CRS Reports

Farm Bill Primer: Budget Issues

Apr 26, 2018

Closing the Flood Insurance Gap

There is a large flood insurance gap in the United States, where many people that are exposed to flood risk are not covered by flood insurance. The National Flood Insurance Program (NFIP) is the primary source of residential flood insurance in the United States. Over 22,000 communities participate in the NFIP, with over 5 million policies providing $1.28 trillion in coverage. The NFIP identifies areas at high risk of flooding as Special Flood Hazard Areas (SFHAs). Property owners are required to purchase flood insurance only if (1) their properties are in SFHAs, (2) their communities participate in the NFIP, and (3) they have federally backed mortgages. Because the SFHA boundary is central to NFIP mapping, it may create a false belief that flood risk changes abruptly at the boundary and that properties outside the SFHA are safe and do not need flood insurance. However, about 20% of NFIP claims are for properties outside SFHAs, and all 50 states have experienced floods in the last five years. Recent floods highlight the issue of high uninsured losses. For example, in the October 2015 South Carolina floods, the average NFIP penetration rate in counties with a federal disaster declaration was 5% (Table 1). Nearly 90% of policies in South Carolina were concentrated at the coast, but the flood damage was primarily inland, where few residents were insured (Figure 1). Figure 1. Residential Penetration Rates of NFIP Flood Insurance in South Carolina Counties with FEMA Individual Assistance Declarations for 2015 South Carolina Floods (DR-4241) / Source: Data for all figures provided by FEMA Congressional Affairs staff, November 6, 2017. Notes for all figures: Left: county-wide penetration rate; right: penetration rate for structures in SFHA. Table 1. Average Residential Penetration Rates for Recent Flood Events Counties with FEMA Individual Assistance Declarations Flood Event Location Average County Penetration Rate Average SFHA Penetration Rate Counties with Highest SFHA Penetration Rate County-wide Penetration Rate Percentage of County in SFHA October 2015 (DR-4241) South Carolina 5% 30% Berkeley 93% Charleston 83% Berkeley 10% Charleston 44% Berkeley 64% Charleston 73% August 2016 (DR-4277) Louisiana 17% 31% St. Tammany 73% Livingstone 54% St. Tammany 53% Livingstone 38% St. Tammany 27% Livingstone 62% Hurricane Harvey (DR-4332) Texas 10% 21% Aransas 72% Galveston 64% Aransas 43% Galveston 47% Aransas 32% Galveston 35% Hurricane Irma (DR-4337) Florida 12% 31% St. Johns 73% Monroe 54% St. Johns 35% Monroe 51% St. Johns 52% Monroe 88% Hurricane Irma (DR-4335), Hurricane Maria (DR-4340) U.S. Virgin Islands 2.5% n/a n/a n/a n/a Hurricane Irma (DR-4336), Hurricane Maria (DR-4339) Puerto Rico 0.2% 1.9% Carolina 3.1% Cataño 0.6% n/a n/a Carolina 14% Cataño 40% Source: Data provided by FEMA Congressional Affairs staff, November 6, 2017. Notes: Penetration rates are given in all cases for the two counties with the highest penetration rates in the SFHA. For comparison, the penetration rate for the whole county is also given. FEMA describes NFIP penetration rates as the proportion of all properties with NFIP flood insurance. See, for example, U.S. Government Accountability Office, Flood Insurance, GAO-14-297R, April 9, 2014, p. 6. In the 2016 Louisiana floods, about 17% of the flooded properties were insured. The 2016 floods were due to intense rainfall rather than coastal flooding, but NFIP policies were concentrated in a band relatively close to the coast (Figure 2). Figure 2. Residential Penetration Rates of NFIP Flood Insurance in Louisiana Counties with FEMA Individual Assistance Declarations for 2016 Louisiana floods (DR-4277) / The flooding caused by the 2017 hurricanes further highlighted the issue of low numbers of insured flood victims, with particularly low penetration rates in Puerto Rico and the Virgin Islands. On average, 10% of flooded structures had NFIP insurance in the 41 counties in Texas with FEMA Individual Assistance (IA) declarations for Hurricane Harvey. In the 48 Florida counties with IA declarations for Hurricane Irma, 12% of the flooded buildings had flood insurance. In both Texas and Florida, penetration rates were highest at the coast (see Figure 3 and Figure 4, respectively). In contrast, many inland counties with a significant proportion of their area within the SFHA had low penetration rates despite the known flood risk. Figure 3. Residential Penetration Rates of NFIP Flood Insurance in Texas Counties with FEMA Individual Assistance Declarations for Hurricane Harvey (DR-4332) / In the floods shown here, less than a third of the structures in SFHAs were insured. Although these structures may not have been covered by the mandatory purchase requirement, the extent of recent flooding suggests that residents in SFHAs might benefit from purchasing flood insurance voluntarily. Figure 4. Residential Penetration Rates of NFIP Flood Insurance in Florida Counties with FEMA Individual Assistance Declarations for Hurricane Irma (DR-4337) / An insured flood victim is likely to recover more quickly and will generally receive more from NFIP insurance than from IA. Homeowners can get up to $350,000 for buildings and contents together, and renters are able to get up to $100,000 from an NFIP policy, compared to a maximum of $34,000 per household from IA. In addition, most disaster victims do not receive the maximum amount available under FEMA disaster assistance. For example, after the 2015 South Carolina floods, the average IA payment was about $3,200, and the average NFIP claim was $34,934. After the 2016 Louisiana floods, the average NFIP claim was $90,674, whereas the average IA payment was about $9,000. The NFIP could achieve greater financial stability with a wider policy base and, in particular, through finding ways to increase coverage outside the SFHA. FEMA has identified the need to increase flood insurance coverage across the nation as a major priority for NFIP reauthorization, and this also forms a key element of FEMA’s 2018-2022 strategic plan. FEMA’s “moonshot” has set a goal of doubling flood insurance coverage by 2023 through the increased sale of both NFIP and private policies. FEMA’s view is that both the NFIP and an expanded private market will be needed in order to increase flood insurance coverage for the nation and reduce uninsured losses after the next flood.

Apr 24, 2018

Work Authorization for H-4 Spouses of H-1B Temporary Workers: Frequently Asked Questions

H-4 nonimmigrant visas allow spouses and unmarried children (under 21 years of age) of H-1B temporary workers to join them in the United States. Eligibility for employment authorization for H-4 nonimmigrants was instituted by regulation in 2015 and is limited to those whose spouses are H-1B nonimmigrants who are in the process of obtaining employment-based lawful permanent resident (LPR) status. The Trump Administration is proposing to rescind this regulation, thus removing eligibility for work authorization for H-4 nonimmigrants. Congress has expressed interest in the background and impact of this proposed change, as well as legislative approaches to addressing work authorization for this group. This report provides answers to frequently asked questions about work authorization for H-4 visa holders.

Apr 24, 2018

Registered Apprenticeship: Federal Role and Recent Federal Efforts

Apprenticeship is a workforce development strategy that trains a worker for a specific occupation using a structured combination of paid on-the-job training and related instruction. Increased costs for higher education and possible mismatches between worker skills and employer needs have led to interest in alternative workforce development strategies such as apprenticeship. The primary federal role in supporting apprenticeships is the administration of the registered apprenticeship system. In this system, the federal Department of Labor (DOL) or a DOL-recognized state apprenticeship agency (SAA) is responsible for evaluating apprenticeship programs to determine if they are in compliance with federal regulations related to program design, worker protections, and other criteria. Programs that are in compliance are “registered.” While registration does not trigger any specific federal financial incentives, registered programs may receive preferential consideration in various federal systems and apprentices who complete a registered program receive a nationally recognized credential. In the federal context, “apprenticeship” has typically been synonymous with registered apprenticeship programs. Programs that may have a strategy or format similar to apprenticeship but are not registered are not typically considered apprenticeships by the federal government, though they may be considered on-the-job training under other federal workforce programs. To register an apprenticeship, a sponsor (an employer, union, industry group, or other eligible entity) submits an application to the applicable registration agency (either DOL or the appropriate SAA). The application must include a work process schedule that describes the competencies that the apprentice will learn and how on-the-job training and related instruction will teach those competencies. The application must also include a schedule of wage increases for the apprentice, a description of safety measures, and various assurances related to program administration and recordkeeping. If the registration agency finds that the program is in conformity with the requirements, the program receives provisional registration. Once a program receives permanent registration, the registration agency is responsible for reviewing the program for conformity not less than once every five years. In recent years, the federal government has supplemented its typical registration activities with competitive grants to support the expansion of registered apprenticeship. These grants have gone predominantly to states and other intermediaries to support apprenticeship expansion through partnerships with apprenticeship sponsors. While registered apprenticeship sponsors do not necessarily qualify for federal funding, several education and workforce programs have identified apprenticeship as an eligible use of funds. For example, some veterans may qualify to receive GI Bill benefits while participating in a registered apprenticeship and registered apprenticeships are eligible for federal workforce development funds through the Workforce Innovation and Opportunity Act (WIOA).

Apr 20, 2018

China-India Great Power Competition in the Indian Ocean Region: Issues for Congress

The Indian Ocean Region (IOR), a key geostrategic space linking the energy-rich nations of the Middle East with economically vibrant Asia, is the site of intensifying rivalry between China and India. This rivalry has significant strategic implications for the United States. Successive U.S. administrations have enunciated the growing importance of the Indo-Pacific region to U.S. security and economic strategy. The Trump Administration’s National Security Strategy of December 2017 states that “A geopolitical competition between free and repressive visions of world order is taking place in the Indo-Pacific region.” A discussion of strategic dynamics related to the rivalry between China and India, with a focus on U.S. interests in the region, and China’s developing strategic presence and infrastructure projects in places such as Pakistan, Sri Lanka, Burma (Myanmar), and Djibouti, can inform congressional decision-makers as they help shape the United States’ regional strategy and military capabilities. Potential issues for Congress include determining resource levels for the Navy, Marines, Air Force, and Army to meet the United States’ national security interests in the region and providing oversight of the Administration’s efforts to develop a regional strategy, provide foreign assistance, and maintain and develop the United States’ strategic and diplomatic relationships with regional friends and allies to further American interests. Competition between China and India is driven to a large extent by their economic rise and the rapid associated growth in, and dependence on, seaborne trade and imported energy, much of which transits the Indian Ocean. There seems to be a new strategic focus on the maritime and littoral regions that are adjacent to the sea lanes that link the energy rich Persian Gulf with the energy dependent economies of Asia. Any disruption of this supply would likely be detrimental to the United States’ and the world’s economy. China’s dependence on seaborne trade and imported energy, and the strategic vulnerability that this represents, has been labeled China’s “Malacca dilemma” after the Strait of Malacca, the key strategic choke point through which a large proportion of China’s trade and energy flows. Much of the activity associated with China’s Belt and Road Initiative (BRI) can be viewed as an attempt by China to minimize its strategic vulnerabilities by diversifying its trade and energy routes while also enhancing its political influence through expanded trade and infrastructure investments. China’s BRI in South and Central Asia and the IOR, when set in context with China’s assertive behavior in the East China Sea and the South China Sea and border tensions with India, is contributing to a growing rivalry between India and China. This rivalry, which previously had been largely limited to the Himalayan region where the two nations fought a border war in 1962, is now increasingly maritime-focused. Some in India feel encircled by China’s strategic moves in the region while China feels threatened by its limited ability to secure its sea lanes. Understanding and effectively managing this evolving security dynamic may be crucial to preserving regional stability and U.S. national interests. Some IOR states appear to be hedging against China’s rising power by building their defense capabilities and partnerships, while others utilize more accommodative strategies with China or employ a mix of both. Some also see an opportunity to balance India’s influence in the region. Hedging strategies by Asian states include increasing intra-Asian strategic ties, as well as seeking to enhance ties with the United States. This may present an opportunity for enhanced security collaboration particularly with like-minded democracies such as the United States, India, Australia and Japan. While forces of nationalism and rivalry may increase tensions, shared trade interests and interdependencies between China and India, as well as forces of regional economic integration in Asia more broadly, have the potential to dampen their rivalry. The United States’ presence as a balancing power can also contribute to regional stability.

Apr 20, 2018

A Peace Treaty with North Korea?

This report explores the possiblity of concluding a peace treaty with North Korea. Also known as a peace settlement or peace mechanism. North Korea always wants bilateral negotiations with the United States, but a peace treaty would require China, the other signator of the armistice that ended the Korean War. The United Nations Command, or UNC, would also be involved in negotiations. In the Six-Party talks, this idea was explored but fell apart, as it was in Four-Party Talks. Japan and Russia would also be concerned with any peace settlement. South Korean president Moon Jae-in has supported the idea and will push at the upcoming Inter-Korean summit. At stake is North Korea's nuclear and missle programs and in what sequence the DPRK would denuclearize. Which comes first: treaty or denuclearization? Trump will hold a summit with Kim Jong-un soon, where this could be broached. China and Russia want parallel tracks to denuclearize and find a peace settlement. A question is what the impact would be on U.S. alliances in the region, including the presence of the U.S. military and the troops stationed in the region. Should a peace treaty be linked to North Korea's human rights record or other factors? How closely should it be coordinated with South Korea? What is the U.S. and DPRK credibility for a deal?

Apr 19, 2018

Overview of Long-Term Services and Supports

Apr 10, 2018

An Overview of Discretionary Reprieves from Removal: Deferred Action, DACA, TPS, and Others

Since at least the 1970s, immigration authorities in the United States have sometimes exercised their discretion to grant temporary reprieves from removal to non-U.S. nationals (aliens) present in the United States in violation of the Immigration and Nationality Act (INA). Well-known types of reprieves include deferred action, Deferred Action for Childhood Arrivals (DACA), and Temporary Protected Status (TPS). The authority to grant some types of discretionary reprieves from removal, including TPS, comes directly from the INA. The authority to grant other types of reprieves generally arises from the Department of Homeland Security’s (DHS’s) enforcement discretion—that is, its discretion to determine the best manner for enforcing the immigration laws, including by prioritizing some removal cases over others. The primary benefit that a reprieve offers to an unlawfully present alien is an assurance that he or she does not face imminent removal. Reprieves also generally confer other benefits, including eligibility for employment authorization and nonaccrual of unlawful presence for purposes of the three- and ten-year bars on admission to the United States under the INA. Reprieves do not confer “lawful immigration status,” in the narrow sense that reprieve recipients typically remain removable under the INA’s grounds of inadmissibility or deportability (although they may have defenses to removal, including a statutory defense in the case of TPS) and in the more general sense that recipients do not enjoy most of the statutorily fixed protections that come with lawful permanent resident (LPR), refugee, asylee, and nonimmigrant status. The availability and duration of reprieves often turn upon executive policies, and accordingly reprieves do not offer steadfast protection from removal or reliable access to other benefits. Categories of reprieves premised upon executive enforcement discretion include the following: Deferred Action. The generic term that DHS uses for a decision not to remove an inadmissible or deportable alien pursuant to its enforcement discretion. DACA. A large-scale, programmatic type of deferred action available since 2012 for a subset of aliens who arrived in the United States as children. Deferred Enforced Departure (DED). A reprieve premised on the President’s exercise of foreign policy powers to protect nationals of countries experiencing war or instability. Extended Voluntary Departure (EVD). An earlier version of DED little used since 1990. Reprieves granted pursuant to statutory authority include the following: TPS Relief. A form of temporary protection from removal for aliens from countries that DHS designates as unsafe for return because of armed conflict, natural disaster, or other extraordinary conditions. Parole. A statutory power that authorizes DHS to grant entry (but not admission) to inadmissible aliens on a case-by-case basis. Immigration authorities may grant other reprieves in connection with removal proceedings: Administrative Closure. A decision to discontinue temporarily a removal proceeding. Voluntary Departure. A brief reprieve that allows an alien to depart the United States at his own expense in lieu of removal proceedings or enforcement of a removal order. Stay of Removal, Order of Supervision. Mechanisms often used together that allow DHS or an immigration judge to postpone enforcement of a removal order.

Apr 10, 2018

Business Investment Spending Slowdown

Business capital investment spending is composed of private spending on nonresidential structures (e.g., factories), equipment (e.g., machinery), and intellectual property products (e.g., software). Business investment is a key determinant of economic growth. When businesses add to the capital stock, the value of goods and services (i.e., gross domestic product [GDP]) the economy can produce increases. One reason that economic growth has been lower in the last decade is because business investment spending has grown more slowly. Boosting investment spending was one of the key goals of the 2017 tax cuts. The Slowdown Average annual business investment spending from 2008 to 2017 was lower than the average for the previous six 10-year periods, going back to 1948. During the financial crisis, investment spending declined by 8.2% per year in 2008 and 2009, as shown in Figure 1. It has grown since then, but by a relatively low annual average of 4.5%, compared with about 6% from 1946 to 2000. In 2017, investment spending increased by 4.7%. Figure 1. Annual Percentage Change in Business Investment 1948-2017 / Source: Bureau of Economic Analysis, downloaded from FRED. The equipment category declined the most during the crisis, but has increased at the fastest pace in the recovery. The slowdown during the current expansion has been greatest within structures. Within the structures category, growth has recently been whipsawed from year to year by large swings in the subcategory “mining exploration, shafts, and wells,” declining by 43% in 2016 and rising by 58% in 2017. This pattern reflects the sensitivity of investment spending for resource extraction to commodity prices, generally, and to the growth of U.S. shale production, in particular. The investment slowdown is not limited to the United States; it has also occurred across advanced and developing economies, suggesting that plausible explanations for the slowdown are not U.S. specific. Causes of the Slowdown Investment spending growth and economic growth are endogenous, meaning that at the same time that changes in investment spending cause changes in economic growth, changes in economic growth also cause changes in investment spending. Economists have debated whether the slowdown in business investment has exceeded what would be expected given the slowdown in growth. Economist Larry Summers attributes 48% of the decline in potential GDP to the decline in investment and 11% to the decline in productivity. One study, by contrast, argues that “weak investment...growth does not appear to have been an important independent contributor to weak [GDP] growth.” The study attributes the investment slowdown to the slowdown in underlying economic growth, which stems from a structural slowdown in productivity growth and labor force growth, the latter due to the aging of the population. If capital and labor are complements instead of substitutes, a slowdown in labor force growth would reduce investment growth—as firms add fewer workers, less capital is needed for those workers to use. Investment could be low because of low investment demand (firms’ willingness to invest) or supply (a dearth of available savings to finance investment). The fact that real interest rates have been persistently low points to the former explanation. Therefore, most explanations for the slowdown focus on why investment demand has been low. Cyclical and structural reasons are distinguishable for the slowdown in business investment and economic growth. Cyclical reasons relate to the business cycle—when overall business conditions are poor, as in a recession, firms are likelier to postpone investment spending, and when conditions are booming, firms are more likely to invest. From 2007 to 2009, the economy was in the longest and deepest recession since the Great Depression. From 2009 to 2013, the economic recovery was unusually sluggish, excess capacity remained elevated, and unemployment remained unusually high. One study attributes over 80% of the investment slowdown to weak demand across advanced economies. Beyond normal cyclical effects, the financial crisis may have temporarily disrupted some businesses’ access to capital. The International Monetary Fund found that decreased credit availability limited investment during the recovery for euro-crisis countries, but not for the United States. Cyclical factors have been less important since the economy recently returned to a more normal state. Given that the business investment slowdown predated the financial crisis—the annual average increase in investment from 2001 to 2007 was 2.5%—there are also a number of possible structural reasons for the slowdown. Hypotheses include the following: One study attributed the slowdown to reduced competition and business dynamism in U.S. markets due to increased industry concentration. Heightened uncertainty could cause businesses to delay investment projects. The IMF found evidence across advanced economies of a greater decline in investment at firms that are more sensitive to policy uncertainty. Policy uncertainty could come from a variety of sources, including regulatory policy and rising debt levels. One question is why business investment is low when rates of return on equity have been high. Jason Furman, then-chair of the Council of Economic Advisers, noted it could be because high rates of return are being earned by a smaller share of companies that are making large payouts to shareholders through dividends and share buybacks instead of investing. Another theory is that this could be caused by “short-termism” among investors and managers in publicly traded companies. But it is unclear why payouts are not being recycled into investments by other companies. Furman argues that the decline could be partly caused by mismeasurement if official statistics are underestimating IT quality improvements, because investment has fallen less in nominal than real terms. One study attributed the slowdown to the shift in GDP from capital-intensive industries, such as manufacturing, to services and knowledge-intensive industries, such as high tech. Summers argues that large tech companies, “awash in cash,” require less capital investment than traditional companies. The behavior of investment spending as the economic expansion progresses will shed more light on the relative merits of these various theories. If investment spending picks up as the economy reaches full employment, it would indicate that the weakness was mainly cyclical. If it does not, that would support the structural explanations.

Apr 9, 2018

Tax Incentives for Opportunity Zones: In Brief

Opportunity zones, OZs, QOZs, opportunity funds, qualified opportunity funds, QOFs, CDFI Fund, New Markets Tax Credit, NMTC, community development, economic development, P.L. 115-97, tax reform, tcja, tax cuts and jobs act, 2017 tax revision, tax incentives, capital gains

Apr 5, 2018

Reconsidering the Strategic Petroleum Reserve

Apr 5, 2018

China’s Retaliatory Tariffs on Selected U.S. Agricultural Products

On April 2, 2018, the Chinese government implemented retaliatory tariffs on 128 product lines, including 93 U.S. agricultural products, in response to recent U.S. Section 232 tariff actions on certain imports of steel and aluminum products. China is the second largest market for U.S. agricultural exports by value, worth about $19.6 billion in 2017, according to the U.S. Department of Agriculture (USDA). China estimates the targeted U.S. imports are worth roughly $3 billion across all product categories, of which about two-thirds of the value is agricultural products. China imposed an additional 25% tariff on U.S. pork products and an additional 15% tariff on certain varieties of U.S. fresh and dried fruit, nuts, wine, and ginseng, according to an unofficial translation of the list issued by the USDA Foreign Agricultural Service (FAS). Generally, U.S. exports to China are subject to the same import tariffs—known as most favored nation (MFN) tariffs—as other World Trade Organization member countries. Countries that have a free trade agreement with China may be subject to lower import tariffs. The retaliatory tariffs on U.S. agricultural products are in addition to the MFN rate, which for these items ranges from 7% to 30%. U.S. farmers express concern that China’s retaliatory tariffs could put them at a disadvantage compared with export competitors. Agriculture groups warn that the imposition of higher tariffs could curb sales to this key export market for U.S. farmers at a time of growing uncertainty about the continuity of other U.S. trading relationships. Additional tariffs could be imposed by China against the United States if commercial disputes escalate further. U.S. Pork Exports to China China was the fifth largest export market by value for U.S. pork and the second largest export market by value for frozen U.S. pork offal in 2017. According to USDA data, which does not include transshipments from Hong Kong to China, the United States exported about $237 million worth of pork meat directly to China in 2017. Of that amount, about $166 million was frozen pork and $69 million was frozen bone-in ham and shoulder cuts. U.S. exports of frozen pork offal to China were valued at roughly $251 million in 2017. Almost a third of all U.S. frozen pork offal exports went to China in 2017. As of April 2, 2018, the tariff to be applied on these pork products increased from 12% to 37%. According to analysis from Purdue University, these increased tariffs on U.S. pork exports to China could result in lost exports. U.S. pork producers could also see prices fall by as much as $7 per hog due to the new tariffs, according to the Purdue analysis. Table 1 shows the tariff increases for the top U.S. pork, fruit, nut, wine, and ginseng exports to China by value. The U.S. Meat Export Federation (USMEF) estimates that U.S. pork product exports to China in 2017 were higher than the USDA data show, exceeding $1 billion. The discrepancy with USDA data reflects the inclusion by USMEF of exports to Hong Kong, which transships a significant volume of U.S. pork to China. Whether these transshipments of pork will be affected by the tariffs is uncertain. Table 1. Selected Agricultural Exports to China Affected by Retaliatory Tariffs Product Harmonized Tariff Codes Regular Applied MFN Tariff MFN Rate Plus China’s Retaliatory Tariff 2017 Export Value ($million) % of Total 2017 U.S. Exports Pork Meat 020322, 020329 12% 37% $236 11% Pork Offal 020649 12% 37% $251 31% Cherries 080929 10% 25% $122 20% Oranges 080510 11% 26% $48 8% Apples 080810 10% 25% $18 2% Almonds 080211, 080212 10% 25% $99 2% Wine 2204 14-30% 29%-45% $75 5% Ginseng 121120 7.5% 22.5% $23 40% Source: FAS’s Global Agricultural Trade System Online, accessed April 2, 2018. FAS Global Agricultural Information Network, China Imposes Additional Tariffs on Selected U.S.-Origin Products, Beijing, April 2, 2018. Note: Official USDA export data report China and Hong Kong separately. The data in the table are direct exports to China only. USMEF combines China and Hong Kong data because some U.S. exports to Hong Kong are transshipped to China. Official China import data may also include commodities that enter through Hong Kong, resulting in Chinese import data that exceeds reported U.S. exports. U.S. Fresh and Dried Fruit, Nuts, Wine, and Ginseng Exports to China China is a major export market for U.S. fresh and dried fruits and nuts and other specialty crop products, including wine and ginseng. U.S. exports of fresh and dried fruits and nuts, wine and ginseng to China totaled an estimated $583 million in 2017. Of that amount, U.S. fresh and dried fruit and nut exports to China accounted for about $485 million—about 4% of total U.S. exports in this category globally. The specialty crops industry expressed concern that an estimated nearly $1 billion in U.S. exports could be harmed by these higher tariffs—an estimate that could reflect transshipments into China. Cherries, oranges, apples, and almonds were the highest value fresh and dried fruit and nut exports to China in 2017 (Table 1). These products could be harmed by the 15% tariff increase. While U.S. exports of most fruits and nuts to China have been declining, exports of U.S. cherries, oranges, and apples to China have increased in recent years. U.S. exports of cherries to China totaled about $122 million in 2017, accounting for a quarter of all U.S. fresh and dried fruit and nut exports to China. U.S. citrus producers exported roughly $48 million worth of oranges to China in 2017, while U.S. apple producers exported about $18 million worth of apples. Almonds were the top U.S. nut export to China; U.S. growers exported more than $99 million worth of shelled and unshelled almonds in 2017. Grapes, plums, apricots, walnuts, pistachios, and hazelnuts are among the other fresh and dried fruit and nut products that could be affected by the 15% retaliatory tariff. China ranks as the fifth largest market by value for U.S. wines, exports of which were worth about $75 million in 2017—about 5% of total U.S. wine exports. Total U.S. wine exports to China have also been increasing. U.S. ginseng exports have also been targeted by China for a 15% tariff increase. China was the second largest foreign market for U.S. ginseng in 2017, with exports valued at about $23 million. Farmer Concerns over More Chinese Retaliatory Tariffs Many farm groups have expressed concern that China may further expand its list of targeted U.S. agricultural products to include higher value exports following recent Section 301 actions by the Trump Administration in response to Chinese violations of U.S. intellectual property rights. On April 4, 2018, China announced that in retaliation for the proposed U.S. Section 301 tariffs, it is proposing a 25% tariff retaliatory tariff on imports of U.S. soybeans and other commodities such as corn, wheat, cotton, beef, and orange juice. However, China did not specify an implementation date for those tariffs. U.S. soybean exports to China totaled more than $12 billion in 2017, accounting for 57% of total U.S. soybean exports. For more on the broader U.S.-China trading relationship, see CRS Report RL33536, China-U.S. Trade Issues.

Apr 4, 2018

Dominican Republic

Apr 2, 2018

Overview of the Federal Tax System in 2018

At the end of 2017, President Trump signed into law P.L. 115-97, which substantially changed the U.S. federal tax system. This report describes the federal tax structure and system in effect for 2018, incorporating these recent changes. The report also provides selected statistics on the tax system as a whole. Historically, the largest component of the federal tax system, in terms of revenue generated, has been the individual income tax. For fiscal year (FY) 2018, an estimated $1.7 trillion, or 50% of the federal government’s revenue, will be collected from the individual income tax. The corporate income tax is estimated to generate another $218 billion in revenue in FY2018, or just under 7% of total revenue. Social insurance or payroll taxes will generate an estimated $1.2 trillion, or 35% of revenue in FY2018. For 2018, it is estimated that revenues will be 16.7% of GDP, slightly below the post-World War II average of 17.2% of GDP. The largest source of revenue for the federal government is the individual income tax. The federal individual income tax is levied on an individual’s taxable income, which is adjusted gross income (AGI) less deductions. Tax rates based on filing status (e.g., married filing jointly, head of household, or single individual) determine the amount of tax liability. Income tax rates in the United States are generally progressive, such that higher levels of income are typically taxed at higher rates. Once tentative tax liability is calculated, tax credits can be used to reduce tax liability. Tax deductions and tax credits are tools available to policymakers to increase or decrease the after-tax price of undertaking specific activities. Individuals with high levels of deductions and credits relative to income may be required to pay the alternative minimum tax (AMT). The federal government also levies taxes on corporations, wage earnings, and certain other goods. Corporate taxable income is also subject to tax at a flat rate of 21%. Social Security and Medicare tax rates are, respectively, 12.4% and 2.9% of earnings. In 2018, Social Security taxes are levied on the first $128,400 of wages. Medicare taxes are assessed against all wage income. Federal excise taxes are levied on specific goods, such as transportation fuels, alcohol, and tobacco. Looking at the tax system as a whole, several observations can be made. Notably, the composition of revenues has changed over time. Corporate income tax revenues have become a smaller share of overall tax revenues over time, while social insurance revenues have trended upward as a share of total revenues. Social insurance revenues are a sizable component of the overall federal tax system. Most taxpayers pay more in payroll taxes than income taxes. Many taxpayers pay social insurance taxes but do not pay individual income taxes, having incomes below the amount that would generate a positive income tax liability. From an international perspective, the U.S. federal tax system tends to collect less in federal revenues as a percentage of GDP than other OECD countries.

Mar 29, 2018

Federal Requirements on Private Health Insurance Plans

A majority of Americans have health insurance from the private health insurance (PHI) market. Health plans sold in the PHI market must comply with requirements at both the state and federal levels; such requirements often are referred to as market reforms. The first part of this report provides background information about health plans sold in the PHI market and briefly describes state and federal regulation of private plans. The second part summarizes selected federal requirements and indicates each requirement’s applicability to one or more of the following types of private health plans: individual, small group, large group, and self-insured. The selected market reforms are grouped under the following categories: obtaining coverage, keeping coverage, developing health insurance premiums, covered services, cost-sharing limits, consumer assistance and other patient protections, and plan requirements related to health care providers. Many of the federal requirements described in this report were established under the Patient Protection and Affordable Care Act (ACA; P.L. 111-148, as amended); however, some were established under federal laws enacted prior to the ACA.

Mar 29, 2018

Supplemental Security Income (SSI)

Mar 22, 2018

The Visa Waiver Program: Balancing Tourism and National Security

Mar 15, 2018

Modes of Constitutional Interpretation

When exercising its power to review the constitutionality of governmental action, the Supreme Court has relied on certain “methods” or “modes” of interpretation—that is, ways of figuring out a particular meaning of a provision within the Constitution. This report broadly describes the most common modes of constitutional interpretation; discusses examples of Supreme Court decisions that demonstrate the application of these methods; and provides a general overview of the various arguments in support of, and in opposition to, the use of such methods of constitutional interpretation. Textualism. Textualism is a mode of interpretation that focuses on the plain meaning of the text of a legal document. Textualism usually emphasizes how the terms in the Constitution would be understood by people at the time they were ratified, as well as the context in which those terms appear. Textualists usually believe there is an objective meaning of the text, and they do not typically inquire into questions regarding the intent of the drafters, adopters, or ratifiers of the Constitution and its amendments when deriving meaning from the text. Original Meaning. Whereas textualist approaches to constitutional interpretation focus solely on the text of the document, originalist approaches consider the meaning of the Constitution as understood by at least some segment of the populace at the time of the Founding. Originalists generally agree that the Constitution’s text had an “objectively identifiable” or public meaning at the time of the Founding that has not changed over time, and the task of judges and Justices (and other responsible interpreters) is to construct this original meaning. Judicial Precedent. The most commonly cited source of constitutional meaning is the Supreme Court’s prior decisions on questions of constitutional law. For most, if not all Justices, judicial precedent provides possible principles, rules, or standards to govern judicial decisions in future cases with arguably similar facts. Pragmatism. Pragmatist approaches often involve the Court weighing or balancing the probable practical consequences of one interpretation of the Constitution against other interpretations. One flavor of pragmatism weighs the future costs and benefits of an interpretation to society or the political branches, selecting the interpretation that may lead to the perceived best outcome. Under another type of pragmatist approach, a court might consider the extent to which the judiciary could play a constructive role in deciding a question of constitutional law. Moral Reasoning. This approach argues that certain moral concepts or ideals underlie some terms in the text of the Constitution (e.g., “equal protection” or “due process of law”), and that these concepts should inform judges’ interpretations of the Constitution. National Identity (or “Ethos”). Judicial reasoning occasionally relies on the concept of a “national ethos,” which draws upon the distinct character and values of the American national identity and the nation’s institutions in order to elaborate on the Constitution’s meaning. Structuralism. Another mode of constitutional interpretation draws inferences from the design of the Constitution: the relationships among the three branches of the federal government (commonly called separation of powers); the relationship between the federal and state governments (known as federalism); and the relationship between the government and the people. Historical Practices. Prior decisions of the political branches, particularly their long-established, historical practices, are an important source of constitutional meaning. Courts have viewed historical practices as a source of the Constitution’s meaning in cases involving questions about the separation of powers, federalism, and individual rights, particularly when the text provides no clear answer.

Mar 15, 2018

Northern Ireland, Brexit, and the Irish Border

As the 20th anniversary of the April 1998 peace accord for Northern Ireland (known as the Good Friday Agreement or the Belfast Agreement) approaches, concerns are increasing about how the expected exit of the United Kingdom (UK) from the European Union (EU)—or “Brexit”—might affect Northern Ireland. The future of the border between Northern Ireland and the Republic of Ireland has become a central issue in the UK’s withdrawal negotiations with the EU. Once the UK ceases to be a member of the EU—likely in March 2019—Northern Ireland will be the only part of the UK to share a land border with an EU member state (Ireland and the UK both joined the EU in 1973). Agreeing upon arrangements for the post-Brexit UK-Irish border is particularly challenging because of Northern Ireland’s history of political violence. Roughly 3,500 people died during “the Troubles,” the 30-year sectarian conflict between unionists (Protestants who largely define themselves as British and support remaining part of the UK) and nationalists (Catholics who consider themselves Irish and may desire a united Ireland). UK, Irish, and EU leaders have pledged repeatedly that they will seek to avoid a “hard” border (with customs and security checks) on the island of Ireland to help preserve the peace process and extensive cross-border economic ties. Many in Ireland and the EU, however, question whether and how this will be possible if the UK continues to pursue a “hard Brexit” outside of the EU’s single market and customs union. (See also CRS Report RS21333, Northern Ireland: Current Issues and Ongoing Challenges in the Peace Process, and CRS Report RL33105, The United Kingdom: Background, Brexit, and Relations with the United States.) Peace, the EU, and the Border In 1998, the EU membership of both the UK and the Republic of Ireland was viewed as underpinning the Northern Ireland peace process by providing a common European identity for unionists and nationalists. In the years since, as security checkpoints were removed in accordance with the peace agreement and because both the UK and Ireland belonged to the EU’s single market and customs union, the circuitous 300-mile land border between Northern Ireland and Ireland effectively disappeared. This served as an important symbol on both sides of the sectarian divide and helped to produce a dynamic cross-border economy. Brexit has raised significant political and economic concerns in Northern Ireland (which, unlike the UK overall, voted to remain in the EU). Many experts deem an invisible border as crucial to a still-fragile peace process, in which deep divisions and a lack of trust persist. This situation is evidenced perhaps most clearly by the stalled negotiations between the unionist and nationalist communities’ respective political parties on reestablishing the regional (or devolved) government, more than a year after the last legislative assembly elections. Police officials warn that a hard border post-Brexit could pose considerable security risks. During the Troubles, border regions were often considered “bandit country,” with smugglers and gunrunners, and checkpoints were frequently sites of sectarian violence (such violence and criminality have decreased significantly since 1998). Security assessments suggest that if border posts were reinstated, violent dissident groups opposed to the peace process would view them as targets, endangering the lives of police and customs officers. Establishing checkpoints also would pose logistical difficulties. Estimates suggest there are upward of 275 border crossing points. Many in Northern Ireland and Ireland also are eager to maintain an invisible border to ensure “frictionless” trade and safeguard the North-South economy. Ireland is Northern Ireland’s top external export and import partner. Moreover, the two parts of the island share integrated labor markets and industries that operate on an all-island basis. Figure 1. The United Kingdom and the Republic of Ireland / Source: Graphic created by CRS using data from Esri (2017). Brexit Negotiations In December 2017, the UK and the EU reached an agreement in principle covering main aspects of key issues in the withdrawal negotiations. Among other measures related to Northern Ireland, the UK committed to uphold the Good Friday Agreement, avoid a hard border (and any physical infrastructure), and protect North-South cooperation on the island of Ireland. In the absence of other agreed solutions that would be preferable to the UK (such as concluding a UK-EU free-trade agreement or devising technology-based solutions), the UK asserted it would maintain “full alignment” with the rules of the EU single market and customs union that support North-South cooperation and the all-island economy. The UK also maintains there will be “no new regulatory barriers” between Northern Ireland and the rest of the United Kingdom. Nevertheless, questions persist about how such a combination of goals can be implemented. Some analysts contend that an invisible border is impossible unless the UK remains in the EU customs union, a “soft Brexit” option that the UK government rejects. UK Prime Minister Theresa May and the Democratic Unionist Party (DUP)—the dominant unionist party in Northern Ireland—also have adamantly rejected an EU proposal that envisions a “common regulatory area” after Brexit on the island of Ireland. This proposal essentially would keep Northern Ireland within the EU customs union and thereby create a regulatory border in the Irish Sea between Northern Ireland and the rest of the United Kingdom. UK and DUP officials contend this arrangement would threaten the UK’s constitutional integrity and thus is unacceptable. Potential Issues for Congress Successive U.S. Administrations and many Members of Congress have actively supported the Northern Ireland peace process. The United States was instrumental in forging the Good Friday Agreement and has encouraged its full implementation over the last two decades. Amid the stalemate in Northern Ireland’s devolved government, some Members of Congress have urged the Trump Administration to reappoint a U.S. special envoy for Northern Ireland; the Administration appears inclined to do so. Congress also may consider the possible political, security, and economic implications of Brexit for Northern Ireland, and Brexit’s impact on the Irish border and the Good Friday Agreement.

Mar 12, 2018

Maternal and Child Health (MCH) Services Block Grant

Mar 7, 2018

Information Warfare: Issues for Congress

Information warfare is hardly a new endeavor. In the Battle of Thermopylae in 480 BC, Persian ruler Xerxes used intimidation tactics to break the will of Greek city-states. Alexander the Great used cultural assimilation to subdue dissent and maintain conquered lands. Military scholars trace the modern use of information as a tool in guerilla warfare to fifth-century BC Chinese military strategist Sun Tzu’s book The Art of War and its emphasis on accurate intelligence for decision superiority over a mightier foe. These ancient strategists helped to lay the foundation for information warfare strategy in modern times. Taking place below the level of armed conflict, information warfare (IW) is the range of military and government operations to protect and exploit the information environment. Although information is recognized as an element of national power, IW is a relatively poorly understood concept in the United States, with several other terms being used to describe the same or similar sets of activity. IW is a strategy for using information to pursue a competitive advantage, including offensive and defensive efforts. A form of political warfare, IW is a means through which nations achieve strategic objectives and advance foreign policy goals. Defensive efforts include information assurance/information security, while offensive efforts include information operations. Similar terms sometimes used to characterize information warfare include active measures, hybrid warfare, and gray zone warfare. IW is sometimes referred to as a “disinformation campaign,” yet disinformation is only one of the tactics used in information operations (IO). The types of information used in IO include propaganda, misinformation, and disinformation. As cyberspace presents an easy, cost-effective method to communicate a message to large swaths of populations, much of present day information warfare takes place on the internet, leading some to conflate “cyberwarfare” with information warfare. While IO in the United States tends to be seen as a purely military activity, other countries and terrorist organizations have robust information warfare strategies and use a whole-of-government or whole-of-society approach to information operations. In terms of U.S. government bureaucracy, there are debates in the United States about where the IW center of gravity should be. During the Cold War, the epicenter in the U.S. government was the Department of State and the U.S. Information Agency. Since 9/11, much of the current doctrine and capability resides with the military, leading some to posit that the epicenter should be the Pentagon. But others worry that the military should not be involved in the production of propaganda. This report offers Congress a conceptual framework for understanding IW as a strategy, discusses past and present IW-related organizations within the U.S. government, and uses several case studies as examples of IW strategy in practice. Countries discussed include Russia, China, North Korea, and Iran. The Islamic State is also discussed.

Mar 5, 2018

Afghanistan: Background and U.S. Policy In Brief

Afghanistan has been a central U.S. foreign policy concern since 2001, when the United States, in response to the terrorist attacks of September 11, 2001, led a military campaign against Al Qaeda and the Taliban government that harbored and supported Al Qaeda. In the intervening 16 years, the United States has suffered more than 2,000 casualties in Afghanistan (including 14 in 2017) and has spent more than $120 billion for reconstruction there. In that time, an elected Afghan government has replaced the Taliban, and nearly every measure of human development has improved, although future prospects of those measures remain mixed. U.S. policymakers routinely describe the war against the insurgency (which controls or contests nearly half of the country’s territory, by Pentagon estimates) as a “stalemate” and the Afghan government faces broad public criticism for its ongoing inability to combat corruption, deliver security, alleviate rising ethnic tensions, and develop the economy. The total number of U.S. troops in the country is reported as around 15,000, with the deployment of another 1,000 troops reportedly under consideration. This report provides an overview of current political and military dynamics, with a focus on the Trump Administration’s new strategy for Afghanistan and South Asia, the U.S.-led coalition and Afghan military operations, and recent political developments, including prospects for peace talks and elections. For more detailed background information and analysis on Afghan history and politics, as well as U.S. involvement in Afghanistan, see CRS Report RL30588, Afghanistan: Post-Taliban Governance, Security, and U.S. Policy, by Kenneth Katzman and Clayton Thomas.

Mar 5, 2018

Blockchain: Background and Policy Issues

The rise of cryptocurrencies like Bitcoin and the use of Initial Coin Offerings to raise capital has drawn increased attention from both the public and private sector concerning the use of digital ledgers to conduct business (called blockchain technology) and its potential. Yet many remain unclear on what the technology actually is, what it does, and the tradeoffs for its use. A blockchain is a digital ledger that allows parties to transact without the use of a central authority as a trusted intermediary. In this ledger, transactions are grouped together in blocks, which are cryptographically chained together in a way that is tamper-proof and creates a mathematically indisputable history. Blockchain is not a new technology; rather it is an innovative way of using existing technologies. The technologies underpinning blockchain are asymmetric key encryption, hash values, Merkle trees, and peer-to-peer networks. Blockchain allows parties who may not trust each other to agree on the current distribution of assets and who has those assets, so that they may conduct new business. But, while there has been a great deal of hype concerning blockchain’s benefits, it also has certain pitfalls that may inhibit its utility. With blockchain, as transactions are added, the identities of the parties conducting those transactions are verified, and the transactions themselves are verifiable by other users. The strong relationship between identities, transactions, and the ledger enables parties that may not trust each other or an individual computing platform to agree on the state of resources as logged in the ledger. With that agreement, they may conduct a new transaction with a common understanding of who has which resource and their ability to trade that resource. Blockchain is not a panacea technology. A blockchain records events as transactions when they happen, in the order they happen, and in an add-on only manner. Previous data on the blockchain cannot be altered, and users of the blockchain have access to the data on the blockchain in order to validate the distribution of resources. Though there are benefits to blockchain, there are also pitfalls and unsolved conditions which may inhibit blockchain use. Some of those concerns are data portability, ill-defined requirements, key security, user collusion, and user safety. As with adopting any technology, users must examine the business, legal, and technical aspects of that technology. Blockchain is currently being tested by industry, but at this time does not appear to be a complete replacement for existing systems. Although the adoption of blockchain is in its early stages, Congress may have a role to play in several areas, including the oversight of federal agencies seeking to use blockchain for government business, and exploration of whether regulations are necessary to govern blockchain’s use in the private sector. Some federal agencies are seeking to better manage identities, assets, data, and contracts through the adoption of blockchain technology. In addition, some federal agencies are issuing guidance on industry use of blockchain, and whether or not the current legal framework governs blockchain use.

Feb 28, 2018

Budgetary Effects of the BCA as Amended: The “Parity Principle”

Feb 23, 2018

Federal and Indian Lands on the U.S.-Mexico Border

Feb 21, 2018

Medicare and Budget Sequestration

Sequestration is the automatic reduction (i.e., cancellation) of certain federal spending, generally by a uniform percentage. The sequester is a budget enforcement tool that was established by Congress in the Balanced Budget and Emergency Deficit Control Act of 1985 (BBEDCA, also known as the Gramm-Rudman-Hollings Act; P.L. 99-177) and was intended to encourage compromise and action, rather than actually being implemented (also known as triggered). Generally, this budget enforcement tool has been incorporated into laws to either discourage Congress from violating specific budget objectives or encourage Congress to fulfill specific budget objectives. When Congress breaks these types of rules, either through the enactment of a law or the lack thereof, a sequester is triggered and certain federal spending is reduced. Sequestration is of recent interest due to its current use as an enforcement mechanism for three budget enforcement rules created by the Statutory Pay-As-You-Go Act of 2010 (Statutory PAYGO; P.L. 111-139) and the Budget Control Act of 2011 (BCA; P.L. 112-25). At present, only the BCA mandatory sequester is triggered. Under the BCA, the sequestration of mandatory spending was originally scheduled to occur in FY2013 through FY2021; however, subsequent legislation, including the Bipartisan Budget Act of 2018 (BBA 18; P.L. 115-123), extended sequestration for mandatory spending through FY2027. The Statutory PAYGO sequester and BCA discretionary sequester are current law and can be triggered if associated budget enforcement rules are broken (and Congress does not take action to change or waive these rules). Medicare is a federal program that pays for certain health care services of qualified beneficiaries. The program is funded using both mandatory and discretionary spending and is impacted by any sequestration order issued in accordance with the aforementioned laws. Medicare is mainly impacted by the sequestration of mandatory funds since Medicare benefit payments are considered mandatory spending. Special sequestration rules limit the extent to which Medicare benefit spending can be reduced in a given fiscal year. This limit varies depending on the type of sequestration order. Under a BCA mandatory sequestration order, Medicare benefit payments and Medicare Integrity Program spending cannot be reduced by more than 2%. Under a Statutory PAYGO sequestration order, Medicare benefit payments and Medicare Program Integrity spending cannot be reduced by more than 4%. These limits do not apply to mandatory administrative Medicare spending under either type of sequestration order. These limits also do not apply to discretionary administrative Medicare spending under a BCA discretionary sequestration order. Generally, Medicare’s benefit structure remains unchanged under a mandatory sequestration order and beneficiaries see few direct impacts. However, due to varying plan and provider payment mechanisms among the four parts of the program, sequestration is implemented somewhat differently across the program.

Feb 16, 2018

Discretionary Spending Levels Under the Bipartisan Budget Act of 2018

On February 9, 2018, the Bipartisan Budget Act of 2018 (BBA 2018) was signed into law as P.L. 115-123. Among other things, it raised the discretionary spending caps for fiscal years 2018 and 2019 originally implemented by the Budget Control Act of 2011 (BCA; P.L. 112-25). BBA 2018 reverses $80 billion of the $97 billion of discretionary spending cuts enacted by the BCA as amended for FY2018. The BCA and Discretionary Spending The BCA affected discretionary spending in two ways: (1) caps on discretionary budget authority, divided between defense and nondefense programs, which went into effect in FY2012 and (2) $1.2 trillion in automatic spending reductions beginning in FY2013 that included annual downward reductions to those discretionary caps. The caps essentially limit the amount of spending through the annual appropriations process for that time period, with adjustments permitted for certain purposes. Cap levels are enforced through a sequestration process (spending cuts that are automatically triggered if cap levels are breached). The BCA contained a variety of measures intended to reduce budget deficits by $2.1 trillion over the FY2012-FY2021 period. Discretionary spending reductions were projected to reduce the deficit by roughly $1.5 trillion over 10 years; the remaining deficit reduction was provided through lower debt servicing costs and automatic reductions to certain mandatory spending accounts and changes to federal student loan programs. For a more detailed analysis of the BCA, see CRS Report R44874, The Budget Control Act: Frequently Asked Questions. BBA 2018 and Discretionary Spending Subject to the BCA Caps BBA 2018 increases the discretionary cap levels for both defense and nondefense programs in FY2018 and FY2019 relative to the caps (in effect after the automatic spending reduction took effect) that would have prevailed absent these statutory changes. For FY2018, it raises the discretionary cap on defense to $629 billion (an $80 billion increase) and raises the nondefense cap to $579 billion (a $63 billion increase). The FY2019 discretionary caps are increased to $647 billion for defense (an increase of $85 billion) and to $597 billion for nondefense (an increase of $68 billion). BBA 2018 does not adjust the discretionary caps in FY2020 and FY2021, the last years for which discretionary caps are provided under the BCA. Table 1 tracks Congressional Budget Office (CBO) projections of discretionary budget authority subject to the BCA caps from before enactment of the BCA (in August 2011) through the enactment of BBA 2018. The BBA cap levels are higher than the ones they replace—which reflect the automatic cap reductions required under the BCA—as well as the BCA’s initial cap levels. However, the BBA 2018 caps are still lower than CBO’s pre-BCA baseline projection for spending subject to the caps in FY2018 and FY2019. Overall, current projected discretionary defense budget authority subject to the caps is $17 billion below CBO’s pre-BCA baseline for both FY2018 and FY2019. Current projected budget authority for nondefense programs is $27 billion and $25 billion below the pre-BCA baseline for FY2018 and FY2019, respectively. Table 1. Discretionary Budget Authority Limits Under the BCA as Amended, FY2018-2019 (in billions of dollars) Pre-BCA Baseline BCA Initial Caps Automatic Cap Reductions BBA 2018 Caps FY Discretionary Caps Level Change from Pre-BCA Baseline =Level Change from BCA Initial Caps Change from Pre-BCA Baseline =Level Change from Pre-BBA 2018 Caps =Level 2018 Defense 646 -43 603 -54 -97 549 +80 629 Nondefense 606 -53 553 -37 -90 516 +63 579 2019 Defense 664 -48 616 -54 -102 562 +85 647 Nondefense 622 -56 566 -37 -93 529 +68 597 Source: CBO, Testimony Before the Joint Select Committee on Deficit Reduction, U.S. Congress, October 2011; CBO, Sequestration Update Report, August 2017; CBO, Bipartisan Budget Act of 2018, February 2018. Notes: Pre-BCA baseline represents 2011 spending levels adjusted for inflation. BBA 2018 is not the first time that Congress has increased the BCA caps—previously, three acts raised the caps from their post-automatic reduction levels for each fiscal year from 2013 to 2017. BBA 2018 increases total discretionary budget authority caps for FY2018-FY2019 by an average of $148 billion per year, a significantly larger increase than the average annual changes to the FY2013-FY2017 caps provided for by earlier acts ($38 billion), as shown in Figure 1. Unlike the BBA 2018, these earlier acts set the caps lower than the BCA’s initial cap levels. Figure 1. Discretionary Budget Authority Under BCA and Subsequent Statutory Amendments FY2013-2019 / Source: CRS calculations. Notes: Totals are combined defense and nondefense caps. BBA 2018 and Discretionary Spending Outside the Caps The discretionary spending cap levels give only a partial picture of overall discretionary spending trends. The BCA allows for upward adjustments to the caps for certain types of discretionary spending. Such spending, which is also known as “spending outside the caps,” includes appropriations for Overseas Contingency Operations (OCO) and appropriations designated as emergency relief. Upward adjustments to the BCA discretionary caps have averaged $113 billion in budget authority per year from FY2012 through FY2017, ranging from $83 billion (in FY2016) to $153 billion (in FY2013). BBA 2018 provides for certain spending that would be designated as upward adjustments to the caps under current law, including $89.3 billion in natural disaster relief. It does not include an upward adjustment for OCO, however, which is anticipated to be added at a later date. Including OCO, CBO currently projects upward adjustments to the FY2018 discretionary caps will total $239 billion, but overall discretionary spending levels (and total cap adjustments) for FY2018 will be determined by subsequent appropriation acts. As shown in Figure 2, discretionary budget authority declined from FY2012 through FY2015 when the upward adjustments to the discretionary caps are accounted for. Total discretionary budget authority subsequently increased in FY2016 and FY2017, and is projected to rise to more than $200 billion above FY2012 levels under BBA 2018. Figure 2. Discretionary Budget Authority, FY2012-FY2018 (in billions of dollars) / Source: CBO, Cost estimate for BBA 2018, February 2018; OMB, 2018 Sequestration Report, May 2017; and CRS In Focus IF10657, Budgetary Effects of the BCA as Amended: The “Parity Principle.” Notes: FY2018 budget authority is projected and subject to future legislative action.

Feb 15, 2018

Potential Options for Electric Power Resiliency in the U.S. Virgin Islands

In September 2017, Hurricanes Irma and Maria, both Category 5 storms, caused catastrophic damage to the U.S. Virgin Islands (USVI), which include the main islands of Saint Croix, Saint John, and Saint Thomas among other smaller islands and cays. Hurricane Irma hit the USVI on September 6, with the eye passing over St. Thomas and St. John. Fourteen days later, on September 20, the eye of Hurricane Maria swept near St. Croix with maximum winds of 175 mph. The USVI government estimates that total uninsured damage from the hurricanes will exceed $7.5 billion. Although the electric power plants fared “relatively well” according to the local public water and power utility (the Virgin Islands Water and Power Authority [VIWAPA]), 80-90% of the power transmission and distribution systems across the USVI were damaged. In November 2017, the government of the USVI estimated that $850 million in hurricane recovery funding is needed to help “rebuild a more resilient electrical system.” Before the 2017 hurricane season, VIWAPA was already challenged with fiscal problems and aging infrastructure. Although the USVI has never defaulted on its obligations, its fiscal problems include high debt levels, pension obligations, decreasing tax bases, and outdated infrastructures. Like many remote island communities, the USVI is dependent on fuel oil for the generation of electricity. Until 2014, VIWAPA was 100% dependent on fuel oil. In 2010, the USVI established a goal to reduce fossil fuel-based energy use by 60% by 2025. As a result, VIWAPA has actively sought to improve energy efficiency and diversify its energy resources, particularly through the use of propane, solar, and wind power. Initial disaster recovery efforts focused on restoring power. On September 13, 2017, the Federal Emergency Management Agency authorized the U.S. Department of Energy’s Western Area Power Administration (DOE-WAPA) to assist with emergency power restoration efforts on the USVI. DOE-WAPA completed their electric power system restoration activities and left the USVI by November 29. Hurricanes and extreme weather will continue to threaten the Caribbean, which may prompt Congress to consider infrastructure hardening and improvements to make the systems more resilient. Building a modernized, flexible electric grid, capable of incorporating more renewable sources of electricity, underpinned by more efficient fossil fuel power plants and energy storage, may help the USVI accomplish these goals. Policymakers are currently considering possible policy options for rebuilding the electricity grid with greater resiliency. This report explores several alternative electric power system structures for meeting the electricity services and needs of the USVI. The cost of rebuilding and modernizing the entire USVI electric grid likely far exceeds the fiscal capacity of the territory in the current budget environment. Incorporating resiliency could also be expensive. Congress may consider the role of comprehensive energy planning and whether the efforts to restore electric power in the USVI should include support for a resilient and modernized electric power system. Additional support for a modernized electrical grid may require new investment by the federal government, investment incentives to form public-private partnerships, or debt adjustments, among other strategies.

Feb 14, 2018

Digital Currencies: Sanctions Evasion Risks

Feb 8, 2018

Financial Innovation: “Cryptocurrencies”

Feb 7, 2018

The 2017 Tax Revision (P.L. 115-97): Comparison to 2017 Tax Law

A tax revision enacted late in 2017 substantively changed the federal income tax system (P.L. 115-97). Broadly, for individuals, the act temporarily modifies income tax rates. Some deductions, credits, and exemptions for individuals are eliminated, while others are substantively modified. These changes are mostly temporary. For businesses, pass-through entities experience a reduction in effective tax rates via a new deduction, which is also temporary. The statutory corporate tax rate is permanently reduced. Many deductions, credits, and other provisions for businesses are also modified. The act also substantively changes the international tax system, generally moving the U.S. tax system towards a territorial system. This report provides a brief summary of P.L. 115-97, comparing each provision in the act with prior tax law. The report also provides a brief legislative history of activity leading to enactment of P.L. 115-97, along with estimated revenue and distributional effects of the recently enacted law.

Feb 6, 2018

The 2018 National Defense Strategy

On January 19, 2018, Secretary of Defense Mattis released the unclassified summary of the Department of Defense’s (DOD) first congressionally mandated National Defense Strategy (NDS). In addition to stating DOD’s approach to contending with current and emerging national security challenges, the NDS is also intended to articulate the overall strategic rationale for programs and priorities contained within the FY2019-FY2023 budget requests. Overall, the document maintains that the strategic environment in which the United States must operate is one characterized by the erosion of the rules-based international order, which has produced a degree of strategic complexity and volatility not seen “in recent memory” (p. 1). As a result, the document argues, the United States must bolster its competitive military advantage—which the NDS sees as having eroded in recent decades—relative to the threats posed by China and Russia. It further maintains that “inter-state strategic competition, not terrorism, is now the primary concern in U.S. national security.” (p. 1) Statutory Requirement Particularly since the end of the Cold War, the Pentagon has regularly reviewed its strategy, policy, and programs to ensure they are appropriate to the current and emerging strategic landscape. Over time, these reviews became congressionally mandated and referred to as the “Quadrennial Defense Review.” Eventually, dissatisfaction with the QDR process and its associated outcomes led Congress to rewrite the requirements for these DOD strategy documents. The FY2017 NDAA, P.L. 114-328, Section 941, amended Title 10, United States Code, Section 113, to require the Secretary of Defense to produce an NDS which articulates how the Department of Defense will advance U.S. objectives articulated in the National Security Strategy, released in December 2017. The document released on January 19th represents a summary of the full NDS, which is itself classified. What the NDS Says Consistent with comparable documents issued by prior administrations, the NDS maintains that there are five central external threats to U.S. interests: China, Russia, North Korea, Iran, and terrorist groups with global reach. The NDS mandate requires DOD to prioritize those threats. Accordingly, retaining the U.S. strategic competitive edge relative to China and Russia is viewed a higher priority than countering violent extremist organizations. Further, the NDS appears conceptually consistent with the National Security Strategy regarding the notion that “peace through strength,” or improving the capability and lethality of the joint force in order to deter warfare, is essential to countering these threats. It also contends that, unlike most of the period since the end of the Cold War, the joint force must now operate in contested domains where freedom of access and maneuver is no longer assured. As such, it organizes DOD activities along three central “lines of effort”—rebuilding military readiness and improving the joint forces’ lethality, strengthening alliances and attracting new partners, and reforming the department’s business practices—and argues that all three are interconnected and critical to enabling DOD to effectively advance U.S. objectives. It also notes that programs designed to advance those objectives will be included in the FY2019-FY2023 budgets. Some further key points include Building a more lethal joint force will require consistent multiyear investments to improve war fighting readiness, an optimally sized joint force, prioritization of preparedness for war as part of an overall deterrent and competitive posture, and the modernization of key capabilities. The latter includes nuclear forces; space and cyberspace capabilities; command, control communications, computers and intelligence, surveillance and reconnaissance (C4ISR) capabilities; missile defense; joint lethality in contested environments; forward maneuver and posture resilience; autonomous and unmanned systems; and resilient logistics (p. 6-7). Strengthening allies and attracting new partners will require better burden-sharing amongst allies; expanding regional consultative mechanisms and collaborative planning; and deepening interoperability amongst allies and partners (p. 8-9). Reforming DOD for greater performance and affordability will require prioritizing speed of capability delivery rather than the “exquisite” performance of systems and capabilities; better organizing the Department to enable innovation to improve lethality across the joint force; better budget discipline and affordability; rapid prototyping and fielding of equipment; and harnessing and protecting the National Security Innovation Base (p 10-11). The NDS sees harnessing that base as a source of competitive advantage Potential Questions for Congress As Congress considers the NDS, as well as the programmatic and resource decisions to be proposed by the Trump Administration to accomplish objectives contained within the strategy, it could consider the following points: What is the force sizing construct? The central conceptual underpinning of the NDS—and all defense strategy reviews prior to it since the end of the Cold War—is the “force sizing construct” (FSC). The FSC is, essentially, a heuristic that allows planners to judge whether the size and composition of the military is sufficient to meet the national security challenges facing the United States. What are the assumptions that went into this FSC? Is the FSC an appropriate guide for building a joint force that can meet the national security challenges the U.S. faces? How flexible is the construct over multiple possible crises? What is the appropriate balance of investment between force size and capability modernization? Secretary Mattis appears to prioritize capability modernization. Yet concerns about force overstretch due to high operations tempos over the past 15 years have prompted some observers to note that investments in additional forces may be necessary, especially given that contending with any one of the 5 key national security challenges in the NDS might be significantly military manpower intensive. How might DOD raise such a force while maintaining its standards? How do the tradeoffs between capability and capacity relate to the threats and scenarios undergirding the NDS? Will the United States be able to retain its alliances in their current forms while attracting new partners? One critical aspect of the strategic competition with China and Russia is their respective abilities to cause other international actors to doubt, if not reject, U.S. leadership. Should the United States prove unable to counter those challenges to American influence, how might that impact DOD’s ability to effectively compete with each? How reliant is the strategy on our current allies and how might the United States seek to cultivate stronger and additional partners? What are the strategic and programmatic implications of the de-prioritization of climate change? Climate change and its national security ramifications were explicitly recognized by the Obama Administration as factors affecting the future global security environment and thus impacted capability and infrastructure investments. What, if any, programs or missions will be de-prioritized as a result of this decision? What are the security implications of these choices if they are made?

Feb 5, 2018

The 2018 National Defense Strategy: Fact Sheet

[SUPPRESS] On January 19, 2018, Secretary of Defense Mattis released the unclassified summary of the Department of Defense’s (DOD) first congressionally mandated National Defense Strategy (NDS). In addition to stating DOD’s approach to contending with current and emerging national security challenges, the NDS is also intended to articulate the overall strategic rationale for programs and priorities contained within the FY2019-FY2023 budget requests. Overall, the document maintains that the strategic environment in which the United States must operate is one characterized by the erosion of the rules-based international order, which has produced a degree of strategic complexity and volatility not seen “in recent memory” (p. 1). As a result, the document argues, the United States must bolster its competitive military advantage—which the NDS sees as having eroded in recent decades—relative to the threats posed by China and Russia. It further maintains that “inter-state strategic competition, not terrorism, is now the primary concern in U.S. national security.” (p. 1)

Feb 5, 2018

What Causes a Recession?

At 104 months, the current economic expansion is already the third longest on record, and it will equal the second longest if it persists until April. This expansion, like all previous ones, will eventually end and be followed by a recession. Few economists are forecasting a recession in 2018, but recessions are notoriously hard to predict even a few months beforehand. For background, see CRS In Focus IF10411, Introduction to U.S. Economy: The Business Cycle and Growth, by Jeffrey M. Stupak. As can be seen in Figure 1, previous expansions vary greatly in length but have recently been longer. Dating back to the 1850s, only five have lasted over five years, including the last three. Figure 1. Length of Previous Expansions Since World War II / Source: The National Bureau of Economic Research (NBER) What will bring this economic expansion to an end? In the words of Janet Yellen, “it’s a myth that expansions die of old age.” Instead, a look at the historical record points to a few culprits that have killed off expansions since the end of World War II—an overheating economy that results in accelerating price inflation, a financial bubble, or an external “shock” to the economy, such as an oil price spike. The longer an expansion lasts, the more likely it will fall victim to one of these killers. What preceded this expansion—the “Great Recession”—could potentially make this business cycle unique, however. Overheating Recessions can be caused by an overheated economy, in which demand outstrips supply, expanding past full employment and the maximum capacity of the nation’s resources. Overheating can be sustained temporarily, but eventually spending will fall in order for supply to catch up to demand. A classic overheating economy has two key characteristics—rising inflation and unemployment below its “natural” rate. As shown in Figure 2, each recession since World War II has featured a run-up in inflation before the recession began, except for the 1953-1954 recession. Some of these increases were larger than others, however. The last three recessions were preceded by increases in the inflation rate of under 3 percentage points, while five of the eight before then featured an increase in inflation of at least 3 percentage points. (The largest increase was the 8 percentage point increase before the 1980 recession.) Figure 2. Inflation Rate (Consumer Price Index) / Source: Bureau of Labor Statistics (BLS). Note: Recessions are shaded. As shown in Figure 3, unemployment fell to 5% or lower before all but two recessions since World War II, and fell below 4% in four of five recessions before the 1970s, but only one since (before the 2001 recession). There is not one threshold unemployment rate that has consistently triggered a recession because most economists believe that the natural rate of unemployment has not been constant over time; for example, CBO estimates that it has varied from 4.7% to 6.3% since 1949. In each recession since World War II except for 1981-1982, unemployment was lower than CBO’s estimate of the natural rate before the recession began. Figure 3. Unemployment Rate / Source: BLS, NBER. Note: Recessions are shaded. The recessions beginning in 1957, 1969, and 1973 fit the classic overheating story well. The rest featured too high of an unemployment rate or too small of a run-up in inflation before the recession. For example, unemployment was above 7% when the 1981-1982 recession started. Does today’s economy show signs of classic overheating? To date, this expansion has featured a very low unemployment rate, but has not featured rising inflation. In the six previous expansions, the unemployment rate has only fallen as low as the current rate (4.1%) once—from 1999 to 2000. In that case, the economy entered a recession 18 months later. Thus, today’s low unemployment rate is not necessarily signaling an immediate recession. Asset Bubbles The last two recessions were arguably caused by overheating of a different type. While neither featured a large increase in price inflation, both featured the rapid growth and subsequent bursting of asset bubbles. The 2001 recession was preceded by the “dot-com” stock bubble, and the 2007-2009 recession was preceded by the housing bubble. The rapid rise in the stock market in 2017 and recent increases in stock market valuation metrics have led some observers to question whether there is currently a bubble. Unfortunately, it is difficult to accurately identify bubbles and to predict when they will cause problems for the broader economy. Because stock prices are volatile, large increases and declines over, say, 12-month periods are not uncommon, and the latter do not always coincide with recessions, as shown in Figure 4. Figure 4. 12-Month Real Change in S&P 500 / Source: Congressional Research Service based on NBER, BLS, Yahoo! Finance data. Note: Recessions are shaded. All recessions feature stock market downturns, but not all downturns are caused by bubbles; instead, deteriorating economic conditions reduce corporations’ future profitability, which lowers stock prices. Bubbles cause broader macroeconomic damage when they result in a substantial reallocation of physical capital and sectoral employment that must then be reversed when the bubble bursts—the liquidation of failed dot-com firms or the decline in new housing starts and construction employment during the foreclosure crisis, for example. Economic Shocks Recessions are not always caused by overheating. They can also be triggered by negative, unexpected, external events, which economists refer to as “shocks” to the economy that disrupt the expansion. Shocks can potentially happen at any point in the expansion, but a longer expansion provides more opportunities for shocks. A classic example of a shock is the oil shocks of the 1970s and 1980s. They help explain why those recessions featured high inflation despite unemployment being relatively high. Shocks could also stem from the spillover effects of an economic crisis abroad, although these are typically not large enough relative to the U.S. economy to cause a recession. The U.S. economy has benefited from the absence of large external shocks in the past couple of years, which has been supportive of growth and low inflation. Unlike overheating, there is little advanced warning as to when a shock may occur.

Feb 2, 2018

Evolving Assessments of Human and Natural Contributions to Climate Change

This CRS report provides context for the Administration’s Climate Science Special Report (October 2017) by tracing the evolution of scientific understanding and confidence regarding the drivers of recent global climate change.

Feb 1, 2018

Real Wage Trends, 1979 to 2016

Wage earnings are the largest source of income for many workers, and wage gains are a primary lever for raising living standards. Reports of stagnant median wages have therefore raised concerns among some that economic growth over the last several decades has not translated into gains for all worker groups. To shed light on recent patterns, this report estimates real (inflation-adjusted) wage trends at the 10th, 50th (median), and 90th percentiles of the wage distributions for the workforce as a whole and for several demographic groups, and it explores changes in educational attainment and occupation for these groups over the 1979 to 2016 period. Key findings of this report include the following: Real wages rose at the top of the distribution, whereas wages stagnated or fell at the bottom. Real (inflation-adjusted) wages at the 90th percentile increased over 1979 to 2016 for the workforce as a whole and across sex, race, and Hispanic ethnicity. However, at the 90th percentile, wage growth was much higher for white men and women and lower for black and Hispanic men. By contrast, middle (50th percentile) and bottom (10th percentile) wages grew to a lesser degree (e.g., women) or declined in real terms (e.g., men). The gender wage gap narrowed, but other gaps did not. From 1979 to 2016, the gap between the women’s median wage and men’s median wage became smaller. Gaps expanded between the median wages for black and white workers and for Hispanic and non-Hispanic workers over the same period. Real wages fell for workers with lower levels of educational attainment and rose for highly educated workers. Wages for workers with a high school diploma or less education declined in real terms at the top, middle, and bottom of the wage distribution, whereas wages rose for workers with at least a college degree. The wage value of a college degree (relative to a high school education) increased markedly over 1979-2000. The college wage premium has leveled since that time, but it remains high. High-wage workers, as a group, benefited more from the increased payoff to a college degree because they are the best educated and had the highest gains in educational attainment over the 1979 to 2016 period. Education and occupation patterns appear to be important to wage trends. With few exceptions, worker groups studied in this report were more likely to have earned a bachelor’s or advanced degree in 2016 than workers in 1979, with the gains in college degree attainment being particularly large for workers in the highest wage groups. For some low- and middle-wage worker groups, however, these educational gains were not sufficient to raise wages. Occupational categories of workers appear to matter as well and may help explain the failure of education alone to raise wages. The focus of this report is on wage rates and changes at selected wage percentiles, with some attention given to the potential influence of educational attainment and the occupational distribution of worker groups on wage patterns. Other factors are likely to contribute to wage trends over the 1979 to 2016 period as well, including changes in the supply and demand for workers, labor market institutions, workplace organization and practices, and macroeconomic trends. This report provides an overview of how these broad forces are thought to interact with wage determination, but it does not attempt to measure their contribution to wage patterns over the last four decades. For example, changes over time in the supply and demand for workers with different skill sets (e.g., as driven by technological change and new international trade patterns) is likely to affect wage growth. A declining real minimum wage and decreasing unionization rates may lead to slower wage growth for workers more reliant on these institutions to provide wage protection, whereas changes in pay-setting practices in certain high-pay occupations, the emergence of superstar earners (e.g., in sports and entertainment), and skill-biased technological changes may have improved wage growth for some workers at the top of the wage distribution. Macroeconomic factors, business cycles, and other national economic trends affect the overall demand for workers, with implications for aggregate wage growth, and may affect employers’ production decisions (e.g., production technology and where to produce) with implications for the distribution of wage income. These factors are briefly discussed at the end of the report.

Jan 30, 2018

Taxes and Fees Enacted as Part of the Affordable Care Act

Jan 26, 2018

AT&T-Time Warner Merger Overview

Jan 26, 2018

2017 Disaster Supplemental Appropriations: Overview

According to the National Oceanographic and Atmospheric Administration (NOAA), 2017 was “a historic year of weather and climate disasters” for the United States. A combination of deadly hurricanes and wildfires were among the 57 major disasters declared under the Stafford Act in 2017. The series of supplemental appropriations requested and provided in the wake of 2017’s hurricanes and wildfires are the latest exercise of one congressional role in disaster situations—to exercise “the power of the purse” to provide relief to state and local governments overwhelmed by disaster response and recovery needs, fund certain relief for individuals and small businesses, and to repair damage to federal facilities. Two supplemental appropriations bills have been enacted in response to Administration requests made in September and October 2017 in the wake of these incidents, providing $34.5 billion in new budget authority and canceling $16.0 billion in debt held by the National Flood Insurance Fund. The Administration made a third supplemental appropriations request for disaster relief and recovery funding in November 2017, seeking roughly $44.0 billion in additional funding. In response, in December 2017, the House of Representatives passed H.R. 4667, which included $81.0 billion in additional funding, as well as other matters. H.R. 4667 is currently awaiting action in the Senate. This report provides a detailed breakdown of the requested, enacted, and proposed supplemental funding in each of these measures, and provides a contact listing for CRS experts on the funded relief and recovery programs. As Congress weighs this legislation and chooses how to proceed, it faces a variety of issues, including the appropriate application of budget discipline when disaster relief is requested from the federal government, the appropriate breadth and speed of the response, and how to ensure that the funding provided is not spent on wasteful or fraudulent endeavors. This report also briefly explores those issues.

Jan 25, 2018

Security of Air Cargo Shipments, Operations, and Facilities

U.S. policies and strategies for protecting air cargo have focused on two main perceived threats: the in-flight detonation of explosives concealed in an air cargo shipment and the hijacking of a large all-cargo aircraft for use as a weapon to attack a ground target such as a major population center, critical infrastructure, or a critical national security asset. Additionally, there is concern that chemical, biological, or radiological agents or devices that could be used in a mass-casualty attack in the United States might be smuggled as international air cargo. The October 2010 discovery of two explosive devices being prepared for loading on U.S.-bound all-cargo aircraft overseas prompted policy debate over air cargo security measures and spurred debate regarding targeted risk-based screening versus comprehensive 100% screening of all air cargo, including shipments that travel on all-cargo aircraft. In coordination with industry, Customs and Border Protection (CBP) and the Transportation Security Administration (TSA) have been pilot testing a risk-based approach to vet air cargo shipments known as the Air Cargo Advance Screening (ACAS) system, with a particular emphasis on improving scrutiny of overseas shipments. In the 115th Congress, the Department of Homeland Security Authorization Act (H.R. 2825), as well as the Air Cargo Security Improvement Act of 2017 (H.R. 4176), would require the full deployment of ACAS for inbound international air cargo. With respect to protecting passenger airliners from explosives placed in cargo, policy debate focused on whether risk-based targeting strategies and methods such as ACAS should be used to identify shipments requiring additional scrutiny or whether all or most shipments should be subject to more intensive physical screening. While the air cargo industry and TSA argued for risk-based approaches, Congress mandated 100% screening of all cargo placed on passenger aircraft using approved methods in 2007. To meet this requirement, TSA established a voluntary Certified Cargo Screening Program (CCSP) that allows TSA-approved cargo screening, carried out by industry personnel, to take place at off-airport manufacturing sites, warehouses, distribution centers, and freight transfer facilities. This off-airport screening is coupled with strict chain-of-custody measures designed to maintain the integrity of screened cargo. To increase flexibility under CCSP, there has been recent interest in expanding the role of canine explosives detection teams to screen air cargo, and industry has advocated for the use of third-party canine teams, particularly at off-airport air cargo screening facilities. H.R. 2825 would direct TSA to develop standards for third-party canine explosives screening for air cargo. A number of other policies under consideration in Congress include cooperative efforts with international partners and industry stakeholders; the implementation challenges and effectiveness of risk-based targeting approaches like ACAS; TSA oversight of the Certified Cargo Screening Program (CCSP); the feasibility and challenges of using third-party canine teams for explosives screening; and the costs and benefits of requiring blast-resistant cargo containers to protect aircraft from in-flight explosions in cargo holds.

Jan 24, 2018

Government Contract Bid Protests In Brief: Analysis of Legal Processes and Recent Developments

Suppressed Summary –Terms for CRS Search Engine Procurement Government contract Bid protest Federal Acquisition Regulation (FAR) Competition in Contracting Act of 1984 (CICA) U.S. Court of Federal Claims (COFC) Government Accountability Office (GAO) Automatic stay Procuring agency

Jan 19, 2018

Countering America’s Adversaries Through Sanctions Act (CAATS Act) Deadlines, Time Frames, and Start Dates

Jan 11, 2018

Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) and Selected Policy Issues

Some observers assert the financial crisis of 2007-2009 revealed that excessive risk had built up in the financial system, and that weaknesses in regulation contributed to that buildup and the resultant instability. In response, Congress passed the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203; the Dodd-Frank Act), and regulators strengthened rules under existing authority. Following this broad overhaul of financial regulation, some observers argue certain changes are an overcorrection, resulting in unduly burdensome regulation. The Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) was reported by the Senate Committee on Banking, Housing, and Urban Affairs on December 18, 2017. S. 2155 would modify Dodd-Frank provisions, such as the Volcker Rule (a ban on proprietary trading and certain relationships with investment funds), the qualified mortgage criteria under the Ability-to-Repay Rule, and enhanced regulation for large banks; provide smaller banks with an “off ramp” from Basel III capital requirements—standards agreed to by national bank regulators as part of an international bank regulatory framework; and make other changes to the regulatory system. Most changes proposed by S. 2155 as reported can be grouped into one of four issue areas: (1) mortgage lending, (2) regulatory relief for “community” banks, (3) credit reporting, and (4) regulatory relief for large banks. Title I of S. 2155 aims to relax or provide exemptions to certain mortgage lending rules. For example, it would create a new compliance option for mortgages originated and held by banks and credit unions with less than $10 billion in assets to be considered qualified mortgages for the purposes of the Ability-to-Repay Rule. In addition, depositories that originated few mortgages would be exempt from certain reporting requirements. Certain mortgages under $400,000 would be exempt from certain appraisal requirements. A number of Title II provisions are intended to provide regulatory relief to community banks. For example, banks with under $10 billion in assets would be exempt from the Volcker Rule and from existing risk-based capital ratio and leverage ratio requirements, provided they meet a Community Bank Leverage Ratio. Banks under $5 billion would face reduced reporting requirements. The asset-size threshold at which banks become subject to less frequent examination and at which bank holding companies become exempt from the same capital requirements as depository subsidiaries (known as the “Collins Amendment”) would be raised from $1 billion to $3 billion. Title III provisions would subject credit reporting agencies (CRAs) to additional requirements, including requirements to generally provide fraud alerts for consumer files for at least a year and to allow consumers to place security freezes on their credit reports. In addition, CRAs would have to exclude certain defaulted private student loan debt from consumers’ credit reports and certain medical debt from veterans’ credit reports. Title IV would alter the criteria used to determine which banks are subject to enhanced prudential regulation, releasing certain banks from the regime. Banks designated as globally systemically important banks and banks with more than $250 billion in assets would still be automatically subjected to enhanced regulation. Banks with between $100 billion and $250 billion in assets would be subject only to supervisory stress tests, and the Fed would have discretion to apply other individual enhanced prudential provisions to these banks. Banks with assets between $50 billion and $100 billion would no longer be subject to enhanced regulation, except for the risk committee requirement. In addition, leverage requirements would be relaxed for large custody banks, and certain municipal bonds would be allowed to count toward large banks’ liquidity requirements. Proponents of S. 2155 assert it would provide necessary and targeted regulatory relief, foster economic growth, and provide increased consumer protections. Opponents of the bill argue it would needlessly pare back important Dodd-Frank protections to the benefit of large and profitable banks.

Jan 10, 2018

Protecting Consumers and Businesses from Fraudulent Robocalls

The Telephone Consumer Protection Act of 1991 (TCPA) regulates robocalls. A robocall, also known as “voice broadcasting,” is any telephone call that delivers a pre-recorded message using an automatic (computerized) telephone dialing system, more commonly referred to as an automatic dialer or “autodialer.” Robocalls are popular with many industry groups, such as real estate, telemarketing, and direct sales companies. The majority of companies who use robocalling are legitimate businesses, but some are not. Those illegitimate businesses may not just be annoying consumers—they may also be trying to defraud them. The Federal Trade Commission (FTC) and Federal Communications Commission (FCC) regularly cite “unwanted and illegal robocalls” as their number-one complaint category. The FTC received more than 1.9 million complaints filed in the first five months of 2017 and about 5.3 million in 2016. The FCC has stated that it gets more than 200,000 complaints about unwanted telemarketing calls each year. These statistics, as well as complaints to congressional offices, have spurred Congress to hold hearings and introduce legislation on the issue in an effort to protect consumers. Congressional policymakers have proposed a number of changes to existing law and regulations to address the problem of illegal robocalls under the TCA, many of which are intended to defraud. These changes would, for example, expand the definition of what a robocall is, increase penalties for illegal spoofing, and improve protection of seniors from robocall scams. As yet, none of these proposals has become law. On August 19, 2016, a 60-day Robocall “Strike Force” convened, culminating in the testing of a Do Not Originate (DNO) Registry to stop unwanted calls from reaching customers. The intent of the registry is to block fraudulent calls before they can reach a consumer. With the FCC’s permission, the Strike Force performed a trial of this concept. The trial was considered a success by the Strike Force and the FCC, reducing calls associated with one particular scam by about 90% in the third quarter of 2016. In November 2017, the FCC promulgated rules on the creation and use of the DNO Registry. The new rules explicitly allow service providers to block calls from two categories of number (1) numbers that the subscriber has asked to be blocked, such as “in-bound only” numbers (numbers that should not ever originate a call); and (2) unassigned numbers, as the use of such a number indicates that the calling party is intending to defraud a consumer. Notwithstanding the efforts above, based on their long history, scammers appear determined to continue their attempts to defraud consumers. Robocalls make these efforts easier. The FTC asserts that law enforcement on its own cannot completely solve the problem of robocalls. Technological solutions, including robust call-blocking technology, likely will also be required. The DNO Registry, a technology solution that has been proven to significantly decrease robocalls, is supported by most stakeholders, but concerns remain with legitimate telemarketers who fear it may negatively impact them. The FCC intends to address these concerns in the first half of 2018. The impacts of the FTC initiatives on fraudulent robocalls, and the resulting impacts in the telemarketing industry, may continue to be oversight issues for Congress.

Jan 5, 2018

CRS Products on North Korea

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Dec 28, 2017

Financial Stability Oversight Council (FSOC): Structure and Activities

The Financial Stability Oversight Council (FSOC) and its Office of Financial Research (OFR) were established by the Dodd-Frank Wall Street Reform and Consumer Protection Act (P.L. 111-203) to address several potential sources of systemic risk. Some observers argue that communication and coordination of financial regulators was insufficient to prevent the financial crisis of 2008. To foster coordination and communication, the FSOC assembles the heads of federal financial regulators, representatives from state regulatory bodies, and an independent insurance expert in a single venue. The OFR supports the FSOC with data collection, research, and analysis. The FSOC does not generally have direct regulatory authority; its role is to make policy recommendations to member agencies where authority already exists or to Congress where additional authority is needed. However, it is responsible for monitoring financial stability and designating nonbank financial companies and financial market utilities as systemic, which subjects those entities to heightened prudential regulation and the direct regulatory authority of other agencies. The FSOC considers a company to pose a threat to financial stability if a company’s financial distress or activities could be transmitted to other firms or markets, causing broader disruptions to financial intermediation or other financial market functions. Three of the many relevant factors used for designation include leverage, interconnectedness with other systemically important nonbank financial institutions (SIFIs), and whether a primary prudential regulator already has responsibility for the SIFI and the activity. Additional FSOC and OFR responsibilities include collection and analysis of financial data, issuing nonbinding recommendations to member agencies, facilitating the resolution of jurisdictional issues among member agencies, issuing a congressionally mandated annual report, and reviewing Consumer Financial Protection Bureau (CFPB) rules under some circumstances. The FSOC is composed of 15 members: 10 voting members and 5 nonvoting members. Voting members include the chair of the FSOC (Treasury Secretary), heads of the banking agencies (Federal Deposit Insurance Corporation, Federal Reserve Board, Office of the Comptroller of the Currency, and the National Credit Union Administration), Securities and Exchange Commission, Commodity Futures Trading Commission, Federal Housing Finance Agency, CFPB, and an independent insurance expert appointed by the President. Nonvoting members include the directors of the OFR and Federal Insurance Office, and state regulatory representatives, one each for insurance, banking, and securities. If an agency is led by a commission or board, the chair is a member, not other commissioners or board members. Additionally, some FSOC actions require a supermajority council vote and an affirmative vote by the chair. The FSOC also monitors regulatory gaps and overlaps to identify emerging sources of systemic risk. Regulatory gaps and overlaps occur in part because agencies have different policy missions and authorities. The financial regulatory architecture includes agencies that issue and enforce behavioral mandates and bans, balance a set of risky but permissible activities, and administer an emergency program or participate in the financial system similarly to a private firm. These diverse missions continue to create regulatory gaps and overlaps. In the current Congress, the House has passed the Financial CHOICE Act of 2017 (H.R. 10) to amend the FSOC. The bill would repeal the FSOC’s ability to designate entities as systemic; eliminate the OFR; subject the FSOC to the congressional appropriations process; repeal the FSOC’s ability to set aside CFPB regulations; and modify council membership, voting procedures, open meeting requirements, and other duties. Additionally, the Financial Stability Oversight Council Insurance Member Continuity Act (P.L. 115-61) became law on September 27, 2017, and modified the term of the FSOC’s independent insurance member.

Dec 22, 2017

Tailoring Bank Regulations: Differences in Bank Size, Activities, and Capital Levels

Banking organizations differ across a multitude of characteristics. The amount of assets they hold, the services they provide, and how they secure funding are just a few examples. These differences affect an individual organization’s risk of failure and the risk its failure or distress could pose to the overall financial system. Policymakers generally agree that certain banking regulations should be tailored to account for such differences, and as a result, banks are currently subject to or exempt from various regulations if they meet certain criteria. To what degree existing bank classifications adequately tailor regulation and how tailoring should be designed and implemented are debated issues. This report examines existing and proposed bank regulatory classifications, legislation that proposes to change existing classifications or create new ones, and, the characteristics of bank organizations that fall under existing and proposed classifications. Banks are classified in a variety of ways. Some are informal classifications that refer to widely understood differences between community and Wall Street banks—two commonly recognized types of banks—but that are unofficial classifications that do not affect banking regulations. For example, community banks are understood to be small institutions that meet the credit needs of a community and Wall Street banks are understood to be large, complex institutions that could individually pose risk to the financial system. Existing regulatory classifications are official classifications applied to banks that meet some criteria and determine whether a bank is subject to certain regulations. In addition, several existing proposals would establish new regulatory classifications and criteria. Often (but not always) existing criteria are size-based thresholds that subject a bank to more stringent regulation once it exceeds a certain amount of assets. Proponents of this system argue simple, “bright line” rules create certainty and transparency and that asset size is an adequate measurement to identify which institutions should or should not be subject to certain regulation. Critics argue it too narrowly focuses on one aspect of a bank organization, and thus may subject certain banks to inappropriate regulation. Critics may argue that new or additional criteria based on other characteristics (e.g., the business activities a bank engages in or the amount of capital it holds) should be implemented. To investigate how well certain criteria would appropriately tailor regulation, it is informative to examine characteristics of banking organizations and compare banks that meet some criteria to those that do not. This report examines characteristics such as asset size; concentrations in loans, deposits, trading assets, and trading liabilities; activity in derivatives; and capital levels. The analysis generally suggests that these characteristics are correlated; larger banks tend to be involved in more business lines and hold less capital whereas smaller banks tend to be more focused on making loans and taking deposits and hold more capital. However, the large number of banks and the high degree of variation across multiple variables means that no set of criteria is easily and objectively identifiable as the best means of tailoring regulations. In the 115th Congress, numerous bills—including H.R. 10, H.R. 1116, H.R. 1948, H.R. 2121, H.R. 3072, H.R. 3312, S. 1002, S. 1284, S. 1499, and S. 1893—would change the existing system of bank regulation tailoring. Some would alter existing size-based classifications or introduce new sized-based criteria, and others would establish new activities-based or capital-based criteria.

Dec 21, 2017

Educational Assessment and the Elementary and Secondary Education Act

The Elementary and Secondary Education Act (ESEA), as amended by the Every Student Succeeds Act (ESSA; P.L. 114-95), specifies the requirements for assessments that states must incorporate into their state accountability systems to receive funding under Title I-A. While many of the assessment requirements of the ESEA have not changed from the requirements put into place by the No Child Left Behind Act (NCLB; P.L. 107-110), the ESSA provides states some new flexibility in meeting them. This report has been prepared in response to congressional inquiries about the revised educational accountability requirements in the ESEA, enacted through the ESSA, and implications for state assessment systems that are used to meet these requirements. While these changes have the potential to add flexibility and nuance to state accountability systems, for these systems to function effectively the changes need to be implemented in such a way as to maintain the validity and reliability of the required assessments. To this end, the report also explores current issues related to assessment and accountability changes made by the ESSA. The ESEA continues to require that states implement high-quality academic assessments in reading, mathematics, and science. States must test all students in reading and mathematics annually in grades 3 through 8 and once in high school. States must also test all students in science at least once within three grade spans (grades 3-5, 6-9, and 10-12). Assessments in other grades and subject areas may be administered at the discretion of the state. All academic assessments must be aligned with state academic standards and provide “coherent and timely” information about an individual student’s attainment of state standards and whether the student is performing at grade level (e.g., proficient). The reading and mathematics assessment results must be used as indicators in a state’s accountability system to differentiate the performance of schools. State accountability systems continue to be required to report on student proficiency on reading and mathematics assessments. However, a singular focus on student proficiency has been criticized for many reasons, most notably that proficiency may not be a valid measure of school quality or teacher effectiveness. It is at least partially a measure of factors outside of the school’s control (e.g., demographic characteristics, prior achievement), and may result in instruction being targeted toward students just below the proficient level, possibly at the expense of other students. In response, the ESSA provides the option for student achievement to be measured based on proficiency and student growth. While measures of student growth remain optional, prior to the enactment of the ESSA, states were only able to include measures of student growth in their accountability systems if they received a waiver from the U.S. Department of Education to do so. The ESSA also authorizes two new assessment options to meet the requirements discussed above. First, in selecting a high school assessment for reading, mathematics, or science (grades 10-12), a local educational agency (LEA) may choose a “nationally-recognized high school academic assessment,” provided that it has been approved by the state. Second, the ESSA explicitly authorizes the use of “computer adaptive assessments” as state assessments. Previously, it was unclear whether computer adaptive assessments met the requirement that statewide assessments be the same assessments used to measure the achievement of all elementary and secondary students. Computer adaptive assessments adjust to a student’s individual responses, which means that all students will not see the exact same questions. The ESSA added language clarifying that students do not have to be offered the same assessment items on a computer adaptive assessment. The ESSA also authorizes an exception to state assessment requirements for 8th grade students taking advanced mathematics in middle school that permits them to take an end-of-course assessment rather than the 8th grade mathematics assessment, provided certain conditions are met. The ESSA added specific provisions related to the assessment of “students with the most significant cognitive disabilities” that were previously addressed only in regulations. It made changes in how English learners (ELs) have their assessment results included in states’ accountability systems as well. Additionally, the ESEA as amended through the ESSA now requires LEAs to notify parents of their right to receive information about assessment opt-out policies in the state. If excessive numbers of students opt out of state assessments, however, it may undermine the validity of a state’s accountability system. States continue to be required to administer 17 assessments annually to meet the requirements of Title I-A. These requirements have been implemented within a crowded landscape of state, local, and classroom uses of educational assessments, raising concerns about over-testing of students. The ESSA added three new provisions related to testing burden: (1) each state may set a target limit on the amount of time devoted to the administration of assessments; (2) LEAs are required to provide information on the assessments used, including the amount of time students will spend taking them, and (3) the Secretary of Education may reserve funds from the State Assessment Grant program for state and LEA assessment audits.

Dec 19, 2017

Brand USA: Congressional Appropriators and Administration Disagree on Funding Cuts for U.S. Tourism Promotion

Dec 14, 2017

Nonimmigrant (Temporary) Admissions to the United States: Policy and Trends

U.S. law provides for the temporary admission of foreign nationals, who are known as nonimmigrants. Nonimmigrants are admitted for a designated period of time and a specific purpose. There are 24 major nonimmigrant visa categories, which are commonly referred to by the letter and numeral that denote their subsection in the Immigration and Nationality Act (INA); for example, B-2 tourists, E-2 treaty investors, F-1 foreign students, H-1B temporary professional workers, J-1 cultural exchange participants, or S-5 law enforcement witnesses and informants. A U.S. Department of State (DOS) consular officer (at the time of application for a visa) and a Department of Homeland Security (DHS) inspector (at the time of application for admission) must be satisfied that an alien is entitled to nonimmigrant status. The burden of proof is on the applicant to establish eligibility for nonimmigrant status and the type of nonimmigrant visa for which the application is made. Both DOS consular officers (when the alien is applying for nonimmigrant status abroad) and DHS inspectors (when the alien is entering the United States) must also determine that the alien is not ineligible for a visa under the INA’s “grounds for inadmissibility,” which include criminal, terrorist, and public health grounds for exclusion. In FY2016, DOS consular officers issued 10.4 million nonimmigrant visas, down from a peak of 10.9 million in FY2015. There were approximately 8 million tourism and business visas, which comprised more than three-quarters of all nonimmigrant visas issued in FY2016. Other notable groups were temporary workers (883,000, or 8.5%), students (513,000, or 4.9%), and cultural exchange visitors (380,000, or 3.7%). Visas issued to foreign nationals from Asia made up 45% of nonimmigrant visas issued in FY2016, followed by North America (20%), South America (17%), Europe (11%), and Africa (5%). U.S. Customs and Border Protection (CBP) inspectors approved 181.3 million temporary admissions of foreign nationals to the United States during FY2016. CBP data enumerate arrivals, thus counting frequent travelers multiple times. Mexican nationals with border crossing cards and Canadian nationals traveling for business or tourist purposes accounted for the vast majority of admissions, representing approximately 104.7 million entries in FY2016. In FY2015, California and Florida were the top two destination states for nonimmigrant visa holders, with each state being listed as the destination for more than 10 million nonimmigrant admissions. In addition, 10 other states and the territory of Guam were listed as the destination for more than 1 million nonimmigrant admissions each in that year. Current law and regulations set terms for nonimmigrant lengths of stay in the United States, typically include foreign residency requirements, and often limit what aliens are permitted to do while in the country (e.g., engage in employment or enroll in school). Some observers assert that the law and regulations are not uniformly or rigorously enforced. Achieving an optimal balance among policy priorities, such as ensuring national security, facilitating trade and commerce, protecting public health and safety, and fostering international cooperation, remains a challenge.

Dec 8, 2017