CRS Reports

Section 232 Auto Investigation

Oct 24, 2018

U.S.-India Trade Relations

Oct 24, 2018

Funding and Financing Highways and Public Transportation

For many years, federal surface transportation programs were funded almost entirely from taxes on motor fuels deposited in the Highway Trust Fund. The tax rates, which are fixed in terms of cents per gallon, have not been increased at the federal level since 1993. Meanwhile, motor fuel consumption is projected to decline due to improved fuel efficiency, increased use of electric vehicles, and slow growth in vehicle miles traveled. In consequence, revenue flowing into the Highway Trust Fund has been insufficient to support the surface transportation program authorized by Congress since 2008. Congress has yet to address the surface transportation program’s fundamental revenue issues, and has given limited consideration to raising fuel taxes in recent years. Instead, since 2008 Congress has supported the federal surface transportation program by supplementing fuel tax revenues with transfers from the U.S. Treasury general fund. The most recent reauthorization act, the Fixing America’s Surface Transportation Act (FAST Act; P.L. 114-94), authorized spending on federal highway and public transportation programs through September 30, 2020. The act provided $70 billion in general fund transfers to the Highway Trust Fund from FY2016 through FY2020. This use of general fund transfers to supplement the Highway Trust Fund will have been the de facto funding policy for 12 years when the FAST Act expires. Congressional Budget Office (CBO) projections indicate that the Highway Trust Fund insufficiency relative to spending will reemerge following expiration of the FAST Act. The projections indicate a shortfall of $85 billion over the first five years following the FAST Act, and $109 billion over the first six years. As the September 2020 expiration of the FAST Act approaches, Congress may again examine adjustments to the funding and financing of the federal role in surface transportation. Raising motor fuel taxes could provide the Highway Trust Fund with sufficient revenue to fully fund the program in the near term, but may not be a viable long-term solution due to expected declines in fuel consumption. It would also not address the equity issue arising from the increasing number of personal and commercial vehicles that are powered electrically and therefore do not pay motor fuel taxes. Replacing motor fuel taxes with a mileage-based road user charge would need to overcome a variety of financial, administrative, and privacy barriers, but could be a solution in the longer term. Treasury general fund transfers could continue to be used to make up for the Highway Trust Fund’s projected shortfalls but could require budget offsets of an equal amount. The political difficulty of adequately funding the Highway Trust Fund could lead Congress to consider altering the trust fund system or eliminating it altogether. This might involve a reallocation of responsibilities and obligations among federal, state, and local governments. Some surface transportation needs can be met by private investment, including public-private partnerships, and federal loans from the Transportation Infrastructure Finance and Innovation Act (TIFIA) program. If it desires to promote private investment in transportation infrastructure, Congress could consider asset recycling incentive grants to state and local governments for the sale or lease of government-owned infrastructure if the proceeds are committed to new infrastructure. Tolling may be an effective way to finance specific roads, bridges, or tunnels that are likely to have heavy use and are located such that the tolls are difficult to evade. All revenue from tolls flows to the state or local agencies or private entities that operate tolled facilities; the federal government does not collect any revenue from tolls. However, a major expansion of tolling might reduce the need for federal expenditures on roads. Tolls and private investment are unlikely to provide broad financial support for surface transportation needs, and many projects are not well suited to alternative financing.

Oct 24, 2018

Head Start: Overview and Current Issues

Oct 23, 2018

Tax Provisions That Expired in 2017 (“Tax Extenders”)

Twenty-eight temporary tax provisions expired at the end of 2017. Collectively, temporary tax provisions that are regularly extended as a group by Congress, rather than being allowed to expire as scheduled, are often referred to as “tax extenders.” Temporary tax provisions were most recently extended in the Bipartisan Budget Act of 2018 (BBA18; P.L. 115-123). BBA18 extended nearly all of the provisions that had expired at the end of 2016, with most provisions extended through the end of 2017. For most provisions, this extension was purely retroactive. Since the BBA18 was enacted in February 2018, the extensions generally were not made available for the tax year in which the legislation was enacted. The extension of expired provisions enacted in BBA18 was estimated to reduce federal revenue by $15.1 billion between FY2018 and FY2027. All of the temporary tax provisions that expired at the end of 2017 have been included in previous “tax extender” legislation. There are several options for Congress to consider regarding temporary tax provisions. Provisions that expired at the end of 2017 could be extended. The extension could be retroactive. The extension could be short term, long term, or permanent. Another option would be to allow expired provisions to remain expired. Making permanent the temporary tax provisions that expired at the end of 2017 would reduce federal revenue by an estimated $92.5 billion between FY2018 and FY2027. This is equal to about 0.2% of current-law projected federal revenue over this period. The number of “tax extender” provisions has fallen in recent years, as has the cost associated with extending “tax extenders.” The Protecting Americans from Tax Hikes Act of 2015 (PATH Act), enacted as Division Q of the Consolidated Appropriations Act, 2016 (P.L. 114-113), made permanent a number of provisions that had been long-standing “tax extenders,” and extended several other provisions through 2019. The 2017 tax revision (P.L. 115-97) also made changes that resulted in the elimination of certain “tax extender” provisions. If Congress chooses to consider extending tax provisions that expired at the end of 2017 late in 2018, the option of extending tax provisions that are scheduled to expire at the end of 2018 might be evaluated simultaneously. The two tax provisions scheduled to expire at the end of 2018 are (1) increased excise tax rates on coal used to finance the Black Lung Disability Trust Fund; and (2) a reduction in the medical expense deduction threshold from 10% of adjusted gross income (AGI) to 7.5% of AGI. Certain disaster-related tax provisions were available for 2017 disasters. Extending or expanding these provisions to be available for 2018 disasters is a policy option that could be considered. This report provides a broad overview of “tax extenders.” More information on specific tax provisions that expired at the end of 2017 can be found in CRS Report R44925, Recently Expired Individual Tax Provisions (“Tax Extenders”): In Brief, coordinated by Molly F. Sherlock; CRS Report R44930, Business Tax Provisions that Expired in 2017 (“Tax Extenders”), coordinated by Molly F. Sherlock; and CRS Report R44990, Energy Tax Provisions That Expired in 2017 (“Tax Extenders”), by Molly F. Sherlock, Donald J. Marples, and Margot L. Crandall-Hollick.

Oct 22, 2018

Financial Innovation: Digital Assets and Initial Coin Offerings

Oct 17, 2018

Are There Any Systemically Important Nonbanks?

During the 2008 financial crisis, problems at AIG, Bear Stearns, and Lehman Brothers led to broader financial instability or government “bailouts” in order to prevent instability. At the time, these firms were nonbank financial institutions and not generally subject to effective safety and soundness regulation on a consolidated basis. The Dodd Frank Act (P.L. 111-203) provided the Financial Stability Oversight Council (FSOC) with the authority to designate nonbanks for enhanced prudential oversight by the Federal Reserve as systemically important financial institutions (SIFIs). Since enactment, FSOC has designated three insurers (AIG, MetLife, and Prudential) and one other firm (GE Capital). Subsequently, all four designations have been removed, three by FSOC and one (MetLife) through a successful lawsuit. Most recently, Prudential was de-designated on October 17, 2018. Proponents believe that designation could make it less likely that a large nonbank would experience a failure that destabilized the financial system. Opponents question whether any nonbank poses systemic risk, and if any does, whether institution-based regulation is the best way to address that risk. FSOC Designations and De-Designations The Dodd-Frank Act bases SIFI designations on whether the firm’s “material distress” or “the nature, scope, size, scale, concentration, interconnectedness, or mix of (its) activities” could pose a threat to financial stability. In deciding whether to designate a firm, FSOC primarily considers (1) if the firm’s distress would lead to financial instability for other firms or markets; (2) the extent to which the firm is already regulated; and (3) the firm’s complexity, opacity, or difficulty to resolve in the event of its failure. (For more information, see CRS Report R45162, Regulatory Reform 10 Years After the Financial Crisis: Systemic Risk Regulation of Non-Bank Financial Institutions.) FSOC annually reevaluates whether designated firms remain systemically important. FSOC de-designated AIG and GE Capital partly because of their reduction in size, through significant divestments and reductions in certain activities. AIG’s total assets fell from $1,048 billion in 2007 to $498 billion in 2016 and GE Capital divested $272 billion in assets from 2012 to 2016. (The large majority of the AIG restructuring occurred prior to its initial SIFI designation, however.) Although it was ultimately a court case that resulted in its de-designation, MetLife also undertook a substantial restructuring after its designation, spinning off lines of business and approximately $220 billion in assets to a new firm in August 2017. MetLife is, however, still the second largest insurer in the United States. Prudential, currently the largest U.S. insurer, has not undertaken any large-scale restructuring since SIFI designation—in fact, it has gotten larger. In its de-designation, FSOC found that Prudential has not significantly decreased its total market exposure, investment portfolio, market share, or resolvability. However, FSOC noted that Prudential had reduced its leverage and counterparty exposures to the largest banks, and that there had been changes to its state insurance regulation. Do Nonbanks Pose Systemic Risk? If systemic risk is mainly a function of size (i.e., “too big to fail”), then a failure to designate any large nonbank could increase the likelihood of financial instability. Figure 1 shows large financial firms based on asset size. P.L. 115-174 raised the asset threshold for automatically subjecting banks to enhanced prudential standards to $250 billion. For comparison, 10 insurers (including the three previously designated) and three other nonbanks have more than $250 billion in assets. The largest insurers (Prudential and MetLife) are comparable in size to banks such as Goldman Sachs and Morgan Stanley. However, differences in the nature of banking and other financial activities may mean that banks above $250 billion pose more systemic risk than nonbanks of the same size. For example, deposits are an important source of funding for most banks, and deposits can be withdrawn on demand. If enough deposits are withdrawn simultaneously, even strong banks would face a liquidity crisis. Insurers offer far fewer products where funds can be withdrawn on demand. Figure 1. Financial Firms With Over $250 Billion in Assets (billions of $, latest annual) / Source: Federal Reserve, S&P Capital IQ. Notes: BHC=Bank Holding Company, FBO=Foreign Banking Organization. For FBOs, includes U.S. assets only. Berkshire Hathaway includes companies engaged in financial and nonfinancial activities. Nevertheless, both large banks and nonbanks undertake other activities that could pose systemic risk. For example, both can participate in short-term debt markets where access to funding could quickly dry up in a panic, causing a liquidity crisis for the firm. Both can hold large portfolios of securities that, if sold quickly under duress (in a “fire sale”), could potentially push other firms or markets into crisis. Both typically have complex, multinational corporate structures that make their resolution complicated. As noted above, one factor in SIFI designation is the firm’s existing regulation. Insurers are regulated for safety and soundness at the state level, although there is no automatic enhanced prudential regime for large insurers analogous to that for large banks. AIG’s problems during the crisis raised concerns that state-level regulation could not adequately mitigate systemic risk posed by an insurer’s noninsurance activities (such as securities lending and credit default swaps) in the future. State regulators implemented changes after the financial crisis that attempted to address such issues, although these changes have not been tested by a crisis. Large investment firms such as Lehman Brothers and Bear Stearns posed systemic risk in the crisis, but today, all large investment firms are parts of bank holding companies or foreign banks and therefore already subject to enhanced regulation. There are government sponsored enterprises with more than $250 billion in assets that are not designated, but are regulated for safety and soundness by the Federal Housing Finance Agency (one of the three factors for designation). No asset managers or lending companies own over $250 billion in assets, but some asset managers that are not part of bank holding companies manage trillions of dollars in customer assets. Losses on assets under management, in isolation, do not pose risk to the firm because they would be borne by customers. Nevertheless, a (controversial) 2013 report by the Office of Financial Research detailed the ways that large asset managers might pose systemic risk.

Oct 17, 2018

Central Valley Project: Issues and Legislation

The Central Valley Project (CVP), a federal water project owned and operated by the U.S. Bureau of Reclamation (Reclamation), is one of the world’s largest water supply projects. The CVP covers approximately 400 miles in California, from Redding to Bakersfield, and draws from two large river basins: the Sacramento and the San Joaquin. It is composed of 20 dams and reservoirs and numerous pieces of water storage and conveyance infrastructure. In an average year, the CVP delivers more than 7 million acre-feet of water to support irrigated agriculture, municipalities, and fish and wildlife needs, among other purposes. About 75% of CVP water is used for agricultural irrigation, including 7 of California’s top 10 agricultural counties. The CVP is operated jointly with the State Water Project (SWP), which provides much of its water to municipal users in Southern California. CVP water is delivered to users that have contracts with Reclamation. These contractors receive varying levels of priority for water deliveries based on several factors, including hydrology, water rights, prior agreements with Reclamation, and regulatory requirements. The Sacramento and San Joaquin Rivers’ confluence with the San Francisco Bay (Bay-Delta or Delta) is a hub for CVP water deliveries; many CVP contractors south of the Delta receive water that is “exported” from north of the Delta. Development of the CVP resulted in significant changes to the area’s natural hydrology. However, construction of most CVP facilities predated major federal natural resources and environmental protection laws. Much of the current debate related to the CVP revolves around how to deal with changes to the hydrologic system that were not significantly mitigated for when the project was constructed. Thus, multiple ongoing efforts to protect species and restore habitat have been authorized and are incorporated into project operations. Congress has engaged in CVP issues through oversight and at times legislation, including provisions in the 2016 Water Infrastructure Improvements for the Nation (WIIN Act; P.L. 114-322) that, among other things, authorized changes to operations in an attempt to provide for delivery of more water under certain circumstances. Although some stakeholders are interested in further operational changes to enhance CVP water deliveries, others are focused on the environmental impacts of operations. Various state and federal proposals are currently under consideration and have generated controversy for their potential to affect CVP operations and allocations. In mid-2018, the State of California proposed revisions to its Bay-Delta Water Quality Control Plan. These changes would require that more flows from the San Joaquin and Sacramento Rivers reach the Bay-Delta for water quality and fish and wildlife enhancement (and thus would further restrict water supplies for other users). At the same time, the Trump Administration is exploring options to increase CVP water supplies for users. Efforts to add or supplement CVP storage and conveyance also are being considered. The state is proposing a major new water conveyance project (known as the California WaterFix) that would bypass the Bay-Delta and, under certain conditions, increase exports from north to south for users. Additionally, Reclamation and the state are studying other new, augmented storage projects that aim to increase CVP and SWP water supplies. In the 115th Congress, legislators are considering bills that would aim to further increase CVP water exports compared to current baselines by altering environmental requirements and repealing parts of some existing restoration programs. Congress also is considering more targeted but potentially significant changes, such as appropriations provisions that would provide federal approval and funding for certain water storage projects in California, prohibit federal funding for the Bay-Delta Water Quality Control Plan, and prohibit judicial review of WaterFix and other water supply projects, among other things. Congress also may consider legislation that would extend or amend previously enacted CVP authorities (e.g., WIIN Act authorities that are expiring or have exceeded their appropriations ceiling). This report provides background on the CVP, the process of allocating CVP water supplies, and associated controversies. It also covers major proposals associated with the project’s current and future operation. Finally, it discusses recently enacted authorities and proposed legislation related to the CVP.

Oct 15, 2018

Vehicle Fuel Economy and Greenhouse Gas Standards

Oct 11, 2018

Miscellaneous Tariff Bills (MTBs)

Oct 10, 2018

Defense’s 30-Year Aircraft Plan Reveals New Details

Oct 9, 2018

Pakistan’s Economic Crisis

Oct 9, 2018

Federal Communications Commission (FCC) Media Ownership Rules

The Federal Communications Commission (FCC) aims, with its broadcast media ownership rules, to promote localism and competition by restricting the number of media outlets that a single entity may own or control within a geographic market and, in the case of broadcast television stations, nationwide. In addition, the FCC seeks to encourage diversity, including (1) the diversity of viewpoints, as reflected in the availability of media content reflecting a variety of perspectives; (2) diversity of programming, as indicated by a variety of formats and content; (3) outlet diversity, to ensure the presence of multiple independently owned media outlets within a geographic market; and (4) minority and female ownership of broadcast media outlets. Two FCC media ownership rules have proven particularly controversial. Its national media ownership rule prohibits any entity from owning commercial television stations that reach more than 39% of U.S. households nationwide. Its “UHF discount” rule discounts by half the reach of a station broadcasting in the Ultra-High Frequency (UHF) band for the purpose of applying the national media ownership rule. In December 2017, the commission opened a rulemaking proceeding, seeking comments about whether it should modify or repeal the two rules. If the FCC retains the UHF discount, even if it maintains the 39% cap, a single entity could potentially reach 78% of U.S. households through its ownership of broadcast television stations. An important issue with respect to the national ownership cap, which the FCC has not addressed in a rulemaking, is how the agency treats a situation in which a broadcaster manages, operates, or sells advertising for a television station owned by another. In some cases, the FCC has articulated its policy on an ad hoc basis in the context of merger reviews, while in other instances it has effectively consented to such arrangements through its silence. Thus, a single entity could comply with the national ownership cap while still influencing broadcast television stations it does not own, reaching more viewers than permitted under the cap. For example, in reviewing the now-cancelled proposed merger between Sinclair Broadcast Group and Tribune Media Company in 2018, FCC commissioners raised concerns that Sinclair’s proposed sale of Tribune’s Chicago station WGN-TV in order to comply with the national ownership cap could effectively be a “sham” transaction due to Sinclair’s relationships with the proposed buyer. Nevertheless, neither Sinclair’s application nor the FCC’s order for a designated hearing addressed whether Sinclair’s intention to operate four television stations owned by others within the Wilkes-Barre-Scranton-Hazleton, PA, television market might cause it to breach the national ownership cap. In November 2017, acting in response to petitions from broadcast station licensees, the FCC repealed or relaxed several local media ownership rules. The repealed rules limited common ownership of broadcast television and radio stations within the same market, and of television stations and newspapers within the same market. The FCC also relaxed rules limiting common ownership of two top-four television stations (generally, ABC, CBS, FOX, and NBC stations) within the same market. In August 2018, the FCC issued rules governing a new “incubator” program designed to enhance ownership diversity. Parties, including the Prometheus Radio Project, have appealed these orders. The U.S. Court of Appeals for the Third Circuit is scheduled to hear arguments regarding the legal challenges to all of the FCC’s recent broadcast media ownership rule changes. The FCC plans to launch its next quadrennial media ownership review later this year. These regulatory changes are occurring against the background of significant changes in media consumption patterns. Based on surveys conducted by Pew Research Center, the percentage of adults citing local broadcast television as a news source declined from 65% in 1996 to 37% in 2016. As broadcast stations face competition for viewers’ attention from other media outlets, and thereby financial pressures, some station owners have sought to strengthen their positions by consolidating. The extent to which such media consolidation can occur is directly related to the FCC media ownership and attribution rules in place at the time.

Oct 9, 2018

Banking: Current Expected Credit Loss (CECL)

Some observers asserted that leading up to the financial crisis of 2007-2009 banks did not have sufficient credit loss reserves or capital to absorb the resulting losses and as a consequence supported additional government intervention to stabilize the financial system. In its legislative oversight capacity, Congress has devoted attention to strengthening the financial system in an effort to prevent another financial crisis and avoid putting taxpayers at risk. However, some Members of Congress have expressed concern that financial reforms have been unduly burdensome, reducing the availability and affordability of credit. Congress has delegated authority to the bank regulators and the Financial Accounting Standards Board (FASB) to address credit loss reserves. FASB promulgates the U.S. Generally Accepted Accounting Principles (U.S. GAAP), which provides the framework for financial reporting by banks and other entities. Credit loss reserves help mitigate the overstatement of income on loans and other assets by accounting for future losses. Credit losses are often very low shortly after loan origination, subsequently rising in the early years of the loan, and then tapering to a lower rate of credit loss until maturity. Consequently, a firm’s financial statements might not accurately reflect potential credit losses at loan inception. During the seven years leading up to the 2007-2009 financial crisis, the loan values held by the U.S. commercial banking system increased by 85%, whereas the credit loss reserves increased by only 21%. The ratio of loss reserves prior to the financial crisis was as low as 1.16% in 2006 and was more than 3.70% near the end of the crisis in early 2010. In response to banks’ challenges during and after the crisis, in June 2016, FASB promulgated a new credit loss standard—Current Expected Credit Loss (CECL). The new standard is expected to result in greater transparency of expected losses at an earlier date during the life of a loan. Early recognition of expected losses might not only help investors, but might also create a more stable banking system. CECL requires consideration of a broader range of reasonable and supportable information in determining the expected credit loss, including current and future economic conditions. In addition to loans, CECL also applies to a broad range of other financial products. The expected lifetime losses of loans and certain other financial instruments are to be recognized at the time a loan or financial instrument is recorded. All public companies are required to issue financial statements that incorporate CECL for reporting periods beginning after December 15, 2019. Although adherence to CECL is required for all public companies, it is expected to have a more significant effect on the banking industry. The change to credit loss estimates under CECL is considered by some to be the most significant accounting change in the banking industry in 40 years. The banking regulators (Federal Reserve, Federal Deposit Insurance Corporation, and Office of the Comptroller of the Currency) have issued preliminary guidance on CECL implementation. Banking regulators have also proposed changing the Allowance for Loan and Lease Losses (ALLL) to Allowance for Credit Loss (ACL) as a newly defined term. The change to ACL is to reflect the broader range of financial products that will be subject to credit loss estimates under CECL. During congressional hearings, banking industry professionals have raised several concerns about CECL. According to one estimate, the transition to CECL will likely result in an increase in loan loss reserves of between $50 billion and $100 billion for banks. As these projections are in aggregate across the banking industry, some banks might need to significantly increase their credit reserves whereas others might need to adjust less. To mitigate the effect of CECL, regulators have given banks the option of phasing in the increased credit reserves over three years. In addition, the Federal Reserve has delayed stress tests that incorporate CECL for the largest banking organizations until 2021. Banks are expected to incur additional costs of developing new credit loss models and costs of implementation. Banks may need to retain historical information on more financial products to estimate credit losses under CECL. Adopting CECL may require upgrading existing hardware and software or paying higher fees to third-party vendors for such services. Participants in recent congressional hearings have raised concerns about CECL implementation issues. The difference in how credit loss estimates are calculated based on CECL and international accounting standards could potentially disadvantage U.S. banks, but CECL is considered less complex to implement. Fannie Mae and Freddie Mac, the government-sponsored enterprises, are also to be subject to CECL credit loss estimates as they are subject to private-sector GAAP requirements even though they are currently in conservatorship under the Federal Housing Financing Agency.

Oct 9, 2018

Trade Related Agencies: FY2019 Appropriations, Commerce, Justice, Science and Related Agencies (CJS)

On February 12, 2018, the Trump Administration submitted its FY2019 budget request to Congress. The proposal includes a total of $590.8 million for three trade-related agencies— the International Trade Administration (ITA), the U.S. International Trade Commission (USITC), and the office of the United States Trade Representative (USTR). This is 8.9% less than the FY2018 total appropriated amounts for these agencies. The Administration requests reducing funding for all three trade-related agencies. For FY2019, the request includes $440.1 million in direct funding for ITA (an 8.7% decrease from the FY2018 appropriation), $87.6 million for USITC (a 6.5% decrease), and $63.0 million for USTR (a 13.2% decrease). Congressional Actions In the spring of 2018, the House and Senate reported FY2019 Commerce, Justice, Science, and Related Agencies (CJS) appropriations bills, which include proposed funding for ITA, USITC, and USTR. The reported bills do not adopt many of the Administration’s budget reductions, and instead propose funding levels that are more similar to the FY2018-enacted amounts. The House Committee on Appropriations reported H.R. 5952 on May 17, 2018. The House proposal recommends a total of $647.6 million for the three CJS trade-related agencies. This proposal is $56.8 million more (9.6%) than the Administration’s request, and $0.7 million less (-0.1%) than the FY2018 enacted legislation. The House committee proposes $480.0 million in direct funding for ITA, $95.0 million for USTIC, and a total of $72.6 million for USTR, comprised of $57.6 million for salaries and expenses and an additional $15 million from the Trade Enforcement Trust Fund. The Senate Committee on Appropriations reported S. 3072 on June 14, 2018. The Senate committee-reported proposal recommends a total of $655.6 million for the three CJS trade-related agencies. This is $64.8 million (11.0%) more than the Administration’s request, and $7.3 million (1.1%) more than the FY2018 enacted appropriations. The Senate committee proposes $488.0 million in direct funding for ITA, $95 million for USITC, and a total of $72.6 million for USTR, comprised of $57.6 million for salaries and expenses and an additional $15 million from the Trade Enforcement Trust Fund. On September 28, 2018, the President signed into law the Continuing Appropriations Act, 2019 (CR) (P.L. 115-245, Division C). The CR provisions continue funding for these agencies (among others) at a prorated 2018 funding level through December 7, 2018.

Oct 5, 2018

The Patient Protection and Affordable Care Act’s (ACA’s) Risk Adjustment Program: Frequently Asked Questions

The Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended) created a permanent risk adjustment program that aims to reduce incentives that insurers may have to avoid enrolling individuals at risk of high health care costs in the private health insurance market. Section 1343 of the ACA established the program, which is designed to assess charges to health plans that have relatively healthier enrollees compared with other health plans in a given state. The program uses collected charges to make payments to other plans in the same state that have relatively sicker enrollees. The Centers for Medicare & Medicaid Services (CMS) administers the risk adjustment program as a budget-neutral program, so that payments made are equal to the charges assessed in each state. CMS assesses payments and charges on an annual basis, beginning in the 2014 benefit year. The concept of risk (i.e., the likelihood and magnitude of experiencing financial loss) is at the root of any insurance arrangement. One of the ways that insurers are exposed to risk is that individuals have more information about their own health status than an insurer does. Individuals who expect or plan for high use of health services (e.g., older or sicker individuals) are more likely to seek out coverage and enroll in plans with more benefits than individuals who do not expect to use many or any health services (e.g., younger or healthier individuals). Prior to the ACA, most state laws (and federal law under limited circumstances) allowed insurers to minimize their exposure to this risk by charging higher or lower premiums to potential enrollees based on factors such as age, gender, and health status. However, under current federal law, insurers in the individual and small-group markets are unable to set premiums based on gender or health status and are limited in how much they may vary premiums by age. Without being permitted to account for the risk from individuals who expect or plan for high use of health services using the aforementioned criteria, insurers still may attempt to avoid such individuals enrolling by using networks, formularies, and other techniques that are not likely to appeal to them, though insurers are limited by other ACA requirements (e.g., they are required to offer certain benefits). The ACA established the permanent risk adjustment program to try to eliminate incentives insurers may have to avoid enrolling high-risk individuals. This program, along with the transitional reinsurance program and the temporary risk corridors programs, is intended to encourage insurers to participate in the marketplace by moderating the risk and uncertainty that may reduce their likelihood to participate. Under the risk adjustment program, insurers place enrollee and claims data for a benefit year on a computer server that they own but that runs CMS software. CMS’s software calculates a risk score for an enrollee using that enrollee’s demographic and diagnosis information and obtains summary data for each plan. CMS uses the risk scores for a plan’s enrollees to calculate the difference between the plan’s predicted costs for its enrollees relative to the predicted state average cost, given the health status of the plan’s enrollees and the estimated premium revenue that the plan would be able to collect based on allowable rating factors, relative to the estimated state average. This difference is then multiplied by the state average premium and results in either a risk adjustment payment or charge for a given plan. This report provides responses to some frequently asked questions (FAQs) about the ACA risk adjustment program. The report begins with background on the health insurance market, discusses why risk mitigation matters, and introduces the role of risk adjustment in risk mitigation. The next section describes the mechanics of the program, including how enrollee risk scores are determined and how they are used to calculate payments and charges. The report concludes with questions regarding the program’s experience thus far and future changes to the program.

Oct 4, 2018

Risk Adjustment in the Private Health Insurance Market

Oct 3, 2018

The Trump Administration’s “Free and Open Indo-Pacific”: Issues for Congress

The Trump Administration has outlined a goal of promoting a Free and Open Indo-Pacific (FOIP), seeking to articulate U.S. strategy towards an expanded Indo-Asia-Pacific region at a time when China’s presence across the region is growing. The FOIP initiative is identified through a number of statements by the President and senior Administration officials. Insight into the initiative’s context and perspective is also offered by the Administration’s National Security Strategy and the National Defense Strategy. The FOIP concept represents a significant change in U.S. strategic thinking towards the region because of its explicit linkage of South Asia and the Indian Ocean region with the Asia-Pacific region. The FOIP also emphasizes maritime issues. While recent statements by Secretary of State Mike Pompeo have provided a more detailed understanding of the strategy, uncertainty remains over the specifics of the initiative. Some critics of the initiative wonder if the United States has the vision, political will, or economic resources necessary to implement a FOIP strategy effectively. Some observers have pointed to inconsistencies with other Trump Administration initiatives toward the region, and to the lack of detail necessary to operationalize the concept. Some also argue that the economic aspects of the initiative are relatively small when compared to either China’s lending, including under its Belt and Road Initiative, or the region’s infrastructure investment needs. Another often-expressed concern is that the FOIP’s initial emphasis on the “Quad” with Australia, India, and Japan raises concerns that it risks eroding U.S. influence in Southeast Asia by not sufficiently incorporating that sub-region’s leading international body, the Association of Southeast Asian Nations, into U.S. strategy toward the region. Regional perceptions of the United States’ commitment to the region were shaken by the Trump Administration’s decision to withdraw from the proposed Trans-Pacific Partnership trade agreement in 2017. This decision also led to perceptions that the United States lacked an integrated regional strategy despite the region’s economic importance to the United States. According to the State Department, two-way trade between the United States and the Indo-Pacific is $1.4 trillion and U.S foreign direct investment in the region is $860 billion a year. The FOIP initiative may raise questions for Congress related to its oversight and appropriations roles: Does the initiative fully account for the strategic and economic environment in the Indo-Pacific, including implications related to but going beyond the rise of China and its Belt and Road Initiative? Does the initiative correctly identify and adequately secure U.S. interests in the Indo-Pacific region? Does it place proper emphasis on developing diplomatic approaches and economic institutions as well as military responses when crafting a strategic vision for the region? Are U.S. Indo-Pacific military forces properly deployed to secure U.S. interests? Is future defense procurement adequately funded to secure U.S. interests? Is the value to the United States of working with friends and allies in the region properly understood and are these alliance and defense relationships being properly managed in order to leverage U.S. strategic posture in the region? Are American values properly taken into account in developing a FOIP strategy?

Oct 3, 2018

Consumer Credit Markets and Loan Pricing: The Basics

Oct 3, 2018

Argentina’s Economic Crisis and Default

Oct 2, 2018

Army Corps of Engineers Annual and Supplemental Appropriations: Issues for Congress

The U.S. Army Corps of Engineers (USACE) is an agency within the Department of Defense with both military and civil works responsibilities. The agency’s civil works activities consist largely of the planning, construction, and operation of water resource projects to maintain navigable channels, reduce flood and storm damage, and restore aquatic ecosystems. Congress directs USACE’s civil works activities through authorization legislation, annual and supplemental appropriations, and oversight. For Congress, the issue is not only the level of USACE appropriations but also how efficiently the agency is delivering flood control, navigation, and ecosystem restoration projects. These projects can have significant local as well as national economic and environmental benefits. Annual and Supplemental Appropriations USACE discretionary appropriations, which typically are provided through annual Energy and Water Development appropriations acts, have ranged from $4.7 billion to $7.0 billion during the decade from FY2009 to FY2019 and have been increasing since FY2013. In recent years, Congress has directed that more than 50% of the enacted appropriations be used for operation and maintenance of USACE’s aging infrastructure. USACE also has a prominent role in responding to natural disasters, especially floods, in U.S. states and territories. Congress increasingly is using supplemental appropriations not only to perform emergency response and repair for damaged flood control works and USACE projects but also to study and construct new projects that reduce flood risks in areas recently affected by hurricanes and floods. From FY2005 through FY2018, Congress enacted 13 supplemental bills related to flooding and natural disasters, providing a total of almost $45 billion to USACE; for the same period, annual discretionary appropriations for USACE’s flood-related projects and activities totaled $23 billion. Supplemental appropriations bills often alter or waive various requirements for USACE activities, such as cost shares and project cost limitations, and establish project selection and reporting requirements that differ from requirements for USACE activities funded through annual discretionary appropriations. Issues for Congress Issues for Congress include the significant role of supplemental appropriations in advancing studies and construction of flood control projects since FY2005 and the agency’s backlog of authorized but unconstructed projects. The agency has reported a $96 billion backlog of authorized construction projects; for context, annual appropriations for the USACE Construction account (which funds most USACE construction projects) in FY2018 and FY2019 are $2.1 billion and $2.2 billion, respectively. Congress also has limited the number of new studies and construction projects initiated with annual discretionary appropriations (e.g., a limit of five new construction starts using FY2019 appropriations). Given that only a few construction projects typically are started each fiscal year, numerous projects authorized for construction by previous Congresses remain unfunded. USACE may fund some of the authorized flood control projects in its backlog with the more than $17 billion in emergency supplemental appropriations provided to USACE accounts in the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123). Although no numerical limits on starting new studies or construction projects are associated with these funds, the study and construction funds have some geographic limitations that tie their use to areas affected by flooding by the hurricanes in 2017 or by more than one flood in calendar years 2014 through 2017. As a result of this limitation, seventeen states (including North Carolina, which was affected by Hurricane Matthew in 2016 and Hurricane Florence in 2018) did not qualify for USACE supplemental construction appropriations provided through the BBA 2018. Related policy questions for Congress and other decisionmakers include the following: How have the roles of Congress and the Administration shifted vis-à-vis USACE and its appropriations, and does that shift affect the type of information and engagement that Congress may pursue in the future regarding USACE’s use of appropriations? How do trends in annual and supplemental appropriations amounts, processes, and requirements influence the effective, efficient, and accountable use of federal funding provided to USACE? What do these trends portend for USACE’s long-term planning, budgeting, and duties?

Oct 1, 2018

Federalism-Based Limitations on Congressional Power: An Overview

The U.S. Constitution establishes a system of dual sovereignty between the states and the federal government, with each state having its own government, endowed with all the functions essential to separate and independent existence. Although the Supremacy Clause of the Constitution designates “the Laws of the United States” as “the supreme Law of the Land,” other provisions of the Constitution—as well as legal principles undergirding those provisions—nonetheless prohibit the national government from enacting certain types of laws that impinge upon state sovereignty. The various principles that delineate the proper boundaries between the powers of the federal and state governments are collectively known as “federalism.” Federalism-based restrictions that the Constitution imposes on the national government’s ability to enact legislation may inform Congress’s work in any number of areas of law in which the states and the federal government dually operate. There are two central ways in which the Constitution imposes federalism-based limitations on Congress’s powers. First, Congress’s powers are restricted by and to the terms of express grants of power in the Constitution, which thereby establish internal constraints on the federal government’s authority. The Constitution explicitly grants Congress a limited set of carefully defined enumerated powers, while reserving most other legislative powers to the states. As a result, Congress may not enact any legislation that exceeds the scope of its limited enumerated powers. That said, Congress’s enumerated powers nevertheless do authorize the federal government to enact legislation that may significantly influence the scope of power exercised by the states. For instance, subject to certain restrictions, Congress may utilize its taxing and spending powers to encourage states to undertake certain types of actions that Congress might otherwise lack the constitutional authority to undertake on its own. Similarly, the Supreme Court has interpreted the Constitution’s Commerce Clause to afford Congress substantial (but not unlimited) authority to regulate certain purely intrastate economic activities that substantially affect interstate commerce in the aggregate. Congress may also enact certain types of legislation in order to implement international treaties. Additionally, pursuant to a collection of constitutional amendments ratified shortly after the Civil War, Congress may directly regulate the states in limited respects in order to prevent states from depriving persons of certain procedural and substantive rights. Finally, the Necessary and Proper Clause augments Congress’s enumerated powers by empowering the federal government to enact laws that are “necessary and proper” to execute its express powers. In addition to the internal constraints on Congress’s authority, the Constitution also imposes external limitations on Congress’s powers vis-à-vis the states—that is, affirmative prohibitions on certain types of federal actions found elsewhere in the text or structure of the Constitution. The Supreme Court has recognized, for instance, that the national government may not commandeer the states’ authority for its own purposes by forcing a state’s legislature or executive to implement federal commands. Nor may Congress apply undue pressure to coerce states into taking actions they are otherwise disinclined to take. Furthermore, the principle of state sovereign immunity—which limits the circumstances in which a state may be forced to defend itself against a lawsuit against its will—imposes significant constraints on Congress’s ability to subject states to suit. Finally, the Supreme Court has recognized limits to the extent to which Congress may subject some states to more onerous regulatory burdens than other states.

Sep 27, 2018

The September 2018 Inter-Korean Summit

From September 18 to 20, South Korean President Moon Jae-in visited North Korea and held approximately five hours of meetings with North Korean leader Kim Jong-un. During the summit, their third since April 2018, the two leaders issued a Pyongyang Joint Declaration pledging denuclearization of the Korean Peninsula, improvements in inter-Korean relations, and confidence-building measures to ease military tension. Kim promised to visit Seoul “at an early date.” The Moon-Kim summit has created potential opportunities and obstacles for the United States. The summit appears to have injected new momentum into North Korea-U.S. denuclearization talks, which had stalled in the months after President Trump’s summit with Kim in Singapore in June. Meeting with Moon days after the inter-Korean summit, President Trump said that he and Kim would be holding a second summit “in the not too distant future.” The September inter-Korean summit, however, also may have constrained the United States’ freedom of action, particularly if North Korea does not follow through on its pledges. Major Outcomes Kim’s reciprocal visit to Seoul: Moon said that the two leaders agreed the visit should occur by the end of 2018, “if possible.” If realized, it will be the first trip to Seoul by a DPRK leader since the end of the Korean War in 1953. Nuclear and missile programs: The two leaders agreed that they would “cooperate ... in the process of pursuing complete denuclearization of the Korean Peninsula,” and that “substantial progress toward this end must be made in a prompt manner.” Kim repeated his June pledge to Trump to dismantle the Tongchang-ri (also called Sohae) missile and satellite launch site, adding for the first time that international experts could be present. Kim pledged to take additional steps, including the “permanent dismantlement” of its nuclear facilities in Yongbyon, “as the United States takes corresponding measures.” Military confidence-building measures: Among other steps, the two Koreas agreed to reestablish communications links to prevent accidental military clashes, create a no-fly zone along the DMZ, withdraw many of their guard posts within the DMZ, and create in effect a “no military drills zone” and a joint fishing zone in the Yellow Sea. Economic measures: Moon and Kim pledged to hold a groundbreaking ceremony for reconnecting east and west coast roads and railroad tracks by the end of 2018. They also agreed, “as conditions ripe [sic],” to reopen the inter-Korean Kaesong Industrial Complex (KIC) inside North Korea that Moon’s predecessor closed in February 2016 following Pyongyang’s fourth nuclear test. Moon’s 200-person contingent included business leaders, including the heads of Samsung, Hyundai, and LG. Other exchanges and cooperation: Moon and Kim pledged to jointly participate in the 2020 Olympics and bid to co-host the 2032 Summer Olympics, as well as strengthen medical and environmental cooperation, especially in forestry. They also agreed to create a permanent facility in North Korea for temporarily reuniting the thousands of families separated since the Korean War. Having already established their first-ever permanent liaison office, at the KIC in North Korea, the declaration said the leaders wished that “current developments in inter-Korean relations will lead to reunification.” Symbolism: The summit, which received TV coverage in both countries, included the two leaders’ motorcade through Pyongyang and joint visit with their wives to the peak of the Peninsula’s tallest mountain, Mt. Paektu, the Korean people’s mythical birthplace. In the first direct speech by a South Korean president to a large North Korean audience, Moon gave a short address to a crowd of approximately 150,000 North Koreans attending a gymnastics performance. Questions How significant are Kim’s nuclear and missile pledges? Moon has said that if North Korea follows through on Kim’s existing promises, it essentially will be unable to advance its nuclear and missile programs. However, many U.S. and ROK experts are skeptical because North Korea has yet to disclose the composition and/or size of its nuclear material or warhead stocks and facilities, including those not at Yongbyon. North Korea and the United States also have not agreed upon what constitutes “denuclearization.” Nor have they agreed upon a timeline or verification measures for dismantlement. North Korea “continue[s] to produce fissile material,” Secretary of State Mike Pompeo testified in July, shortly after U.S. intelligence agencies reportedly gathered evidence of DPRK efforts to conceal parts of its nuclear programs. Pyongyang also reportedly has continued working on more advanced long-range missiles. What are the “corresponding measures” the United States must take for North Korea to dismantle Yongbyon? Moon has aligned with Kim’s view that concessions by the United States and DPRK be made in a “balanced manner,” and that the United States should “put an end to hostile relations” and “provide security assurances to the North,” as Trump promised in Singapore. However, the Pyongyang Declaration did not specify which party needs to move first, on what measures. This has stymied progress in U.S.-DPRK relations since the Singapore summit. Without such an agreement, which Moon appears to be trying to broker, the policy logjam could continue. Do the military agreements limit the U.S.-ROK alliance’s capabilities? Defense analysts have claimed that the dramatic expansion of existing no-fly zones could curtail the alliance’s ability to conduct surveillance on North Korean military activities north of the DMZ. Together with the removal of guard posts in the DMZ, North Korea may be better positioned to launch a surprise attack on South Korea. Have the two Koreas limited the United States’ options? By eroding North Korea’s diplomatic and economic isolation, institutionalizing their rapprochement, and declaring their desire for non-aggression and a peace declaration, the two Koreas over the past nine months may have limited the United States’ ability to return to its expansive “maximum pressure” campaign of 2017. They also may have further reduced the viability of a U.S. military strike against North Korea, which the Trump Administration reportedly was considering in 2017, because it likely will be harder to gain support from South Korea. President Moon has stated that he seeks “an enduring peace regime” to enable “the South and North to become the masters of Korean Peninsula issues without getting pushed around by any international situation....”

Sep 25, 2018

Escalating Tariffs: Potential Impacts

Concerns over trading partner trade practices and the U.S. trade deficit have been a focus of the Trump Administration. For a timeline of recent actions, see CRS Insight IN10943, Escalating Tariffs: Timeline. Citing these concerns and others, the President has imposed tariffs under three U.S. laws and authorities (Figure 1) that allow the Administration to unilaterally impose trade restrictions: (1) Section 201 on U.S. imports of washing machines and solar products; (2) Section 232 on U.S. imports of steel and aluminum, and potentially autos and uranium, and (3) Section 301 on U.S. imports from China. Annual U.S. imports of goods subject to the additional tariffs, which range from 10% to 50%, totaled $282 billion in 2017 (Table 1). All formally proposed tariffs are now in effect, but the President has informally raised the prospect of tariffs on an additional $267 billion of U.S. annual imports from China, and, pending a Section 232 investigation, approximately $361 billion of U.S. auto and parts imports. While the tariffs may benefit import-competing U.S. producers, they are also likely to increase costs for downstream users of imported products and consumers. The Administration could be using the tariffs in part to pressure affected countries into broader trade negotiations, such as the U.S.-EU trade liberalization talks, but it is unclear what specific outcomes the Administration is seeking. Figure 1. Trump Administration Tariffs and Affected Imports / Source: CRS calculations with data from U.S. Census Bureau sourced through Global Trade Atlas. Notes: Based on 2017 import values. Increased U.S. import tariffs may reduce demand for imports lowering annual import values. The figure above includes all U.S. imports from China under HTS 85176200 ($22.9 billion in 2017). A portion of the products currently included in this category are excluded from the tariffs, but there is currently no statistical reporting number (HTS 10 digit code) for these excluded items such that CRS is unable to determine the portion of trade under this category that will be excluded. USITC is creating a new statistical reporting number, HTS 8517620090, to capture these excluded items. Retaliation may amplify the potential negative effects of the U.S. tariff measures. Retaliatory tariffs in effect cover almost $126 billion of U.S. annual exports, based on 2017 export data (Table 2). Economically, retaliatory tariffs broaden the scope of U.S. industries potentially harmed, targeting those reliant on export markets and sensitive to price fluctuations, such as agricultural commodities. Some U.S. manufacturers have announced plans to shift production to other countries in order to avoid the tariffs on U.S. exports. Lost market access resulting from the retaliatory tariffs may compound concerns raised by many U.S. exporters that the United States increasingly faces higher tariffs than some competitors in foreign markets as other countries proceed with trade liberalization agreements, such as the recently signed EU-Japan FTA. Adverse effects could grow if a tit-for-tat process of retaliation continues and the scale of trade affected increases. For example, the President stated that $267 billion of additional U.S. imports from China could face increased tariffs. China’s potential retaliation against another round of U.S. tariffs is limited by the fact that it has already imposed tariff increases on nearly all its U.S. imports, but it could further increase tariffs on the products it has already targeted or begin imposing nontariff measures such as informal pressure to limit U.S. multinational sales in China. New Section 232 actions by the Administration could result in larger potential trade effects. On March 23, 2018, the Commerce Department initiated a new Section 232 investigation on U.S. auto and auto parts imports. Motor vehicles and parts accounted for $361 billion of U.S. imports in 2017. The EU, which accounts for more than $50 billion of U.S. motor vehicle and parts imports, has reportedly threatened comparable retaliatory measures. The globally integrated nature of the industry could complicate the impact of the tariffs. For example, affiliates of foreign motor vehicle firms operating in the United States exported more than $49 billion (nearly $70 billion including wholesale trade) in 2015 (latest available data). Although the auto investigation remains ongoing, the Administration has stated it will not impose tariffs while the recently announced U.S.-EU trade talks are ongoing. On July 18, the Administration began a fourth Section 232 investigation on U.S. uranium imports. Many Members of Congress and U.S. businesses, interest groups, and trade partners, including major allies, have weighed in on the President’s actions. While some U.S. stakeholders support the President’s use of unilateral trade actions, many have raised concerns, including the chairs of the Ways and Means and Senate Finance Committees, about potential negative impacts. In July 2017, Congress passed a nonbinding resolution directing appropriations bill conferees to include language giving Congress a role in Section 232 determinations, and several Members have introduced legislation that would constrain the President’s authority (e.g., S. 3013 and S. 3266). As it debates the Administration’s import restrictions, Congress may consider the following: Delegation of Authority. Among these statutes, only Section 201 requires an affirmative finding by an independent agency (the ITC) before the President may restrict imports. Section 232 and Section 301 investigations are undertaken by the Administration, giving the President broad discretion in their use. Are additional congressional checks on such discretion necessary? Economic Implications and Escalation. The Administration’s tariffs imposed to date cover more than 10% of annual U.S. goods imports; pending investigations and threatened further counter-retaliations could potentially increase this to nearly 30%. While most economists estimate that the current level of tariffs is unlikely to have major effects on the overall U.S. economy, these effects may be substantial for individual firms reliant either on imports subject to the U.S. tariffs or exports facing retaliatory measures. The potential drag on economic growth could be significant if tit-for-tat action escalates. What are the Administration’s ultimate objectives from the tariff increases and do potential benefits justify potential costs? International Trading System. While the Administration argues that the imposition of U.S. import restrictions is within its rights under international trade agreement obligations, U.S. trade partners disagree and have initiated dispute proceedings, and begun retaliating. The United States has initiated its own dispute proceedings arguing that retaliatory countermeasures violate trade agreement obligations. What are the risks to the international trading system of continued unilateral action? Potential Trade Affected The tables below provide the range of potential trade volumes affected by the U.S. tariffs and trading partner retaliation. In addition to tariffs, the President has imposed quotas, or quantitative limits on U.S. imports of certain goods from specified countries, as well as tariff-rate quotas (TRQs), for which one tariff applies up to a specific quantity of imports and a higher tariff applies above that threshold. Table 1. U.S. Import Restrictions U.S. Trade Action U.S. Imports (millions, 2017) Additional Tariff Potential Annual Tariff Revenue (millions, 2017) Effective Date Section 201 Solar Cells/ Modules $5,196 TRQ (0%, 30%)/ 30% $1,559 Feb. 7, 2018 Large Washers/ Washer Parts $1,927 TRQ (20%, 50%)/ TRQ (0%, 50%) $964 Feb. 7, 2018 Total $7,123 $2,523 Section 232 Aluminum $16,643 10% $1,664 Mar. 23, 2018 Steel $23,369 25%a $6,140 Mar. 23, 2018 Total $40,012 $7,805 Section 301 China - Stage 1 $32,262 25% $8,066 July 6, 2018 China - Stage 2 $13,685 25% $3,421 Aug. 23, 2018 China - Stage 3 $188,897b 10%(2018) 25%(2019) $42,502c Sept. 24, 2018 Total $234,844 $53,989 Total in Effect $281,979 $64,316 Source: Calculations by CRS based on trade data from U.S. Census Bureau and tariff data from Administration notifications. Notes: Potential tariff revenue estimated using 2017 import values. This does not account for potential fluctuations in demand resulting from the tariffs or other variables. Increases in the price of goods resulting from the tariffs are likely to decrease demand for imports and therefore result in lower revenue collection than the estimated amounts. TRQ tariff revenue estimated assuming all imports are subject to over quota tariff. U.S. steel tariff is 50% on imports from Turkey. This includes all U.S. imports from China under HTS 85176200 ($22.9 billion in 2017). A portion of the products currently included in this category are excluded from the tariffs, but there is currently no statistical reporting number (HTS 10 digit code) for these excluded items such that CRS is unable to determine the portion of trade under this category that will be excluded. USITC is creating a new statistical reporting number, HTS 8517620090, to capture these excluded items moving forward. Annual total revenue estimate calculated with 2 months at 10% and 10 months at 25%. Table 2. Retaliatory Actions Retaliatory Trade Action U.S. Exports (millions, 2017) Additional Tariff Potential Annual Tariff Revenue (millions, 2017) Effective Date Section 201 South Korea (Solar and Washers) $1,377a TBD $474a 2021 China (Solar and Washers) $654a TBD $220a 2021 Japan (Solar) $83a TBD $25a 2021 Total $2,114 $719 Section 232 Canada $12,748 10-25% $1,920 July 1, 2018 Mexico $3,691 7-25% $730 Partial-June 5, Full-July 5, 2018 European Union (EU)—Stage 1 $3,204 10-25% $781 June 25, 2018 EU—Stage 2 $4,239 10-50% $931 2021 China $2,969 15-25% $645 Apr. 2, 2018 Japan $1,911a TBD $440a TBD Turkey $1,788 4-140%b $935 June 21, 2018b India $1,396 10-50% $240 Nov. 2, 2018 Russia $347 25-40% $105 Aug. 6, 2018c Russia—Stage 2 TBD TBD TBD 2021 Total $32,292 $6,727 Section 301 China—Stage 1 $33,834 25% $8,459 July 6, 2018 China—Stage 2 $14,108 25% $3,527 Aug. 23, 2018 China—Stage 3 $53,296 5%-10% $3,650 Sept. 24, 2018 Total $101,238 $15,636 Total in Effect $125,984 $20,752 Source: CRS calculations based on import data of U.S. trade partner countries sourced from Global Trade Atlas and tariff details from WTO or government notifications. Notes: Potential tariff revenue estimated using 2017 import values in dollars (foreign trade data converted to U.S. dollars based on monthly average exchange rates during the relevant time periods). This does not account for potential fluctuations in demand resulting from the tariffs or other variables. Increases in the price of goods resulting from the tariffs are likely to decrease demand for imports and therefore result in lower revenue collection than the estimated amounts. TRQ tariff revenue estimated assuming all imports are subject to over quota tariff. Retaliation announcements did not include a product list or specific tariff values. Retaliatory export and tariff value estimated based on retaliation commensurate with U.S. tariff actions. Turkey’s retaliatory tariffs have been in effect since June 2018. Turkey increased the tariff rates in August 2018 in response to the Trump Administration’s decision to increase the U.S. steel tariff on Turkish imports to 50%. Russia published its list of retaliatory tariff rates and products on July 6, 2018. The tariffs appear to go into effect within 30 days of publication.

Sep 24, 2018

Campaign Finance Law: An Analysis of Key Issues, Recent Developments, and Constitutional Considerations for Legislation

Federal campaign finance law is composed of a complex set of limits, restrictions, and requirements on money and other things of value that are spent or contributed in the context of federal elections. While the Federal Election Campaign Act (FECA, or Act) sets forth the statutory provisions governing this area of law, several Supreme Court and lower court rulings have had a significant impact on the Act’s regulatory scope. Most notably, since 2003, a series of Supreme Court decisions has invalidated several FECA provisions that were enacted as part of the Bipartisan Campaign Reform Act of 2002 (BCRA), and in 2010, the Court invalidated a long-standing prohibition on independent expenditures funded from the treasuries of corporations and labor unions. Generally, the Court has overturned such provisions as unconstitutional violations of First Amendment guarantees of free speech. As a foundational matter, FECA distinguishes between a contribution and an expenditure: a contribution involves giving money to an entity, such as a candidate’s campaign committee, while an expenditure involves spending money directly for advocacy of the election or defeat of a candidate. Generally, the Supreme Court has upheld limits on contributions, while invalidating limits on expenditures. FECA regulates campaigns in three primary ways: contribution limits, source restrictions, and disclosure and disclaimer requirements. Contribution Limits Contribution limits refer to how much a donor can contribute as well as how they can contribute. Contribution limits include specific limits on how much money a donor may contribute to a candidate, party, and political committee, which are known as base limits. FECA also provides for related restrictions, including the ban on contributions made through a conduit; the ban on converting campaign contributions for personal use; and the treatment of communications a donor makes in coordination with a candidate or party as contributions. While the Supreme Court has generally upheld base limits, the Court has struck down FECA’s aggregate limits, which capped the total amount of money a donor could contribute to all candidates, parties, and political committees; limits on contributions to candidates whose opponents self-finance; and limits on contributions by minors. In addition, based on Supreme Court precedent, an appellate court ruling provided the legal underpinning for the establishment of super PACs. Source Restrictions FECA contains several bans, referred to as source restrictions, on who may make campaign contributions. Source restrictions include the ban on corporate and labor union campaign contributions directly from treasury funds—although the Supreme Court has held that limits on corporate and labor union independent spending are unconstitutional, the Court has upheld limits on contributions. Source restrictions also include the ban on federal contractor contributions—known as the “pay-to-play” prohibition—which the U.S. Court of Appeals for the D.C. Circuit upheld against a First Amendment challenge in 2015; the ban on foreign national contributions and expenditures; and the restrictions on foreign national involvement in U.S. campaigns. Disclaimer and Disclosure Requirements FECA also sets forth disclaimer and disclosure requirements. FECA’s disclaimer requirements mandate that statements of attribution appear directly on campaign-related communications. FECA’s disclosure requirements mandate that political committees register with the Federal Election Commission (FEC) and comply with periodic reporting requirements. In addition, the law requires other entities—such as labor unions and corporations, including incorporated organizations that are tax-exempt under Section 501(c)(4) of the Internal Revenue Code—that make independent expenditures or electioneering communications to disclose information to the FEC. Generally, the Supreme Court has upheld the constitutionality of disclaimer and disclosure requirements against First Amendment challenges as substantially related to the governmental interest of safeguarding the integrity of the electoral process by promoting transparency and accountability. Criminal Penalties For knowing and willful violations of any provision of the Act, FECA sets forth criminal penalties, including specific penalties for violations of the prohibition on contributions made through a conduit. In most instances, the U.S. Department of Justice initiates the prosecution of criminal violations of FECA, but the law also provides that the FEC may refer an apparent violation to the Justice Department for criminal prosecution under certain circumstances.

Sep 24, 2018

Exchange-Traded Funds (ETFs): Issues for Congress

Exchange-traded funds (ETFs) are common ways for Americans to invest. An ETF is an investment vehicle that, similar to a mutual fund, offers public investors shares of a pool of assets; unlike a mutual fund, however, an ETF can be traded on exchanges like a stock. The catchall category of exchange-traded products (ETPs) includes all portfolio products that trade on exchanges. U.S. ETF domestic listings stand at more than $3.4 trillion, making ETFs among the most important investment methods and critical components of the financial system. The first U.S. ETF was introduced in 1993 to track the S&P 500 stock index. That was the first time a public investor could buy or sell a basket of stocks in a single publicly traded share. It was considered as one of the most important financial innovations in decades and one that transformed the asset management industry. In the ensuing 25 years, ETFs have grown to become a mainstream investment vehicle held by 6% of U.S. households and representing 30% of all U.S. equity trading, according to data from Investment Company Institute and iShares. The rapid growth of the ETF market has simultaneously elevated its importance in the global financial system and brought risk and regulatory considerations to the fore. A key consideration is ETFs’ behavior under market stress. ETFs drew media attention when market distress occurred in 2010, 2015, and 2018. These events have led to global discussions of ETFs’ effects on financial stability. Although the events did not seem to leave long-lasting impacts on financial markets, they revealed aspects of ETFs’ vulnerability that could not be observed under normal market conditions. Given ETFs’ scale of representation in financial markets, it is likely that they would be affected by any future financial crisis (e.g., their value would fall with the value of other assets), but it is uncertain whether ETFs would also amplify it. At the center of the debate over ETFs and financial stability is “liquidity mismatch,” which is often discussed under the context of the difficulty of buying and selling ETFs during a market downturn. This mismatch points to a relatively complex ETF operational structure that has generated misunderstanding. Not all ETFs are created equal. The majority of ETFs are “plain vanilla” index-tracking products that are considered lower risk. There is also a growing subset of complex, higher-risk ETFs that are sources of concern over financial stability and investor protection. To add to the confusion, the industry does not currently have a consistent naming convention to differentiate the types of products that vary in risk exposure. Lastly, despite ETFs’ common usage, the Securities and Exchange Commission (SEC) has not yet established a comprehensive listing standard. As such, each aspiring issuer must typically be approved by the SEC under an exemption to the Investment Company Act of 1940 and other securities regulations. The SEC proposed a new ETF approval process on June 28, 2018, that would replace individual exemptive orders with a single rule for plain vanilla ETFs. The proposed approach excludes certain higher-risk ETFs and mandates new disclosures and other conditions generally on index-based and actively managed ETFs.

Sep 24, 2018

Consumer Protections in Private Health Insurance for Individuals with Preexisting Health Conditions

Individuals with preexisting health conditions may have concerns about practices in the private health insurance market in which insurers use medical underwriting to assess their risk of offering health insurance to applicants. Before full implementation of the Affordable Care Act’s (ACA’s; P.L. 111-148, as amended) insurance reforms, subject to certain exceptions, insurers generally were permitted to consider health factors in determining the offer of insurance, its price, and covered health services. Although references to individuals with preexisting conditions commonly focus on the possibility of denial of insurance, they also pertain to the offer of insurance that is more expensive on the basis of health factors and to insurance that excludes health services to treat preexisting conditions. Current Law Current federal law prohibits those insurer practices from most (but not all) private health plans. Guaranteed issue, adjusted community rating, and coverage of preexisting health conditions provide consumer protections related to the offer, price, and scope of insurance, respectively. These provisions are included in the ACA, but their applicability varies across different types of health plans, such as individual vs. group, small group vs. large group, and so on. (The ACA also requires the coverage of essential health benefits in the individual and small-group markets, and the range of covered benefits may be a factor in an individual’s decision to purchase insurance. However, this discussion focuses on the key consumer protections that prohibit differentiating individuals with preexisting health conditions from otherwise healthy insurance applicants.) For more information about these and other federal requirements applicable to private plans, see CRS Report R45146, Federal Requirements on Private Health Insurance Plans. Consumer Protections Established Prior to the ACA A number of federal health insurance requirements established prior to the ACA provided protections to individuals with preexisting conditions. Almost all pre-ACA consumer protections applicable to private health insurance were established under the Health Insurance Portability and Accountability Act (HIPAA; P.L. 104-191). (ACA revisions to HIPAA-established provisions took many forms; HIPAA language was struck and replaced, renumbered, expanded, or left alone.) Specifically, HIPAA’s preexisting condition protections applied to the individual health insurance market under limited circumstances and to a greater degree in the group market (see Table 1). Table 1. Selected HIPAA Provisions Applicable to Individual and Group Health Plans HIPPA Provision Individual Health Plans Group Health Plans Guaranteed Issue HIPAA eligibles onlya All small groups Prohibit Health Discrimination in Eligibility n/a All groups—across similarly situated individualsb Prohibit Health Discrimination in Premiums n/a All groups—across similarly situated individuals Coverage of Preexisting Health Conditions HIPAA eligibles only—prohibit coverage exclusions All groups—allow coverage exclusions for a limited duration Source: CRS Report RL31634, The Health Insurance Portability and Accountability Act (HIPAA) of 1996: Overview and Guidance on Frequently Asked Questions. HIPAA eligibles refers to individuals who meet certain requirements to be eligible for HIPAA protections. Similarly-situated individuals are employees who are part of the same “bona fide employment-based classification”; such classifications include part-time vs. full-time status, different workplace locations, length of employment, and so on. See 29 C.F.R. §2590.702(d). In addition to federal protections, states enacted preexisting condition protections prior to ACA enactment, particularly targeting the individual and small-group markets. These protections varied across states. For example, in 2008, 7 states prohibited the use of health factors in determining premiums in the individual health insurance market, another 11 states allowed health factors to be used in premium development but limited the effects of such factors, and the remaining 32 states and the District of Columbia (DC) allowed health factors to be used to develop premiums with no specified limitations. In the small-group market, in 2009, 12 states prohibited the use of health factors, 35 states allowed limited use of health factors, and 3 states and DC allowed unlimited use of health factors. Likewise, guaranteed issue and preexisting condition coverage provisions varied by state prior to the ACA. Since enactment of the ACA, some states have enacted provisions to partially or completely align with the federal requirements, but such state action has not been uniform. Therefore, current state health insurance requirements are a mix of pre- and post-ACA enacted provisions. Recent Developments Policy and legal developments this past year have refocused attention on preexisting conditions in the press and in policy circles. For example, the Trump Administration has taken actions to support health plans that are largely exempt from federal law, such as promulgation of a final rule regarding short-term, limited-duration insurance. Although such insurance is “primarily designed to fill temporary gaps in coverage,” which may benefit individuals transitioning from one health plan to another, extension of the duration of such plans has raised questions about their value to individuals with preexisting (or newly developed) health conditions. Plaintiffs in a current federal lawsuit argue that Congress lacks the authority to impose an “individual mandate” to purchase health insurance and seek invalidation of the entire ACA. Further, the Department of Justice (DOJ) submitted a brief in which DOJ maintains that “the individual mandate is not severable from the ACA’s guaranteed-issue and community-rating requirements” but is severable from the rest of the ACA; DOJ seeks to strike down provisions related only to those three requirements. Future administrative and judicial developments may raise questions about the applicability and enforcement of consumer protections for individuals with preexisting health conditions. A decision in the federal lawsuit is anticipated following oral arguments heard on September 5, 2018. Congress and states may undertake legislative activity to address preexisting condition protections. In the meantime, uncertainty in the regulatory environment may affect the process (currently under way) for reviewing and approving exchange health plans, which subsequently may affect the types of and prices for plans offered in 2019.

Sep 20, 2018

Expedited Removal of Aliens: Legal Framework

The federal government has broad authority over the admission of non-U.S. nationals (aliens) seeking to enter the United States. The Supreme Court has repeatedly held that the government may exclude such aliens without affording them the due process protections that traditionally apply to persons physically present in the United States. Instead, aliens seeking entry are entitled only to those procedural protections that Congress has expressly authorized. Consistent with this broad authority, Congress established an expedited removal process for certain aliens who have arrived in the United States without permission. In general, aliens whom immigration authorities seek to remove from the United States may challenge that determination in administrative proceedings with attendant statutory rights to counsel, evidentiary requirements, and appeal. Under the streamlined expedited removal process created by the Illegal Immigration Reform and Immigrant Responsibility Act of 1996 and codified in Section 235(b)(1) of the Immigration and Nationality Act (INA), however, certain aliens deemed inadmissible by an immigration officer may be removed from the United States without further administrative hearings or review. INA Section 235(b)(1) applies only to certain aliens who are inadmissible into the United States because they either lack valid entry documents or have attempted to procure their admission through fraud or misrepresentation. The statute generally permits the government to summarily remove those aliens if they are arriving in the United States. The statute also authorizes, but does not require, the government to apply this procedure to aliens who are inadmissible on the same grounds if they have been physically present in the country for less than two years. As a matter of practice, however, immigration authorities have applied expedited removal in more limited fashion than potentially authorized by statute—in general, the process is applied strictly to (1) arriving aliens apprehended at a designated port of entry; (2) aliens who arrived in the United States by sea without being admitted or paroled into the country by immigration authorities, and who have been physically present in the United States for less than two years; or (3) aliens who are found in the United States within 100 miles of the border within 14 days of entering the country, who have not been admitted or paroled into the United States by immigration authorities. Nevertheless, expedited removal accounts for a substantial portion of the alien removals each year. And in January 2017, President Trump issued an executive order directing the Department of Homeland Security to expand expedited removal within the broader framework of INA Section 235(b)(1). The agency has yet to promulgate regulations implementing this directive. In some circumstances, however, an alien subject to expedited removal may be entitled to certain procedural protections before he may be removed from the United States. For example, an alien who expresses a fear of persecution may obtain administrative review of his claim, and if his fear is determined credible the alien will be placed in formal removal proceedings where he can pursue asylum and related protections. Additionally, an alien may seek administrative review of a claim that he is a U.S. citizen, lawful permanent resident, admitted refugee, or asylee. Unaccompanied alien children also are statutorily exempted from expedited removal. Given the streamlined nature of expedited removal and the broad discretion afforded to immigration officers to implement that process, challenges have been raised contesting the procedure’s constitutionality. In particular, some have argued that the procedure violates aliens’ due process rights because aliens placed in expedited removal do not have the opportunity to seek counsel or contest their removal before a judge or other arbiter. Reviewing courts have largely dismissed such challenges for lack of jurisdiction, or, in the alternative, rejected the claims on the grounds that aliens seeking entry into the United States generally do not have constitutional due process protections. But such cases have concerned aliens arriving at the U.S. border or designated ports of entry, and such aliens may be entitled to lesser constitutional protections than aliens located within the United States. Expanding the expedited removal process to aliens located within the interior could compel courts to tackle questions involving the relationship between the federal government’s broad power over the entry and removal of aliens and the due process rights of aliens located within the United States.

Sep 19, 2018

The Palestinians: Overview, Aid, and U.S. Policy Issues

Sep 18, 2018

Policy Options for Multiemployer Defined Benefit Pension Plans

Multiemployer defined benefit (DB) pension plans are pensions sponsored by more than one employer and maintained as part of a collective bargaining agreement. In DB pensions, participants receive a monthly benefit in retirement that is based on a formula. In multiemployer DB pensions, the formula typically multiplies a dollar amount by the number of years of service the employee has worked for employers that participate in the DB plan. The Pension Benefit Guaranty Corporation (PBGC) is a federally-chartered corporation that insures participant benefits in private-sector DB pension plans. Although PBGC is projected to have sufficient resources to provide financial assistance to multiemployer DB plans through 2025, the projected insolvency of many multiemployer DB pension plans will likely result in a substantial strain on PBGC’s multiemployer insurance program. In a report released in June 2017, PBGC indicated that the multiemployer insurance program is highly likely to become insolvent in 2025. In the absence of increased financial resources for PBGC, participants in insolvent multiemployer DB pension plans would likely see sharp reductions in their pension benefits. As a result of a variety of factors—such as the recessions in 2001 and from 2007 to 2009—about 10% to 15% of multiemployer plan participants are in multiemployer DB plans that are likely to become insolvent over the next 19 years and run out of funds from which to pay benefits owed to participants. The Bipartisan Budget Act of 2018 (P.L. 115-123), enacted February 9, 2018, created the Joint Select Committee on Solvency of Multiemployer Pension Plans to address the impending insolvencies of several large multiemployer DB pension plans and PBGC. The committee must provide to Congress no later than November 30, 2018, a report and proposed legislative language to improve the solvency of multiemployer DB plans and the PBGC. The report and proposed legislative language must be approved by (1) a majority of committee members appointed by the Speaker of the House and Majority Leader of the Senate and (2) a majority of committee members appointed by the Minority Leader of the House and Minority Leader of the Senate. P.L. 115-123 provides for expedited procedures in the Senate if the committee approves of the proposed legislative language. There are no provisions that provide any special procedures governing House consideration of such legislation. Many policy options have been discussed in committee hearings and in the multiemployer pension plan community by policymakers and stakeholders. Not all options directly address the solvency of financially distressed multiemployer plans or PBGC, but they could be considered as part of a comprehensive package of policy options. The options include assistance for financially troubled multiemployer plans with subsidized loans or partitions; changes to the maximum benefit limit imposed on plans when they receive PBGC financial assistance; changes to PBGC’s premium structure; stricter funding rules; and alternative pension plan designs.

Sep 12, 2018

Farm Policy: USDA’s Trade Aid Package

In early 2018, the Trump Administration—citing concerns over national security and unfair trade practices—imposed increased tariffs on certain imported products in general and on U.S. imports from China in particular. Several of the affected foreign trading partners (including China) responded to the U.S. tariffs with their own retaliatory tariffs targeting various U.S. products, especially agricultural commodities. On July 24, 2018, Secretary of Agriculture Sonny Perdue announced that the U.S. Department of Agriculture (USDA) would be taking several temporary actions to assist farmers in response to trade damage from what the Administration has characterized as “unjustified retaliation.” Specifically, the Secretary said that USDA would authorize up to $12 billion in financial assistance—referred to as a trade aid package—for certain agricultural commodities using Section 5 of the Commodity Credit Corporation (CCC) Charter Act (15 U.S.C. 714c). USDA intends for the trade aid package to provide short-term assistance until the ongoing trade disputes are resolved. The aid package includes (1) a Market Facilitation Program (MFP) of direct payments to farmers of soybeans, corn, cotton, sorghum, wheat, hogs, and dairy who are most affected by the trade retaliation; (2) a Food Purchase and Distribution Program to partially offset lost export sales of affected commodities; and (3) an Agricultural Trade Promotion (ATP) Program to expand foreign markets. On August 27, 2018, Secretary Perdue announced details of the trade aid package, including an initial tranche of $6.1 billion in outlays. Under this initial phase, the MFP is to provide $4.7 billion in direct payments to qualifying agricultural producers. To be eligible, a producer must have an ownership share in the commodity, be actively engaged in farming, and be in compliance with adjusted gross income restrictions and conservation provisions. The first sign-up period started September 4, 2018, and extends through January 15, 2019. During this period, an eligible producer may apply for MFP payments—equal to an announced MFP payment rate times 50% of the producer’s 2018 production of eligible commodities. USDA estimates that over three-fourths ($3.6 billion) of the $4.7 billion in initial MFP payments could go to soybean producers. If warranted, USDA may announce a second payment period in early December 2018. MFP payments are capped on a per-person or per-legal-entity basis at a combined $125,000 for eligible crop commodities and, separately, a combined $125,000 for dairy production and hogs. In addition to the initial round of MFP payments, the Administration announced a Food Purchase and Distribution Program that is to undertake $1.2 billion in government purchases of excess food supplies. USDA has targeted an initial 29 commodities for purchases and distribution through domestic nutrition assistance programs. Purchasing orders and distribution activities are to be adjusted based on the demand by the recipient food assistance programs geographically. The smallest piece of the trade aid package is an allocation of $200 million to the ATP to boost the trade promotion efforts at USDA’s Foreign Agricultural Service, including foreign market development for affected agricultural products. USDA’s use of its discretionary authority under the CCC Charter Act to make direct payments without further congressional action has historically been somewhat intermittent and limited in its scale. While the use of this authority is not without precedent, the scope and scale of this trade aid package has increased congressional and public interest. Furthermore, the significant variation in the announced MFP payment rates for affected commodities and the general lack of transparency behind the MFP payment rate calculations may elicit questions about equitable treatment among affected commodities.

Sep 12, 2018

Agriculture in the WTO: Rules and Limits on U.S. Domestic Support

Omnibus U.S. farm legislation—referred to as the farm bill—has typically been renewed every five or six years. Farm income and commodity price support programs have been a part of U.S. farm bills since the 1930s. Each successive farm bill usually involves some modification or replacement of existing farm programs. A key question likely to be asked of every new farm proposal or program is how it will affect U.S. commitments under the World Trade Organization’s (WTO’s) Agreement on Agriculture (AoA) and its Agreement on Subsidies and Countervailing Measures (SCM). The United States is currently committed, under the AoA, to spend no more than $19.1 billion annually on those domestic farm support programs most likely to distort trade—referred to as amber box programs and measured by the Aggregate Measure of Support (AMS). The AoA spells out the rules for countries to determine whether their policies—for any given year—are potentially trade distorting and how to calculate the costs. The most recent U.S. notification to the WTO of domestic support outlays (made on May 1, 2018) is for the 2015 crop year. To date, the United States has never exceeded its $19.1 billion amber box spending limit. However, this has been achieved in some years (1999, 2000, and 2001) through judicious use of the de minimis exclusion described below. An additional consideration for WTO compliance—the SCM rules governing adverse market effects resulting from a farm program—comes into play when a domestic farm policy effect spills over into international markets. The SCM details rules for determining when a subsidy is “prohibited” (e.g., certain export- and import-substitution subsidies) and when it is “actionable” (e.g., certain domestic support policies that incentivize overproduction and result in significant market distortion—whether as lower market prices or altered trade patterns). Because the United States is a major producer, consumer, exporter, and/or importer of most major agricultural commodities, the SCM is relevant for most major U.S. agricultural products. As a result, if a particular U.S. farm program is deemed to result in market distortion that adversely affects other WTO members—even if it is within agreed-upon AoA spending limits—then that program may be subject to challenge under the WTO dispute settlement procedures. Designing farm programs that comply with WTO rules can avoid potential trade disputes. Based on AoA and SCM rules, U.S. domestic agricultural support can be evaluated against five specific successive questions to determine how it is classified under the WTO rules, whether total support is within WTO limits, and whether a specific program fully complies with WTO rules: Can a program’s support outlays be excluded from the AMS total by being placed in the green box of minimally distorting programs? Can a program’s support outlays be excluded from the AMS total by being placed in the blue box of production-limiting programs? If amber, will support be less than 5% of production value (either product-specific or non-product-specific) thus qualifying for the de minimis exclusion? Does the total, remaining annual AMS exceed the $19.1 billion amber box limit? Even if a program is found to be fully compliant with the AoA rules and limits, does its support result in price or trade distortion in international markets? If so, then it may be subject to challenge under SCM rules.

Sep 6, 2018

The U.S. Nuclear Weapons Complex: Overview of Department of Energy Sites

Responsibility for U.S. nuclear weapons resides in both the Department of Defense (DOD) and the Department of Energy (DOE). DOD develops, deploys, and operates the missiles and aircraft that deliver nuclear warheads. It also generates the military requirements for the warheads carried on those platforms. DOE, and its semi-autonomous National Nuclear Security Administration (NNSA), oversee the research, development, testing, and acquisition programs that produce, maintain, and sustain the nuclear warheads. To achieve these objectives, the facilities that constitute the nuclear weapons complex produce nuclear materials, fabricate nuclear and nonnuclear components, assemble and disassemble nuclear warheads, conduct scientific research and analysis to maintain confidence in the reliability of existing warheads, integrate components with nuclear weapons delivery vehicles, and conduct support operations. The Trump Administration, in testimony before Congress and in the 2018 Nuclear Posture Review (released in February 2018), has raised concerns about the aging infrastructure of facilities in the nuclear weapons complex. While the Obama Administration proposed, and Congress funded, budget increases for these facilities in the past decade, the Trump Administration has argued that “the United States has not pursued the investments needed to ensure that the infrastructure has the capacity to not only maintain the current nuclear stockpile but also to respond to unforeseen technical or geopolitical developments.” The nuclear weapons complex—what NNSA currently refers to as the Nuclear Security Enterprise—consists primarily of nine government-owned, contractor-operated sites in seven states, and a Tennessee Valley Authority (TVA) nuclear reactor used to produce tritium for nuclear weapons. The complex began with the establishment of the Manhattan Engineer District in 1942, then grew in size and complexity during the Cold War, before evolving into the current configuration during the 1990s. Facilities at the current nine sites include three laboratories, five component fabrication/materials production plants, one assembly and disassembly site, a geologic waste repository, and one testing facility that now conducts research but was previously the location for U.S. underground nuclear tests. This report summarizes the operations at each of these sites. As Congress conducts oversight of DOE’s and NNSA’s management, operations, and programs, and as it authorizes and appropriates funds for the Nuclear Security Enterprise, it may address a wide range of issues related to the nuclear weapons complex. These include questions about organization and management at NNSA, infrastructure recapitalization, plutonium pit production, and concerns about access to necessary supplies of tritium.

Sep 6, 2018

Drinking Water State Revolving Fund (DWSRF): Overview, Issues, and Legislation

The Safe Drinking Water Act (SDWA) is the federal authority for regulating contaminants in public water supplies. The act includes the Drinking Water State Revolving Fund (DWSRF) program, established in 1996 to help public water systems finance infrastructure projects needed to comply with federal drinking water regulations and to meet the act’s health protection objectives. Under this program, states receive annual capitalization grants from the U.S. Environmental Protection Agency (EPA) to provide financial assistance (primarily subsidized loans) to public water systems for drinking water projects and other specified activities. Through FY2018, Congress has appropriated a total of $20.41 billion for the program. From FY1997 through FY2017, states provided $35.38 billion in DWSRF assistance to water systems for 14,090 projects. The latest EPA survey of capital improvement needs indicates that public water systems need to invest $472.6 billion on infrastructure improvements over 20 years to ensure the provision of safe drinking water. EPA reports that, while all of the projects identified in the survey would promote the health protection objectives of the SDWA, $57.6 billion (12%) of reported needs are attributable to SDWA compliance. A study by the American Water Works Association estimates that restoring aging infrastructure and expanding water systems to keep up with population growth would require a nationwide investment of at least $1 trillion through 2035. Program issues include (1) the gap between estimated needs and funding; (2) the growing cost of complying with SDWA standards (particularly for small communities); (3) the ability of small or disadvantaged communities to afford DWSRF financing; and (4) the broader need for cities to maintain, upgrade, and expand infrastructure unrelated to SDWA compliance. Several overarching policy questions are under debate, including the appropriate federal role in providing financial assistance for local water infrastructure projects and potential funding mechanisms that could supplement or replace a program reliant on annual appropriations. Enacted in 2014, the Water Infrastructure Finance and Innovation Act (WIFIA; P.L. 113-121,Title V, Subtitle C) authorized a five-year pilot loan guarantee program to promote increased development of, and private investment in, primarily large water infrastructure projects. Congress noted that the pilot program is intended to complement, not replace, the DWSRF program and the similar Clean Water Act State Revolving Fund (CWSRF) program for wastewater infrastructure. For FY2017, Congress provided $30.0 million for the program ($25 million for EPA to provide loan guarantees for water infrastructure projects under WIFIA and $5 million for administrative costs). The Water Infrastructure Improvements for the Nation Act (WIIN Act; P.L. 114-322) made several revisions to the DWSRF program and authorized $100 million in DWSRF appropriations to Michigan to assist the City of Flint in repairing its drinking water system. In P.L. 114-254, Congress appropriated the DWSRF funding authorized in the WIIN Act. The Consolidated Appropriations Act, 2017 (P.L. 115-31), included $863.23 million for the DWSRF program. For FY2018, the President requested $863 million for the DWSRF program and $20 million for the WIFIA program. The Consolidated Appropriations Act, 2018 (P.L. 115-141), included $1.16 billion for the DWSRF program and $63 million for WIFIA. The state of the nation’s water infrastructure and the challenges many communities face in addressing infrastructure needs continue to receive congressional attention. Numerous bills have been introduced in the 115th Congress to expand DWSRF eligibilities, increase funding authority, and make other revisions to the DWSRF program and to authorize new funding programs. Two such bills have been reported: the Drinking Water System Improvement Act of 2017 (H.R. 3387) and a broader water resources infrastructure bill, America’s Water Infrastructure Act of 2018 (S. 2800), which would add new DWSRF and CWSRF provisions to WIFIA.

Sep 5, 2018

Defense Primer: Lowest Price Technically Acceptable Contracts

Sep 4, 2018

Federal Role in U.S. Campaigns and Elections: An Overview

Conventional wisdom holds that the federal government plays relatively little role in U.S. campaigns and elections. Although states retain authority for most aspects of election administration, a closer look reveals that the federal government also has steadily increased its presence in campaigns and elections in the past 50 years. Altogether, dozens of congressional committees and federal agencies could be involved in federal elections under current law. Congress faces a complex mix of traditional oversight areas with developing ones throughout the elections field. Reports of foreign interference during the 2016 election cycle, and concerns about future interference, have raised the profile of campaigns and elections policy in Congress, at federal agencies, and beyond. As Congress considers these and other developing issues, this report provides the House and Senate with a resource for first understanding the current campaigns and elections regulatory structure. The report addresses those areas of law and public policy that most directly and routinely affect American campaigns and elections. This includes six broad categories of law through which Congress has assigned various agencies roles in regulating or supporting campaigns, elections, or both. These are campaign finance; election administration; election security; redistricting; qualifications and contested elections; and voting rights. No single federal agency is in charge of the federal role in campaigns and elections, just as multiple statutes address various aspects of the field. The Election Assistance Commission and Federal Election Commission are devoted entirely to campaigns and elections. Congress has charged other departments and agencies—such as the Department of Justice, Department of Defense, and component organizations comprising the Intelligence Community—primarily with responsibilities for other areas of public policy, but also with supporting or administering campaigns and elections policy in specific cases. Other agencies or statutes may be relevant in specific cases. This report does not track legislation that proposes changes in the policy environment discussed herein. It will be updated occasionally to reflect new information or major policy developments.

Sep 4, 2018

Securities Regulation and Initial Coin Offerings: A Legal Primer

Initial coin offerings (ICOs)—a method of raising capital in exchange for digital coins or tokens that entitle their holders to certain rights—are a hot topic among legislators, regulators, and financial market professionals. In response to a surge in the popularity of ICOs over the past 18 months, regulators in a number of countries have banned ICOs. Other foreign regulators have cautioned that unregistered ICOs may violate their securities laws, issued guidance clarifying the application of their securities laws to ICOs, or proposed new rules or legislation directed at regulating ICOs. ICOs have also attracted the attention of U.S. securities regulators. The Securities and Exchange Commission (SEC) has cautioned that depending on their specific features, ICOs may qualify as offerings of “securities” subject to federal regulation. Whether an ICO involves an offering of “securities” has important legal consequences. Section 5 of the Securities Act of 1933 (Securities Act) requires issuers of securities to register their offerings with the SEC or conduct them pursuant to a specific exemption from registration. Issuers and sellers of securities also face anti-fraud liability under the Securities Act and the Securities Exchange Act of 1934 (Exchange Act). The SEC has the authority to investigate and punish violations of the securities laws, and has indicated that it will “vigorously” police the burgeoning ICO market for such violations. To determine whether a transaction involves an offering of “securities,” courts employ a four-part test outlined by the Supreme Court’s 1946 decision in SEC v. W.J. Howey Co. Under that test, a transaction qualifies as an offering of “securities” if it involves (1) an investment of money, (2) in a common enterprise, (3) with a reasonable expectation of profit, (4) to be derived from the efforts of others. In applying the Howey test, the Court has emphasized the importance of analyzing “the economic realities” of a transaction, as opposed to its form or the label that its promoters give it. Because ICOs are incredibly diverse, it is impossible to draw broad conclusions about their status under the securities laws, which will depend on fact-intensive inquiries into details that vary among different ICOs. As a general matter, though, ICOs are more likely to qualify as offerings of “securities” when token purchasers (1) are motivated primarily by a desire for financial returns (as opposed to a desire to use or consume some good or service for which tokens can be exchanged), and (2) lack a meaningful ability to control the activities on which their profits will depend. In light of these principles, attorneys have developed a method for structuring ICOs—the Simple Agreement for Future Tokens (SAFT)—that attempts to avoid classification of the tokens issued pursuant to certain ICOs as “securities.” However, whether the SAFT achieves its intended goal remains subject to significant debate. The SEC has pursued a number of enforcement actions related to unregistered ICOs. In July 2017, the SEC issued a report of investigation concluding that tokens issued by an unincorporated organization called “The DAO” qualified as “securities” under the Howey test. And in December 2017, the agency reached the same conclusion about tokens issued by Munchee, Inc., the creator of an iPhone application involving restaurant reviews. These enforcement actions, and a prominent speech given by an agency official in June 2018, offer some guidance on the SEC’s views on when ICOs will qualify as offerings of “securities.” The Securities Act and related regulations offer a number of exemptions from the Act’s registration requirements for offerings that meet certain conditions. However, some commentators have doubted the attractiveness of the relevant exemptions for ICOs. Commentators have also proposed a number of policies to improve the regulation of ICOs, ranging from a specific registration exemption for ICOs to a “safe harbor” for certain token exchanges.

Aug 31, 2018

Turkey’s Currency Crisis

Aug 30, 2018

India: Religious Freedom Issues

India is the world’s second-most populous country with more than 1.3 billion people and is the birthplace of four major world religions: Hinduism, Buddhism, Sikhism, and Jainism. It is also home to about 180 million Muslims—only Indonesia and Pakistan have more. A small Christian minority includes about 30 million people. An officially secular nation with thousands of ethnic groups and 22 official languages, independent India has a long tradition of religious tolerance (with periodic and sometimes serious lapses). Religious freedom is explicitly protected under its constitution. Hindus account for a vast majority (nearly four-fifths) of the country’s populace. Hindu nationalism has been a rising political force in recent decades, by many accounts eroding India’s secular nature and leading to new assaults on the country’s religious freedoms. The 2014 national election victory of the Bharatiya Janata Party (Indian Peoples’ Party or BJP) brought newly acute attention to the issue of religious freedom in India. Tracing its origins to a political party created in 1951 in collaboration with the Hindu nationalist Rashtriya Swayamsevak Sangh (National Volunteer Organization or RSS), the BJP has since gone on to win control of numerous state governments, including in Uttar Pradesh, the country’s most populous state with more than 200 million residents, one-fifth of them Muslim. The BJP’s leader, Prime Minister Narendra Modi, is a self-avowed Hindu nationalist and lifelong RSS member with a controversial past: In 2002, during his 13-year tenure as chief minister of the Gujarat state, large-scale anti-Muslim rioting there left more than 1,000 people dead, and Modi faced accusations of complicity and/or inaction (he was later formally exculpated). In 2005, Modi was denied a U.S. visa under a rarely-used law barring entry for foreign government officials found to be complicit in severe violations of religious freedom, and he had no official contacts with the U.S. government until 2013. Many in the U.S. Congress were critical of Modi’s role in the 2002 violence, and some continue to call attention to signs that religious freedom abuses are increasing under his and his party’s rule, as documented by the U.S. State Department and independent human rights groups. This report provides an overview of religious freedom issues in India, beginning with a brief review of U.S.-India relations and India’s human rights setting broadly, then discussing the country’s religious demographics, religious freedom protections, and conceptions of Hindu nationalism and its key institutional proponents in Indian society. It then moves to specific areas of religiously-motivated repression and violence, including state-level anti-conversion laws, cow protection vigilantism, and perceived assaults on freedoms of expression and operations by nongovernmental organizations that are seen as harmful to India’s secular traditions and the U.S-promoted goal of interfaith tolerance.

Aug 30, 2018

Made in China 2025 and Industrial Policies: Issues for Congress

Aug 29, 2018

Emergency Relief for Disaster-Damaged Roads and Public Transportation Systems

The U.S. Department of Transportation (DOT) provides federal assistance for disaster-damaged roads and public transportation systems through two programs: the Emergency Relief Program (ER) administered by the Federal Highway Administration (FHWA) and the Public Transportation Emergency Relief Program administered by the Federal Transit Administration (FTA). These programs are funded mainly by appropriations that have varied considerably from year to year. Over time the amounts are substantial. Since 2012, the Highway ER Program has received $5.4 billion; FTA’s ER program has received $10.7 billion, all but $330 million of which was in response to Hurricane Sandy. Roads and bridges that are federal-aid highways or are public-use roads on federal lands are eligible for assistance under FHWA’s ER Program. Following natural disasters (such as Hurricanes Harvey, Irma, and Maria in 2017, which damaged highways in Florida, Texas, Puerto Rico, and the U.S. Virgin Islands), or catastrophic failures (such as the 2013 collapse of the Skagit River Bridge in Washington State), ER funds are made available for both emergency repairs and restoration of eligible facilities to conditions comparable to those before the disaster. Although emergency relief for highways is a federal program, the decision to seek ER funding is made by a state government or by a federal land management agency. Local governments are not eligible to apply. The program is funded by a permanent annual authorization of $100 million from the Highway Trust Fund (HTF) along with general fund appropriations provided by Congress on a “such sums as necessary” basis. Appropriated ER funds have averaged roughly $730 million annually since FY2009. FHWA pays 100% of the cost of emergency repairs done to minimize the extent of damage, to protect remaining facilities, and to restore essential traffic during or immediately after a disaster. Emergency repairs must be completed within 180 days of the disaster event. Permanent repairs go beyond the restoration of essential traffic and are intended to restore damaged bridges and roads to conditions and capabilities comparable to those before the event. The federal share for permanent repairs is generally 80% for non-Interstate roads and 90% for Interstate Highways. All ER funding is distributed through state departments of transportation or federal land management agencies such as the National Park Service. Certain “quick release” funds are allocated to help with initial emergency repair costs and may be released prior to completion of detailed damage inspections and cost estimates. Other allocations to the states follow a more deliberate process of completing detailed damage reports, developing cost estimates, and processing competitive bids. Unlike the long-standing ER program in highways, the Public Transportation ER Program dates to 2012. The Public Transportation ER program provides federal funding on a reimbursement basis to public transportation agencies, states, and other government authorities for damage to public transportation facilities or operations as a result of a natural disaster or other emergency and to protect assets from future damage. The Public Transportation ER program provides federal support for both capital and operating expenses. Unlike the FHWA’s ER program, FTA’s ER program does not have a permanent annual authorization. All funds are authorized on a “such sums as necessary” basis and are available only pursuant to an appropriation from the general fund of the U.S. Treasury. In the absence of an appropriation, transit agencies must rely on funds from the Federal Emergency Management Agency (FEMA). Since its creation in 2012, there have been two appropriations to the Public Transportation ER program. More than $10 billion was appropriated in 2013 to respond to Hurricane Sandy and $330 million was appropriated in 2018 to respond to Hurricanes Harvey, Irma, and Maria. Two recurring issues drawing congressional attention are funding levels and funding of activities that go beyond restoring transportation facilities to predisaster conditions, such as making damaged highways more resilient to natural disasters. FTA’s ER program has fewer limits and more flexibility than the emergency relief programs administered by FEMA and FHWA; thus it too faces questions about expenditures that go beyond repairing damage from a disaster. The lack of a permanent annual authorization for FTA means FTA cannot provide funding immediately after a disaster or emergency, and transit agencies must rely on FEMA for a quick response.

Aug 29, 2018

CFIUS Reform Under FIRRMA

Aug 22, 2018

Trade Remedies: Section 201 of the Trade Act of 1974

Aug 22, 2018

Agriculture Appropriations: Animal and Plant Health

Aug 22, 2018

Medicare Coverage of End-Stage Renal Disease (ESRD)

End-stage renal disease (ESRD) is the last stage of chronic kidney disease (CKD), which is the gradual decrease of kidney function over time. Individuals with ESRD have substantial and permanent loss of kidney function and require either a regular course of dialysis (a process that removes harmful waste products from an individual’s bloodstream) or a kidney transplant to survive. In 1972, Congress enacted legislation allowing qualified individuals with ESRD under the age of 65 to enroll in the federal Medicare health care program (Social Security Amendments of 1972; P.L. 92-603). The legislation marked the first time that individuals were allowed to enroll in Medicare based on a specific medical condition rather than on age. Medicare benefits for ESRD beneficiaries, including those under the age of 65 who qualify based on the disease, include a thrice-weekly dialysis treatment and coverage for kidney transplant. There is an initial waiting period for coverage for ESRD patients under the age of 65, and coverage for such enrollees terminates 12 months after a patient ends dialysis or after 36 months of follow-up care (including immunosuppressive medications) after a kidney transplant. Many beneficiaries with ESRD also require Medicare services to treat related, chronic health conditions, such as diabetes or heart disease. Because Medicare beneficiaries with ESRD have higher-than-average health care costs, they account for about 7% of Medicare fee-for-service (FFS) spending, while making up about 1% of total program enrollment (FFS and managed care combined). In total, FFS Medicare covers about three-fourths of all U.S. medical spending to treat ESRD. Over the years, Congress has enacted a number of changes to Medicare ESRD-related benefits in an effort to improve the quality of services and control program costs. For example, the Medicare Improvements for Patients and Providers Act of 2008 (MIPPA; P.L. 110-275) instituted a “bundled” payment system for ESRD dialysis providers, which took effect in 2011. The 21st Century Cures Act (CURES; P.L. 114-255) will allow Medicare-eligible individuals with ESRD to enroll in Medicare Part C Medicare Advantage (MA) managed care plans, beginning in 2021. Currently, ESRD patients are not allowed to enroll in most MA plans, with the exception of some special-needs plans. As a result, ESRD patients do not have access to some of the enhanced benefits offered by MA providers. This report provides background on the ESRD Medicare benefit, including information about the disease, Medicare enrollment criteria, covered services, other health care coverage for ESRD, and the Medicare reimbursement policy. The report concludes with a discussion of outstanding payment and coverage issues in ESRD care.

Aug 16, 2018

When Does Double Prosecution Count as Double Jeopardy?

Aug 16, 2018

Emergency Use Authorization and FDA’s Related Authorities

Aug 13, 2018

Military Child Development Program: Background and Issues

The Department of Defense (DOD) operates the largest employer-sponsored childcare program in the United States, serving approximately 200,000 children of uniformed servicemembers and DOD civilians, and employing over 23,000 childcare workers, at an annual cost of over $800 million. DOD’s child development program (CDP) includes a combination of accredited, installation-based, government-run, full-time pre-school and school-aged care in Child Development Centers (CDCs) and subsidized care in Family Care Centers (FCCs) or through private providers under the Fee Assistance program. Childcare services are part of a broader set of quality of life benefits that make up the total compensation package for military personnel and certain DOD civilians. The Department has argued that these childcare benefits help support their recruiting, retention, and readiness goals and that there is generally a high level of satisfaction among servicemembers who use DOD childcare services. Moreover, military family advocacy groups have largely supported existing childcare benefits and have also called for expanding awareness of, access to, operating hours for, and improving or enhancing other aspects of military childcare services. While there has been broad support for DOD’s CDP since its inception, the questions of what benefits should be provided to military servicemembers and their families, how these benefits should be structured, and what resources should be directed to these benefits are issues for Congress when considering the annual defense budget authorization and appropriation.

Aug 10, 2018

Older Americans Act: Nutrition Services Program

Aug 7, 2018

Gas Exporting Countries Forum (GECF): Cartel Lite?

Aug 2, 2018