Looking at this city, you can imagine what a Palestinian state could someday be like if folks got serious: The streets are clean, there's construction in every direction and Palestinian soldiers line the roads. A visitor sees new apartment buildings, banks, brokerage firms, luxury car dealerships and even health clubs.

These are "facts on the ground," as the Israelis like to say. And they are the result of a determined Palestinian effort, with U.S. and Israeli support, to begin creating the institutions of a viable Palestinian state. Even Israeli hard-liners, including Prime Minister Binyamin Netanyahu, agree that the improvement in Palestinian security forces is real.

But here's the tragedy: At the same time there is brick-and-mortar progress in Ramallah and some other West Bank cities, the peace process has nearly collapsed. A wary Netanyahu has been dragging his feet, a frustrated Palestinian Authority President Mahmoud Abbas has been talking about quitting and the Obama administration has been spinning its wheels trying to revive negotiations.

It's the same old depressing Middle East story of missed opportunities. But rather than walk away, the United States needs to give the process a harder push.

I have a suggestion, drawn from a visit here and several days of conversations with Israeli, Palestinian and U.S. officials: Follow the lead of Salam Fayyad, the prime minister of the Palestinian Authority and the man who's largely responsible for Ramallah's turnaround. He has drawn up a plan for a two-year transition to statehood. The United States should endorse this goal, explicitly, and call for an immediate start to negotiations about the details.

"Fayyad is the only game in town, but his plan isn't sustainable without a political process," says Martin Indyk, who heads the Saban Center at the Brookings Institution and organized a three-day conference in Jerusalem to discuss U.S.-Israeli issues.

Israelis may balk at some aspects of Fayyad's state-building plan, but that's what negotiations are for. It's a better alternative than the recent proposal from Abbas's allies for the United Nations to declare Palestinian statehood, which Netanyahu rightly rejects as a unilateral move. And it's certainly a better alternative than just letting the problem fester, which only benefits Hamas, the extremist group that controls Gaza.

"What we're focusing on is to get ready for statehood," Fayyad says. His plan, published three months ago, is a compendium of mission statements, ministry by ministry, for providing government services. "Our objective is to ensure that within two years, the Palestinian people will have strong, competent institutions."

This may sound like pie in the sky, given the Palestinian Authority's reputation for corruption and inefficiency. But Fayyad, a former official of the International Monetary Fund, has begun to reverse that history of mismanagement. His reorganization of public services in the West Bank has encouraged something of a boom here. The economy is officially growing at 7 percent, and Fayyad reckons the real rate may be 11 percent.

The Israelis have helped the economy by removing 28 of 42 checkpoints in the West Bank. But they can do more to ease movement and market access for West Bank businesses. Economic development is a cheaper option than Israeli troops.

Fayyad's biggest success story -- to the Israelis' astonishment -- has been in security. When he became prime minister in 2007, gunmen roamed the West Bank almost at will. Fayyad insisted that the government would establish a monopoly of force, and with U.S. and Israeli help, he has delivered results. The United States has funded the training of what are now more than 2,000 well-disciplined troops, with several thousand more planned by 2011. The Israelis, after initial reluctance, have given them responsibility in West Bank cities.

The Israelis would be smart to build on this success by reducing their raids into the cities and extending the authority of the Palestinian troops. Right now, the Palestinians usually need Israeli permission to move outside the major cities. A top Israeli military official tells me he's ready to let the Palestinians operate more in villages and rural areas -- a move that Fayyad says would give Palestinians hope that occupation will end eventually.

Don't get me wrong: The West Bank is still ragged, and Gaza is a disaster. Fayyad will be lucky to meet his two-year timetable for creating effective institutions. If he can't deliver, the Israelis shouldn't go forward. But frankly, his nation-building program is the only ray of light I can see in the Palestinian morass, and it deserves American support.