medicare Shared Savings Program (MSSP). Panel sessions featured leading experts in ACO research, implementation and health care policy.

 Join the conversation on Twitter using #ACOFuture or follow @BrookingsMed

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• The Medicare Shared Savings Program (MSSP): Looking Ahead
• Big Issues for ACOs Going Forward
• ACO Policy Issues and Solutions on the Horizon

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• The State of Accountable Care: Evidence to Date and Next Steps

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• Uncorrected Transcript (.pdf)

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• ACO Public Event full deck FINAL
• 102014_Accountable Care_Transcript

       

Introduction

Ohio has already taken important steps to address the state’s ongoing foreclosure crisis, yet the crisis continues, causing distress for thousands of families and individuals, and destabilizing cities, towns and neighborhoods across the state. Therefore, the state, its local governments and private stakeholders need to do still more to deal more effectively with the crisis and its impacts on the state’s housing stock, cities and neighborhoods.

What is often termed the “foreclosure crisis” is actually a multi-dimensional crisis, in which the collapse of the housing bubble, the devastation caused by the lax and often irresponsible credit practices that accompanied and perpetuated that bubble, the resulting freeze on commercial and consumer credit, and the worldwide recession are interwoven, and can only with great difficulty be untangled. In Ohio, those forces are further exacerbated by profound changes to the state’s historical economic underpinnings. Ohio cannot solve the crisis by itself, but it can significantly mitigate its impact on people, neighborhoods, and towns and cities. These mitigating efforts will also help preserve the value of homes and neighborhoods in the state, and place Ohio in a stronger position to benefit from the future economic recovery.

The paper begins with a short summary of current conditions and the actions the state has already taken to address the wave of foreclosures, followed by a discussion of areas for future action. This discussion will address mitigating both the individual and community impacts of foreclosure, but will give particular emphasis to the critical issue of softening the blow of foreclosure on communities, which up to now has been less of a focus for state action.

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Ohio, like most other states in the country and particularly its neighbors in the Great Lakes region, is still reeling from the “Great Recession.” This economic crisis, the worst in a half century, has devastated economies across the globe.

While economists have declared that the recession has abated, it will be a long time before the businesses, households, and government treasuries across the country, and specifically in the state of Ohio, shake off the effects. And when the recession’s grip finally breaks, what will Ohio’s economy and landscape look like?

The choices that Ohio’s people and its leaders make—starting now and continuing over the next few years—will determine that answer. Ohioans can decide whether to shy away from manufacturing after the loss of so many jobs, or to transform the state’s old manufacturing strengths, derived from its role in the auto supply chain, into new products, markets, and opportunities. They can decide to opt out of the national shift to a lower-carbon economy, or to be at the forefront of developing clean coal and renewable energy industries and jobs.

They can choose a workforce system that is aligned to the true metropolitan scale of the economy and oriented to the needs of workers and employers. They can choose transformative transportation networks over more roads; smaller, greener, stronger cities; collaboration and regional cooperation to save money, reduce duplication, and bolster regional competitiveness. And instead of trying to go it alone in the 21st century global marketplace, they can maximize the federal resources on offer to support Ohio’s economic transformation and choose to compete effectively for new federal investments.

This report, Restoring Prosperity: Transforming Ohio’s Communities for the Next Economy, lays out some of the specific policy options that will help Ohioans restore the prosperity that the state enjoyed for much of the 19th and 20th centuries, but that it has been struggling to regain for at least a decade, if not longer.

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• Bruce Katz's Speech in Ohio