An analysis of the growth and characteristics of the foreign-born in the Philadelphia metropolitan area between 1970 and 2006 finds:

• Among its peers, metropolitan Philadelphia has the largest and fastest growing immigrant population, which now stands at over 500,000, comprising 9 percent of the population. Between 2000 and 2006, greater Philadelphia’s immigrant population grew by 113,000, nearly as many as had arrived in the decade of the 1990s.
• Metropolitan Philadelphia has a diverse mix of immigrants and refugees from Asia (39 percent), Latin America and the Caribbean (28 percent), Europe (23 percent) and Africa (8 percent). The 10 largest source countries are India, Mexico, China, Vietnam, Korea, Italy, Ukraine, Philippines, Jamaica, and Germany.
• Immigrant growth in suburban Philadelphia has outpaced the city’s growth, but numerically, the city has the largest population of all local jurisdictions. Outside the city, Montgomery County had the earliest post- World War II suburban settlement of the foreign born and has the largest number of immigrants among jurisdictions, while Chester County saw the fastest growth during the 1970-2006 time period.
• Nearly 60 percent of the foreign-born living in metropolitan Philadelphia arrived in the United States after 1990. Although their naturalization rates and educational levels reflect their recentness of arrival, on the whole, greater Philadelphia’s immigrants are doing well on these measures as compared with some other U.S. metropolitan immigrant populations.
• Nearly 75 percent of greater Philadelphia’s labor force growth since 2000 is attributable to immigrants. Immigrants’ contributions to the labor force are considerably higher in this period than in the 1990s, when just 36 percent of the growth was due to immigrants.

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Bringing together the five counties of Southeastern Pennsylvania, the nonprofit Metropolitan Caucus, a new regional consortium there, is promoting a joint regional application for ARRA’s competitive Energy Efficiency and Conservation Block Grant dollars. Its four-part proposal, which will add and refine partners and programs over time, draws on the collaboration of multiple regional institutions to establish and operate a loan fund for green building and retrofits; support clean energy technology deployment; assist local governments with energy efficiency plans; and measure the energy performance of public facilities.

The newly created Metropolitan Caucus of southeastern Pennsylvania is leading the bold new regional energy efficiency strategy targeting for the competitive Energy Efficiency and Conservation Block Grants (EECBG) in the American Recovery and Reinvestment Act (ARRA). Unprecedented for the region, the Metropolitan Caucus has brought together five area counties—Bucks, Chester, Delaware, Montgomery, and Philadelphia—to make the most of the stimulus opportunity by coordinating their plans, goals, and assets to achieve maximum regional benefit. Their proposed joint EECBG competitive application for roughly $35 million calls for financing construction and retrofits, supporting clean energy companies, measuring building energy performance, and assisting local governments in implementing various sustainability solutions. To carry out each of these activities, the caucus intends to engage in broad cross-sector collaboration to leverage the strengths and unique assets of regional educational institutions, key nonprofits, and planning agencies.

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On May 24, the John L. Thornton China Center at Brookings hosted U.S. Undersecretary of the Treasury for International Affairs Nathan Sheets for a discussion on the U.S.-China economic relationship and engagement in preparation for the economic track of the upcoming eighth U.S.-China Strategic & Economic Dialogue (S&ED), to be held in Beijing in early June. Senior Fellow and Director of the Brookings China Center Cheng Li provided opening remarks and Senior Fellow David Dollar moderated the discussion.

Undersecretary Sheets was confirmed by the U.S. Senate as the Treasury Department’s undersecretary for international affairs in September 2014. In this position, he serves as the senior official responsible for advising the secretary of the Treasury on international economic issues. Previously, Sheets worked as global head of international economics at Citigroup, and at the Federal Reserve Board in a number of positions, including as director of the division of international finance.

Following the discussion, panelists took questions from the audience.

Join the conversation on Twitter using #USChina

Video

• Introduction by Cheng Li, and remarks by Nathan Sheets
• Discussion between Nathan Sheets and David Dollar

Audio

• A preview of the eighth U.S.-China Strategic and Economic Dialogue

Transcript

• Transcript (.pdf)

Event Materials

• 20160524_us_china_sheets_transcript

In “Designing Pan-Atlantic and International Anti-Crime Cooperation,” a chapter for the new book, Dark Networks in the Atlantic Basin: Emerging Trends and Implications for Human Security (Center for Transatlantic Relations, January 2015), Vanda Felbab-Brown discusses the context and challenges of designing policies to counter organized crime and illicit economies in West Africa. She argues that although large-scale illicit economies and organized crime have received intense attention from governments and international organizations since the end of the Cold War, the strategies designed to combat these developments have been ineffective and, at times, counterproductive. Many populations experiencing inadequate state presence, great poverty, and social and political marginalization are dependent on illicit economies; and policies prioritizing suppression of these economies can, paradoxically, increase the economic and political capital of criminal or militant groups.

The recent drug trade epidemic and the connections between various illicit economies and terrorism have cast a spotlight on West Africa, Felbab-Brown explains. But in analyzing how the drug trade affects West Africa, it is important to note that preexisting institutional and governance deficiencies crucially amplify the destabilizing effects of the drug trade. Neither the  drug trade nor the entrenchment of political corruption and misgovernance in West Africa are new phenomena emerging in the wake of cocaine flows through the region. Rather, political contestation in West Africa has long centered on the capture of rents from legal, semi-illegal, or outright illegal economies such as diamonds, gold, timber, cacao, human trafficking, and illegal fishing, resulting in a pervasive culture of illegality, in which society expects that laws will be broken, enforcement evaded, and that the state will be the source of rents rather than an equitable provider of public goods. A long history of rentier economies, illicit activity, smuggling, endemic corruption, weak institutions, and governance as mafia rule—that provides exceptions from law enforcement to the ruler's clique—has left West Africa with what Felbab-Brown terms the technology of illegality and the state as mafia bazaar.

This context makes West Africa a particularly vexing area for policymakers and international donors who want to combat militancy or organized crime in West Africa. The United States and international community should consider any intervention in the region strategically, calibrating assistance packages to the absorptive capacity of the partner country, focusing on broad state-building, and fostering good governance. The priority of the United States must be to combat the most disruptive and dangerous networks of organized crime and belligerency, recognizing that anti-crime interventions cannot eradicate the majority of organized crime, illicit economies, and drug trafficking in the region. Moreover, efforts by external donors, such as Colombia or Brazil, to transfer policy practices to West African countries need to carefully consider which external lessons and policies are suited for local contexts.

The full book, Dark Networks in the Atlantic Basin: Emerging Trends and Implications for Human Security, is available for purchase from The Brookings Institution Press.

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“Although we are seeing a strengthening recovery in the United States, the overall performance of the global economy continues to fall short of aspirations,” said Treasury Undersecretary for International Affairs Nathan Sheets to a Brookings audience yesterday. In the event, hosted by the Global Economy and Development program and the Economic Studies program at Brookings, Undersecretary Sheets described six “pillars” that form his offices “core policy agenda for the years ahead” to support “a growing and vibrant U.S. economy.”

1. Strengthening and rebalancing global growth. Undersecretary Sheets noted the “persistent and deeper asymmetry in the international economic landscape,” and called for policymakers to “work together toward mutually beneficial growth strategies” such as boosting demand.
2. Deepening engagement with emerging-market giants, such as China, India, Mexico, and Brazil. On India, for example, the undersecretary noted that “faster growth, deeper financial markets, and greater openness to trade and foreign investment promise to raise incomes, reduce poverty, and bring many more Indians into the global middle class.”
3. Framing a resilient global financial system. “To be sustained,” he said, “growth must be built on a resilient financial foundation.” (See also Federal Reserve Governor Lael Brainard’s remarks yesterday on the Fed’s role in financial stability.)
4. Enhancing access to capital in developing countries. “Expanding access to financial services for the over 2 billion unbanked people in the world promises to open new possibilities as the financial wherewithal in these populations grows,” he said.
5. Promoting open trade and investment. Undersecretary Sheets explained that “Increased U.S. access to foreign markets, and the consequent rise in exports of our goods and services, is an important source of job creation in the United States.” He described current trade priorities, including the Trans-Pacific Partnership (TPP), the Transatlantic Trade and Investment Partnership (TTIP), the Information Technology Agreement (ITA) concerning China, and the Trade Facilitation Agreement (TFA) concerning India.
6. Enhancing U.S. leadership in the IMF. Undersecretary Sheets said that Treasury and the Obama administration “are firmly committed to securing approval for the 2010 IMF quota and governance reforms.” Citing the widespread support already in place for these policies, Sheets argued that “without these reforms, emerging economies may well look outside the IMF and the international economic system we helped design, potentially undermining the Fund’s ability to serve as a first responder for financial crises around the world, and also our national security and economic well-being.” He also called on the Senate to confirm six administration nominees as executive directors or alternate executive directors at the IMF and multilateral development banks.

Watch the video here:

Get a transcript of Undersecretary Sheets’ prepared remarks here.

Brookings expert Donald Kohn, the Robert S. Kerr Senior Fellow, moderated the discussion. The speaker was introduced by Senior Fellow Amar Bhattacharya.

2015 is a pivotal year for global development; this fall is a pivotal moment. Meetings this fall will determine the global vision for sustainable development for 2030.

Three papers being released today—“Action implications focusing now on implementation of the post-2015 agenda,” “Systemic sustainability as the strategic imperative for the post-2015 agenda,” and “Political decisions and institutional innovations required for systemic transformations envisioned in the post-2015 sustainable development agenda”—set out some foundational ideas and specific proposals for political decisions and institutional innovations, which focus now on the implementation of the new global vision for 2030. This blog summarizes the key points in the three papers listed below.

Fundamentals for guiding actions, reforms and decisions

1) Managing systemic risks needs to be the foundational idea for implementing the post-2015 agenda.

The key political idea latent but not yet fully visible in the post-2015 agenda is that it is not a developing country poverty agenda for global development in the traditional North-South axis but a universal agenda based on the perception of urgent challenges that constitute systemic threats.

The term “sustainable development” by itself as the headline for the P-2015 agenda creates the danger of inheriting terminology from the past to guide the future.

2) Goal-setting and implementation must be effectively linked.

The international community learned from the previous two sets of goal-setting experiences that linking implementation to goal-setting is critical to goal achievement.  G-20 leader engagement in the post-2015 agenda and linking the success of the G-20 presidencies of Turkey (2015), China (2016), and Germany (2017) would provide global leadership for continuity of global awareness and commitment.

3) Focus on the Sustainable Development Goals must be clear.

Criticism of the 17 Sustainable Development Goals (SDGs) as being too defuse and too detailed is ill-founded and reveals a lack of political imagination. It is a simple task to group the 17 goals into a few clusters that clearly communicate their focus on poverty, access, sustainability, partnership, growth, and institutions and their linkages to the social, economic, and environmental systemic threats that are the real and present dangers.

The Bretton Woods era is over. It was over before China initiated the creation of the Asian Infrastructure Investment Bank (AIIB) and the BRICS New Development Bank (NDB). Never has it been clearer than now that maintaining a single global system of international institutions is essential for geopolitical reasons. For the implementation of the post-2015 agenda, all the major international institutions need to commit to them.

In a joint paper with Zhang Haibing from the Shanghai Institutes of International Studies (SIIS), we make five specific governance proposals for decision-makers: 

The implementation of the post-2015 agenda requires that nations internalize the SDGs by debating, adapting and adopting them in terms of their own domestic cultural, institutional, and political circumstances. It will be important for the U.N. declarations in September to urge all countries to undertake domestic decision-making processes toward this end.

2) Presidential coordination committees should be established.

To adequately address systemic risks and to implement the P-2015 agenda requires comprehensive, integrated, cross-sectoral, whole-of-government approaches.  South Korea’s experience with presidential committees composed of ministers with diverse portfolios, private sector and civil society leaders provides an example of how governments could break the “silos” and meet the holistic nature of systemic threats.

3) There needs to be a single global system of international institutions.

China’s Premier Li Keqiang stated at the World Economic Forum in early 2015 that “the world order established after World War II must be maintained, not overturned.” Together with a speech Li gave at the OECD on July 1st after signing an expanded work program agreement with the OECD and becoming a member of the OECD Development Center, clearly signals of China’s intention to cooperate within the current institutional system. The West needs to reciprocate with clear signals of respect for the increasing roles and influence of China and other emerging market economies in global affairs.

4) We must move toward a single global monitoring system for development targets.

The monitoring and evaluation system that accompanies the post-2015 SDGs will be crucial to guiding the implementation of them. The U.N., the OECD, the World Bank, and the IMF have all participated in joint data gathering efforts under the International Development Goals  (IDGs) in the 1990s and the Millennium Development Goals (MDGs) in the 2000s. Each of these institutions has a crucial role to play now, but they need to be brought together under one umbrella to orchestrate their contributions to a comprehensive global data system.

By engaging in the post-2015 agenda, the G-20 leaders’ summits would be strengthened by involving G-20 leaders in the people-centered post-2015 agenda. Systemically important countries would be seen as leading on systemically important issues. The G-20 finance ministers can play an appropriate role by serving as the coordinating mechanism for the global system of international institutions for the post-2015 agenda. A G-20 Global Sustainable Development Council, composed of the heads of the presidential committees for sustainable development from G20 countries, could become an effective focal point for assessing systemic sustainability.

These governance innovations could re-energize the G-20 and provide the international community with the leadership, the coordination, and the monitoring capabilities that it needs to implement the post-2015 agenda.

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As China presides over the G-20 for the first time, the country has the significant opportunity to impact a system of global governance under increasing stress. At the same time, while enduring the costs and realizing the benefits of its leadership role, China can address critical issues including innovation, global security, infrastructure development, and climate change. Even as China recently has made its own forays into regional institution-building with the launch of the Asia Infrastructure Investment Bank and the “One Belt, One Road” initiative, its G-20 presidency presents a new platform from which the country can advance its own agenda as part of a broader global agenda. As the first and second largest economies in the world, the United States and China can benefit enormously by understanding each other’s perspective.

Think tanks like the Brookings-Tsinghua Center have been playing an important role in this bilateral and multilateral exchange of views. On March 22, in celebration of the 10th anniversaries of the Brookings-Tsinghua Center and the John L. Thornton China Center at Brookings, Tsinghua University hosted a conference to examine how China can realize the 2016 G-20 theme of “an innovative, invigorated, interconnected, and inclusive world economy.” The event began with introductory keynote remarks on the substantive advancements China and the United States have made in think tank development and people-to-people diplomacy, followed by an additional set of keynote remarks and panel discussions presenting Chinese and American perspectives on the G-20 agenda and the state of global governance.

Event Materials

• Chinas G20 Presidency Transcript

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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• Download Full Paper

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The context for aid is changing. Globalization has spurred economic convergence, upending the twentieth century economic balance and creating a smaller world where both problems and solutions spill across national borders more readily. This has given rise to a legion of new development actors, including emerging economies, NGOs, private businesses, and coordinating networks, who have brought fresh energy and resources to the field while rendering the prospect of genuine donor coordination ever more difficult. Global integration and competition for resources has raised the prominence of global public goods, whose equitable and sustainable provision requires international collective action. Meanwhile, poor countries are demanding a new form of partnership with the international community, built upon the principles of country ownership and mutual accountability.

From G-20 meetings and the upcoming High Level Forum on Aid Effectiveness in Korea to unfolding events in the Middle East and North Africa, leadership from the United States is crucial, placing pressure on the Obama administration to deliver on its promise of far-reaching reforms to U.S. global development efforts. And amidst this shifting global landscape is the issue of effectively communicating the importance of global development cooperation to both a national and global public, at a time when budget pressures are being felt across many of the world’s major economies

At the eighth annual Brookings Blum Roundtable, co-chaired by Kemal Derviş and Richard C. Blum, 50 thought-leaders in international development came together to discuss a new role for global development cooperation, one that employs inclusive and innovative approaches for tackling contemporary development problems and that leverages the resources of a large field of actors.

Roundtable Agenda

Wednesday, August 3, 2011

Welcome: 8:40 a.m. – 9:00 a.m.
Open Remarks
• Richard C. Blum, Blum Capital Partners, LP and Founder of the Blum Center for 
Developing Economies at Berkeley
• Mark Suzman, Global Development Program, Bill & Melinda Gates Foundation
• Kemal Derviş, Global Economy and Development, Brookings

Statement of Purpose, Scene Setter, Comments on the Agenda
• Homi Kharas, Brookings

Session I: 9:00AM - 10:30AM
Reframing Development Cooperation
In almost any discussion of international development, foreign aid takes center stage. But while 
aid can certainly be a catalyst for development, it does not work in isolation. Participants will 
discuss the key objectives of development cooperation, consider what measures of development 
cooperation are most valuable for recipients, and explore an effective balance of roles and 
responsibilities - including both public and private players - in today’s evolving development 
landscape.

Moderator
• Walter Isaacson, Aspen Institute

Introductory Remarks
• Owen Barder, Center for Global Development
• Donald Kaberuka, African Development Bank Group
• Ananya Roy, University of California, Berkeley
• Elizabeth Littlefield, Overseas Private Investment Corporation

Session II: 10:50AM - 12:20PM
The G-20's Development Agenda
Last year’s G-20 meeting in Seoul marked the first time the group formally took up the issue of development. There they announced the Seoul Development Consensus for Shared Growth and the Multi-Year Action Plan for Development: two far-reaching policies which are expected to guide the G20’s future agenda. What is the G-20’s comparative advantage vis-à-vis development, and how can the group’s development efforts be strengthened and supported?

Moderator
• Mark Suzman, Bill and Melinda Gates Foundation

Introductory Remarks
• Alan Hirsch, The Presidency, South Africa
• Suman Bery, International Growth Centre
• Homi Kharas, Brookings

Dinner Program: 6:00PM - 9:00PM
A Conversation with Al Gore and Mary Robinson
Topic: "Energy Security and Climate Justice"

Moderator
• Kemal Derviş, Global Economy and Development, Brookings

Thursday, August 4, 2012 

Session III: 9:00AM - 10:30AM 
The Road to Buscan
In November, participants from over 150 countries, including ministers of developing and developed countries, heads of bilateral and multilateral development institutions, and civil society representatives, will take part in the fourth High Level Forum on Aid Effectiveness in Busan, South Korea. The forum is intended to take account of the development community’s progress in achieving greater impact through aid and to redefine the aid effectiveness agenda to adjust to a changing global landscape. What would constitute success or failure at Busan?

Moderator
• Raymond Offenheiser, Oxfam America

Introductory Remarks
• J. Brian Atwood, Organisation of Economic Co-operation and Development, 
Development Assistance Committee 
• Wonhyuk Lim, Korean Development Institute
• Ngozi Okonjo-Iweala, World Bank 
• Steven Radelet, U.S. Agency for International Development 

Session IV: 10:50AM - 12:20PM 
Lessons from the Middle East on Governance and Aid
Popular protests across the Middle East against authoritarian regimes have prompted reflection 
on the role of aid to non-democratic and poorly governed countries. Some critics believe that aid 
should only be given to relatively well-governed countries where it is more likely to be effective, 
but for others, this amounts to collective punishment for the people who suffer under such 
governments. Do aid allocation models need to change and what role can the development 
community now play in supporting peaceful, democratic reform in the Middle East?

Moderator
• Madeleine K. Albright, Albright Stonebridge Group

Introductory Remarks
• Ragui Assaad, University of Minnesota
• Sheila Herrling, Millennium Challenge Corporation
• Tarik Yousef, Silatech

Lunch Program: 12:30PM - 2:00PM
A Conversation with Thomas R. Nides, U.S. Deputy Secretary of State for Management and Resources

Moderator
• Richard C. Blum, Blum Capital Partners, LP and Founder of the Blum Center for Developing Economies at Berkeley

Session V: 9:00AM - 10:30AM
Implementing U.S. Development Reforms 
The end of 2010 saw the completion of two major policy reviews in Washington concerned with 
international development: the Presidential Policy Directive on Global Development and the 
Quadrennial Diplomacy and Development Review. Progress on implementation has been 
significant in many respects and meager in others. Additionally, despite directives to deliver on 
many valuable priorities for improvement, essential components of fundamental reform are still 
in need of address. Casting a shadow across the exercise, or alternatively serving as a spur to 
focus, the budget environment has soured.

Moderator
• Jim Kolbe, German Marshall Fund of the United States

Introductory Remarks
• Rajiv Shah, U.S. Agency for International Development
• Samina Ahmed, International Crisis Group
• Robert Mosbacher, Jr., Mosbacher Energy Company

Session VI: 10:50AM - 12:20PM
Communicating Development Cooperation
Public interest in and support for aid matter. Yet in many aid giving countries, there is 
widespread cynicism as to what end aid programs serve and ignorance as to what activities they 
actually involve. What are the best examples of development efforts which have been 
communicated successfully and what can we learn from this to shore up support for 
development cooperation now and in the future?

Moderator 
• Liz Schrayer, U.S. Global Leadership Coalition

Introductory Remarks 
• Steven Kull, Program on International Policy Attitudes
• Joshua Bolten, ONE
• S. Shankar Sastry, University of California, Berkeley
• Jack Leslie, Weber Shandwick

Closing Remarks: 12:20PM- 12:30PM
• Richard C. Blum, Blum Capital Partners, LP and Founder of the Blum Center for 
Developing Economies at Berkeley
• Kemal Derviş, Global Economy and Development, Brookings

Public Event: 4:00PM - 5:30PM
Brookings and the Aspen Institute present “Development as National Security?”: A Conversation with Rajiv Shah, U.S. Agency for International Development; Sylvia Mathews Burwell, Bill & Melinda Gates Foundation; Richard J. Danzig, Center for a New American Security; and Susan C. Schwab, University of Maryland.

Moderator
• Jessica Tuchman Mathews, Carnegie Endowment for International Peace

Welcome and Introductions
• Kemal Derviş, Brookings

Hosts
• Richard C. Blum and Senator Dianne Feinstein

Event Information

Russia’s annexation of Crimea in March and the continuing crisis in Ukraine have triggered the most heated confrontation between Russia and the West since the Cold War. The standoff over Ukraine has raised critical questions about Russia’s ambitions in the post-Soviet space and the future political perspectives of the countries caught between Russia and the European Union. Despite political and economic pressure and ongoing occupation by Russia, Georgia is pursuing democratic transformation and a path toward the West.

On May 5, the Center on the United States and Europe (CUSE) at Brookings hosted Georgian Defense Minister Irakli Alasania for an address on Georgia’s vision for Euro-Atlantic integration during a period of increased insecurity in the region. In his remarks, Minister Alasania shared his insights on the upcoming NATO summit and Georgia’s approach to enhancing its relations with the West while attempting to normalize relations with Russia to lower tensions still simmering from the war six years ago.

Irakli Alasania previously served as Georgia's permanent representative to the United Nations from 2006 to 2009 and before that as special representative of the president in Georgian-Abkhazian negotiations. He is the founder and chairman of the Our Georgia-Free Democrats Party and one of the founders of Georgian Dream Coalition.

CUSE Director Fiona Hill provided introductory remarks and moderated the discussion.

Audio

• Georgia's Euro-Atlantic Aspirations and Regional Security

Transcript

• Transcript (.pdf)

Event Materials

• 20140505_georgia_security_transcript

I write this as I learn of the beating death of an Azerbaijani journalist Rasim Aliyev. His “crime” was to post a Facebook item about football. What follows seems insignificant compared to his murder.

Two articles have appeared in prominent Western outlets in the past month addressing developments in the South Caucasus and the need for adjustments in U.S. (and Western) policy toward the region. The first was an excellent, in-depth Brookings report titled "Retracing the Caucasian Circle—Considerations and Constraints for U.S., EU, and Turkish Engagement in the South Caucasus"; the second was a shorter essay that Bill Courtney, Denis Corboy, and I penned for Newsweek on the need to reboot policy toward Armenia, Azerbaijan, and Georgia. Both reflected the difficulty of writing about the “South Caucasus” as if the three countries had common interests and objectives. Increasingly these interests and objectives are diverging, except for a growing unhappiness with the United States and the West for not paying attention to—or doing enough to support—the region. In the case of Azerbaijan, the frustration stems from U.S. leaders paying too much attention to the appalling human rights situation in the country.

What’s making the Azerbaijanis so upset with the West?

The authors of the Brookings report point to elite cynicism over Western disinterest and policy failures in the region as sources of Azerbaijani leaders’ unhappiness. This, in their view, is causing Armenia, Georgia, and Azerbaijan—for different reasons and in different ways—to tack toward Russia.

We have a different take in our Newsweek piece. We argue that the unhappiness results from governing elites recognizing that U.S. and Western policy regarding human rights, democracy building, corruption, and conflict resolution (especially the Nagorno-Karabakh conflict) threaten regime stability. Therefore, the tacking toward Russia is a conscious choice to avoid pressure and the transparency that closer association with the United States and Europe would involve.

The new orientation of these countries requires serious adjustment in Western policies. There are four new drivers prompting change (beyond the role of Russia): the regional consequences of the Iran nuclear agreement; the growing economic crisis, which is affecting the South Caucasian states in different ways; the threat of renewed military conflict between Armenia and Azerbaijan; and the internal security implications of suppression of human rights. While each country responds to these drivers in different ways, they are the source of a new dynamic in the South Caucasus that requires a fresh Western policy approach.

Three wild cards will shape these drivers and the Western approach to them: First, how hard will Russian President Vladimir Putin push his objective of rolling back the degree of Western influence achieved since the fall of the Soviet Union? Second, how well will Iran play the nuclear agreement card, especially regarding its reentry into global energy markets? Third, how distracting will Turkey’s military response to the Islamic State and the Kurdistan Workers’ Party (PKK) be for Turkey’s interests in the South Caucasus and its objective of becoming a regional energy hub?

The shortcomings of soft regionalism

What is to be done? Faced with such a challenging situation, the default policy response is to provide more assistance (economic and military), dispatch senior officials from Western capitals to visit the region, and indulge (rather than criticize) democracy and human rights abuses, all in the name of developing a strategic partnership. In other words: Show more love.

That business-as-usual approach is inappropriate for these challenging times. In the case of Azerbaijan, it is an inappropriate response to the continued violations by the Baku regime of basic human rights and freedom of expression.

The Brookings paper suggests a multilateral approach (involving the United States, EU, and Turkey) based on soft regionalism. I do not believe that soft regionalism will work. The best we can hope for is parallel bilateral engagement on the basis of common interests (e.g. conflict prevention) and shared values (e.g. democratic evolution, observance of human rights). We need to treat the energy issue in the region as a commercial rather than geopolitical one. Changes in the global energy market have undermined the geopolitical significance of Caspian energy resources compared to two decades ago. With low energy prices likely the norm for the near future, energy no longer plays a strategic role for the region. Among other weaknesses, the soft regionalism prescription implies coordinated interests with Turkey—this will be difficult absent an opening in Turkish-Armenian relations.

Who needs who more?

The burden of choice in this relationship with the West must shift from the outside parties to the South Caucasian states themselves. The outsiders should stop talking about “strategic” partnerships, trans-Caspian pipelines and Silk Roads because this perpetuates a “you-need-us-more-than-we-need-you” starting point. Rather, the time has come for Armenia, Azerbaijan, and Georgia to decide on their own where their interests coincide with those of the West. That’s where we and they can begin to develop meaningful relationships, rather than trying to invent a veneer to cover differences—as in the case of Azerbaijan’s record on human rights.

Another recent article in Newsweek, by Theodore Gerber and Jane Zavisca, raised questions about promoting democracy and human rights where populations and elites are skeptical of U.S. motivations in promoting these issues. Fairly, the article questions the effectiveness of the traditional instruments of promoting opposition political parties and local NGOs as a way of winning “hearts and minds” in the former Soviet Union. Unfortunately, these traditional instruments tend to emphasize the attractiveness of the “American way of life” through student and scientific exchanges. This offers a variant on the soft regionalism theme advanced in the Brookings paper. Both require a receptivity to change that both elites and populations increasingly find threatening. Developing a values-based relationship is difficult when values diverge.

To the extent our interests do not coincide, then the Western policy focus must be transactional and rest exclusively on conflict prevention and/or amelioration. It also should not shy away from pressing all three South Caucasian states on their obligations to observe international standards regarding human rights, democracy, and freedom of expression.

Event Information

President Barack Obama has established a broad policy of engagement as a central feature of his administration’s foreign policy agenda. From the earliest days of his presidency, the president has reached out to Iran, Russia and other nations around the world, marking not only a turning of the page but possibly a whole new chapter in U.S. foreign policy. While Europeans have advocated for increased bi-lateral and multi-lateral dialogue for some time, several important questions remain. With which nations or groups should the United States and Europe engage and should there be limits to dialogue in some cases? What are the consequences if dialogue fails? Do Europeans and Americans now have the same agenda and goals for engagement?

On May 29, the Center on the United States and Europe at Brookings (CUSE) will host experts and officials from both sides of the Atlantic for the 2009 CUSE Annual Conference to address these issues. Panelists will examine the prospect of engagement with Iran and Russia, and how to deal with groups such as Hamas and the Taliban. After each panel, participants will take audience questions.

Transcript

• Uncorrected Transcript (.pdf)

Event Materials

• 20090529_cuse

DC KIDS COUNT, housed at the nonprofit DC Action for Children, is the DC chapter of a nationwide network of local-level organizations aiming to provide a community-by-community picture of the conditions of children. The 26 year-old project is funded by the Annie E. Casey Foundation and its aim is to provide high-quality data and trend analysis as well as help local governments monitor budget and legislative decisions based on evidence of what works for children and families. As we pointed out in our recent papers and a blog, developing reliable and comprehensive data is a critical step to building effective community partnerships and producing outcomes that improve economic mobility and health in a neighborhood.

We discussed these issues with HyeSook Chung, Executive Director of DC Action for Children.

Q. Please summarize the history of the DC Kids Count project. What motivated it, and how it has evolved over the last years?

A. As part of the nationwide Kids Count network, each chapter tracks a number of indicators on child and family well-being through an online database called Kids Count Data Center. Each chapter also releases a yearly data book which summarizes the state of child well-being within their state or locality. When DC Action for Children became the host of DC Kids Count in 2012, I wanted to rethink the way we presented our data to move beyond the traditional print format into the exciting realm of visualizing data. This led to the beginning of our partnership with DataKind, a group of dedicated pro-bono data scientists who worked with us to create an interactive, web-based data tool that maps out indicators of child well-being across DC’s 39 neighborhood clusters.

We know that the neighborhood children grow up in, and the resources they have access to, plays a huge role in shaping children’s future opportunities. The maps we created with our Data Tool 2.0  reveal sharp disparities in DC neighborhoods: some DC neighborhoods are wealthy and have many assets, while others are characterized by high levels of poverty. The many challenges that come with high poverty neighborhoods include: poorer performing schools, more crime, and less access to libraries, parks, and healthy foods.  

Q. What type of indicators do you gather? How many years does the data cover? What level of granularity does the data have?

A. We track a variety of indicators of child well-being, including demographics, economic well-being, health and safety. The data is housed online in two places: The KIDS COUNT Data Center and our Data Tool 2.0. The Data Tool 2.0 maps the most recent available data at the neighborhood cluster, while the Data Center allows for a wider range of geographies (citywide and ward level) and different timeframes.  Many of the indicators have data from 1990 to the present.

Q. How do you measure the data tool’s impact on policy and legislation?

A. We have made it a priority to conduct internal evaluations to assess the utilization of the online tool, but we also believe that measuring the tool’s impact must go beyond traditional web analytics. We regularly use the Data Tool 2.0 in our work with city officials and direct service providers to offer an overview of the social context in the city’s different neighborhoods.     

In a city where the allocation of resources is often guided by personal relationships and old-school politics, it is important to show clearly whether budget decisions are aligned with the needs of our children. We believe that our Data Tool 2.0 project can bring much needed transparency to the allocation of the DC government budget and help achieve agreement.

Q. The DC Kids Count project is helping build data capacity across organizations, with the aim of creating a more “data-literate” city. Could you tell us about some of these initiatives? 

A. Businesses like Amazon and Netflix increasingly focus on finding “actionable” insights from their data. For them, “big data” analytics can help answer tough business questions. With the right platforms for analytics, they can increase efficiency or even improve operations and sales.

In a similar manner, we at DC Action for Children believe that big data opens up the opportunity for us to improve and reshape our strategy and decision making process to better align services with the needs of DC children in the same way Amazon or Netflix does with their customers.

For instance, we are offering the Child and Family Services Agency technical and data analysis support for their Healthy Families Thriving Communities Collaboratives, which are a citywide network of community-based organizations designed to embed family supports in their communities. Their mission is to strengthen and stabilize families and to prevent child abuse and neglect by offering services in the form of case management and support. We use KIDS COUNT data at the ward and neighborhood levels to highlight needs in the community and inform their planning. This encourages the Collaboratives’ staff to look at data differently—integrating it as a vital part of their program planning and strategy.

Q. What are some of the obstacles and challenges you face in integrating the data, and updating it?

A. Historically, our data analysis looked at more traditional indicators, such as program enrollment and the number of child welfare cases. But now we think we can use our access to big data to pull out patterns within our datasets and help guide the decisions of the city administrators. For example, if we are trying to prevent future child abuse cases, we can look at patterns analyzing family and child data in specific neighborhoods. We can use the type of predictive analysis practiced in the for-profit business to help us serve DC children more efficiently and effectively.

One of the most significant obstacles we face is ensuring that the indicators are up-to-date. This can be an issue with government agencies since some of them are slow in their release of new data.  Moreover, there is also no standard format across local agencies for how data is collected and released. Furthermore, data is often aggregated at different geographical units, like zip codes or census tracts. To get the data ready to upload to our Data Tool, we must recalculate the data into neighborhood clusters.  

Q. What policy changes would help produce better data-sharing ecosystems? 

A. DC has in many ways demonstrated leadership in data sharing. The Office of the Chief Technology Officer works to make a large variety of datasets publicly available. We have also seen large investments over the years to create new data systems that track progress and service delivery for different agencies. But our city can do more to promote a data-sharing ecosystem. So can other cities.

While multiple agencies are adopting innovative data systems, the systems are often siloed and do not speak to each other. Moreover, since data is tracked differently across agencies, based on needs and requirements for reporting, it is difficult for agencies to share data both publicly and internally. It is also often difficult to get access to de-identified disaggregated data for richer analysis. We are glad that many agencies recognize the value of robust data collection, but more data transparency policies would give us a better understanding of the challenges that lie behind improving the wellbeing of children in the city.

Q. What are the next steps for the DC Kids Count project, and how do you expect it to grow over the next few years?

A. We just finished wrapping up some of the final work on our DataTool 2.0. In terms of next steps, we are working on a handbook that explains how we created our Data Tool so that other Kids Count chapters and organizations can replicate and adapt our tool.

We would also like to add local budget data to the asset maps to see if public investments align with the neighborhoods that need it the most. This would give us a more nuanced understanding of the geography of DC budget investments, including inequities in investments by geography and demographics.

Big data analytics has changed the way we focus our priorities and engage in business practices. I’m committed to this movement. I think that, through big data, we can also revolutionize the way we do policy.

***

Although a few political analysts have been focusing on the white working class for years, it is only in response to the rise of Donald Trump that this large group of Americans has begun to receive the attention it deserves. Now, thanks to a comprehensive survey that the Public Religion Research Institute (PRRI) undertook in collaboration with the Brookings Institution, we can speak with some precision about the distinctive attitudes and preferences of these voters.

There are different ways of defining the white working class. Along with several other survey researchers, PRRI defines this group as non-Hispanic whites with less than a college degree, with the additional qualification of being paid by the hour or by the job rather than receiving a salary. No definition is perfect, but this one works pretty well. Most working-class whites have incomes below $50,000; most whites with BAs or more have incomes above $50,000. Most working-class whites rate their financial circumstances as only fair or poor; most college educated whites rate their financial circumstances as good or excellent. Fifty-four percent of working-class whites think of themselves as working class or lower class, compared to only 18 percent of better-educated whites.

The PRRI/Brookings study finds that in many respects, these two groups of white voters see the world very differently. For example, 54 percent of college-educated whites think that America’s culture and way of life have improved since the 1950s; 62 percent of white working-class Americans think that it has changed for the worse. Sixty-eight percent of working-class whites, but only 47 percent of college-educated whites, believe that the American way of life needs to be protected against foreign influences. Sixty-six percent of working-class whites, but only 43 percent of college-educated whites, say that discrimination against whites has become as big a problem as discrimination against blacks and other minorities. In a similar vein, 62 percent of working-class whites believe that discrimination against Christians has become as big a problem as discrimination against other groups, a proposition only 38 percent of college educated whites endorse.

This brings us to the issue of immigration. By a margin of 52 to 35 percent, college-educated whites affirm that today’s immigrants strengthen our country through their talent and hard work. Conversely, 61 percent of white working-class voters say that immigrants weaken us by taking jobs, housing, and health care. Seventy-one percent of working-class whites think that immigrants mostly hurt the economy by driving down wages, a belief endorsed by only 44 percent of college-educated whites. Fifty-nine percent of working-class whites believe that we should make a serious effort to deport all illegal immigrants back to their home countries; only 33 percent of college-educated whites agree. Fifty-five percent of working-class whites think we should build a wall along our border with Mexico, while 61 percent of whites with BAs or more think we should not. Majorities of working-class whites believe that we should make the entry of Syrian refugees into the United States illegal and temporarily ban the entrance of non-American Muslims into our country; about two-thirds of college-educated whites oppose each of these proposals.

Opinions on trade follow a similar pattern. By a narrow margin of 48 to 46 percent, college-educated whites endorse the view that trade agreements are mostly helpful to the United States because they open up overseas markets while 62 percent of working-class whites believe that they are harmful because they send jobs overseas and drive down wages.

It is understandable that working-class whites are more worried that they or their families will become victims of violent crime than are whites with more education. After all, they are more likely to live in neighborhoods with higher levels of social disorder and criminal behavior. It is harder to explain why they are also much more likely to believe that their families will fall victim to terrorism. To be sure, homegrown terrorist massacres of recent years have driven home the message that it can happen to anyone, anywhere. We still need to explain why working-class whites have interpreted this message in more personal terms.

The most plausible interpretation is that working-class whites are experiencing a pervasive sense of vulnerability. On every front—economic, cultural, personal security—they feel threatened and beleaguered. They seek protection against all the forces they perceive as hostile to their cherished way of life—foreign people, foreign goods, foreign ideas, aided and abetted by a government they no longer believe cares about them. Perhaps this is why fully 60 percent of them are willing to endorse a proposition that in previous periods would be viewed as extreme: the country has gotten so far off track that we need a leader who is prepared to break so rules if that is what it takes to set things right.

On June 23, Brookings hosted the release of the Immigrants, Immigration Reform, and 2016 Election Survey, a joint project with the Public Religion Research Institute (PRRI). The associated report entitled, How immigration and concern about cultural change are shaping the 2016 election finds an American public anxious and intensely divided on matters of immigration and cultural change at the forefront of the 2016 Election.

On matters of cultural change, Jones painted a picture of a sharply divided America. Poll results indicate that a majority (55 percent) of Americans believe that the American way of life needs to be protected from foreign influence, while 44 percent disagree.  Responses illustrate a stark partisan divide:

Jones identified Americans’ views on language and “reverse discrimination” as additional touchstones of cultural change. Americans are nearly evenly divided over how comfortable they feel when they encounter immigrants who do not speak English: 50 percent say this bothers them and 49 percent say it does not. 66 percent of Republicans and 77 percent of Trump supporters express discomfort when coming into contact with immigrants who do not speak English; just 35 percent of Democrats say the same.

Americans split evenly on the question of whether discrimination against whites, or “reverse discrimination,” is as big of a problem as discrimination against blacks and other minorities (49 percent agree, 49 percent disagree). Once again, the partisan differences are considerable: 72 percent of Republicans and 81 percent of Trump supporters agree that reverse discrimination is a problem, whereas more than two thirds (68 percent) of Democrats disagree.

On economic matters, survey results indicate that nearly seven in ten (69 percent) Americans support increasing the tax rate on wealthy Americans, defined as those earning over $250,000 a year. This represents a modest increase in the share of Americans who favor increasing the tax rate relative to 2012, but a dramatic increase in the number of Republicans who favor this position.

The share of  Republicans favoring increasing the tax rate on wealthy Americans jumped from 36 percent in 2012 to 54 percent in 2016—an 18 point increase. Democrats and Independents views on this position remained relatively constant, increasing from 80 to 84 percent and 61 to 68 percent approval respectively.

Finally, on matters of immigration, Americans are divided over whether immigrants are changing their communities for the better (50 percent) or for the worse (49 percent). Across party lines, however, Americans are more likely to think immigrants are changing American society as a whole than they are to think immigrants are changing the local community. This, Jones suggested, indicates that Americans’ views on immigration are motivated by partisan ideology more than by lived experience. 

At the conclusion of Dr. Jones’s presentation, Brookings senior fellow in Governance Studies, Dr. William Galston moderated a panel discussion of the poll’s findings. Karlyn Bowman, a senior fellow and research coordinator at the American Enterprise Institute, observed that cultural anxiety has long characterized Americans’ views on immigration. Never, Bowman remarked, has the share of Americans that favor immigrants outpaced the share of those who oppose immigrants. Turning to the results of the PRRI survey, Bowman highlighted the partisan divide influencing responses to the proposition that the United States place a temporary ban on Muslims. The strong level of Republican support for the proposal--64 percent support among Republicans--compared to just 23 percent support among Democrats has more to do with fear of terrorism than anxiety about immigration, she argued.

Henry Olsen, a senior fellow at the Ethics and Public Policy Center, remarked that many Americans feel that government should do more to ensure protection, prosperity, and security -- as evidenced by the large proportion of voters who feel that their way of life is under threat from terrorism (51%), crime (63%), or unemployment (65%).  In examining fractures within the Republican Party, Olsen considered the ways in which Trump voters differ from non-Trump voters, regardless of party affiliation. On questions of leadership, he suggested, the fact that 57% of all Republicans agree that we need a leader “willing to break some rules” is skewed by the high proportion of Trump supporters (72%) who agree with that statement. Indeed, just 49% of Republicans who did not vote for Trump agreed that the country needs a leader willing to break rules to set things right.

Joy Reid, National Correspondent at MSNBC, cited the survey’s findings that Americans are bitterly divided over whether American culture and way of life has changed for the better (49 percent) or the worse (50 percent) since the 1950s. More than two-thirds of Republicans (68 percent) and Donald Trump supporters (68 percent) believe the American way of life has changed for the worse since the 1950s. Connecting this nostalgia to survey results indicating anxiety about immigration and cultural change, Reid argued that culture—not economics—is the primary concern animating many Trump supporters.

From its modest beginnings in 1975, the Earned Income Tax Credit has grown into one of the nation’s most effective anti-poverty programs. Each year, the EITC supplements low-income workers’ earnings, encouraging work and lifting millions of people out of poverty.¹ It has positive lasting effects for parents, who have shown longer-run earnings increases and better health outcomes. At the same time, their children exhibit a host of benefits, from better school performance and higher rates of college enrollment to more hours worked and higher incomes in adulthood.² 

Moreover, the EITC supports economic stability in communities throughout the country where filers collectively receive millions of dollars in earnings supplements annually.³ These successes stem from a series of targeted expansions—supported by both Republicans and Democrats—over the EITC’s 40-year history, transforming it from a small credit into a significant income supplement for low-income working families.⁴

Yet more can be done to preserve and build on the effectiveness of the EITC, and a growing number of elected officials and policy experts have proposed  strengthening the credit. Three main recommendations have emerged from these proposals.

Preserve two key provisions of the EITC that are set to expire in 2017;

Expand the credit for workers without qualifying children; and

Offer filers options to receive a portion of the credit outside of tax time.

In this brief, we consider the first two recommendations, using our MetroTax model and detailed microdata from the 2014 American Community Survey to estimate the impact of these potential changes on workers and on the metropolitan areas and states where they live.⁵ A new analysis by Steve Holt will take an in-depth look at the issue of periodic payment.

If two key EITC provisions expire in 2017, 7.4 million filers would lose part or all of their EITC.

In 2009, Congress and the Obama administration enacted two targeted, but temporary, expansions to the EITC. The legislation reduced the “penalty” for married couples filing jointly by extending their eligibility for the credit $5,000 beyond that for unmarried filers, and it boosted the credit for families with three or more children (who are more likely to be low-income even when working).

If those provisions expire in 2017, the EITC would shrink for 6.7 million taxpayers, while a little under 700,000 filers would lose eligibility altogether. Two-thirds of filers who would be affected are married couples, 1.8 million of whom are also raising more than two kids (meaning they would be subject to both cuts). The remaining third are unmarried workers with at least three children. Most of these taxpayers (58 percent) have a high school diploma or less, and they are most likely to work in manufacturing, construction, and retail. The typical adjusted gross income of these filers is $28,000 a year, just above the poverty line for a family of four (roughly $24,000 in 2014).

States and metro areas in the Midwest and West would see the steepest cuts if these provisions expire. 

Every state stands to lose millions of dollars if these EITC provisions are not made permanent. States and metro areas with higher-than-average shares of married couples and larger families would be hardest hit. In the Intermountain West, Idaho and Utah could see a 10 percent drop in federal EITC dollars coming into the state (Table 1). The major population centers in those states—including metropolitan Provo and Ogden in Utah and Boise, Idaho—top the list of major metro areas that would experience the biggest cuts if these provisions expire.

While larger states like California and Texas would see their EITC claims drop by smaller percentages, the size of the EITC-eligible population in these states mean that the expiration of these two provisions would translate into a loss of more than half a billion dollars in California ($538 million) and over $400 million in Texas. Taxpayers in the Los Angeles metro area stand to lose an estimated $185 million in EITC receipts, while those in Dallas would forfeit nearly $100 million. (For detailed state and metro data see the appendix.)

Expanding the credit for workers without qualifying children would benefit more than 14.4 million filers. 

The EITC for childless workers is significantly smaller than the credit for families with children. In tax year 2013 (the most recent year for which detailed data are available), workers with qualifying dependents received $2,794 on average through the EITC, compared to the meager $281 claimed by the average childless worker.⁶ In fact, low-wage earning childless adults are the only group of taxpayers actually taxed into (or deeper into) poverty by the federal tax system.⁷

Both President Obama and House Speaker Paul Ryan have proposed expanding the EITC for these workers, as have legislators—including Sen. Patty Murray (D-Wash.), Rep. Richard Neal (D-Mass.), and Rep. Barbara Lee (D-Calif.)—and Republican presidential candidate Jeb Bush.⁸ (Republican presidential candidates Ted Cruz and John Kasich have also called for the EITC to be expanded but have not specified whom that expansion would target.⁹)

The proposals put forward by Obama, Ryan, Lee, and Bush are strikingly similar (although they differ considerably in how they would pay for it). These expansions would double the size of the credit for childless workers and the pace at which the credit phases in and out (Figure 1). They would also lower the minimum age of eligibility from 25 to 21.¹⁰

Together, these changes would boost the value of the credit for 8 million filers and extend eligibility to 6.4 million more taxpayers, increasing EITC dollars for these workers by $6.9 billion.¹¹

The filers who would benefit from these changes are largely unmarried workers (87 percent) who are most likely to be employed in service industries (retail, accommodation and food service, administrative services), health care, and construction. Half of these workers have a high school diploma or less. The typical adjusted gross income for these workers is just $8,300, well below the poverty threshold for individuals and married couples without children (e.g., $12,316 and $15,853, respectively, in 2014).

Several states and large metro areas in the Midwest and Northeast would see the number of childless workers eligible for the EITC more than double if the credit were expanded. 

The District of Columbia and Utah, each of which has above-average shares of the population between 21 and 24, would experience the largest percentage growth in the number of childless workers eligible for the EITC (135 and 134 percent, respectively). However, the bulk of states that would double their pool of eligible filers without qualifying children fall in the Midwest (North Dakota, Iowa, Nebraska, and Wisconsin) and Northeast (Rhode Island, Massachusetts, and Vermont), and tend have higher-than-average shares of one-person households and households without children.

Similarly, while the number of EITC-eligible childless workers in the Provo metro area would more than triple if the credit were expanded, most of the major metro areas that would at least double the number of eligible workers without qualifying children are in the Midwest (e.g., Grand Rapids, Milwaukee, and Toledo) and Northeast (e.g., Bridgeport, Boston, and Springfield) (Map 1).

In this era of partisan gridlock in Washington, it is rare to find a policy with the kind of bipartisan support the EITC has received—a testament to its effectiveness in encouraging work, alleviating poverty, and improving outcomes for workers and their children. By preserving key provisions of the EITC for working families and by making the EITC work better for workers without qualifying children, millions of Americans across the country stand to benefit.

Downloads

• State and Metro Data Appendix

Executive Summary

The Millennium Challenge Corporation (MCC) is one of the outstanding innovations of the eight-year presidency of George W. Bush. No other aid agency—foreign or domestic—can match its purposeful mandate, its operational flexibility and its potential muscle.

In the first year after it became operational in May 2004, however, the MCC made a number of mistakes from which it has not fully recovered. It also had the bad luck of facing an increasingly tight budget environment as its performance improved.

The MCC may not survive as an independent agency. Critics have advocated closing it down, while many supporters of foreign assistance reform would maintain the MCC program but consolidate it with the Agency for International Development and the President’s Emergency Plan for Aids Relief under a single individual with broad development responsibilities.

In our assessment, one of the singular achievements of this innovation is the “MCC effect”: steps taken by a number of countries to improve their performance against the MCC’s objective indicators in order to become eligible for an MCC compact.

A Rough Start

The Millennium Challenge Corporation started off in the wrong direction in 2004. New leadership a year later put the MCC back on track. Unfortunately, however, the MCC has not been able to recover quickly enough from its early mistakes to compete successfully for funding in the face of increasingly severe government-wide budget constraints. After more than four years of operation, it has not yet achieved “proof of concept.” As a result, its future as an independent agency is in jeopardy.

The Concept

In March 2002, six months after the 9/11 terrorist attacks, President George W. Bush announced a commitment to increase U.S. aid to low-income countries by $5 billion per year, representing a jump of 50 percent from the baseline level of official development assistance (ODA).

More remarkable than the size of the commitment was the nature of the commitment. It would not be more of the same. It would be better. It would reward good performance by focusing exclusively on poor countries implementing sound economic development and poverty reduction strategies, as reflected in objective indicators. It would achieve measurable results.

President Bush’s initial concept did not specify the organizational form of the new program. Instead of putting it under the State Department or Agency for International Development (USAID), President Bush opted for creating a special-purpose government corporation—the Millennium Challenge Corporation—to run the program.

Conception turned out to be the easy part. It took almost a year for the administration to send legislation proposing the MCC to Congress, and it took another year for the Congress to send authorizing legislation to the president.

While the purity of the MCC concept was compromised significantly in the process of obtaining enough votes in Congress to establish it, six key elements were preserved: rewarding good performance; country ownership; measurable results; operational efficiency; sufficient scale at the country level to be “transformational”; and global commitments at the rate of $5 billion per year.

The Record

Perhaps the biggest mistake in the MCC’s first year of operations was a failure to develop a good working relationship with the U.S. Congress. Some staffing choices gave the impression that the MCC had no interest in the experience and expertise that existed in USAID, the multilateral development banks and NGOs working in low-income countries. In retrospect, a third problem may have been starting compact negotiations with more than a dozen countries instead of building its portfolio of compact countries more slowly and carefully.

Paul Applegarth resigned as CEO in June 2005 and John Danilovich took over the following October. At that point, compacts had been signed with five countries. Funding problems were already visible. Against the original proposal seeking a combined $4.6 billion for the first two start-up years (reaching the target $5 billion in FY 2006), the budget request added up to only $3.8 billion, Congress authorized only $3.6 billion, and appropriations only reached $2.5 billion.

For the next three years, FY 2006 – FY 2008, the administration’s budget request for the MCC was straight-lined at $3 billion. Appropriations peaked in FY 2006 at $1.77 billion, and then slipped to $1.75 billion in FY 2007 and $1.482 billion in FY 2008 (after an across-the-board rescission). Thirteen more compacts were signed, bringing the total number of compact countries to 18. In addition, threshold agreements totaling $361 million were being implemented in 14 countries. At the end of FY 2008, cumulative MCC appropriations were $7.5 billion, and cumulative compact commitments were $6.3 billion.

As the Bush administration winds down and the Obama administration gears up, the MCC is in an awkward situation. It has recovered from its start-up problems and now has significant support in Congress and the development community. The evidence of an “MCC effect” is particularly notable. The compact countries are fans of the program, and other potentially eligible countries appear eager to conclude compacts.

However, the “measurable results” promised to an impatient Congress have not yet materialized. Since the first compact will not reach the end of its original four year lifespan until July 2009, it is too early to expect such results. Still, enough questions about the effectiveness of the MCC have been raised to strengthen the position of skeptics in the Congress.

A moment of truth is approaching. Assuming FY 2009 funding remains capped by continuing resolutions at a level no higher than $1.5 billion, the MCC will not be able to conclude more than three compacts averaging $400 million each during this fiscal year. While a strong case can be made for an independent aid agency operating at the rate of $5 billion per year, a rate of $1-$1.5 billion per year for a stand-alone agency is not so easy to justify. Meanwhile, an important coalition of foreign aid advocates sees the change of administration as an opportunity to consolidate a wide range of development and humanitarian assistance programs, including the MCC, into a single agency or cabinet-level department.

Findings and Recommendations

Our assessment of the MCC at the end of FY 2008 focuses on six operational issues and ends with a recommendation to the Obama administration. (The full assessment is in our working paper “The Millennium Challenge Corporation: An Opportunity for the Next President.”)

1. Objective indicators. From the outset, objective indicators of country performance have been at the core of the MCC approach to development assistance. The concept is simple: the MCC will provide funding to countries that excel against performance indicators in three areas: ruling justly, investing in people and providing economic freedom. Selecting countries is not so simple.

The MCC’s 17 indicators of country performance are state of the art. But they are not embedded in concrete. The MCC has been pushing hard for improvements. A number of the independent providers of these indicators have tightened their procedures and methodology, and others have shortened the time between data collection and dissemination. The publication of updated country “scorecards” on the MCC Web site each year provides an unprecedented level of visibility linking country performance to donor assistance. In general, the MCC’s indicators have met broad approval in the donor community.

The “MCC effect” has been the most important benefit of these indicators. The MCC’s indicators provide a comprehensive, objective and highly visible system for comparing a country with its peer group and showing where its performance falls short. One academic study found that eligible countries improved their indicators significantly more after the MCC was established than in the pre-MCC period, and that eligible countries improved their indicators significantly faster than developing countries not eligible for compacts.

The MCC’s objective indicator approach has been very successful. Still, it is important to recognize certain inherent limitations. Four are worth singling out:

• The majority of the measures used to measure performance are available only with a time lag.
• The indicators reveal relative performance, not absolute performance. Good performers on the basis of the indicators still face daunting challenges.
• Even a top performing country is likely to see its ranking slip on one of the indicators at some point during compact implementation. This can create a credibility problem for the program even when the underlying trend is positive.
• Measuring corruption is especially problematic. The corruption indicator is probably state of the art, but corruption has many elements, and there is no agreement on which weights to assign to each one.

Recommendation: Retain and continue to refine the objective indicators.

2. Country selection. Initially, the MCC was limited to funding low-income countries. Since FY 2006, the MCC has been able to commit up to 25 percent of its resources to lower-middle-income countries. For FY 2008, these were countries with annual per capita incomes between $1,736 and $3,595. Together, the two groups included 95 countries.

The MCC board reviews country scorecards once a year and decides which countries to add to the eligibility list. Selection is not automatic based on the indicators. The board considers a wide range of political, economic and social factors.

The MCC’s overall track record in selecting countries is good but not brilliant. At the end of FY 2008, there were 18 countries with signed compacts, five threshold countries that had been declared eligible for compacts, and three additional countries declared eligible that were not in the threshold program. The few selections that have been criticized are cases where political factors might have tipped the balance in favor of the country.

Most of the selected countries have small populations, perhaps because it is easier to be transformational in a small country. Even large countries, however, have poor regions and a case can easily be made that the MCC might have a greater impact by focusing on one poor region in a large country like India or Indonesia than on one entire microstate like Vanuatu.

Recommendation: As long as the MCC’s funding level remains below $2 billion per year, stick with the current approach to selection but avoid new cases where political factors appear to be overriding performance indicators. At higher funding levels, give greater weight to improvements in absolute performance so that the indicators will not be a constraint to adding countries and enlarging the MCC’s impact.

3. Compact design. Compact design can be broken down into four elements: preparation, size, content and choice of partner. One of the hallmarks of the MCC approach to development assistance is an exceptional degree of participation by the host country government and civil society. In a relatively short time, the MCC approach to country ownership has set a high standard to which other donor agencies should aspire.

Compact size is seriously constrained by the statutory five-year limit on the length of a compact and by the prohibition against concurrent compacts. The limit leads to unrealistic expectations: anyone who believes a five-year program can be transformational does not understand development. The inability to have concurrent compacts has led the MCC to bundle together activities that would better be pursued separately. Within these constraints, compact size so far is defensible.

Regarding content, one early criticism of the MCC centered on its bias toward infrastructure projects. Agriculture and infrastructure were the clear priorities at the outset, based on partner-country priorities. These two sectors still account for more than half of all MCC funding, but attention to other sectors has grown. For example, funding for education was absent from the first 10 compacts, but was present in five of the next eight.

This evolution may reflect congressional pressure to be active in the social sectors despite evidence that more investment to expand productive capacity and lower costs could have a greater poverty reduction payoff.

The MCC has also shied away from non-project funding (budget support), which has the advantages of being fast-disbursing, having very low overhead costs and avoiding performance failure by rewarding countries for results recently achieved. Similarly, the MCC has yet to use its considerable ability to leverage funding from private investors, especially for infrastructure projects.

On partnership, all of the compacts to date have been with national governments even though the MCC has the authority to enter into compacts with regional/municipal authorities and private sector parties such as NGOs. With this narrow focus, the MCC is probably missing some opportunities to have a bigger impact.

Our major concern is that the design of the 18 compacts concluded so far reflects very little innovation. They can be characterized as collections of the kinds of development interventions that USAID, the World Bank and other donors have been undertaking for decades. Perhaps in the attempt to overcome its early start-up problems and minimize congressional criticism, the MCC has been too risk averse.

Recommendation: Immediately remove the prohibition against concurrent compacts that is a disincentive to improving performance. Allow the MCC to extend compacts beyond five years when unanticipated complications arise. Provide encouragement from the White House and Congress to be more innovative in compact design.

4. Compact implementation. No MCC compacts have been completed, so assessment of their impact is premature. One problem is the lag from the date of compact signing to the date of its entry into force, which has lengthened from about three months for the first three compacts to 10 months for the 10th and 11th compacts. This reflects the MCC’s tactical decision to delay entry into force until the legal framework is in place and the implementing organization is up and running. The normal process of tendering for infrastructure projects accounts for some of the slowness, and bad luck has also created recent problems in the form of unanticipated increases in fuel and commodity costs.

The choice of an appropriate local implementing agency is both difficult and critical to success. The objectives of country ownership and capacity building/institutional development argue for selecting an existing government ministry or agency. Realities on the ground have led the MCC typically to establish a special-purpose organization (“accountable entity” in the MCC’s jargon). In effect, the MCC has promoted strict accountability at the expense of building partner-country capacity.

The MCC’s approach to monitoring and evaluation is a source of pride, but it could become the program’s Achilles’ heel. The MCC’s recent decision to make public the “economic rate of return” analysis for each new compact puts it at the head of the donor community. Other donor agencies have been unwilling to take this step, except in a more opaque form. A potentially critical problem with the MCC’s approach is latent in the micro performance benchmarks established for each compact. It seems likely that the results will be mixed at the end of most of the compacts. Given the high expectations created for the MCC’s impact, the failure to show superior results could undermine congressional support for the MCC going forward.

Finally, the MCC has largely lived up to its billing as a lean organization. It is now fully staffed at its ceiling of 300 positions. The MCC’s field offices, established after compact signing, are typically limited to two positions.

Recommendation: Continue to refine implementation techniques to the point of becoming a pace-setter and develop performance benchmarks that are less likely to generate disappointment.

5. Threshold Programs. The MCC has committed some $360 million to 16 “threshold” countries. Nearly all of these programs are managed by USAID. Two different visions seem to coexist. One vision is to prepare countries for a compact within a year or two. A second vision is to address a particular “target of opportunity” that will help a country qualify for a compact eventually. It is too soon to say how effective these programs have been under either approach.

However, the individual projects funded under the threshold programs have been indistinguishable from the typical USAID project involving a contract with an American firm to field a team of expatriate advisors focusing on a particular sector. A fundamental problem with the threshold programs is that they give the impression of trying to boost performance scores by short-term actions rather than rewarding the kind of self-generated progress that is more likely to be sustainable.

Recommendation: As long as MCC funding remains below $2 billion per year, shift funding of threshold programs to USAID funding. This will help to ensure that the activities being funded are of high value, and encourage USAID to take a more strategic approach to its operations in low-income countries.

6. Governance. The MCC legislation created a board of directors with five ex officio members and four private sector members. Having private sectors members on the board is one of the great strengths of the MCC, enhancing its objectivity and credibility, helping to ensure bipartisan support, and providing strategic links to the broader development community. By comparison to the boards of other government corporations, the MCC board is small in size and more biased toward public-sector members. Having the secretary of state chair the board weakens the image of the MCC as an agency focused on long-term development.

Recommendation: Amend the MCC legislation to add four more private sector members to the MCC board, allow the board to elect one of its private sector members as chairman.

The Existential Issue.

Although the MCC has not yet lived up to its promise, it still has the potential of offering the biggest bang for the buck among all U.S. development assistance programs. Six features are not only worth keeping but strengthening further: rewarding good performance; using objective indicators to guide the selection of countries; focusing on low-income countries; achieving a high degree of country ownership; avoiding earmarks and time limits on spending authority; and keeping staff small.

However, the current operating level of less than $2 billion per year is far below the original concept. Retaining a separate agency for such a small program within a much larger bilateral assistance program is questionable. With funding moving toward the pace of $5 billion per year, and with added authority to have concurrent compacts, the MCC can be more innovative and more transformational.

The MCC has the potential of being the world's leading "venture capitalist" focused on promoting economic growth in low-income countries. As a core component of a foreign policy that relies more on partnership with other countries, the Obama administration can realize this potential by affirming the MCC's bold mandate, strengthening its leadership, and boosting its annual appropriations to at least $3 billion beginning in FY 2010.R. Kent Weaver is a Senior Fellow in Governance Studies at the Brookings Institution and a Professor of Public Policy and Government at Georgetown University. He is the author of the forthcoming book Reforming Social Security: Lessons from Abroad.

Lex Rieffel is a nonresident senior fellow in Brookings's Global Economy and Development program. He is a former U.S. Treasury official and teaches a graduate course at George Washington University.

James W. Fox, formerly chief economist for Latin America at USAID, is an economic consultant.