Introduction:

There is an Egyptian proverb that says those who worry about demons will tend to run into them. Like much folk wisdom, it has solid psychological foundations; the likelihood of a problem rearing its head often appears to be exacerbated by constantly fretting about it. Ever since Hosni Mubarak stepped down as president of Egypt on February 11, 2011, the demon named “Now What?” has been keeping the Israeli government up at night. On August 18, it finally leapt up at them.

That day, a group of armed men attacked Israeli buses, as well as civilian and military vehicles north of Eilat, near the Egyptian border. Eight Israelis, both civilians and soldiers, were killed. The Israel Defense Forces (IDF) set off in hot pursuit, shooting at the attackers from a helicopter. The helicopter crew either failed to notice, or ignored, that they were shooting over the Egyptian side of the border. In the pursuit, three Egyptians— an officer and two enlisted men—were killed and another three later died of their wounds. Israeli minister of defense Ehud Barak, while blaming Palestinian groups for the assault, made comments to the effect that the attacks were largely Egypt’s fault as there had been a major security collapse in Egypt since the former regime had been ousted six months earlier.

The way matters unfolded over the next few days pointedly illustrated the answer to a question that had been asked repeatedly both by international media and the Israeli government since Hosni Mubarak’s ouster: What did Egypt’s January 25 Revolution mean for Israel? The simplest answer is that it is no longer business as usual. The relationship between Egypt and Israel has changed and both countries will have to navigate new waters carefully and wisely.

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INTRODUCTION

A year after President Hosni Mubarak’s fall, U.S.-Egypt relations are at an all-time low. Not, as many expected, because of the rise of Islamist parties, but because America’s longtime allies in the Egyptian military have whipped up anti-American sentiment at a feverish pace. It may have started as a political ploy, a way to build support on the street and highlight the army’s nationalist credentials, but the generals soon lost control. In January, the Egyptian government announced that sixteen Americans—including the son of a top U.S. official— would be put on trial, facing up to five years in prison. Their apparent crime was working for American nongovernmental organizations (NGOs)—the National Democratic Institute, the International Republican Institute, and Freedom House—that offered support, funding, and election monitoring for Egypt’s uneven transition.

On March 1, the Egyptian government lifted the travel ban on seven Americans who were still in Egypt, allowing them to leave the country. A major diplomatic breach was avoided, giving the impression that the crisis had been resolved. This appears to be the interpretation of the Obama administration, which waived congressional conditions on military aid, citing the importance of maintaining a “strategic partnership” with Egypt.2 However, the charges against the Americans remain, and there is no sign that the American NGOs in question will be able to reopen anytime soon. More importantly, the vast majority of affected NGOs—which are Egyptian rather than American—still find themselves on trial and under attack.

The NGO episode, however worrying it is on its own, reflects something larger and more troubling: the slow descent from the national unity of the revolution to a fog of paranoia, distrust, and conspiracy theorizing. Who is with the revolution, and who isn’t? The roots of the problem lie in the uncertainly inherent in Egypt’s muddled transition. Unlike in Tunisia, where the Higher Committee for the Achievement of Revolutionary Objectives (HCARO)—accepted as legitimate by all of the country’s main political forces—was responsible for managing the transition, Egypt has featured various competing actors claiming their own distinct sources of power. The struggle for legitimacy between the Supreme Council of the Armed Forces (SCAF), the Muslim Brotherhood-dominated parliament, and the protest movement has created a fragmented political scene. Everyone wants to lead the transition, but no one wants to take full responsibility for the results.

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Last winter, Salafi parties in Egypt proved themselves a formidable political force, winning a quarter of the vote in the country’s first elections in the post-Mubarak era. For many in Washington, the unexpected strength of Egypt’s conservative religious groups raised unsettling questions about the future of U.S.-Egyptian relations and America’s security interests in the region.

Will the political success of Salafis turn Egypt into an anti-American power and strengthen jihadist groups like al-Qa’ida that are bent on using violence against the United States and its allies?

In the Saban Center Middle East Memo, William McCants, a Middle East specialist at CNA and adjunct faculty at Johns Hopkins University, examines the implications of the Salafis’ turn to, and success in, electoral politics. McCants argues that while political participation may not moderate Salafis’ positions on social issues, it will likely erode the strength of their most extreme and violent affiliates. For this reason, America’s interests may be best served when Salafis play a role in post-revolution politics.

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• The Lesser of Two Evils: The Salafi Turn to Party Politics in Egypt

The potential for confrontation between the United States and Iran, stemming from ongoing tensions over Iran’s nuclear program and western covert actions intended to delay or degrade it, remains a pressing concern for U.S. policymakers. The Saban Center for Middle East Policy hosted a one-day crisis simulation in September that explored different scenarios should a confrontation occur.

The Saban Center's new Middle East Memo, A Series of Unfortunate Events: A Crisis Simulation of a U.S.-Iranian Confrontation, authored by senior fellow Kenneth M. Pollack, presents lessons and observations from the exercise.

Key findings include:

• Growing tensions are significantly reducing the “margin of error” between the two sides, increasing the potential for miscalculations to escalate to a conflict between the two countries.

• Should Iran make significant progress in enriching fissile material, both sides would have a powerful incentive to think short-term rather than long-term, in turn reinforcing the propensity for rapid escalation.

• U.S. policymakers must recognize the possibility that Iranian rhetoric about how the Islamic Republic would react in various situations may prove consistent with actual Iranian actions.

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Last September, as part of its annual conference with the United States Central Command, the Saban Center for Middle East Policy at the Brookings Institution conducted a day-long simulation of a confrontation between the United States and Iran arising from a hypothetical scenario in which the Syrian opposition had made significant gains in its civil war and was on the verge of crushing the Assad regime.  

The simulation suggested that, even in the wake of President Rouhani’s ascension to power and the changed atmosphere between Tehran and Washington, there is still a risk of misunderstanding and miscalculation between the two sides.

This new Middle East Memo examines the possible U.S. foreign policy lessons that emerged from this crisis simulation, and stresses the importance of communication, understanding the Saudi-Iran conflict and the difficulty in limited interventions. 

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• Hard Road to Damascus: A Crisis Simulation of U.S.-Iranian Confrontation over Syria

For decades, we have been hearing that the baby-boom generation was like a pig moving through a python–bigger than the generations before and after.

That’s true. But that’s also a very misleading metaphor for understanding the demographic forces that are driving up federal spending: They aren’t temporary. The generation born between 1946 and 1964 is the beginning of a demographic transition that will persist for decades after the baby boomers die, the consequence of lengthening lifespans and declining fertility. Putting the federal budget on a sustainable course requires long-lasting fixes, not short-lived tweaks.  

First, a few demographic facts.

As the chart below illustrates, there was a surge in births in the U.S. at the end of World War II, a subsequent decline, and then an uptick as baby boomers began having children.

Although the population has been rising, the number of births in the U.S. the past few years has been below the peak baby-boom levels, possibly because many couples chose not to have children during bad economic times. More significant, fertility rates–roughly the number of babies born per woman during her lifetime–have fallen well below pre-baby-boom levels.

Meanwhile, Americans are living longer. In 1950, a man who made it to age 65 could expect to live until 78 and a woman until 81. Social Security’s actuaries project that a man who lived to age 65 in 2010 will reach 84 and a woman age 86.

Put all this together, and it’s clear that a growing fraction of the U.S. population will be 65 or older.   

The combination of longer life spans and lower fertility rates means the ratio of elderly (over 65) to working-age population (ages 20 to 64) is rising. As the chart below illustrates, the ratio will rise steadily as more baby boomers reach retirement age–and then it levels off.  

Simply put, this doesn’t look like a pig in a python.  

So what do these demographic facts portend for the federal budget?  In simple dollars and cents, the federal government spends more on the old than the young. More older Americans means more federal spending on Social Security and Medicare, the health insurance program for the elderly. On top of that, health care spending per person is likely to continue to grow faster than the overall economy.

The net result: 85 percent of the increase in federal spending that the Congressional Budget Office projects for the next 10 years, based on current policies, will go toward Social Security, Medicare and other major federal health programs, and interest on the national debt.

Restraining future deficits and the size of the federal debt mean restraining spending on these programs or raising taxes–and probably both. One-time savings or minor tweaks won’t suffice. Nor will limiting the belt-tightening to annually appropriated spending.

The fundamental fiscal problem is not coping with the retirement of the baby boomers and then going back to budgets that resemble those of the past. The fundamental fiscal problem is that retirement of the baby boomers marks a major demographic transition for the nation, one that will require long-lived changes to benefit programs and taxes.

Open any magazine aimed at the upper middle class and you’ll find lots of ads about retirement planning: financial firms fighting over which one will ‘advise’ you and get you to invest your money with them.

But, for most people, that isn’t the most important part of retirement planning. In fact, most people don’t have significant retirement savings, so arguing about who or how to invest them is irrelevant. Their “financial planning” is more likely to be about whether and when to pay the credit card bill.

So what kind of retirement planning really matters? There are lots of answers, but here are two of the most important: How long you work and when you apply for Social Security. For most people, these matter far more than whether your savings are invested in stocks or bonds.

Working Longer Requires More than Wishful Thinking. One of the great blessings of modern medicine is that people are living longer. But one of the consequences of that blessing is that unless people work longer and/or save more while they’re working, they’re more likely to run out of money in retirement than ever before. (The decline of traditional pensions, which paid lifetime income benefits, hasn’t helped either.) Most folks know this and are responding. According to a recent survey, 65 percent of baby boomers expect to work past 65.

But those expectations may not be met. Currently, about half of workers stop working before age 65: some are wealthy enough; more often they’re just not healthy enough.

Flexible retirement is more slogan than fact. Moreover, the job market isn’t as flexible as some may hope. Yes, an increasing percentage of seniors are working at least occasionally (~35 percent of men over 60, ~25 percent of women), but that doesn’t mean they’re doing their dream job on their chosen schedule. Increasingly, most of those who do work past 65 work full-time. Twenty years ago about 60 percent of workers over the age of 65 worked part-time; today about 60 percent work full-time.

It’s not clear why part-time work has declined, but one reason may be that employers still haven’t adjusted to the idea. A recent Transamerica Survey found that 66 percent of age 55+ US workers expect they will enter retirement flexibly -- but only 25 percent report that their employer offers the opportunity to move from full-time to part-time. However, the best way for employers to change is for their employees to ask (or have a union that does).

Retirement planning involves more than wishful thinking. If you want a flexible or a phased retirement, you need to know what your options really are – and the time to find out is long before you’re on the verge of retirement.

Defer Applying for Social Security? The other step that matters for most people is when they choose to apply for Social Security. Many apply as soon as they legally can do so, generally at age 62. For most people, that’s a mistake, because it means they will get reduced payments for the rest of their lives. Most others claim their Social Security benefits by the time they reach the “normal retirement age”, which for baby boomers is 66 years. (The normal retirement age is gradually being raised; for those born after 1959 it’s age 67.) For many people, that’s a mistake, too, because your lifetime benefit increases each year that you delay from 62 up to age 70.

How much more will your Social Security be if you start taking it at 70 instead of claiming benefits at the earliest possible age? A lot. For baby boomers, waiting till 70 increases the annual benefit by about 8% or each year of delay. That means instead of taking an annual payment at 62 of $10,000 a year, waiting 8 years means your annual payment will rise to $17,600 – inflation indexed for life. (If you keep working after age 62, then the math can be even more compelling, because Social Security is based on your highest 35 years of earnings.) If you are married, delaying also increases payments to your spouse after you die.

Of course, lots of folks have justifications for taking the lower payment at 62. Some say, “I won’t live long enough to make up the difference” – but in fact most people do live that long and many live longer. Others say, “I need the money to pay my bills.” But if you have savings or home equity, it’s worth using those first and taking Social Security later.

So the next time someone approaches you about moving your 401k money over to them, consider the option they won’t tell you about: spending it first and deferring Social Security. After all, Social Security gives you a guaranteed 8% return for waiting – and an 8% guaranteed return is hard to beat. (But they probably won’t tell you that, either.)

Editor's note: This piece originally appeared in Inside Sources.

The American people deserve to have a federal government that is both responsive and effective. That simply isn’t the case for more than 1 million people who are awaiting the adjudication of their applications for disability benefits from the Social Security Administration.

Washington can and must do better. This gridlock harms applicants either by depriving them of much-needed support or effectively barring them from work while their cases are resolved because having any significant earnings would immediately render them ineligible. This is unacceptable.

Within the next month, the Government Accountability Office, the nonpartisan congressional watchdog, will launch a study on the issue. More policymakers should follow GAO’s lead. A solution to this problem is long overdue. Here’s how the government can do it.

Congress does not need to look far for an example of how to reduce the SSA backlog. In 2013, the Veterans Administration cut its 600,000-case backlog by 84 percent and reduced waiting times by nearly two-thirds, all within two years. It’s an impressive result.

Why have federal officials dealt aggressively and effectively with that backlog, but not the one at SSA? One obvious answer is that the American people and their representatives recognize a debt to those who served in the armed forces. Allowing veterans to languish while a sluggish bureaucracy dithers is unconscionable. Public and congressional outrage helped light a fire under the bureaucracy. Administrators improved services the old-fashioned way — more staff time. VA employees had to work at least 20 hours overtime per month.

Things are a bit more complicated at SSA, unfortunately. Roughly three quarters of applicants for disability benefits have their cases decided within about nine months and, if denied, decide not to appeal. But those whose applications are denied are legally entitled to ask for a hearing before an administrative law judge — and that is where the real bottleneck begins.

There are too few ALJs to hear the cases. Even in the best of times, maintaining an adequate cadre of ALJs is difficult because normal attrition means that SSA has to hire at least 100 ALJs a year to stay even. When unemployment increases, however, so does the number of applications for disability benefits. After exhausting unemployment benefits, people who believe they are impaired often turn to the disability programs. So, when the Great Recession hit, SSA knew it had to hire many more ALJs. It tried to do so, but SSA cannot act without the help of the Office of Personnel Management, which must provide lists of qualified candidates before agencies can hire them. SSA employs 85 percent of all ALJs and for several years has paid OPM approximately $2 million annually to administer the requisite tests and interviews to establish a register of qualified candidates. Nonetheless, OPM has persistently refused to employ legally trained people to vet ALJ candidates or to update registers. And when SSA sought to ramp up ALJ hiring to cope with the recession challenge, OPM was slow to respond.

In 2009, for example, OPM promised to supply a new register containing names of ALJ candidates. Five years passed before it actually delivered the new list of names. For a time, the number of ALJs deciding cases actually fell. The situation got so bad that the president’s January 2015 budget created a work group headed by the Office of Management and Budget and the Administrative Conference of the United States to try to break the logjam. OPM promised a list for 2015, but insisted it could not change procedures. Not trusting OPM to mend its ways, Congress in October 2015 enacted legislation that explicitly required OPM to administer a new round of tests within the succeeding six months.

These stopgap measures are inadequate to the challenge. Both applicants and taxpayers deserve prompt adjudication of the merits of claims. The million-person backlog and the two-year average waits are bad enough. Many applicants wait far longer. Meanwhile, they are strongly discouraged from working, as anything more than minimal earnings will cause their applications automatically to be denied. Throughout this waiting period, applicants have no means of self-support. Any skills applicants retain atrophy.

The shortage of ALJs is not the only problem. The quality and consistency of adjudication by some ALJs has been called into question. For example, differences in approval rates are so large that differences among applicants cannot plausibly explain them. Some ALJs have processed so many cases that they could not possibly have applied proper standards. In recognition of both problems, SSA has increased oversight and beefed up training. The numbers have improved. But large and troubling variations in workloads and approval rates persist.

For now, political polarization blocks agreement on whether and how to modify eligibility rules and improve incentives to encourage work by those able to work. But there is bipartisan agreement that dragging out the application process benefits no one. While completely eliminating hearing delays is impossible, adequate administrative funding and more, better trained hearing officers would help reduce them. Even if OPM’s past record were better than it is, OPM is now a beleaguered agency, struggling to cope with the fallout from a security breach that jeopardizes the security of the nation and the privacy of millions of current and past federal employees and federal contractors. Mending this breach and establishing new procedures will — and should — be OPM’s top priority.

That’s why, for the sake of everyone concerned, responsibility for screening candidates for administrative law judge positions should be moved, at least temporarily, to another agency, such as the Administrative Conference of the United States. Shortening the period that applicants for disability benefits now spend waiting for a final answer is an achievable goal that can and should be addressed. Our nation’s disabled and its taxpayers deserve better.

Editor's note: This piece originally appeared in Politico.

Critics of the nation's retirement system regularly complain that the system is in crisis. Too many private companies fail to offer their employees a retirement plan. Many employees who are covered by a plan fail to make contributions to it. Those who do make contributions may contribute too little or invest their savings unwisely. The end result: Many of us will reach retirement age with miniscule pensions or too little savings to enjoy a comfortable old age.

The argument that our retirement system has gaping holes is well founded. The notion that it faces an imminent "crisis" is nonsense. If the system currently faces a crisis, it has faced the same one for the past 40 years. While elderly Americans have seen their incomes and living standards improve in recent decades, the median working-age family has experienced little improvement in its real income. Nonelderly families that depend solely on the earnings of breadwinners who have below-average schooling saw a drop in their incomes.

In recent research with Brookings colleagues, I tracked the real incomes of families headed by aged and nonaged Americans. In the 34 years ending in 2012, the median real income of working-age families climbed a little more than 2 percent (in other words, by less than one-tenth of a percentage point per year). The median real income of families headed by someone past 62 increased a little more than 40 percent. The numbers suggest our retirement system is doing a decent job improving the living standards of the aged. Unfortunately, the labor market is doing a much worse job boosting the living standards of middle-class wage earners.

Critics of the retirement system might worry that it succeeds in protecting the incomes of the middle class elderly but fails to protect the incomes of the poor -- a concern not supported by the evidence. Income inequality has gone up among the elderly as it has among the nonelderly. But older low-income Americans have fared much better than low-income working-age adults. In the late 1950s, by far the highest poverty rate of any age group was that for people over 65. Even in the late 1980s, the elderly had a higher poverty rate than adults between 18-64. Since the middle of the last decade, however, the elderly have had the lowest poverty rate of any age group.

People who warn us of a retirement "crisis" are nonetheless correct in pointing to sizeable holes in the current system. Too few companies, especially small ones, offer their workers a retirement plan. According to recent government estimates, only about half of workers in companies with fewer than 100 employees are offered a retirement plan. Offer rates are higher in bigger companies and in government agencies, but about 30 percent of all employees are not offered any pension or retirement savings plan where they work. When retirement plans are offered, however, workers are very likely to participate in them -- even if they must make a voluntary contribution out of their pretax wages.

What is crucial for a retirement savings plan's success is automatic payroll withholding. Dollars that are withheld from workers' paychecks are harder for workers to spend on something other than retirement savings. A crucial improvement in our current system would be to require all employers to establish automatic payroll withholding for voluntary retirement savings in an IRA (individual retirement account). Companies that already offer a qualified pension or retirement savings plan should be exempt from any extra obligation.

The harshest critics of the current retirement system would go much further than this. Many want to bring back traditional retirement plans that guaranteed workers a specific monthly pension linked to their job tenure, final pay, and age at retirement. The advantages of such a plan for workers are that their employer is typically responsible for funding the plan and for ensuring that pensions are paid, regardless of the ups and downs of financial markets. A big disadvantage is that the promised benefits are not worth much if the worker's career with a company is cut short, either because of a layoff or quitting.

People who are nostalgic for old-fashioned pensions may be right that workers would prefer to be covered by such a plan, despite their disadvantages for short-tenure workers. I'm less persuaded that traditional pensions offer better protection to typical workers than modern 401(k)-type plans. Regardless of the pros and cons of the two kinds of plan, it is wildly unrealistic to think small employers or new employers will want to take on the risks and administrative burdens connected with an old-fashioned pension plan.

All U.S. workers are covered by a traditional, defined-benefit pension: it's called Social Security. It has worked well over the past four decades in protecting and even lifting the incomes of the retired elderly. It may not work as well in the future if benefits are cut substantially to keep the program solvent. Boosting workplace retirement savings is a sensible way to insure future retirees will have adequate incomes, even if Social Security benefits have to be trimmed. An essential first step to boosting savings is to require companies to put a retirement savings plan in every workplace.

Editor's note: This piece originally appeared in Real Clear Markets.

As I’ve noted in a previous JAMA Forum post, there has been a determined and serious effort in recent years by a broad range of organizations and analysts to find a consensus approach to the growing problem of financing long-term care in the United States. These efforts have just resulted in 2 major reports, released in February.

One report comes from the Bipartisan Policy Center (BPC), a national think tank committed to finding workable bipartisan policy solutions. The other is published by the Convergence Center for Policy Resolution, an organization that convenes groups and individuals with conflicting views to seek consensus on difficult issues. Participants in the latter project, known as the Long-Term Care Financing Collaborative, included leaders from major think tanks and philanthropy, insurance associations, health and consumer advocacy groups, organizations representing the interests of older Americans, not-for-profit services, and care for elderly persons, as well as former state and federal officials. (Disclosure: I served as an advisor to the BPC project and as a member of the Collaborative).

It’s a big step forward that the diverse participants in each of these projects were able to come to agreement. Why was that possible?

For one thing, the huge cost of long-term care and earlier failures to agree clearly focused many minds. Future costs are indeed attention-grabbing. Over the next 40 years, for instance, the number of elderly US residents with a severe need for long-term services and supports (LTSS) will increase 140% to more than 15 million. Meanwhile US adults turning 65 today can expect to incur an average of $138 000 in LTSS costs. But there is a wide risk distribution, with 15% of these seniors likely incurring more than $250 000 in expenses. Meanwhile, private insurance that covers the most crippling potential costs is proving harder and harder to find, with insurers increasing premiums and most pulling out of the market—in part because of the heavy and less predictable costs of aging.

Another factor that helped agreement in these projects was that the Urban Institute was able to upgrade its dynamic simulation model and to partner with the actuarial firm Milliman to incorporate claims data into its research to provide far more sophisticated and reliable estimates of several benchmark proposals. Urban made its model available to a range of organizations, including BPC (an employee benefits consulting company), LeadingAge (an association of groups that offer aging-related services), and the Collaborative. The estimates the Urban Institute produced had the effect of narrowing the set of plausible components in any serious plan. For instance, it became clear that a voluntary public catastrophic insurance program—even with subsidies—would be hard-pressed to significantly boost the number of people acquiring insurance protection against catastrophic LTSS costs.

What’s also important about these 2 projects is that the reports agree on several key elements. These elements are likely to form the core of potentially bipartisan legislation under a new Congress and administration. Among the most important are:

• Improving the market for private insurance. The BPC and the Collaborative proposals call for a number of steps to revitalize the market for private long-term care insurance, such as allowing employment-based retirement savings to be used for premiums and perhaps using autoenrollment to increase the take-up of available coverage. Both plans propose simpler, more standardized plans, with BPC including details of standard options. The Collaborative recommends clearly delineating private and public roles in long-term care insurance, with a stronger public role in addressing high need, long duration risk. As a further step toward bolstering the insurance market, both proposals recommend exploring innovations in long-term care product design. Ideas include possible jointly marketed products with health insurance or Medicare and perhaps long-term care coverage combined with life insurance or annuities.
• Public catastrophic insurance. Both reports call for a public catastrophic program for individuals with extraordinary costs to protect them from poverty and bankruptcy. In part, this is also to help cover the “tail end” risk that discourages private insurers from offering comprehensive protection, thereby allowing insurers to focus on shorter-term, more predictable coverage.  Each report is cautious about the uncertain cost of such protection but notes that the Medicaid program currently plays the role of insurer of last resort, and so a new catastrophic long-term care insurance program could help shift from the current welfare-based model toward a system of insurance. Echoing this, a new report from LeadingAge, which represents thousands of organizations engaged in aging services, also concluded that a universal program appears the best way to handle catastrophic costs.
• Retooling Medicaid. Both reports call for revamping Medicaid, by retooling its LTSS component to better serve persons with disabilities and others with long-term needs. Under both the BPC and Collaborative plans, states would offer a sliding-scale “buy-in” for Medicaid’s LTSS benefits. For working individuals with disabilities, this would function as a wraparound service to employer-sponsored health insurance and other health coverage. As both reports point out, the public catastrophic long-term care program would produce some savings for state Medicaid programs, making it financially easier for states to offer the wraparound coverage.
• Home and community based services. The 2 reports emphasize the importance of fostering community-based care and helping family caregivers.  An AARP report found that approximately 34 million family members and friends—mainly women—provide unpaid care to an older adult each year. The BPC would streamline waivers from federal rules to encourage states to expand home and community services. The Collaborative takes a step further and recommends entirely redefining Medicaid LTSS to include all settings and services currently offered under “mandatory” and “optional” state programs, and by doing so, eliminating the current bias in financing toward institutional care. The BPC suggests exploring some support for these caregivers, including temporary respite care to allow the usual caregiver some time off. The Collaborative published a report last summer, arguing for much greater integration of health and LTSS, including housing and transportation and for greater opportunities for training and support for caregivers.

There is of course a long road between publishing recommendations and the passage of legislation. And there are gaps in these proposals. For instance, how much a full proposal would cost and how it would be paid for (including how much from savings or new taxes) depends on design choices not worked out in detail.

But the similarity of these reports, the range of people and organizations involved and the determination of the participants to find common ground are in stark contrast to the polarization and gridlock we have become accustomed to. It augers well for enacting a solution to the enormous challenge of long-term care costs.

Editor's note: This piece originally appeared in The JAMA Forum

As the biological basis of more diseases are fully revealed, and the drugs targeting medical problems become more focused and effective, more patients are finding themselves on costlier specialty medicines. At the same time, consumers find themselves paying a growing portion of their drug bills out of pocket as the structure of insurance changes. These two developments have combined to result in significant consumer hardship.

In response to these trends, there has been political pressure to enact policies giving federal and state governments authority to set drug prices or limit price increases. However, these policies could have the unintended consequence of reducing the incentive to develop more effective drugs.

In Europe, government price-setting authorities systematically overpay for some older, less innovative drugs while reducing the prices of and access to newer, more significant breakthroughs. Many worry that enacting a similar policy in the United States would reduce the profitability of new, innovative research endeavors.

We believe that certain regulatory reforms can address these concerns and encourage more robust competition within the drug market. These policies would allow prices to more easily adjust to reflect how medicines are prescribed and the outcomes they deliver, and thus would help control rising spending and reduce the burden of drug costs for consumers. One way to make drug pricing more competitive is to implement selling models that tie the price of drugs more closely to the usefulness of the clinical setting in which they are being prescribed. However, existing regulations obstruct this type of market-oriented approach.

Pricing Based On Indication And Outcomes

The Centers for Medicare and Medicaid Services (CMS) recently announced that as early as 2017, it plans to pursue changes in the way Medicare pays for injectable drugs under its Part B program to give drug makers more flexibility to price products based on indications and outcomes. Yet the Medicare program left open how the relative value of different indications would be determined. Would drug makers be free to vary prices based on clinical demand and the benefits being offered in different clinical settings? Or as the rule suggests, will CMS try to influence these conclusions with an assessment of clinical value?

CMS’ proposed rule also does not address several challenges associated with a value-based pricing framework. For example, the proposal did not address the small molecule drugs that are the focus of much of the price scrutiny, only injectable drugs paid for as part of the medical benefit. Moreover, enabling such a framework for value-based pricing would require simultaneous regulatory reforms at the Food and Drug Administration (FDA), as well as the Office of the Inspector General. Because the impediments to this sort of policy effort cut across multiple agencies, it will likely require a legislative remedy to fully enable.

Inside CMS, enabling drug makers to adjust prices based on the purpose for which medicines are being prescribed will require changes to the existing rules that govern drug pricing. For example, federal regulators will need to relax the way that they implement current price-setting constructs like the calculation for Medicaid best price, the ceiling price for the 340B program, and the reporting rules for Medicare’s Part B average sales price. These rules complicate the ability of companies to price the same drug differently, based on how it’s being prescribed, or to enter into “value-based’ contracts that tie drug prices and discounts to measures of how a population of patients benefit from a given treatment.

Take, for example, the Medicaid Best Price rules. Best price is the lowest manufacturer price paid for a drug by any purchaser. It’s defined by the Medicaid statute as “any wholesaler, retailer, provider, health maintenance organization, or nonprofit or government entity” with some exceptions (Note 1). In short, it’s the cheapest price at which a drug is sold. A drug’s reported best price is required to reflect all discounts, rebates, and other pricing adjustments. It’s the benchmark that the government uses to make sure that state Medicaid programs are receiving the lowest price for which a drug is being offered to any purchaser.

Under these rules, if a drug maker enters into a contract with a private health plan to discount a drug based on how it’s being used (or the clinical results that it achieves) then the discount that’s offered when the drug is used in settings that are judged to yield less value would become the new benchmark for calculating the Medicaid best price. The rebates offered to a private insurer under the terms of just one value-based contract would establish the new price offered to all Medicaid programs, regardless of whether or not the Medicaid plans were also entering into similar contracting arrangements. So Medicaid plans that did not contract to pay higher prices when drugs were used in certain higher value settings, and lower prices when they were prescribed for lower value indications, would nonetheless pay a price for all of their prescriptions that reflected the lowest price offered under a value-based arrangement. This new Medicaid price could, in turn, influence other price schedules.

Consider a drug maker that offered a 90 percent discount on a drug when it didn’t produce any of its expected benefit. Under current rules, that deeply discounted price would become the new Medicaid best price, but not necessarily the blended price that reflects the average price being paid under a contract where the price fluctuated based on how a drug was being prescribed. This could create a significant disincentive for manufacturers to offering indication and outcome-based prices. For these reasons, enabling drug makers to adjust prices based on these parameters will require changes to rules on how drug makers must track and report prices to the government under Medicaid and to the 340B drug program.

Similar challenges to value-based pricing are posed by Medicare’s calculation of average sales price (ASP) as part of its framework for reimbursing injectable drugs paid under Part B. The ASP is defined as a manufacturer’s sales of a drug to all U.S. purchasers in a calendar quarter divided by the total number of units of the drug sold by the manufacturer in that same quarter (Note 2). The ASP is net of any price concessions, such as volume discounts, prompt pay discounts, cash discounts, free goods contingent on purchase requirements, chargebacks, and rebates other than those obtained through the Medicaid drug rebate program.

Manufacturers that offer discounts under commercial, value-based contracts would probably face reductions in their calculated ASP as a result of the concessions. In turn, they would see their reimbursement under Medicare Part B also decline, regardless of whether Medicare entered into the same outcome or indication-based contracts. Since the private market pegs its own pricing off of the ASP, a single value-based contract that served to lower the ASP could have the effect of reducing a drug maker’s reimbursement across every other contract. For drug manufacturers, this is another disincentive to entering into these arrangements.

Moreover, without significant regulatory changes, it is unlikely that Medicare would participate in a value-based system due to both legal and practical limitations. In the past, CMS has avoided these contracting arrangements when sponsors have approached the agency with such proposals. Even if CMS asserts the legal authority to enter into such arrangements, it is unclear whether the agency has the informational capacity to implement them. Managing a value-based system would require careful tracking of how and when drugs are prescribed, and collecting information to measure outcomes. Currently, CMS probably lacks the capacity to carry out this level of measurement and analysis. So for now, it will mostly be left to private payers to pursue value-based arrangements.

Reducing Regulatory Barriers

To reduce obstacles to value-based pricing, new regulations would need to be issued to clarify how drug makers, insurance plans, and health systems can rationalize value-based and indication-based contracts with their price reporting calculations. Medicare probably has the requisite authority to do so under constructs created by the Affordable Care Act. Additionally, Congress could provide clear authority and direction through legislation addressing these policy opportunities.

The Medicare and Medicaid programs could exempt value-based contracts that meet certain criteria from the requirement that the resulting prices, and the discounts, be used toward calculating Medicaid best price. CMS recently signaled that it had the existing authority to address some of these issues through a pilot program designed under the Center for Medicare and Medicaid Innovation (CMMI). Such a program could enable commercial health plans to adapt their reporting obligations to test how value-based and indication-based contracts would impact overall spending and outcomes. While the proposed regulation lays out Medicare’s general intent to pursue these strategies, it does not outline the parameters needed in order to go forward.

Some of the regulatory discretion that is required to change drug-pricing systems may be outside of the Medicare agency’s direct control. For example, the Office of the Inspector General (OIG) would have to change its interpretation of anti-kickback rules to enable drug makers to provide discounts based on the clinical indications for which drugs are prescribed, as well as the outcomes they deliver. Otherwise, under the OIG’s existing interpretation of its authority, these arrangements could be perceived as inducements to prescribing.

Fostering outcomes-based and indication-based pricing will also require FDA to adapt some of its existing rules and practices. Currently, drug makers are largely prevented from offering price concessions based on how a drug is used unless all of the prescribing options are listed precisely and completely on the drug’s label. When a drug maker secures approval for a new medicine, what appears on its drug label forms the basis for any outcomes-based contracts with health plans or Pharmacy Benefit Managers (PBMs), even if it would make more sense to contract for drugs based on measuring outcomes for which the drug is not explicitly approved. So far, FDA’s sometimes-purposeful ambiguity over the scope of its authority in these areas of commercial speech creates enough legal risk to discourage these sorts of business interactions.

In order to enable these arrangements, FDA would have to concede that commercial, contract-related communications constitute protected speech under the First Amendment and thus are not subject to the agency’s active regulation. At the least, FDA could stipulate that it does not forfeit its authority to regulate these and similar forms of commercial communication, but as a matter of policy will exercise enforcement discretion when it comes to value-based contracts and their negotiation. Better still, Congress can more firmly establish the same safe harbors in legislation, rather than leaving it up to FDA to stipulate these important legal principles in non-binding guidance or regulation.

Another impediment to contracting based on outcomes measurement is uncertainty over the FDA’s regulation of pre-approval communication. FDA prohibits pre-approval communication, but has not specified whether these restrictions extend to discussions between drug makers and drug purchasers that are conducted as part of contracting discussions prior to a drug’s launch. Pre-market commercial discussions are an important part of the ability to negotiate these complex, value-based contracts, as the contracts would need to be put into place at the time of approval. Because targeted pre-approval conversations between manufacturers and health plans are not inherently promotional, FDA as a matter of policy should not seek to regulate them.

Absent these collective regulatory impediments, drug makers and those who pay for medicines could have more ability and incentive to engage in price negotiations based on the indication for which a medicine is being prescribed by providers and the variable outcomes that it delivers to patients. In the absence of reforms to make drug pricing more competitive, the political alternative may well be regulated pricing. This approach would end up skewing investment because it would inevitably allocate capital based on political priorities rather than scientific priorities and clinical goals.

The discussion over drug prices is driven by a fair degree of politics, but the debate arose because of secular changes in the political economy of health care, and increasing costs to consumers. These challenges need to be addressed with constructive measures that foster access to and competitive pricing of medicines, while preserving market-based rewards for innovation, and the efficient allocation of capital to these efforts.

Note 1: Exceptions to the best price include prices that are charged to certain federal purchasers (sales made through federal supply schedule, single award contract prices of any federal agency, federal depot prices, and prices charged to the Department of Defense, Department of Veterans Affairs, Indian Health Service, and the Public Health Service), eligible state pharmaceutical assistance programs, and state-run nursing homes.

Note 2: Section 1847A(c) of the Social Security Act (the Act), as added by the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA), P.L. No. 108-173, defines an ASP as a manufacturer’s sales of a drug to all purchasers in the United States in a calendar quarter divided by the total number of units of the drug sold by the manufacturer in that same quarter.

Editor's Note: Both authors consult with and invest in life science and healthcare services companies.

Editor's note: This piece originally appeared in Health Affairs Blog.

President Barack Obama's April 17 debut before the hemisphere's main gathering of democratically elected leaders offers an important test of his administration's commitment to longstanding bipartisan support for democracy abroad. So far, the signals are not encouraging.

No doubt, the president inherits an unfortunate legacy on this front. President George W. Bush's over-the-top freedom agenda was seen by many as a veiled attempt, by military means or otherwise, to assert U.S. hegemony. At best, it was an overly ambitious and ham-handed effort to boost prospects for political reform in every corner of the world.

The more pragmatic Mr. Obama will take a different, more muted approach, bending U.S. advocacy on human rights to other concerns. Secretary of State Hillary Clinton apparently suggested that in her February visit to Beijing, where she signaled to the Communist Party's leaders that the United States would not let human rights get in the way of other priorities. But how far will this pragmatism go? Are we entering a new era in which the rights of the hundreds of millions of people who still live under authoritarian rule are relegated to third-tier status in the U.S. agenda?

In Latin America and the Caribbean, the good news is that most citizens not only have a secure voice and vote in how they are governed, but live in increasingly free societies. Freedom of the press is robust, civil society is active and independent judiciaries are slowly consolidating. Threats to these critical components of any democratic society emanate less from a restless military and more from heavily armed criminals who create havoc in once safe neighborhoods and target investigative journalists and honest judges with "plata o plomo" - money or lead.

There are, however, a few exceptions to this generally positive trend. Venezuela, under Hugo Chavez's tutelage, has deteriorated badly on several indicators of democratic life and is no longer invited to the Community of Democracies, a global association of governments committed to fundamental practices of democracy and human rights. Not far behind is Nicaragua which, under Sandinista leader Daniel Ortega, is reverting to old-style tactics of repressing the opposition and clamping down on dissent. Other states worth watching closely are Ecuador and Bolivia which, as they undertake dramatic reform to incorporate once marginalized groups, are vulnerable to civil conflict.

And then there is Cuba. Raul Castro will not be at the Summit of the Americas in Trinidad and Tobago because Cuba does not adhere to the inter-American system's fundamental principles of democracy and human rights. That is as it should be. But Mr. Obama will face considerable pressure from his colleagues to fudge this bright line by engaging, rather than isolating Cuba, as they and nearly every other country has done. Indeed, the White House has already begun moving in this direction by easing restrictions on family travel and remittances to the island. Much more can and should be done in the coming months to continue this process of rapprochement between Washington and Havana. But lifting Cuba's suspension as a member of the Organization of American States (OAS), as many are advocating, would be a step too far.

The governments of the region, as they emerged from years of military dictatorship in the 1980s, agreed to lock arms and resist any attempt to overthrow civilian constitutional rule. This joint approach has served the region well when such countries as Peru, Paraguay, Guatemala and Haiti faced political turmoil. The commitment to core democratic standards, expressed through the Inter-American Democratic Charter, is central to the region's identity and compares well to the European model of integration based on common democratic values and forms of government.

All this progress is at risk if the region's governments decide to lift Cuba's suspension as a member of the OAS without preconditions. Unless the Castro regime takes serious steps toward meeting the region's basic human rights standards, including rights to free speech, fair elections and due process for political prisoners, it should not be considered for renewed membership. The Obama Administration, which appears determined to open new paths of dialogue with difficult countries like Cuba, Iran and Syria, must be careful not to lower the bar so far that its own neighborhood loses its distinct identity as a community of democratic states.

President Obama, thus, should walk a fine line at the Summit gathering. He needs to lead by example by implementing human rights reforms at home while reminding his colleagues they share a common responsibility to follow and promote universal democratic standards. This must include encouraging the Castro government to adopt genuine political reforms before it can be welcomed back to the OAS, as well as strengthening the region's collective defense of democracy in backsliding states. Anything less would surely set the human rights cause back for the region, and the world.

Event Information

President Barack Obama took office in early 2009 with an ambitious foreign policy agenda for the Americas. In April of that year, his keynote remarks at the fifth Summit of the Americas emphasized the United States’ new course of seeking equal partnership and collaboration in the region.

On June 29, the Latin America Initiative at Brookings and the Corporación Andina de Fomento (CAF) brought together experts from the region to discuss the significance of this renewed hemispheric partnership and featured a keynote address from Arturo Valenzuela, assistant secretary of state for Western Hemisphere affairs. Panelists included: Craig Kelly, principal deputy assistant secretary for Western Hemisphere Affairs at the U.S. Department of State; Michael Shifter, president of the Inter-American Dialogue; Luis Enrique Berrizbeitia, executive vice-president of the Corporación Andina de Fomento (CAF); and Kevin Casas-Zamora, senior fellow at Brookings. They took a closer look at the idea of partnership in the region, reviewed the progress that has been made, explored opportunities that exist for the future and discussed the realities of developing collaborative policies in the region across a wide range of topics, including energy and climate change. The discussion also revisited the policy recommendations made by Brookings‘s Partnership for the Americas Commission.

Video

• A Confident and Strong Latin America
• Adaptable Latin America Policy
• Four Pillars of U.S. Strategy
• Need a Strong U.S. Relationship with Brazil

Audio

• Latin America and the Obama Administration: A New Partnership?

Transcript

• Transcript (.pdf)

Event Materials

• 20100629_americas_partnership

On June 29, the Latin America Initiative (LAI) at Brookings and the Corporación Andina de Fomento (CAF) hosted a panel of experts from Latin America to discuss the significance of the renewed hemispheric partnership between the U.S. and Latin America. In this video from the event, LAI director Mauricio Cárdenas discusses the challenges of U.S. foreign policy in Latin America and how the focus has changed since President Obama took office.

Latin America is starting off 2015 with a clear economic slowdown. The United Nations Economic Commission for Latin America and the Caribbean (ECLAC) projects a modest recovery (2.2 per cent) with respect to last year (in 2014 growth was only 1.1 per cent, the lowest since the 2009 crisis), though these calculations may vary due to several factors.

The world economy is not helping. The downward trend in raw materials prices, scant dynamism in global demand, and the appreciation of the dollar are three factors that work against the region today.

Venezuela and Argentina, are facing very complex economic contexts. Venezuela is in the midst of stagflation (aggravated by plummeting oil prices); and Argentina is experiencing negative growth, high inflation, and the unresolved conflict with the “vulture funds.”

The two largest economies of the region, Brazil and Mexico, are facing their own demons. Brazil President Dilma Rousseff, with a weak mandate, is gambling the political capital of her second term (which just began on 1 January) on the new economic team led by Joaquim “Scissorhands” Levy. Levy is to make a fiscal adjustment that has been put off and is much needed; Rousseff hopes it will enable her to regain investor confidence, and thereby return to higher growth. The Petrobras scandal (in addition to the negative impact it has been having within the Workers Party) requires that she wage a head-on struggle against corruption and impunity (she just proposed a national anticorruption campaign), and that she implement a thoroughgoing political reform, which has been put off for too long.

In Mexico, falling oil prices, economic growth below official expectations, and the wave of protests in the wake of the murders of the 43 students in school to become teachers at Ayotzinapa, have eclipsed the so-called Mexico moment and have Enrique Peña Nieto against the ropes. He has sought to retake the initiative by announcing new reforms and proposals, and he hopes to recover citizen trust if the structural reforms yield the results promised.

The challenge of the polls

In the 2015 electoral agenda, of special note are three presidential elections (Argentina, Guatemala, and Haiti), three legislative elections (El Salvador, Mexico, and Venezuela), and several state, regional, and municipal elections, in Bolivia, El Salvador, Colombia, Mexico, Paraguay, and Uruguay, among others.

The three presidential elections continue to be very open races. In Guatemala (from the return of democracy to date) the party in power has never been returned to office. The three best-positioned presidential candidates are the government party candidate Alejandro Sinibaldi, and opposition candidates Manuel Baldizón (for now he’s leading the polls) and former first lady Sandra Torres.

In Argentina, kirchnerismo is pulling into the election period worn down and without any clear candidate for now. The three leading candidates based on polling data are Peronists Daniel Scioli (former vice president of Néstor Kirchner and current governor of the province of Buenos Aires) and Sergio Massa (former chief of staff of Cristina Fernández de Kirchner, currently a federal legislator and opponent of the government), and on the center-right Mauricio Macri (current head of government of the city of Buenos Aires).

In Haiti, in a tense political environment, it is not clear who will succeed President Michel Martelly, or what the exact date will be for municipal, legislative, or presidential elections. It is rumored that presidential elections may be held in January 2016. Ultimately the electoral calendar will depend on how negotiations proceed between Martelly and the opposition.

The Salvadoran legislative and municipal elections are especially important. The Sánchez Cerén administration will seek to revalidate its triumph of early 2014, ensuring good legislative and municipal support for his efforts with a view to the next three years, while the Alianza Republicana Nacionalista (ARENA) will seek to turn things around at the polls.

In Mexico, the future of the administration of President Peña Nieto, beset by protests and scandals, turns on the midterm elections of June 2015. Whether Peña Nieto will have sufficient political capital to continue giving impetus to his agenda of structural reforms (“Pacto por México”) during the remaining three years of his term will hinge on the results of these elections.

In Venezuela, the legislative elections will increase political tension and repression by the regime. The opposition has a golden opportunity to win back the legislative majority from the chavistas or President Chavez followers, taking advantage of the profound economic crisis looming over the country and the fall in Nicolás Maduro’s popularity in the polls. The big question is whether the opposition will prove capable of taking advantage of this opportunity and whether the elections will be truly free and competitive. The other aspect to monitor is whether Vatican diplomacy, under the leadership of Pope Francis (and with the precedent of the re-establishment of relations between the United States and Cuba in his favor), will be able to facilitate an effective political dialogue between the government and the opposition to seek a negotiated solution to Venezuela’s complex situation.

Colombia, Cuba and Chile

In Colombia, in addition to the regional elections (in which the uribistas, or followers of former President Álvaro Uribe, will seek to come out on top this time), attention is focused on the final phase of the negotiations in Havana between the Revolutionary Armed Forces of Colombia (FARC) and the government of Juan Manuel Santos aimed at achieving peace. If the negotiations are successful, it will no doubt be the most important political event in the region in 2015. The fate of the peace process will be subject to a referendum, which will probably be held in the second half of 2015 or early 2016 (depending on the speed at which the negotiations proceed and their success).

The most important political event of 2014--the re-establishment of diplomatic relations between the United States and Cuba after more than 50 years of confrontation--will continue to capture considerable attention in 2015. This decision, which entails a 180-degree turnabout in U.S. policy to Cuba, will help improve relations between the United States and the region. It enables Cuba to fully assume its place in the hemisphere (its participation at the Seventh Summit of the Americas next April in Panama will make it a historic occasion), and at the same time it will also be able to diversify its trade relations and allow for new investment at a time when Venezuela (its main partner in recent years) is experiencing its own profound economic crisis. Full normalization of relations between the United States and Cuba (including the end of the embargo, a decision in the hands of Congress) will be a long and complex process, but the first step has already been taken, and in the right direction. In 2015 it will also be important to monitor the evolution and results of the economic reforms that Raúl Castro has been carrying out.

In addition, 2015 is a vital year in Chile for the government of Michelle Bachelet who, with markedly diminished popularity and mounting criticism of her presidency, must address two major challenges in the second year of her administration: bringing about the recovery of an economy that has clearly slowed down (1.7 per cent during 2014), and continuing to give impetus to an ambitious agenda of reforms.

This year the polemical education reform should be approved; it not only enjoys the backing of the opposition, but also provokes major tensions within the government coalition. In addition, the electoral reform should be unveiled (it will do away with the binomial system) and the labour reform, which is resulting in a new distancing of business from the government. Another point on the agenda is starting up the process aimed at amending the Constitution (one of Bachelet’s three main pledges during her campaign); the process promises to be the “mother of all reforms.”

Different scenarios in regional relations

In regional relations, seven events stand out for their importance and should be closely monitored:

1. The first ministerial meeting of China-Comunidad de Estados Latinoamericanos y Caribeños CELAC Forum in Beijing, China (January 8 and 9);
2. The third meeting of CELAC in Costa Rica (January 28 and 29), where Ecuador will assume the presidency;
3. The Seventh Summit of the Americas, which will take place in Panama (April 10 and 11), and whose focus of attention will be Cuba’s participation for the first time since the Summits process began in 1994;
4. The election of a new Secretary General of the Organization of American States (OAS) with the capacity to strategically reposition this weakened regional organization affected by the political divisions among its member countries;
5. The evolution of the process of rapprochement between MERCOSUR and the Pacific Alliance;
6. The EU-Latin America Summit;
7. The recent re-launch of UNASUR (which took place in December in Quito), under the leadership of former President Ernesto Samper.

My opinion

Latin America finds itself in the doldrums, and must undertake a two-fold transition: from the model based on high raw materials prices and low financing costs, to one with low raw materials prices and higher financing costs. As the OECD rightly notes: “this abrupt economic slowdown is not a passing phenomenon, it has come to stay. It’s the end of a cycle.”

This requires the region to urgently set in motion profound structural reforms, aimed at changing its development model which can strategically adapt to this new global context.

Only by improving productivity and competitiveness, education and innovation, infrastructure, but also the quality of its institutions, will the region be able to achieve inclusive, equitable, and sustainable economic growth that makes it possible to continue reducing poverty and inequality. All this will enable the region to respond more effectively to the demands and expectations of citizens ever more aware and demanding of their rights and of quality public services.

This economic slowdown and the implementation of an agenda of structural reforms (including the structural adjustment policies that we’ll see in some countries) will surely affect certain interests, thereby paving the way for certain countries to suffer greater social discontent in 2015 and a more complex situation when it comes to governability.

Yet the region is not homogenous. On the contrary, there is a considerable degree of heterogeneity that will determine a wide diversity of national situations. In effect, while Central America grew 3.7 per cent in 2014, and will grow 4.1 per cent in 2015, in South America these percentages are 0.7 per cent and 1.8 per cent respectively. Yet there is also diversity among countries. Accordingly, for example, while Panama (7.0 per cent), Bolivia (5.5 per cent), Peru, Dominican Republic, and Nicaragua (5.0 per cent) head up the list of economies with the best prospects for growth. Countries such as Brazil and Argentina – with more capacity for traction than the rest of the economies – have much more moderate projections. Mexico and Chile, predicted to experience 3 per cent annual growth, could help push the regional average up. Venezuela, similar to 2014 (with negative growth and inflation at about 64 per cent), will have a very complicated year economically speaking.

As Warren Buffet said, and rightly so, “when the tide goes out you can see who's been skinny dipping.” Something similar will happen with the countries of the region in 2015. Soon we’ll know which governments have been financially exposed.

This piece was originally published by International IDEA.

Over the past decade, many observers of U.S.-Latin America relations have taken a pessimistic view, arguing that U.S. influence is in retreat and decline. In this more optimistic policy brief, Richard Feinberg, Emily Miller, and Harold Trinkunas show that—to the contrary—U.S. core interests in the region have steadily improved in recent decades. While acknowledging heartening successes in the region, the authors outline how the United States should adapt its instruments of diplomacy for the 21st century.

Key Findings

• U.S. core interests in the hemisphere are: (1) progressive, resilient political democracies with respect for human rights; (2) reasonably well-managed, market-oriented economies open to global trade and investment; (3) inter-state peace among nations; and (4) the absence of credible threats to the United States from international terrorism or weapons of mass destruction.

• In country after country, international and domestic actors have aligned to produce stronger economic growth, improved macroeconomic management, consolidated democracy, and inter-state peace.

• Traditional tools of U.S. leverage—including bilateral economic assistance, economic policy advice, sanctions, arms transfers, military training, and covert and overt military interventions—have declined dramatically in effectiveness and relevance.

• In a few countries, poor domestic policy choices have produced problematic macroeconomic outcomes and political conflict. However such cases may well be corrected as domestic politics change in due course.

Policy Recommendations

• Organize U.S. hemispheric policy around bolstering our four core interests and the regional institutions that undergird them.

• Target our policies toward Latin America to focus on collaboration on global governance with the upper-middle income countries, technical assistance for the fragile states of the Caribbean Basin, and watchful patience with rejectionist leaders as we wait for history to take its course.

• Rethink and retarget problematic U.S. counternarcotics policies, both to rebalance away from their dominance in the assistance agenda to Latin America and to focus on dimensions of the problem that fall under U.S. jurisdiction and control.

• Extend the principle of evidence-based programs, systematically evaluated based on transparent metrics, to other dimensions of our economic and security assistance to the region.

• Manage the challenges posed by our relationship with Brazil within a broader framework designed to promote constructive contributions by all rising powers to a stable and peaceful international order.

• Ensure that China’s inevitable economic presence in the region contributes positively to Latin America’s development without eroding hard-won political and social gains.

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• Better Than You Think: Reframing Inter-American Relations

Event Information

On April 10 and 11, 2015, the Seventh Summit of the Americas will bring together the heads of state and government of every country in the Western Hemisphere for the first time. Recent efforts by the United States to reform immigration policy, re-establish diplomatic relations with Cuba, and reform our approach to drug policies at home and abroad have generated greater optimism about the future of inter-American relations. This Summit provides an opportunity to spark greater collaboration on development, social inclusion, democracy, education, and energy security.

However, this Summit of the Americas is also convening at a time when the hemisphere is characterized by competing visions for economic development, democracy and human rights, and regional cooperation through various institutions such as the Organization of American States, the Union of South American Nations, and the Community of Latin American and Caribbean States.

On Friday, April 3, the Latin America Initiative at Brookings hosted Assistant Secretary of State Roberta S. Jacobson for a discussion on the Seventh Summit of the Americas and what it portends for the future of hemispheric relations.

Join the conversation on Twitter using #VIISummit

Audio

• The Summit of the Americas and prospects for inter-American relations

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20150403_summit_americas_jacobson_transcript

Robert Sargent Shriver, Jr. guided the Peace Corps from its inception in 1961 (when it was a nascent vision of service and citizen diplomacy) to establish a renowned track record of success over the past half century, in which more than 200,000 volunteers and trainees have served in 139 countries.

The legacy of Shriver’s leadership with the Peace Corps and later with the Office on Economic Opportunity and Special Olympics has reached and changed millions of lives—of both those empowered and those who served—from impoverished communities across rural and urban America to huts and villages in developing nations throughout the world. Yet one of the greatest gifts he leaves us is the foundation to build on those accomplishments to scale-up service as a direly needed “soft power” alternative to establish international understanding and collaboration in a volatile world. As Sarge put it, so simply but powerfully: “Caring for others is the practice of peace.”

Sarge Shriver’s unquenchable idealism today is being advanced by a new generation of social entrepreneurs such as Dr. Ed O’Neil, founder of OmniMed and chair of the Brookings International Volunteering Project health service policy group. With the help of Peace Corps volunteers and USAID-supported Volunteers for Prosperity, O’Neil has fielded an impressive service initiative in Ugandan villages that has expanded the capacity and reach of local health-service volunteers engaged in malaria prevention and education on basic hygiene. 

Timothy Shriver, who succeeded his parents, Sarge and Eunice, at the helm of the Special Olympics, speaks eloquently on the move of a second generation from politics to building civil society coalitions promoting soft power acts of service and love, one at a time. This impulse is echoed in the Service World policy platform which hundreds of NGOs and faith-based groups, corporations and universities have launched to scale-up the impact of international service initiatives. This ambitious undertaking was first announced by longtime Shriver protégé former Senator Harris Wofford at a Service Nation forum convened on the morning of President Obama’s Cairo speech in which he called for a new wave of global service and interfaith initiatives.

I had the privilege of serving as a national director of the VISTA program inspired by Shriver and  to work alongside Senator Wofford and John Bridgeland, President George W. Bush’s  former White House Freedom Corps director, who have co-chaired the Brookings International Volunteering Project policy team. Along with Tim Shriver, they have ignited the Service World call to action, together with Michelle Nunn of Points of Light Institute, Steve Rosenthal of the Building Bridges Coalition, Kevin Quigley of the National Peace Corps Association and many others.

The Obama administration and Congress would best honor the life and legacy of Sarge Shriver by calling for congressional hearings and fast- tracking agency actions outlined in the Service World platform and naming the global service legislation after him. Coupled with innovative private-sector and federal agency innovations, the legislation would authorize Global Service Fellowships, link volunteer capacity-building to USAID development programs such as  Volunteers for Prosperity, and double the Peace Corps to reach a combined goal of 100,000 global service volunteers annually—a goal first declared by JFK.

Those who promote opportunity and service as vehicles to advance peace and international collaboration will continue to draw inspiration from Sargent Shriver’s indefatigable quest for social justice―from the time he talked then-Senator John F. Kennedy into intervening in the unjust jailing of Martin Luther King, Jr. to his refusal to accept wanton violence and impoverished conditions in any corner of the world.

Information on offering online tributes to the Shriver family and donations in lieu of flowers requested by the family of Sargent Shriver can be found at www.sargentshriver.org .

INTRODUCTION

Over the past decade, the focused attention of African nations, the United States, U.N. agencies and other multilateral partners has brought significant progress toward achievement of the Millennium Development Goals (MDGs) in health and malaria control and elimination. The potential contribution of these strategies to long-term peace-building objectives and overall regional prosperity is of paramount significance in sub-regions such as the Horn of Africa and Western Africa that are facing the challenges of malaria and other health crises compounded by identity-based conflicts.

National campaigns to address health Millennium Development Goals through cross-ethnic campaigns tackling basic hygiene and malaria have proven effective in reducing child infant mortality while also contributing to comprehensive efforts to overcome health disparities and achieve higher levels of societal well-being.

There is also growing if nascent research to suggest that health and other humanitarian interventions can result in additional benefits to both recipients and donors alike.

The social, economic and political fault lines of conflicts, according to a new study, are most pronounced in Africa within nations (as opposed to international conflicts). Addressing issues of disparate resource allocations in areas such as health could be a primary factor in mitigating such intra-national conflicts. However, to date there has been insufficient research on and policy attention to the potential for wedding proven life-saving health solutions such as malaria intervention to conflict mitigation or other non-health benefits.

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• malaria africa caprara

Suzy Khimm reports on a proposal from the Bipartisan Policy Center that would establish a framework for reaching a grand bargain on deficit reduction in 2013. In short, the BPC proposes that Congress and the president in the lame duck session would agree to a procedural framework for guiding enactment of major spending and tax reforms in 2013. In enacting the framework, Congress and the president would also avert going over the fiscal cliff. In exchange, Congress and the president would make a small down payment on deficit reduction in the lame duck, and would authorize a legislative “backstop” of entitlement cuts and elimination of tax expenditures that would become law if Congress and the president failed in 2013 to enact tax and spending reforms.

The procedural elements of the BPC’s proposal bear some attention. The BPC’s not-quite-yet-a-catchphrase is “accelerated regular order.” Although it sounds like a nasty procedural disease, it’s akin to the fast-track procedures established in the Congressional Budget Act and in several other statutes. In short, the framework proposed by the BPC would instruct the relevant standing committees in 2013 to suggest to the chamber budget committees entitlement and tax reforms that would sum to $4 trillion dollars in spending cuts and new revenues (assuming extension of the Bush tax cuts). The House and Senate budget panels would each report a grand bargain bill for their chamber’s consideration that would be considered (without amendment) by simple majority vote after twenty hours of debate. Failure to meet the framework’s legislated deadlines would empower the executive branch to impose entitlement savings and to eliminate tax expenditures to meet the framework’s target.

Loyal Monkey Cage readers will recognize that the BPC proposal resembles in many ways the procedural solution adopted in the Deficit Control Act in August of 2011. But there are at least two procedural differences from the 2011 deficit deal. First, rather than a super committee, the BPC envisions “regular order,” meaning that the standing committees—not a special panel hand-selected by party-leaders—would devise the legislative package. Like the August deficit deal, the BPC proposal then offers procedural protection for the package by banning the Senate filibuster and preventing changes on the chamber floors (hence, an accelerated regular order). Second, rather than a meat-axe of sequestration that imposes only spending cuts, the BPC offers a “backstop,” giving what I take to be statutory authority to the executive branch to determine which tax expenditures to eliminate and which entitlement programs to cut back.

These differences from 2011 are subtle, but the BPC believes that they would improve the odds of success compared to the failed Super-committee plus sequestration plan. As a BPC staffer noted:

"One of the reasons the Joint Select Committee on Deficit Reduction failed, in our view, was because only 12 lawmakers were setting policy for the entire Congress,” said Steve Bell, Senior Director of BPC’s Economic Policy Project. “The framework we propose today would both ensure an acceleration of regular budget order in the House and Senate, and it would involve all committees of relevant jurisdiction.”

This is an interesting argument worth considering. Still, I’m not so sure that accelerated regular order would improve the prospects for an agreement.

First, it strikes me that the real barrier to a grand bargain hasn’t been the Senate’s filibuster rule. The super committee was guaranteed a fast-track to passage, but that still didn’t motivate the parties to reach an agreement. The more relevant obstacle in 2011 and 2012 has been the bicameral chasm between a Republican House and a Democratic Senate. To be sure, eliminating the need for a sixty-vote cloture margin would smooth the way towards Senate passage. But we could easily imagine that the 60th senator (in 2013, perhaps a GOP senator like Lisa Murkowski) might be willing to sign onto a deal that would still be too moderate to secure the votes of House Republicans (assuming no change in party control of the two chambers). As we saw over the course of the 112th Congress, House passage required more than the consent of the House median (an ideologically moderate Republican) and more than the support of a majority of the GOP conference. The big deals in the 112th Congress only passed if they could attract the votes of roughly 90% of the House GOP conference. Expedited procedures can protect hard-fought compromises from being unraveled on the chamber floors but by themselves don’t seem sufficient to generate compromise in the first place.

Second, and related, I’m somewhat skeptical that the small size of the super committee precluded a viable agreement. By balancing parties and chambers, the group was (in theory) a microcosm of the full Congress. If true, then delegating to the super committee was more akin to delegating to a mini-Congress. Perhaps the BPC’s idea of allowing the standing committees to generate proposals would broaden legislators’ willingness to buy-in to a final agreement. More likely, I suspect that the framework would produce a House bill perched on the right and a Senate bill left of center (since the filibuster ban would reduce Democrats’ incentives to produce a bipartisan bill). That leaves the bicameral chasm still to be bridged, suggesting that accelerated regular order might not bring Congress all that much closer to a bipartisan agreement in 2013. Consent of party leaders remains critical for an agreement.

Third, the BPC proposal is unclear on the precise nature of the legislative backstop. But would either party agree in advance to the framework if they didn’t know whose ox would be gored by the administration when it exercised its power to reform entitlements and eliminate tax expenditures? Perhaps delegating such authority to the executive branch would allow legislators to avoid voters’ blame, making them more likely to vote for the framework. (That said, it’s somewhat ironic that the BPC’s embrace of accelerated regular order flows from its desire to broaden the set of legislators whose fingerprints are visible on the grand bargain.) Regardless, the prospects for cuts in entitlement programs could lead both parties to favor kicking the can down the road again before it actually explodes.

Fast-track procedures have a decent track record in facilitating congressional action. (Steve Smith and I have extolled their virtues elsewhere.) But the most successful of these episodes involve narrow policy areas (such as closing obsolete military bases) on which substantial bipartisan agreement on a preferred policy outcome is already in place. Expecting a procedural device to do the hard work of securing bipartisan agreement may be asking too much of Congress’s procedural tool kit in a period of divided and split party control.

In this podcast, congressional expert Sarah Binder explains why the Senate filibuster is a historical mistake. She talks about her research on Congress’s relationship with the Federal Reserve and addresses whether Congress is more polarized today than it has been in the past. Binder, a senior fellow in Governance Studies, is also a professor of political science at George Washington University and contributor to the Monkey Cage blog.

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Show notes:

• The Federal Reserve: Balancing Multiple Mandates (testimony by Alice Rivlin)
• Boom! What the Senate Will Be Like When the Nuclear Dust Settles
• Beyond the Horse Race to Lead the Fed
• Droning on: Thoughts on the Rand Paul “Talking Filibuster”
• Advice and Dissent: The Struggle to Shape the Federal Judiciary
• The History of the Filibuster

* In the image, Senator Henry Clay speaks about the Compromise of 1850 in the Old Senate Chamber. Daniel Webster is seated to the left of Clay and John C. Calhoun to the left of the Speaker's chair. (engraving by Robert Whitechurch, ca. 1880, Library of Congress)