CRS Reports

Department of Defense Use of Other Transaction Authority: Background, Analysis, and Issues for Congress

The Department of Defense (DOD) obligates more than $300 billion annually to buy goods and services, and to support research and development. Most of these acquisitions are governed by procurement statutes and regulations found in Title 10 (and parts of other select titles) of the United States Code, the Federal Acquisition Regulation (FAR), and the Defense Federal Acquisition Regulation Supplement. Under certain circumstances, DOD can enter into an other transaction (OT) agreement instead of a traditional contract. OT agreements are generally exempt from federal procurement laws and regulations. These exemptions grant government officials the flexibility to include, amend, or exclude contract clauses and requirements that are mandatory in traditional procurements (e.g., termination clauses, cost accounting standards, payments, audit requirements, intellectual property, and contract disputes). OT authorities also grant more flexibility to structure agreements in numerous ways, including joint ventures; partnerships; consortia; or multiple agencies joining together to fund an agreement encompassing multiple providers. Other transaction agreements are legally binding contracts; they are referred to as agreements to distinguish them from the traditional procurement contracts governed by the FAR and procurements laws. Other transaction authorities are set forth in two sections of law: 10 U.S.C. 2371—granting authority to use OTs for basic, applied, and advanced research projects. 10 U.S.C. 2371b—granting authority to use OTs for prototype projects and follow-on production. Under this authority, a prototype project can only be conducted if at least one nontraditional defense contractor significantly participates in the project; all significant participants are small businesses or nontraditional defense contractors; at least one-third of the total cost of the prototype project is provided by nongovernment participants; or the senior procurement acquisition official provides a written justification for using an OT. Follow-on production can only be conducted when the underlying prototype OT was competitively awarded, and the prototype project was successfully completed. OTs have the potential to provide significant benefits to DOD, including attracting nontraditional contractors with promising technological capabilities to work with DOD, establishing a mechanism to pool resources with other entities to facilitate development of, and obtain, state-of-the-art dual-use technologies, and offering a unique mechanism for DOD to invest in, and influence the direction of, technology development. A number of analysts warn that along with the potential benefits come significant risks, including potentially diminished oversight and exemption from laws and regulations designed to protect government and taxpayer interests. In FY2017, DOD obligated $2.1 billion on prototype OT agreements, representing less than 1% of contract obligations for the year. However, the use of OTs is expected to grow at a rapid pace, due in part to recent statutory changes expanding other transaction authorities. A number of analysts and officials have raised concerns that if DOD uses OTs in ways not intended by Congress—or is perceived to abuse the authority—Congress could clamp down on the authority. Generally, DOD lacks authoritative data that can be used to measure and evaluate the use of other transaction authorities.

Feb 22, 2019

Trump Administration Tariff Actions (Sections 201, 232, and 301): Frequently Asked Questions

The Constitution grants Congress the sole authority over the regulation of foreign commerce. Over the past several decades, Congress has authorized the President to adjust tariffs and other trade restrictions in certain circumstances through specific trade laws. Using these delegated authorities under three trade laws, President Trump has imposed increased tariffs, largely in the range of 10% - 25%, on a variety of U.S. imports to address concerns related to national security, injury to competing industries, and China’s trade practices on forced technology transfer and intellectual property rights, among other issues. Several U.S. trade partners argue that these tariff actions violate existing U.S. commitments under multilateral and bilateral or regional trade agreements and have imposed tariffs on U.S. exports in retaliation. Congress continues to actively examine and debate these tariffs, and several bills have been introduced either to expand, limit, or revise existing authorities. U.S. Trade Laws Authorizing the President’s Tariff Actions Section 201 of the Trade Act of 1974—Allows the President to impose temporary duties and other trade measures if the U.S. International Trade Commission (ITC) determines a surge in imports is a substantial cause or threat of serious injury to a U.S. industry. Section 232 of the Trade Expansion Act of 1962—Allows the President to adjust imports if the Department of Commerce finds certain products are imported in such quantities or under such circumstances as to threaten to impair U.S. national security. Section 301 of the Trade Act of 1974—Allows the United States Trade Representative (USTR) to suspend trade agreement concessions or impose import restrictions if it determines a U.S. trading partner is violating trade agreement commitments or engaging in discriminatory or unreasonable practices that burden or restrict U.S. commerce. The President’s recent tariff actions raise a number of significant issues for Congress. These issues include the economic effects of tariffs on firms, farmers, and workers, and the overall U.S. economy, the appropriate use of delegated authorities in line with congressional intent, and the potential implications and impact of these measures for broader U.S. trade policy, particularly with respect to the U.S. role in the global trading system. The products affected by the tariff increases include washing machines, solar products, steel, aluminum, and numerous imports from China. Retaliatory tariffs are affecting several U.S. exports, including agricultural products such as soybeans and pork, motor vehicles, steel, and aluminum. Using 2017 values, U.S. imports subject to the increased tariffs accounted for 12% of annual U.S. imports, while exports subject to retaliatory tariffs accounted for 8% of annual U.S. exports. A pending Section 232 investigation on motor vehicle and parts imports could result in increased tariffs on more than $360 billion of imports, and the President has stated that additional tariffs could be imposed on imports from China absent a negotiated agreement to address certain Chinese trade practices of longstanding concern to the United States. U.S. Imports and Exports Affected by the Recent Tariff Actions / Sources: CRS analysis of U.S. import data from the U.S. Census Bureau and trade partner data from Global Trade Atlas IHS Markit. Although the consensus among most economists is that the tariffs are likely to have a negative effect on the U.S. economy overall, they may have both costs and benefits across different market sectors and actors. Import tariffs are effectively a tax on domestic consumption and thus increase costs for U.S. consumers and downstream industries that use products subject to tariffs. Retaliatory tariffs create disadvantages for U.S. exports in foreign markets, and can lead to fewer sales of U.S. products abroad and depressed prices. However, domestic producers who compete with affected imports can benefit by being able to charge higher prices for their goods. The Administration also argues the tariffs may have an indirect benefit if they result in tariff reductions by U.S. trading partners and lead to resolution of U.S. trade concerns affecting key sectors of the U.S. economy. Economic analyses of the tariff actions estimate a range of potential effects, but generally suggest a 0.1%-0.2% reduction in U.S. gross domestic product (GDP) growth annually owing to the actions to date. The economic effects of the President’s actions are likely to be central to ongoing congressional debate on legislation to alter the President’s tariff authority.

Feb 22, 2019

U.S.-Mexico-Canada (USMCA) Trade Agreement

Feb 22, 2019

The 2018 Farm Bill (P.L. 115-334): Summary and Side-by-Side Comparison

Congress sets national food and agriculture policy through periodic omnibus farm bills that address a broad range of farm and food programs and policies. The 115th Congress established the direction of farm and food policy for five years through 2023 by enacting the Agricultural Improvement Act of 2018, which the President signed into law on December 20, 2018, as P.L. 115-334. The Congressional Budget Office (CBO) has scored the cost of programs with mandatory spending—such as nutrition programs, commodity support programs, major conservation programs, and crop insurance—in the enacted 2018 farm bill at $867 billion over a 10-year budget window of FY2019-FY2028. This amount is budget neutral compared with CBO’s baseline scenario of an extension of 2014 farm bill (P.L. 113-79) programs with no changes. CBO estimates that over the five-year life of the law (FY2019-FY2023), outlays will amount to $428 billion, or $1.8 billion above the baseline scenario. In general, the new law largely extends many major programs through FY2023, thereby providing an overlay of continuity with the existing framework of agriculture and nutrition programs even as it modifies numerous programs, alters the amount and type of program funding that certain programs receive, and exercises discretion not to reauthorize some others. The enacted 2018 farm bill extends agricultural commodity support programs largely along existing lines while modifying them in various ways. For instance, producers acquire greater flexibility, compared with prior law, to switch between the Price Loss Coverage (PLC) and Agricultural Risk Coverage (ARC) revenue support programs. Producers may update program yields that factor into payments under PLC, while a newly added escalator could raise a commodity’s reference price under the program. The law also makes several modifications to ARC, including introducing a trend-adjusted yield that has the potential to raise ARC revenue guarantees for producers. Other changes include an increase in marketing assistance loan rates for a number of crops and revising the definition of family farm to include nephews, nieces, and cousins, making these individuals eligible for farm program payments. The law modifies dairy programs, including renaming the Margin Protection Program as Dairy Margin Coverage (DMC) and revising it to expand the margin protection between milk prices and feed costs that milk producers may purchase, as well as lowering the cost of this coverage for the first 5 million pounds of milk produced. Loan rates under the sugar program are increased. The Supplemental Nutrition Assistance Program (SNAP), the largest domestic nutrition assistance program, is reauthorized through FY2023. The law amends SNAP in a number of ways, including making changes to policies intended to reduced errors and fraud in SNAP, limiting fees that electronic benefit transfer processors may charge, and requiring nationwide online acceptance of SNAP benefits. Not included in the enacted bill are provisions in the House-passed bill that would have expanded work requirements and SNAP employment and training programs. The enacted bill does make certain modifications to these elements of the program, such as expanding the employment and training activities that a state may provide. Beyond SNAP, the law amends programs that distribute U.S. Department of Agriculture foods to low-income households, and it increases funding for The Emergency Food Assistance Program (TEFAP). The enacted farm bill addresses agricultural conservation on several fronts. For one, it reauthorizes the two largest working lands programs—the Environmental Quality Incentives Program (EQIP) and the Conservation Stewardship Program (CSP)—while reducing the overall funding allocated for these two programs. It also reauthorizes the primary land retirement program, the Conservation Reserve Program (CRP), allowing it to expand from a maximum of 24 million acres in FY2019 to 27 million acres in FY2023 while offsetting the added cost of any enrollment increase through lower payments to participants. The law also expands grazing and commercial uses on CRP acres and provides options for new and limited resource producers for transitioning CRP land. The enacted 2018 farm bill addresses a range of issues of importance to rural America, including combatting substance abuse by prioritizing assistance under certain programs, by expanding broadband access and providing additional authorized appropriations to that end and by amending the definition of rural by excluding certain groups of individuals from population-based criteria. The credit title increases the maximum loan amount for guaranteed loans, and these amounts are adjusted for inflation thereafter. The ceiling for direct loans is also raised, among other changes. Among the broad and diverse array of other provisions in the law are provisions intended to facilitate the commercial cultivation, processing, and marketing of hemp. Among these, hemp with low levels of the psychoactive ingredient in marijuana is excluded from the statutory definition of marijuana. The law creates a new hemp program under USDA oversight and makes hemp an eligible crop under the federal crop insurance program. The enacted 2018 farm bill also strengthens the National Organic Program and increases funding for organic agricultural research. Within the Miscellaneous title, the livestock industry is the object of several initiatives to guard against disease outbreaks and strengthen the response to such events. These include the establishment of the National Animal Disease Preparedness Response Program and the National Animal Vaccine and Veterinary Countermeasures Bank. The law also addresses USDA organizational changes in recent years, requiring USDA to reestablish the position of Under Secretary for Rural Development and creating a Rural Health Liaison, among other changes. Among its provisions, the Forestry title addresses the accumulation of biomass in many forests and the consequent risk of wildfires by establishing, reauthorizing, and modifying various assistance programs to promote wood use and biomass removal. With these programs, policies, and initiatives codified into law, the job that remains is for USDA, other federal agencies, and entities designated by the enacted farm law to implement the will of Congress through regulatory actions and other administrative measures. As implementation of the farm law proceeds, Congress may find it prudent to monitor this process and to provide direction and feedback through the exercise of its oversight responsibilities.

Feb 22, 2019

The Army’s Optionally Manned Fighting Vehicle (OMFV) Program: Background and Issues for Congress

Feb 22, 2019

Banking Policy Issues in the 116th Congress

Regulation of the banking industry has undergone substantial changes over the past decade. In response to the 2007-2009 financial crisis, many new bank regulations were implemented pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank Act; P.L. 111-203) or under the existing authorities of bank regulators to address apparent weaknesses in the regulatory regime. While some observers view those changes as necessary and effective, others argued that certain regulations were unjustifiably burdensome. To address those concerns, the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018 (P.L. 115-174) relaxed certain regulations. Opponents of that legislation argue it unnecessarily pared back important safeguards, but proponents of deregulation argue additional pare backs are needed. Meanwhile, a variety of economic and technological trends continue to affect banks. As a result, the 116th Congress faces many issues related to banking, including the following: Safety and Soundness. Banks are subject to regulations designed to reduce the likelihood of bank failures. Examples include requirements to hold a certain amount of capital (which enables a bank to absorb losses without failing) and the so-called Volcker Rule (a ban on banks’ proprietary trading). In addition, anti-money laundering requirements aim to reduce the likelihood banks will execute transactions involving criminal proceeds. Banks are also required to take steps to avoid becoming victims of cyberattacks. The extent to which these regulations (i) are effective, and (ii) appropriately balance benefits and costs is a matter of debate. Consumer Protection, Fair Lending, and Access to Banking. Certain laws are designed to protect consumers and ensure that lenders use fair lending practices. The Consumer Financial Protection Bureau has authorities to regulate for consumer protection. No consensus exists on whether current regulations strike an appropriate balance between protecting consumers while ensuring access to credit and justifiable compliance costs. In addition, whether Community Reinvestment Act regulations as currently implemented effectively and efficiently encourage banks to provide services in their areas of operation is an open question. Large Banks and “Too Big To Fail.” Regulators also regulate for systemic risks, such as those associated with very large and complex financial institutions that may contribute to systemic instability. Dodd-Frank Act provisions include enhanced prudential regulation for certain large banks and changes to resolution processes in the event one fails. In addition, bank regulators imposed additional capital requirements on certain large, complex banks. Subsequently, some argued that certain of these additional regulations were too broadly applied and overly stringent. In response, Congress reduced the applicability of the Dodd-Frank measures and regulators have proposed changes to the capital rules. Whether relaxing these rules will provide needed relief to these banks or unnecessarily pare back important safeguards is a debated issue. Community Banks. The number of small or “community” banks has declined substantially in recent decades. No consensus exists on the degree to which regulatory burden, market forces, and the removal of regulatory barriers to interstate branching and banking are causing the decline. What Companies Should Be Eligible for Bank Charters. To operate legally as a bank, an institution must hold a charter granted by a state or federal government. Traditionally, these are held by companies generally focused on and led by people with experience in finance. However, recently companies with a focus on technology are interested in having legal status as a bank, either through a charter from the Office of the Comptroller of the Currency or a state-level industrial loan company charter. Policymakers disagree over whether allowing these companies to operate as banks would create appropriately regulated providers of financial services or inappropriately extend government-backed bank safety nets and disadvantage existing banks. Recent Market and Economic Trends. Changing economic forces also pose issues for the banking industry. Some observers argue that increases in regulation could drive certain financial activities into a relatively lightly regulated “shadow banking” sector. Innovative financial technology may alter the way certain financial services are delivered. If interest rates rise, it could create opportunities and risks. Such trends could have implications for how the financial system performs and influence debates over appropriate banking regulations.

Feb 21, 2019

Hong Kong’s Legislative Council (Legco)

Feb 21, 2019

2019 Tax Filing Season (2018 Tax Year): Examples of Deducting Interest on Mortgage Debt and Home Equity Loans

Feb 21, 2019

The Defense Department and 10 U.S.C. 284: Legislative Origins and Funding Questions

Introduction On February 15, President Donald J. Trump confirmed recent reports that described the Administration’s consideration of Department of Defense (DOD) authorities and funds to emplace physical barriers along the U.S.-Mexico border. A White House fact sheet detailed the potential availability of up to $8.1 billion “to build the border wall”—including, among other authorities and funding sources, “up to $2.5 billion under the Department of Defense funds transferred for Support for Counterdrug Activities (Title 10 United States Code, section 284).” The full title of the referenced authority is “Support for Counterdrug Activities and Activities to Counter Transnational Organized Crime.” It is one of several DOD authorities to conduct counterdrug missions. In the context of Administration priorities along the southern border, this authority has gained congressional attention because its use is not contingent on the declaration of a national emergency. What Does 10 U.S.C. 284 Authorize? 10 U.S.C. 284 authorizes the Secretary of Defense to provide specified support to other federal departments or agencies, as well as state, local, tribal, or foreign law enforcement agencies, to conduct counterdrug activities or to counter transnational organized crime. The authority specifies 10 types of authorized domestic support, including the “construction of roads and fences and installation of lighting to block drug smuggling corridors across international boundaries of the United States.” According to Joint Chiefs of Staff guidance issued in 2014, such activities encompass “engineering support” for mobility and counter-mobility purposes and are limited to the southern border. Other authorized domestic support activities include the maintenance, repair, or upgrading of certain equipment; transportation of personnel; establishment and operation of certain bases or training facilities; counterdrug or counter-transnational organized crime training; detection, monitoring, and communication of the movement of air, sea, and surface traffic near U.S. boundaries; establishment of command, control, communications, and computer networks for interoperability; provision of linguist and intelligence analysis services; and aerial and ground reconnaissance. How Did 10 U.S.C. 284 Come to Exist? The authority traces its origins to Section 1004 of the FY1991 National Defense Authorization Act (NDAA; P.L. 101-510). The original provision authorized DOD to support the “construction of roads and fences and installation of lighting to block drug smuggling corridors across international boundaries of the United States.” Enactment of Section 1004 fit within the context of U.S. government-wide efforts to combat drugs in the 1980s—and congressional desire to assign DOD a key role. In 1988, for example, the FY1989 NDAA mandated DOD to serve as the “single lead agency ... for the detection and monitoring of aerial and maritime transit of illegal drugs into the United States.” DOD’s role in counternarcotics has long been a source of policy debate, raising questions over the use of the military to perform law enforcement functions, concerns regarding the use of force along the southern border, and the impact of such efforts on military readiness. In part due to lingering questions over whether the authorities in Section 1004 should be made permanent, Congress, for more than two decades, mandated the authority to sunset unless explicitly reauthorized. Although Section 1004 continued to be reauthorized over the years, it was not until the FY2017 NDAA (P.L. 114-328) that Congress codified the provisions of Section 1004. The current law, which does not sunset, incorporates a key change made to its scope in the FY2015 NDAA (P.L. 113-291): it authorizes DOD to support efforts to combat transnational organized crime, in addition to drugs. How Are Activities Authorized by 10 U.S.C. 284 Funded? 10 U.S.C. 284 does not address the availability of funds. DOD’s counterdrug activities, including those carried out pursuant to 10 U.S.C. 284, are funded out of the “Drug Interdiction and Counter-Drug Activities” central transfer account (CTA) in annual DOD appropriations for Defense-wide operations and maintenance (O&M). For FY2019, Defense appropriations (Division A; P.L. 115-245) provided a total of $881.5 million to this CTA, excluding $152.1 million in overseas contingency operations (OCO) counterdrug funding (primarily for activities in Afghanistan). This amount is above the President’s FY2019 base budget request of $787.5 million—including $130.3 million for domestic support (the President requested an additional $152.1 million in OCO counterdrug funding). Counterdrug funding through the CTA is disbursed through the Office of the Deputy Assistant Secretary of Defense for Counternarcotics and Global Threats. Requests for domestic counterdrug support are fielded by U.S. Northern Command (USNORTHCOM), while Joint Task Force North (JTF-N) plans and coordinates domestic counterdrug support missions. Outlook In light of President Trump’s memorandum of April 4, 2018, instructing the Secretary of Defense to support Department of Homeland Security (DHS) efforts to secure the southern border, the House Armed Services Committee held a hearing on January 29 on the topic. In congressional testimony, Under Secretary of Defense John Rood stated that 10 U.S.C. 284 has not been used by DOD to support DHS to harden ports of entry or to lay concertina wire between them. A DOD press release from February 15 stated that if DHS were to request support pursuant to 10 U.S.C. 284, it would “review and respond appropriately to any request for assistance received.” Questions related to DOD’s counterdrug authorities and funding remain and may include the following: How might the role and scope of active duty military and National Guard personnel along the border evolve with the invocation of 10 U.S.C. 284 or other authorities available to DOD to conduct counterdrug missions? What role might defense contractors play? How does the border mission fit within DOD’s priorities for counterdrug programming? If funding were reprogrammed or diverted from other DOD priorities in order to fund engineering projects along the southern border, what current counterdrug activities would be affected? In addition to FY2019 funds appropriated in DOD’s counterdrug CTA, what additional amounts may be available for the purposes of 10 U.S.C. 284 through reprogramming or transfers? How might the FY2020 budget request for DOD counterdrug activities be affected by the President’s February 15 announcement?

Feb 20, 2019

Are Excessive Fines Fundamentally Unfair?

Feb 20, 2019

Legislative Proposals to Address National Park Service Deferred Maintenance

Feb 19, 2019

Immigration: U.S. Asylum Policy

Asylum is a complex area of immigration law and policy. While much of the recent debate surrounding asylum has focused on efforts by the Trump Administration to address asylum seekers arriving at the U.S. southern border, U.S. asylum policies have long been a subject of discussion. The Immigration and Nationality Act (INA) of 1952, as originally enacted, did not contain any language on asylum. Asylum provisions were added and then revised by a series of subsequent laws. Currently, the INA provides for the granting of asylum to an alien who applies for such relief in accordance with applicable requirements and is determined to be a refugee. The INA defines a refugee, in general, as a person who is outside his or her country of nationality and is unable or unwilling to return to that country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. Under current law and regulations, aliens who are in the United States or who arrive in the United States, regardless of immigration status, may apply for asylum (with exceptions). An asylum application is affirmative if an alien who is physically present in the United States (and is not in removal proceedings) submits an application to the Department of Homeland Security’s (DHS’s) U.S. Citizenship and Immigration Services (USCIS). An asylum application is defensive when the applicant is in standard removal proceedings with the Department of Justice’s (DOJ’s) Executive Office for Immigration Review (EOIR) and requests asylum as a defense against removal. An asylum applicant may receive employment authorization 180 days after the application filing date. Special asylum provisions apply to aliens who are subject to a streamlined removal process known as expedited removal. To be considered for asylum, these aliens must first be determined by a USCIS asylum officer to have a credible fear of persecution. Under the INA, credible fear of persecution means that “there is a significant possibility, taking into account the credibility of the statements made by the alien in support of the alien’s claim and such other facts as are known to the officer, that the alien could establish eligibility for asylum.” Individuals determined to have a credible fear may apply for asylum during standard removal proceedings. Asylum may be granted by USCIS or EOIR. There are no numerical limitations on asylum grants. If an alien is granted asylum, his or her spouse and children may also be granted asylum, as dependents. A grant of asylum does not expire, but it may be terminated under certain circumstances. After one year of physical presence in the United States as asylees, an alien and his or her spouse and children may be granted lawful permanent resident status, subject to certain requirements. The Trump Administration has taken a variety of steps that would limit eligibility for asylum. As of the date of this report, legal challenges to these actions are ongoing. For its part, the 115th Congress considered asylum-related legislation, which generally would have tightened the asylum system. Several bills contained provisions that, among other things, would have amended INA provisions on termination of asylum, credible fear of persecution, frivolous asylum applications, and the definition of a refugee. Key policy considerations about asylum include the asylum application backlog, the grounds for granting asylum, the credible fear of persecution threshold, frivolous asylum applications, employment authorization, variation in immigration judges’ asylum decisions, and safe third country agreements.

Feb 19, 2019

Child Welfare: Purposes, Federal Programs, and Funding

Feb 19, 2019

Selected Issues for National Flood Insurance Program (NFIP) Reauthorization and Reform: Homeland Security Issues in the 116th Congress

/ NFIP Reauthorization The National Flood Insurance Program (NFIP) is the primary source of flood insurance for residential properties in the United States, with more than 5.1 million policies providing over $1.3 trillion in coverage in over 22,000 communities. Since the end of FY2017, 10 short-term NFIP reauthorizations have been enacted, and the NFIP is currently authorized until May 31, 2019. Unless reauthorized or amended by Congress, on May 31, 2019, (1) the authority to provide new flood insurance contracts will expire and (2) the authority for the NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. A number of bills were introduced in the 115th Congress to provide longer-term reauthorization of the NFIP and numerous other changes to the program. The House passed H.R. 2874 on November 14, 2017. Three reauthorization bills were introduced in the Senate, S. 1313, S. 1368, and S. 1571; however, none of these were considered by the Senate in the 115th Congress. Premiums and Affordability Historically, Congress has asked the Federal Emergency Management Agency (FEMA) to set NFIP premiums that are simultaneously “risk-based” and “reasonable.” Except for certain subsidies, statute directs that NFIP flood insurance rates should reflect the true flood risk to the property. Properties paying less than the full risk-based rate are determined by the date when the structure was built relative to the date of the community’s Flood Insurance Rate Map (FIRM), rather than the flood risk or the policyholder’s ability to pay. Congress has directed FEMA to subsidize flood insurance for properties built before the community’s first FIRM (the pre-FIRM subsidy). When FIRMs are updated, FEMA also “grandfathers” properties at their rate from past FIRMs through a cross-subsidy. Under existing law, pre-FIRM subsidies are being phased out, whereas grandfathering is retained indefinitely. Reforming the premium structure to reflect full risk-based rates could place the NFIP on a more financially sustainable path, risk-based price signals could give policyholders a clearer understanding of their true flood risk, and a reformed rate structure could encourage more private insurers to enter the market. However, charging risk-based premiums may mean that insurance for some properties becomes unaffordable. FEMA currently does not have the authority or funding to implement an affordability program. An NFIP-funded affordability program would require either raising flood insurance rates for NFIP policyholders or diverting resources from another existing use. Properties with Multiple Losses An area of controversy involves NFIP coverage of properties that have suffered multiple flood losses. One concern is the cost to the program; another is whether the NFIP should continue to insure properties that are likely to have further losses. According to FEMA, claims on repetitive loss (RL) and severe repetitive loss (SRL) properties since 1968 amount to approximately $17 billion, or approximately 30% of claims paid. Reducing the number of RL and SRL properties, through mitigation or relocation, could reduce claims and improve the NFIP’s financial position. Under current statute, the NFIP cannot refuse to insure any property; however, from April 1, 2019, FEMA will introduce an SRL premium equal to 5% of the annual premium for SRL properties. Private Flood Insurance Private insurers play a major role in administering the NFIP through the Write-Your-Own (WYO) program, where private insurance companies are paid to issue and service NFIP policies. WYO companies take on little flood risk themselves; instead, the NFIP retains the financial risk of paying claims for these policies. Few private insurers compete with the NFIP in the primary residential flood insurance market. However, private insurer interest in providing flood coverage has increased recently, and many see private insurance as a way of transferring flood risk from the federal government to the private sector. For example, FEMA has transferred $4.322 billion of its flood risk to the capital markets through reinsurance in 2017, 2018, and 2019. Private flood insurance may offer some potential advantages over the NFIP, including more flexible policies, broader coverage, integrated coverage with homeowners’ insurance, business interruption insurance, or lower-cost coverage for some consumers. Private marketing also might increase the overall amount of flood coverage purchased. More people purchasing flood insurance, either NFIP or private, could help to reduce the amount of disaster assistance provided by the federal government. Increasing private insurance, however, may have some disadvantages compared to the NFIP. Unlike the NFIP, private coverage availability would not be guaranteed to all floodplain residents, and consumer protections could vary in different states. In addition, private sector competition might increase the financial exposure and volatility of the NFIP, as private markets likely will seek out policies that offer the greatest likelihood of profit. In the most extreme case, the private market might “cherry-pick” (i.e., adversely select) the profitable, lower-risk NFIP policies that are “overpriced” either due to cross-subsidization or imprecise rate structures. This could leave the NFIP with a higher density of actuarially unsound policies that are directly subsidized or benefit from cross-subsidization. An increase in private flood insurance policies that “depopulates” the NFIP also may undermine the NFIP’s ability to generate revenue, reducing the ability or extending the time required to repay previously incurred debt. The NFIP’s role has historically been broader than just providing insurance. As currently authorized, the NFIP also encompasses social goals to provide flood insurance in flood-prone areas to those who otherwise would not be able to obtain it and to reduce the government’s cost after floods. The NFIP has tried to reduce the impact of floods through flood-mapping and mitigation efforts. It is unclear how effectively the NFIP could play this broader role if private insurance became a large part of the flood marketplace. The majority of funding for flood mapping and floodplain management comes from the Federal Policy Fee (FPF), paid by all NFIP policyholders. To the extent that the private flood insurance market grows and policies move from the NFIP to private insurers, FEMA would no longer collect the FPF on those policies and less money would be available for floodplain mapping and management.

Feb 19, 2019

A Brief Introduction to the National Flood Insurance Program: Homeland Security Issues in the 116th Congress

The National Flood Insurance Program (NFIP) is authorized by the National Flood Insurance Act of 1968 (Title XIII of P.L. 90-448, as amended, 42 U.S.C. §§4001 et seq.) and is the primary source of flood insurance coverage for residential properties in the United States. The NFIP has two main policy goals: (1) to provide access to primary flood insurance, thereby allowing for the transfer of some of the financial risk from property owners to the federal government, and (2) to mitigate and reduce the nation’s comprehensive flood risk through the development and implementation of floodplain management standards. A longer-term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. The NFIP engages in many “noninsurance” activities in the public interest: it identifies and maps flood hazards, disseminates flood-risk information through flood maps, requires community land-use and building-code standards, contributes to community resilience by providing a mechanism to fund rebuilding after a flood, and offers grants and incentive programs for household- and community-level investments in flood-risk reduction. Over 22,000 communities participate in the NFIP, with more than 5.1 million policies providing over $1.3 trillion in coverage. The program collects more than $4.7 billion in annual revenue from policyholders’ premiums, fees, and surcharges. Floods are the most common natural disaster in the United States, and all 50 states have experienced floods in recent years. Structure of the NFIP The NFIP is managed by the Federal Emergency Management Agency (FEMA) through its subcomponent, the Federal Insurance and Mitigation Administration (FIMA). Communities are not legally required to participate in the program; they participate voluntarily to obtain access to NFIP flood insurance. Communities choosing to participate in the NFIP are required to adopt land-use and control measures with effective enforcement provisions and to regulate development in the floodplain. FEMA has set forth in federal regulations the minimum standards required for participation in the NFIP; however, these standards have the force of law only if they are adopted and enforced by a state or local government. Legal enforcement of floodplain management standards is the responsibility of participating NFIP communities, which also can elect to adopt higher standards to mitigate flood risk. The NFIP approaches the goal of reducing comprehensive flood risk primarily by requiring participating communities to collaborate with FEMA to develop and adopt flood maps called Flood Insurance Rate Maps (FIRMs). Property owners in the mapped Special Flood Hazard Area (SFHA), defined as an area with a 1% annual chance of flooding, are required to purchase flood insurance as a condition of receiving a federally backed mortgage. This mandatory purchase requirement is enforced by the lender rather than FEMA. Property owners who do not obtain flood insurance when required may find that they are not eligible for certain types of disaster assistance after a flood. Financial Standing of the NFIP The NFIP is funded from (1) premiums, fees, and surcharges paid by NFIP policyholders; (2) annual appropriations for flood-hazard mapping and risk analysis; (3) borrowing from the Treasury when the balance of the National Flood Insurance Fund is insufficient to pay the NFIP’s obligations (e.g., insurance claims); and (4) reinsurance proceeds if NFIP losses are sufficiently large. The NFIP was not designed to retain funding to cover claims for truly extreme events; instead, the statute allows the program to borrow money from the Treasury for such events. For most of the NFIP’s history, the program was able to borrow relatively small amounts from the Treasury to pay claims and then repay the loans with interest. However, this changed when Congress increased the borrowing limit to $20.775 billion to pay claims in the aftermath of the 2005 hurricane season (particularly Hurricanes Katrina, Rita, and Wilma). Congress increased the borrowing limit again in 2013, after Hurricane Sandy, to the current limit of $30.425 billion. The 2017 hurricane season was the second-largest claims year in the NFIP’s history, with approximately $10.5 billion currently paid in response to Hurricanes Harvey, Irma, and Maria. At the beginning of the 2017 hurricane season, the NFIP owed $24.6 billion. On September 22, 2017, the NFIP borrowed the remaining $5.825 billion from the Treasury to cover claims from Hurricane Harvey, reaching the NFIP’s borrowing limit. On October 26, 2017, Congress canceled $16 billion of NFIP debt in order to pay claims for Hurricanes Harvey, Irma, and Maria. FEMA borrowed another $6.1 billion on November 9, 2017, bringing the debt back up to $20.525 billion. For the 2018 hurricane season, as of November 2018, the NFIP had paid $117 million in claims for Hurricanes Florence and Michael. As of January 2019, the NFIP has $9.9 billion of remaining borrowing authority. The NFIP’s debt is conceptually owed by current and future participants in the NFIP, as the insurance program itself owes the debt to the Treasury and pays for accruing interest on that debt through the premium revenues of policyholders. Since 2005, the NFIP has paid $2.82 billion in principal repayments and $4.2 billion in interest to service the debt through the premiums collected on insurance policies. The October 2017 cancellation of $16 billion of NFIP debt represents the first time that NFIP debt has been canceled. NFIP Reauthorization Since the end of FY2017, Congress has enacted 10 short-term NFIP reauthorizations. The NFIP is currently authorized until May 31, 2019. The statute for the NFIP does not contain a comprehensive expiration, termination, or sunset provision for the whole of the program. Rather, the NFIP has multiple different legal provisions that generally tie to the expiration of key components of the program. Unless reauthorized or amended by Congress, the following will occur on May 31, 2019: (1) the authority to provide new flood insurance contracts will expire; however, insurance contracts entered into before the expiration would continue until the end of their policy term and (2) the authority for the NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion.

Feb 19, 2019

Medicare Graduate Medical Education Payments: An Overview

Feb 19, 2019

Can the Department of Defense Build the Border Wall?

Feb 18, 2019

The Transportation Infrastructure Finance and Innovation Act (TIFIA) Program

The Transportation Infrastructure Finance and Innovation Act (TIFIA) program, administered by the Department of Transportation’s Build America Bureau, provides long-term, low-interest loans and other types of credit assistance for the construction of surface transportation projects (23 U.S.C. §601 et seq.). The TIFIA program was reauthorized from FY2016 through FY2020 in the Fixing America’s Surface Transportation (FAST) Act (P.L. 114-94). Direct funding for the TIFIA program is authorized at $300 million for each of FY2019 and FY2020. Additionally, state departments of transportation can use other federal-aid highway grant money, both formula and discretionary, to subsidize much larger loans. To date, states have not had to use other grant funding to subsidize credit assistance because the TIFIA program has a relatively large unexpended funding balance. The primary goal of the TIFIA program, historically, has been to enable the construction of large-scale surface transportation projects by providing financing to complement state, local, and private investment. The TIFIA program has been one of the main ways in which the federal government has encouraged the development of public-private partnerships (P3s) and private financing in surface transportation often backed by new, but sometimes uncertain, revenue sources such as highway tolls, other types of user charges, and incremental real estate taxes. To be eligible for TIFIA assistance, a project sponsor must be deemed creditworthy, that is, a good risk for repaying its debts, and must have a dedicated source of revenue for repayment. Project sponsors, therefore, are required to develop a funding mechanism, whether this is a new user fee or tax or the repurposing of existing fees and taxes. Changes to the TIFIA program have sought to make TIFIA assistance more accessible to less costly projects, but so far every TIFIA-supported project has cost $175 million or more. Financing projects instead of relying on pay-as-you go funding from taxes and other existing revenues can mean such projects can be constructed years earlier. TIFIA, therefore, is a means to accelerate project delivery and the benefits that flow from new infrastructure. The TIFIA program is also a relatively low-cost way for the federal government to support surface transportation projects because it relies on loans, not grants, and the TIFIA assistance is typically one-third or less of project costs. Another advantage from the federal point of view is that a relatively small amount of budget authority can be leveraged into a large amount of loan capacity. Because the government expects its loans to be repaid, an appropriation need only cover administrative costs and the subsidy cost of credit assistance. Program funding of $300 million can support approximately $4 billion in TIFIA loans. Since its enactment in 1998, the TIFIA program has provided assistance of $32 billion to 74 projects with a total cost of about $117 billion (in FY2018 inflation-adjusted dollars). All but one TIFIA credit agreement has been a loan; the exception is a loan guarantee. The average TIFIA-supported project cost is $1.5 billion, and the average TIFIA loan is $430 million (both in FY2018 dollars). About two-thirds of TIFIA loans have gone to highway and highway bridge projects, and another quarter to public transportation. TIFIA has supported at least one project in 21 states, the District of Columbia, and Puerto Rico, but the top 10 states account for about 80% of the 74 projects supported. The TIFIA program is likely to be considered in the 116th Congress during the reauthorization of the surface transportation programs. Program funding is one issue that may be discussed, because some stakeholders would like more budget authority despite a relatively large unexpended balance and the existing authority of states to use grant funding to pay the subsidy cost of credit assistance. Criticisms of the program and its implementation include the often slow decisionmaking process, the program’s increasing risk aversion, and the limitation of the federal share of project costs to 33%, despite a statutory limit of 49%. Because of the relatively large unexpended balance, Congress might considered broadening the use of TIFIA assistance to nonsurface transportation and nontransportation infrastructure. Another option might be to create a national infrastructure bank, a federal infrastructure financing entity largely independent of other executive branch agencies, to take the place of TIFIA and other federal infrastructure credit assistance programs.

Feb 15, 2019

The Venezuela Regional Humanitarian Crisis and COVID-19

Feb 15, 2019

Supreme Court Cert Grant Creates Uncertainty in Post-Heller World: Part I

Feb 14, 2019

Where’s My Refund? A Look at Tax Refund Trends over Time and Across Income Levels

The issue of tax refunds has received robust media attention as 2018 tax returns are filed in early 2019. For individual income tax filers, 2018 was the first year in which the major changes signed into law by President Trump at the end of 2017 (P.L. 115-97) became effective. What Determines Tax Refunds? A taxpayer’s tax refund (or payment) in a given year is determined by income tax liability: what a taxpayer owes in federal income tax; and income tax withholding: the amount that the taxpayer has paid toward that tax bill during the year, often through their employer withholding income taxes from their paychecks. The refund (or amount owed) is the liability less the amount already paid through withholding. For many low-income taxpayers, the amount of their refund is largely determined by refundable credits. Refundable credits, unlike nonrefundable credits, are not limited to a taxpayer’s tax liability. Thus, taxpayers with little to no income tax liability—including many low-income taxpayers—can receive the full value of the credit. The amount of the refundable credit that exceeds tax liability is received as a refund. Income Tax Liability Income tax liability depends on several factors—including where a taxpayer lives, the number of children they have, and whether they own their home, for example. Although some taxpayers experienced no changes in their economic or personal circumstances, the numerous changes that P.L. 115-97 made to the tax code could result in these same taxpayers experiencing a change in their tax liability. The Tax Policy Center estimates that approximately 80% of taxpayers will have a lower income tax liability in 2018 as a result of P.L. 115-97, while 5% will experience a tax increase. Income Tax Withholding The amount of income tax withheld from employees’ paychecks is determined by withholding tables that the IRS provides employers. Employees can adjust this amount (both upward and downward) by filing IRS Form W-4 with their employer. A 2018 Government Accountability Office (GAO) report provides a detailed overview of the withholding process and examples of withholding tables. Taxpayers who do not withhold enough throughout the year to pay their income tax in full are said to be “underwithheld” and owe tax to settle the balance, while those whose total withholdings are greater than their liability are said to be “overwithheld” and receive a tax refund. Generally, a taxpayer’s federal income tax refund has no bearing on their tax liability. However, a change in tax liability can affect a taxpayer’s refund. Trends in Tax Refunds Most taxpayers receive a federal tax refund after filing their individual income tax returns. Throughout the 1990s, about 70% of tax returns filed resulted in a refund (see Figure 1). The share of tax returns filed resulting in a refund increased following the tax cuts of the early 2000s. Over the past decade, on average, 77% of returns filed have resulted in a refund. Figure 1. Share of Returns with Tax Refund, 1990-2016 / Source: Internal Revenue Service (IRS), Individual Statistics of Income (SOI), Table A: Selected Income and Tax Items for Selected Years. Note: The shaded region includes returns filed in the 1990s before tax cuts were enacted in the early 2000s (e.g., P.L. 107-16). While the share of taxpayers receiving a refund has remained relatively stable over time, the average refund amount has increased, even after adjusting for inflation. The average tax refund in 1990 was $1,261 in 2016 dollars (see Figure 2). By 2016, the average tax refund was $2,229. Refunds were higher following the start of the Great Recession, reflective of lower incomes and stimulus-oriented tax policies. Refunds subsequently declined as the economy recovered and many tax stimulus policies expired. Figure 2. Average Tax Refund, 1990-2016 / Source: IRS, Individual SOI, Table A: Selected Income and Tax Items for Selected Years. Note: Nominal dollars adjusted for inflation using the CPI-U. Lower-income taxpayers are more likely to receive a tax refund than higher-income taxpayers (see Figure 3). The amount of refund, however, generally increases for higher-income taxpayers (see Table 1). The composition of the refund also tends to change across the income distribution. Specifically, for lower-income taxpayers, a larger share of their refund is due to the refundable portion of refundable tax credits (the earned income tax credit or the additional child tax credit, for example). Higher-income taxpayers generally cannot claim refundable tax credits. For these taxpayers, their tax refund is a function of the amount of tax withheld. Figure 3. Share of Returns with Refunds and Share of Refund from Refundable Credits by Adjusted Gross Income (AGI) Category, 2016 / Source: CRS calculations using data from IRS Individual SOI, All Returns: Tax Liability, Tax Credits, and Tax Payments. Table 1. Tax Refunds by Income Category, 2016 AGI Category Number of Returns Number of Returns with Refund Number of Returns with Refundable Portion of Refundable Credits Average Refund Average Refundable Credit Less than $20,000 43,733,263 36,013,997 16,138,041 $1,564 $1,056 $20,000 to $50,000 45,488,420 38,170,631 11,510,062 $2,242 $835 $50,000 to $100,000 33,199,220 24,372,272 1,075,571 $2,198 $48 $100,000 to $200,000 18,858,241 11,650,297 41,259 $2,728 $3 $200,000 to $1 million 6,475,930 2,418,309 24 $3,694 $0 $1 million or more 424,442 88,956 0 $29,154 $0 All Returns 150,272,157 113,547,753 29,138,314 $2,229 $0 Source: CRS calculations using data from IRS Individual SOI, All Returns: Tax Liability, Tax Credits, and Tax Payments. Notes: All returns include returns with no adjusted gross income. Thus, the sum of the values in each income category is not necessarily equal to the value for all returns. Filing 2018 Tax Returns: Observations for the 2019 Tax Filing Season There is limited information regarding the effect of P.L. 115-97 and the subsequent changes in withholdings on tax refunds. The 2018 GAO report indicated that the percentage of taxpayers overwithheld (receiving refunds) could decline by 3 percentage points in 2018, while the number of taxpayers underwithheld (owing taxes) could increase by 3 percentage points. The report did not, however, provide any information on how the value of tax refunds might change for taxpayers filing their 2018 taxes. The first filing statistics of the 2019 tax filing season suggest that refunds are down. In a tweet, the Department of the Treasury warned that this information was based on a small sample, suggesting that the actual effects of recent changes on 2018 tax refunds will not be known until the filing season is over.

Feb 13, 2019

Defense Primer: Emerging Technologies

Feb 12, 2019

The Federal Income Tax: How Did P.L. 115-97 Change Marginal Income Tax Rates?

At the end of 2017, President Trump signed into law P.L. 115-97, which is commonly referred to as the Tax Cuts and Jobs Act, or TCJA. (The title of the bill as passed by the House was the Tax Cuts and Jobs Act, but it was eliminated before final passage under the reconciliation process used to consider the bill in the Senate.) This law made numerous changes to the federal income tax for individuals and businesses. Of the many changes made to individual income tax provisions, the law temporarily changed marginal tax rates. These changes are currently in effect from 2018 through the end of 2025. What Are Marginal Income Tax Rates? For many taxpayers, calculating federal income tax liability can be broken down into three main steps Taxpayers calculate the amount of income subject to taxation (i.e., their taxable income). Taxpayers apply marginal income tax rates to their taxable income to determine their “pre-tax credit” income tax liability. Taxpayers subtract tax credits from their pre-tax credit income tax liability to determine their final income tax liability. Marginal income tax rates are the tax rates applied to the last dollar of taxable income. Taxable income is often equal to total income minus the standard deduction or the sum of itemized deductions, whichever is greater. Specific marginal rates apply over discrete ranges of taxable income. For example, as illustrated below, if a married taxpayer has $750,000 of taxable income, only the amount above $600,000—or $150,000—is subject to a marginal rate of 37%, not the entire $750,000. Note: The maximum taxable income displayed in this graphic and all subsequent graphics is $1,000,000. This Insight looks only at statutory marginal tax rates and not effective marginal tax rates, which may differ. Effective marginal tax rates are the amount paid in tax on the next dollar of income, taking into account interactions with other features of the tax system. Thus, effective marginal tax rates are a function of (1) a taxpayer’s statutory marginal tax rate; and (2) interactions with other credits, deductions, exemptions, and special provisions in the tax code. Of note, capital gain or dividend income is taxed at different rates. In addition, some taxpayers may be subject to the alternative minimum tax (AMT), which in addition to a different definition of taxable income has different marginal tax rates. For a visualization of how federal income tax liability is calculated, see CRS Infographic IG10011, The U.S. Individual Income Tax System, 2018. How Did Marginal Income Tax Rates Change? Below are visualizations of marginal income tax rates in 2018 before and after the changes made by the TCJA (P.L. 115-97). The pre-TCJA rates are gray (what the 2018 marginal tax rates would have been, had P.L. 115-97 not become law), while the new marginal tax rates are pink. The three figures reflect the tax rates for taxpayers who file their federal income taxes as single filers (generally unmarried individuals without dependents), head of household filers (generally unmarried individuals with dependents, like a single parent), and married couples who file jointly (most married couples file their taxes this way). Several patterns are visible in these figures First, the lowest-income taxpayers generally see no change in their marginal tax rates since the 10% tax bracket is unchanged by the law. This is illustrated when the height of the pink and gray rectangles are the same. Second, for many medium- and upper-income taxpayers, their marginal tax rates are often lower. This is illustrated when the height of a pink rectangle is below the height of a gray rectangle for a given range of taxable income. Third, for single and head of household filers, and to a lesser extent married joint filers, there is a range of taxable income subject to higher marginal tax rates under the new tax law. This is illustrated when the height of a pink rectangle is above the height of a gray rectangle for a given range of taxable income. Each of these points is discussed in detail for a given filing status. Importantly, marginal tax rates are not the only factor that determines whether an individual has a lower or higher tax liability as a result of P.L. 115-97. A broad constellation of factors can result in taxpayers receiving a tax cut or a tax increase as a result of the TCJA. These factors include, but are not limited to, where the taxpayer lives, the number of children they have, whether they incurred significant medical expenses, and whether they own a home. Single Filers / For single filers, the TCJA left unchanged, reduced, or increased marginal income tax rates over different ranges of taxable income. For the lowest-income taxpayers, the 10% tax bracket was unchanged by the law and applied to the first $9,525 of taxable income. For taxable income greater than $9,525 up to $157,500, marginal rates are lower under the TCJA. Marginal rates are higher under the TCJA between $157,500 and $424,950 of taxable income (excluding a rate reduction between $195,450 and $200,000 of taxable income). The marginal tax rate on taxable income between $424,950 and $426,700 was unchanged by the TCJA. For taxable income above $426,700, marginal rates are lower under TCJA. Head of Household Filers / For head of household filers, the TCJA left unchanged, reduced, or increased marginal income tax rates over different ranges of taxable income. For the lowest-income taxpayers, the 10% tax bracket was unchanged by the law and applies to the first $13,600 of taxable income. For taxable income greater than $13,600 up to $157,500, marginal rates are lower under the TCJA. Marginal rates are higher under TCJA between $157,500 and $424,950 of taxable income. The marginal tax rate on taxable income between $424,950 and $453,350 was unchanged by the TCJA. For taxable income above $453,350, marginal rates are lower under TCJA. Married Couples Filing Jointly / For married couples filing jointly, the TCJA left unchanged, reduced, or increased marginal income tax rates over different ranges of taxable income. For the lowest-income taxpayers, the 10% tax bracket was unchanged by the law and applies to the first $19,050 of taxable income. For taxable income greater than $19,050 up to $400,000, marginal rates are lower under the TCJA. The marginal income rate is higher under TCJA between $400,000 and $424,950 of taxable income. The marginal tax rate on taxable income between $424,950 and $480,050 was unchanged by the TCJA. For taxable income above $480,050, marginal rates are lower under TCJA. Acknowledgments Kevin Borden created the data visualizations used in this Insight.

Feb 12, 2019

Social Security Dual Entitlement

Feb 12, 2019

Terrorist Groups in Afghanistan

Feb 12, 2019

Border Security Between Ports of Entry: Homeland Security Issues in the 116th Congress

/ The United States’ southern border with Mexico runs for approximately 2,000 miles over diverse terrain, varied population densities, and discontinuous sections of public, private, and tribal land ownership. The Department of Homeland Security (DHS) Customs and Border Protection (CBP) is primarily responsible for border security, including the construction and maintenance of tactical infrastructure, installation and monitoring of surveillance technology, and the deployment of border patrol agents to prevent unlawful entries of people and contraband into the United States (including unauthorized migrants, terrorists, firearms, narcotics, etc.). CBP’s border management and control responsibilities also include facilitating legitimate travel and commerce. Existing statute pertaining to border security confers broad authority to DHS to construct barriers along the U.S. border to deter unlawful crossings, and more specifically directs DHS to deploy fencing along “at least 700 miles” of the southern border with Mexico. The primary statute is the Illegal Immigration and Immigrant Responsibility ACT (IIRIRA) as amended by the REAL ID Act of 2005, the Secure Fence Act of 2006, and the Consolidated Appropriations Act of 2008. On January 25, 2017, President Trump issued Executive Order 13767 “Border Security and Immigration Enforcement Improvements,” which addresses, in part, the physical security of the southern border and instructed the DHS Secretary to “take all appropriate steps to immediately plan, design, and construct a physical wall along the southern border, using appropriate materials and technology to most effectively achieve complete operational control.” The order did not identify the expected mileage of barriers to be constructed. The three main dimensions of border security are tactical infrastructure, surveillance technology, and personnel. Tactical Infrastructure. Physical barriers between ports of entry (POE) on the southern border vary in age, purpose, form, and location. GAO reports that at the end of FY2015, about one-third of the southern border, or 654 miles, had a primary layer of fencing: approximately 350 miles designed to keep out pedestrians, and 300 miles to prevent vehicles from entering. Approximately 90% of the 654 miles of primary fencing is located in the five contiguous Border Patrol sectors located in California, Arizona, and New Mexico, while the remaining 10% is in the four eastern sectors (largely in Texas) where the Rio Grande River delineates most of the border. About 82% of primary pedestrian fencing and 75% of primary vehicle fencing are considered “modern” and were constructed between 2006 and 2011. Across 37 discontinuous miles, the primary layer is backed by a secondary layer (pedestrian) as well as an additional 14 miles of tertiary fencing (typically to delineate property lines). No new miles of primary fencing have been constructed since the 654 miles were completed in 2015, but sections of legacy fencing and breached areas have been replaced. Additional tactical infrastructure includes roads, gates, bridges, and lighting designed to support border enforcement, and to disrupt and impede illicit activity. Surveillance Technology. To assist in the detection, identification, and apprehension of individuals illegally entering the United States between POEs, CBP also maintains border surveillance technology. Ground technology includes sensors, cameras, and radar tailored to fit specific terrain and population densities. Aerial and marine surveillance vessels, manned and unmanned, patrol inaccessible regions. Personnel. Approximately 19,500 Border Patrol agents were stationed nationwide, with most (16,600) at the southern border in FY2017. Subject to available appropriations, Executive Order 13767 calls on CBP to take appropriate action to hire an additional 5,000 Border Patrol agents. However, CBP continues to face challenges attaining statutorily established minimum staffing levels for its Border Patrol positions despite increased recruitment and retention efforts. Southern border security may be improved by changes to tactical infrastructure, surveillance technology, and personnel. A challenge facing policymakers is in determining the optimal mix of border security strategies given the difficulty of measuring the effectiveness of current efforts. While the number of apprehensions of illegal entrants has long been used to measure U.S. Border Patrol performance, it does not measure illegal border crossers who evade detection by the Border Patrol. When apprehensions decline, whether it is due to fewer illegal entrants getting caught or fewer attempting to enter illegally is not known. Other difficulties include measuring the contribution of any single border security component in isolation from the others, assessing the extent to which enforcement actions deter illegal crossing attempts, and evaluating ongoing enforcement efforts outside of border-specific actions and their impact on border security. Section 1092 of the FY2017 National Defense Authorization Act (NDAA) directs the Secretary of Homeland Security to provide annual metrics on border security that are intended to help address some of the challenges of measuring the impact of border security efforts. DHS has produced baseline estimates that go beyond apprehensions statistics to measure progress towards meeting the goals contained in Executive Order 13767. Congress, through CBP appropriations—and appropriations to its predecessor agency, the Immigration and Naturalization Service (INS)—has invested in tactical infrastructure, surveillance technology, and personnel since the 1980s. Given the changing level of detail and structure of appropriations for border infrastructure over time, it is not possible to develop a consistent history of congressional appropriations specifically for border infrastructure. However, CBP has provided the Congressional Research Service (CRS) with some historical information on how it has allocated funding for border barrier planning, construction, and operations and support. Between FY2007 and FY2018, CBP allocated just over $5.0 billion to these activities, including almost $1.4 billion specifically for border barrier construction and improvement through a new “Wall Program” activity in its FY2018 budget. The 116th Congress is considering a mix of tactical infrastructure, including fencing, surveillance technologies, and personnel to enhance border security between U.S. POEs. Some experts have warned that the northern border may need more resources and oversight than it is currently receiving in light of potential national security risks. Other border security priorities that may be considered during the 116th Congress include improvements to existing facilities and screening and detection capacity at U.S. POEs.

Feb 11, 2019

Venezuela Oil Sector Sanctions: Market and Trade Impacts

On January 28, 2019, the Trump Administration imposed sanctions on Venezuela’s state-owned oil company, Petroleos de Venezuela, S.A. (PdVSA), adding to existing Venezuela sanctions. The Department of the Treasury determined that persons (e.g., individuals and companies) operating in Venezuela’s oil sector are subject to sanctions in order to apply economic pressure on the government of Nicolas Maduro and facilitate a transition to democracy. Subsequently, Treasury’s Office of Foreign Assets Control (OFAC) added PdVSA—including all entities in which PdVSA has a 50% or more ownership position—to its Specifically Designated Nationals (SDN) list. This designation blocks PdVSA’s U.S. assets and prohibits the company from dealing with U.S. persons. These sanctions will affect several areas in which U.S. companies have business interests (e.g., debt/financial transactions and oil field services) and will effectively terminate U.S.-Venezuela petroleum (crude oil and petroleum products) trade. Potential economic impacts of these sanctions on Venezuela could be significant, but are beyond the scope of this product. U.S.-Venezuela Petroleum Trade Petroleum trade between the United States and Venezuela has been characterized by imports of heavy Venezuelan crude oil to U.S. refineries (see Figure 1), mostly to the Gulf Coast. In 2017, U.S. refineries imported 618,000 barrels per day (bpd) of Venezuelan crude oil—approximately 8% of total crude imports during the year. U.S. importers also purchased 55,000 bpd of Venezuelan petroleum products. U.S. exports to PdVSA consisted of 64,000 bpd of petroleum products directly to Venezuela and 11,000 bpd of crude oil to Curacao, where PdVSA has operated a refinery and petroleum storage facility. U.S. light oil and petroleum products are typically used as a diluent for blending with Venezuelan heavy crude oil as a means of reducing viscosity and facilitating transportation and marketing. Figure 1. U.S. and Venezuela Petroleum Trade, 2017 / Source: CRS, data from the Energy Information Administration and, where noted, the Organization of the Petroleum Exporting Countries (OPEC). Notes: EIA export data indicate that U.S. suppliers have not exported crude oil to Curacao since April 2018. The Curacao refinery was temporarily idled in mid-2018 due to a legal dispute between PdVSA and ConocoPhillips. Petroleum Market and Trade Impacts Prohibiting petroleum trade and related financial transactions between the United States and PdVSA will create a constraint within the global oil logistics system that will result in adjustments to global trade flows. The oil sector sanctions do not explicitly prevent non-U.S. entities from purchasing crude oil from or supplying petroleum products to Venezuela. However, OFAC-issued Frequently Asked Questions (FAQs, #657) indicate that petroleum purchases by non-U.S. entities involving “any other U.S. nexus (e.g., transactions involving the U.S. financial system or U.S. commodity brokers)” are prohibited following a 90-day wind-down period. PdVSA will need to secure alternative buyers for crude oil and petroleum product volumes that might otherwise be delivered to U.S. refiners as well as alternative suppliers for diluents previously sourced from the United States. U.S. refiners, on the other hand, will be required to identify alternative crude oil suppliers and U.S. petroleum exporters will have to locate other buyers for petroleum products that might have been destined for Venezuela. Adjusting to these sanctions-related supply constraints may take some time as alternative buyers and suppliers are located. Price levels for the affected petroleum commodities will also likely change as a means to facilitate alternative trade routes (e.g., U.S. refiners may have to incur price premiums to attract substitute crudes and PdVSA may have to accept price discounts in order to attract alternative buyers). Trade flow adjustments could potentially influence the magnitude of price impacts. U.S. Petroleum Exports to Venezuela Petroleum exports (e.g., diluents) from the United States to Venezuela are prohibited as of January 28, 2019. As a result, PdVSA will have to replace volumes purchased from U.S. suppliers. While there are alternative global suppliers, acquiring replacement diluents may result in delayed deliveries due to potentially longer trade routes. Since diluents are necessary to transport and market Venezuela’s heavy crude oil, a temporary diluent shortage could potentially reduce PdVSA’s crude oil production and export volumes until replacement diluents are acquired. U.S. petroleum product suppliers will need to find alternative customers for volumes previously destined for Venezuela. Venezuela Petroleum Exports to the United States Crude oil and petroleum product exports from Venezuela to the United States are also prohibited, although OFAC issued general licenses (7 and 12) allowing two U.S.-based PdVSA subsidiaries, including CITGO, as well as U.S. companies to continue purchasing and importing crude oil and petroleum products from PdVSA until April 28, 2019. Any payment made for petroleum imports from PdVSA during the wind-down period must be deposited into a U.S.-based blocked account, which will likely result in those transactions being stopped immediately. PdVSA will likely seek alternative non-U.S. cash buyers. However, PdVSA petroleum sales to non-U.S. buyers could be complicated due to OFAC’s indication that any such transactions involving the U.S. financial system are prohibited. U.S. crude oil imports from Venezuela—the largest trade element between the two countries—have declined since 2017 and averaged 511,000 barrels per day in November 2018. U.S. refiners will need to secure alternative supply sources to replace crude oil imports from PdVSA. Table 1 shows the companies that purchased Venezuelan crude oil and the states where oil was delivered during November 2018. Table 1. Crude Oil Imports from Venezuela by Company and State, November 2018 Thousand Barrels California Louisiana Mississippi Texas Total Percentage Chevron 220 2,793 3,013 20% CITGO 2,705 1,507 4,212 28% Houston Refining 495 495 3% Marathon 660 660 4% Motiva 458 458 3% Paulsboro 1,392 1,392 9% Valero 329 1,577 3,196 5,102 33% Total 549 6,334 2,793 5,656 15,332 100% Percentage 4% 41% 18% 37% 100% Source: Energy Information Administration, Company Level Imports, with data for November 2018, available at https://www.eia.gov/petroleum/imports/companylevel/, accessed February 6, 2019. Notes: Citgo is majority-owned by PdVSA. Russian oil company Rosneft holds 49.9% of Citgo as loan collateral. Other refiners purchase Venezuelan crude throughout the year, most located in the Gulf Coast.

Feb 11, 2019

Transportation Security: Issues for the 116th Congress

The nation’s air, land, and marine transportation systems are designed for accessibility and efficiency, two characteristics that make them vulnerable to terrorist attack. While hardening the transportation sector is difficult, measures can be taken to deter terrorists. The enduring challenge facing Congress is how best to implement and finance a system of deterrence, protection, and response that effectively reduces the possibility and consequences of terrorist attacks without unduly interfering with travel, commerce, and civil liberties. Transportation security has been a major policy focus since the terrorist attacks of September 11, 2001. In the aftermath of those attacks, the 107th Congress moved quickly to pass the Aviation and Transportation Security Act (ATSA; P.L. 107-71), creating the Transportation Security Administration (TSA) and mandating that security screeners employed by the federal government inspect airline passengers, their baggage, and air cargo. Despite the extensive focus on aviation and transportation security over the past decade, a number of challenges remain, including developing and deploying effective biometric capabilities to verify the identities of transportation workers and travelers; developing effective risk-based approaches to vetting and screening transportation workers accessing secured areas of airports and other sensitive areas of transportation networks; developing cost-effective solutions to screen air cargo and freight without impeding the flow of commerce; and coordination among state, local, and federal homeland security and law enforcement personnel to effectively deter and respond to criminal and terrorist acts targeting public areas of transportation facilities. The FAA Extension, Safety, and Security Act of 2016 (P.L. 114-190) and the TSA Modernization Act (P.L. 115-254, Division K) included provisions intended to improve screening technologies, streamline the passenger screening process, mandate more rigorous background checks of airport workers, strengthen airport access controls, increase passenger checkpoint efficiency and operational performance, and enhance security in public areas of airports and at foreign airports where flights depart for the United States. Oversight of TSA actions to implement these mandates may be an area of particular interest in the 116th Congress. Particular topics may include the evolution of screening technologies and assessments of emerging screening technology solutions; the expansion of canine teams for transportation security; the expansion of the PreCheck program to expedite screening of known travelers; the use of biometrics and associated data security and privacy concerns; implementing effective approaches, regulations, and international agreements to conduct risk-based screening of air cargo shipments worldwide; protecting public areas of airports; and developing effective countermeasures to protect critical infrastructure, including airports and aircraft, from attacks using drones. Bombings of passenger trains in Europe and Asia in the past few years illustrate the vulnerability of passenger rail systems to terrorist attacks. Passenger rail systems—primarily subway systems—in the United States carry about five times as many passengers each day as do airlines, over many thousands of miles of track, serving stations that are designed primarily for easy access. Transit security issues of recent interest to Congress include the quality of TSA’s surface transportation inspector program. The bulk of U.S. overseas trade is carried by ships, and thus the economic consequences of a maritime terrorist attack could be significant. Customs and Border Protection (CBP) and the Coast Guard have implemented security screening procedures that effectively “push the borders out”—that is, they begin screening vessels and cargo before they reach a U.S. port. Two aspects of maritime security that have drawn attention recently are cybersecurity and the use of drones for coastal surveillance.

Feb 11, 2019

U.S. National Health Security: Homeland Security Issues in the 116th Congress

In its quadrennial National Health Security Strategy, the U.S. Department of Health and Human Services (HHS) states: U.S. National Health Security actions protect the nation’s physical and psychological health, limit economic losses, and preserve confidence in government and the national will to pursue its interests when threatened by incidents that result in serious health consequences whether natural, accidental, or deliberate. The strategy aims to ensure the resilience of the nation’s public health and health care systems against potential threats, including natural disasters and human-caused incidents, emerging and pandemic infectious diseases, acts of terrorism, and potentially catastrophic risks posed by nation-state actors. By law, the HHS Secretary “shall lead all Federal public health and medical response to public health emergencies and incidents covered by the [National Response Framework],” and the HHS Assistant Secretary for Preparedness and Response (ASPR) shall “[s]erve as the principal advisor to the Secretary on all matters related to Federal public health and medical preparedness and response for public health emergencies.” However, under the nation’s federal system of government, state and local agencies and private entities are principally responsible for ensuring health security and responding to threats. The federal government’s ability to affect national health security, through funding assistance and other policies, is relatively limited. Figure 1. HHS Secretary’s Operations Center (SOC), Activated for the Wannacry Ransomware Attack, May 2017 / Source: Office of the HHS Assistant Secretary for Preparedness and Response, February 6, 2019. Notes: The health care sector was a significant target of the cyberattack. The image shows a staff briefing on cyber threat information sharing and other efforts to protect health care infrastructure. The nation’s public health emergency management laws have expanded considerably following the terrorist attacks in 2001. Since then, a number of public health emergencies revealed both improvements in the nation’s readiness, and persistent gaps. The National Health Security Preparedness Index (NHSPI, or the Index), a public-private partnership begun in 2013, currently assesses preparedness, using 140 measures, across all 50 states and the District of Columbia. In its latest comprehensive report, for 2017, NHSPI found overall incremental improvements over earlier years. However, the report highlighted differing preparedness levels among states, stating: Large differences in preparedness persisted across states, and those in the Deep South and Mountain West regions lagged significantly behind the rest of the nation. If current trends continue, the average state will require 9 more years to reach health security levels currently found in the best-prepared states. In addition, measures of health care delivery—for example, the number of certain types of health care providers (including mental health providers) per unit of population, access to trauma centers, the extent of preparedness planning in long-term care facilities, and uptake of electronic health record systems—continued to yield the lowest scores. The readiness of individual health care facilities and services to respond to a mass casualty incident or other public health emergency has been a persistent health security challenge. Aiming to address this, the HHS Centers for Medicare & Medicaid Services (CMS) has implemented a rule that requires 17 different types of health care facilities and service providers to meet a suite of preparedness benchmarks in order to participate in (i.e., receive payments from) the Medicare and Medicaid programs. The Emergency Preparedness (EP) Rule became effective in November, 2017. Policymakers may be interested to see, in NHSPI results and through other studies, the extent to which the EP Rule yields meaningful improvements in national health system preparedness in the future. For incidents declared by the President as major disasters or emergencies under the Robert T. Stafford Disaster Relief and Emergency Assistance Act (P.L. 93-288, as amended), public assistance is available to help federal, state, and local agencies with the costs of some public health emergency response activities, such as ensuring food and water safety. However, no federal assistance program is designed specifically to cover the uninsured costs of individual health care services that may be needed as a consequence of a disaster. There is no consensus that this should be a federal responsibility. Nonetheless, during mass casualty incidents, hospitals and health care providers may face expectations to deliver care without a clear payment source of reimbursement. Also, the response to an incident could necessitate activities that begin before Stafford Act reimbursement to HHS has been approved, or that are not eligible for reimbursement under the act. (For example, there is no precedent for a major disaster declaration under the Stafford Act for an outbreak of infectious disease, and only one declaration of emergency, for West Nile virus in 2000.) Although the HHS Secretary has authority for a no-year Public Health Emergency Fund (PHEF), Congress has not appropriated monies to it for many years, and no funds are currently available. On several occasions Congress has provided supplemental appropriations to address uncompensated disaster-related health care costs and otherwise unreimbursed state and local response costs flowing from a public health emergency. These incidents include Hurricane Katrina and Hurricane Sandy, the 2009 H1N1 influenza pandemic, and the Ebola and Zika virus outbreaks. Supplemental appropriations for hurricane relief were provided for costs (such as uncompensated care) that were not reimbursed under the Stafford Act. The act was not invoked for the three infectious disease incidents, and supplemental appropriations were therefore needed to fund most aspects of the federal response to those outbreaks. Some policymakers, concerned about the inherent uncertainty in supplemental appropriations, have proposed dedicated funding approaches for public health emergency response. Two proposals in the 115th Congress (S. 196, H.R. 3579) would have appropriated funds to the PHEF. These measures did not advance. In appropriations for FY2019 (P.L. 115-245), Congress established and appropriated $50 million (to remain available until expended) to an Infectious Diseases Rapid Response Reserve Fund, to be administered by the Director of the HHS Centers for Disease Control and Prevention (CDC) “to prevent, prepare for, or respond to an infectious disease emergency.” The 116th Congress may choose to examine any uses of this new fund by CDC, and to consider appropriations to the PHEF, as well as other options to improve national health security preparedness.

Feb 11, 2019

Military Medical Malpractice and the Feres Doctrine

Feb 11, 2019

Department of Homeland Security Human Resources Management: Homeland Security Issues in the 116th Congress

/ Human resources management (HRM) underlies the Department of Homeland Security’s (DHS) mission and performance. DHS’s Chief Human Capital Officer (CHCO) “is responsible for the Department’s human capital program,” which is described as including such elements as “human resources policy, systems, and programs for strategic workforce planning, recruitment and hiring, pay and leave, performance management, employee development, executive resources, labor relations, work/life and safety and health.” Under Title 5, Section 1402, of the United States Code, a CHCO’s functions include “setting the workforce development strategy” and aligning HRM with “organization mission, strategic goals, and performance outcomes.” DHS’s Management Directorate web page includes the CHCO position under the Under Secretary for Management (USM). The Organizational Chart and Leadership web pages do not include the position under the USM nor explain that difference. At DHS, the CHCO is a career Senior Executive Service position. The incumbent CHCO assumed the position in January 2016. The 116th Congress may decide to conduct oversight of DHS CHCO operations—including placement, role, and functions within the department—and DHS human resources management. Such reviews could focus on the department’s plans for, and performance of, HRM. These plans are set forth in a Strategic Plan and an Annual Performance Report. The latter report for FY2020 is expected to be published along with the release of the department’s budget request. Congress may also examine DHS activities related to the President’s Management Agenda (PMA), particularly the agenda’s Cross-Agency Priority Goal (CAP) to develop the federal workforce. These topics are briefly discussed below. Hearings, roundtables, and meetings with officials and employees could inform congressional oversight on DHS appropriations, administration, and management as they relate to HRM. Annually, on or about the anniversary of DHS’s official inception, which occurred on March 1, 2003, Congress could consider conducting a review that focuses specifically on the CHCO operations and HRM policies and programs. The DHS FY2020 budget request, anticipated in March 2019, may enable Congress to conduct such a review within the context of the department’s Strategic Plan, Performance Report, and PMA activities. DHS Strategic Plan Section 2 of the GPRA Modernization Act of 2010 (P.L. 111-352) requires agency heads to submit a strategic plan that provides, among other things, “a description of how the goals and objectives are to be achieved,” including a description of the “human, capital ... resources required to achieve those goals and objectives.” Section 230 of the Office of Management and Budget’s (OMB) Circular No. A-11 (2018), “Preparation, Submission and Execution of the Budget,” stated: An agency’s Strategic Plan should provide the context for decisions about performance goals, priorities, strategic human capital planning and budget planning. It should provide the framework for the detail published in agency Annual Performance Plans, Annual Performance Reports and on Performance.gov. DHS published its most recent publicly available Strategic Plan, covering FY2014-FY2018, in September 2015. The plan briefly mentioned HRM. To “strengthen service delivery and manage DHS resources,” the plan stated that the department would “[r]ecruit, hire, retain, and develop a highly qualified, diverse, effective, mission-focused, and resilient workforce.” Specific objectives identified to accomplish this were “1) building an effective, mission-focused, diverse, and inspiring cadre of leaders; 2) recruiting a highly qualified and diverse workforce; 3) retaining an engaged workforce; and 4) solidifying a DHS culture of mission performance, adaptability, accountability, equity, and results.” To obtain an understanding of progress on the plan’s HRM components to date, Congress could ask the department to document the specific framework for these four objectives and the conditions and factors related to each being fulfilled. Congress could also ask DHS to include a statement about the expected publication of an updated Strategic Plan on the Strategic Planning page of its website. DHS Annual Performance Report A Performance Report, required by Section 3 of P.L. 111-352, is to be published by the first Monday in February each year and cover “each program activity set forth in the budget.” Among the other requirements that are specified at Title 31, Section 1115(b), of the United States Code, the plan must “provide a description of how the performance goals are to be achieved,” including “the operation processes, training, skills and technology, and the human, capital, information, and other resources and strategies required to meet those performance goals.” DHS published its most recent Performance Report, covering FY2017-FY2019, in February 2018. The report noted that the Human Capital Operating Plan (HCOP) identifies “goals, objectives, and performance measures linked to DHS strategy” and “emphasizes management integration, accountability tracking, and the use of human capital data analysis to meet DHS mission needs.” According to the department, the HCOP is used to “identify and address critical skills gaps.” The Performance Report stated that Component Recruitment and Outreach Plans specify “recruitment strategies” as “a key element to sustain progress in skill gap closure.” The HCOP and the Component Recruitment and Outreach Plans do not appear to be publicly available on the department’s website. Congress could suggest that the department include a link to these documents on DHS.gov to facilitate consultation and oversight about measurable results for performance goals. President’s Management Agenda The President Donald Trump Administration describes the PMA as setting forth “a long-term vision for modernizing the Federal Government.” The PMA is to be implemented through CAPs that address “critical government-wide challenges.” One such CAP—led by the Office of Personnel Management, OMB, and the Department of Defense—is “Developing a Workforce for the 21st Century.” It seeks a strategic human capital management framework that enables managers to “hire the best employees, remove the worst employees, and engage employees.” Three CAP subgoals under this objective are “Improve Employee Performance Management and Engagement,” “Reskill and Redeploy Human Capital Resources,” and “Simple and Strategic Hiring.” The DHS CHCO is the leader for the third CAP subgoal, which includes strategies to reduce hiring times; “better differentiate applicants’ qualifications, competencies, and experience;” and “eliminate burdensome policies and procedures.” Congressional oversight of PMA activities at DHS could focus on such matters as key initiatives, measureable results, and anticipated timelines for accomplishing subgoals.

Feb 8, 2019

Electrification May Disrupt the Automotive Supply Chain

Feb 8, 2019

The Fundamentals of Unemployment Compensation

Feb 8, 2019

Trade Promotion Authority (TPA)

Feb 7, 2019

EU-Japan FTA: Implications for U.S. Trade Policy

Feb 7, 2019

EU Data Protection Rules and U.S. Implications

Feb 7, 2019

Congressional Franked Mail: Overview

Feb 7, 2019

Science and Technology Issues in the 116th Congress

Science and technology (S&T) have a pervasive influence over a wide range of issues confronting the nation. Public and private research and development spur scientific and technological advancement. Such advances can drive economic growth, help address national priorities, and improve health and quality of life. The ubiquity and constantly changing nature of science and technology frequently create public policy issues of congressional interest. The federal government supports scientific and technological advancement directly by funding and performing research and development and indirectly by creating and maintaining policies that encourage private sector efforts. Additionally, the federal government regulates many aspects of S&T activities. This report briefly outlines a key set of science and technology policy issues that may come before the 116th Congress. This set is not exhaustive, however. Given the rapid pace of S&T advancement and its importance in many diverse public policy contexts, other S&T-related issues not discussed in this report may come before the 116th Congress. The selected issues are grouped into 10 categories Overarching S&T Policy Issues, Agriculture, Biomedical Research and Development, Climate Change Science and Water, Defense, Energy, Homeland Security, Information Technology, Physical and Material Sciences, and Space. Each of these categories includes concise analysis of multiple policy issues. The material presented in this report should be viewed as illustrative rather than comprehensive. Each section identifies CRS reports, when available, and the appropriate CRS experts to contact for further information and analysis.

Feb 6, 2019

Ebola Outbreak: Democratic Republic of Congo

Feb 6, 2019

Defense Primer: Military Retirement

Feb 6, 2019

Title Transfer for Bureau of Reclamation Facilities

Feb 6, 2019

Venezuela: U.S. Recognizes Interim Government

Many in Congress are closely following events in Venezuela, given recent political developments that have led the United States and other governments to recognize an interim government. On January 23, 2019, amid widespread protests against the authoritarian government of President Nicolás Maduro, the president of Venezuela’s democratically elected, opposition-controlled National Assembly, Juan Guaidó, declared himself interim president of Venezuela until new presidential elections are convened. The United States, Canada, and more than 35 other countries have recognized Guaidó as the interim president. The situation remains volatile. Maduro retains control of most of the military, even as domestic protests and international pressure mount against him. The United States has blocked the Maduro government from accessing revenue from the state oil company and agreed to provide humanitarian aid at Guaidó’s request. Background Maduro began a second six-year term as president of Venezuela on January 10, 2019. He won reelection in May 2018 in a contest boycotted by most of the opposition and deemed illegitimate by much of the international community. An escalating economic and humanitarian crisis has further undermined his domestic legitimacy. There had been dissent within the military, but Maduro arrested and reportedly tortured individuals, including military personnel, accused of plotting coups. Maduro faced international isolation, as the United States, key European countries, and 18 other members of the Organization of American States recognized the National Assembly as Venezuela’s only democratic institution. Interim President Juan Guaidó Juan Guaidó, a 35-year-old industrial engineer who hails from the Popular Will (VP) party of Leopoldo López (who remains under house arrest), was elected president of the National Assembly on January 5, 2019. Under Guaidó’s leadership, the National Assembly has enacted resolutions declaring that President Maduro is no longer the legitimate president, establishing a framework for a transition government, and providing amnesty for any public officials (including military members) who support a transition. On January 11, Guaidó declared himself willing to serve as interim president until presidential elections are held. He called for protests to occur on January 23, 2019, the 61st anniversary of the ouster of dictator Marcos Pérez Jiménez. Intelligence police detained and then released Guaidó on January 13, 2019. The Maduro-aligned Supreme Court has ruled that the new National Assembly leadership has been acting outside the law and invalidated its declarations. Nevertheless, Guaidó took the oath of office on January 23, 2019, based on an interpretation of Article 233 of the constitution that regards Maduro as having “usurped” (or abandoned) the presidency after January 10. Rallies for Guaidó have been massive. Guaidó is seeking to form a transition government, but Maduro controls the military and refuses to step down. Thus far, one general has supported Guiadó, but it is unclear whether others will. Some 40 deaths and more than 800 detentions have occurred since January 23. The government has sent police to raid Guaidó’s home, detained foreign journalists, and censored coverage of Guiadó. Further unrest is likely. International Reaction Fourteen Western Hemisphere countries have recognized the Guiadó government, including Canada, most South American countries (including neighboring Colombia and Brazil), four Central American countries, and three Caribbean nations. The EU initially gave Maduro a deadline for scheduling elections; it lapsed on February 3. Although Italy blocked unified EU recognition of Guaidó’s government, 24 European countries recognized Guaidó (including France, Spain, and Germany). The EU and some Latin American countries are forming a contact group on Venezuela. Russia has backed President Maduro and warned against U.S. intervention in Venezuela. Bolivia, Nicaragua, Turkey, Syria, and Iran also have supported Maduro. China has pledged not to intervene in Venezuela’s domestic affairs, and Mexico and Uruguay have supported mediation. U.S. Policy The Trump Administration has sought to increase pressure on the Maduro government and hasten a return to democracy in Venezuela. U.S. pressure has included targeted sanctions on Venezuelan officials and entities and four executive orders establishing broader economic sanctions. On January 10, 2019, the U.S. State Department condemned Maduro’s “illegitimate usurpation of power.” On January 22, Vice President Pence issued a video urging the Venezuelan people to protest the following day in support of Guiadó. President Trump recognized Guaidó as interim president of Venezuela on January 23. In response to U.S. actions, Maduro broke diplomatic ties with the United States and initially ordered U.S. diplomats to depart within 72 hours before eventually allowing them to stay for 30 days. Secretary of State Pompeo has stated that the United States will maintain a mission in Caracas to conduct relations with the Guiadó government, but nonessential staff and dependents have evacuated. The State Department has warned U.S. citizens not to travel to Venezuela. The Trump Administration has continued high-level communications with Guaidó and his representatives. On January 28, the Administration imposed sanctions on Venezuela’s state-owned oil company, Petroleos de Venezuela, S.A. (PdVSA), to prevent Maduro and his government from benefitting from Venezuela’s oil revenue. The State Department offered $20 million in humanitarian assistance to interim President Guaidó; that aid reportedly is being positioned in border areas for delivery. President Trump also has repeatedly asserted that “all options are on the table” to address the Venezuela situation, including the use of U.S. military force, although most observers believe that is a remote possibility. Potential Implications The rapidly changing situation in Venezuela poses significant challenges for U.S. policymakers. The United States has pledged full support for the Guaidó government, although it is unclear what that support might involve should the situation devolve into violence. If Guaidó consolidates a transition government, Congress may consider the type and appropriate channels through which it could authorize and appropriate funding for the new government. Support from international financial institutions likely would play a major role in supporting Venezuela’s economic recovery. Some observers, including a former head of the U.S. Southern Command, have argued against policy options that could exacerbate the tense situation on the ground in Venezuela and alienate some U.S. allies. If a political transition does not occur quickly, some observers also caution that the stronger sanctions imposed on PdVSA could exacerbate Venezuela’s humanitarian crisis.

Feb 6, 2019

El Salvador’s 2019 Elections

On February 3, 2019, Nayib Bukele, a 37-year-old former mayor of San Salvador and candidate of the Grand Alliance of National Unity (GANA) party, won El Salvador’s presidential election. Bukele garnered 53% of the vote, well ahead of Carlos Calleja, a business executive running for a conservative National Republican Alliance (ARENA)-led coalition, with 31.8%, and Hugo Mártinez, a former foreign minister of the leftist Farabundo Marti National Liberation Front (FMLN), with 14.4%. Bukele’s first-round victory occurred amid relatively low voter turnout (44.7%) during a peaceful electoral process observed by the Organization of American States and others. Bukele is set to succeed Salvador Sánchez Cerén (FMLN) as president on June 1, 2019, and serve a single, five-year term. Bukele’s election ends 10 years of FMLN government. Who Is Nayib Bukele? Nayib Bukele served as mayor of Nuevo Cuscatlán (2012-2015) and San Salvador (2015-2018) for the FMLN. Prior to entering politics, Bukele worked in family businesses started by his late father, a prominent Salvadoran of Palestinian descent who backed the FMLN financially beginning in the early 1990s. Throughout his political career, Bukele has used social media to connect directly with voters, a new phenomenon in Salvadoran politics. As mayor, he revitalized the historic center of San Salvador and engaged at-risk youth in violence-prevention programs. In 2017, the FMLN expelled him for criticizing the party’s leadership. Bukele tried to create his own political party, but El Salvador’s electoral court did not approve the new party’s registration in time to appear on the ballot for the 2019 presidential election. Bukele then joined the GANA party and became its presidential candidate. Bukele led the race from start to finish, despite releasing few specific policy proposals until late in the campaign and opting not to attend debates. His personal popularity appeared to overcome GANA’s reputation for corruption (its founder, former president Tony Saca, is in prison). In fact, Bukele ran on an anti-corruption campaign and called for the establishment of an international anti-corruption commission in El Salvador similar to the U.N.-sponsored International Commission Against Impunity in Guatemala (CICIG). It is unclear how close Bukele’s ties to GANA will be once he takes office and how he will compose his Cabinet. Why Is Bukele’s Victory Significant? Considered a youthful outsider, Bukele is the first person in 30 years to be elected president of El Salvador without the backing of the FMLN or ARENA. Polarization between the FMLN, a party formed by former guerillas after the signing of peace accords, and ARENA, a party aligned with the military, has been the primary dynamic in Salvadoran politics since the civil conflict (1980-1992). Tension between current FMLN President Sánchez Cerén, once an FMLN high commander, and the ARENA-dominated legislature has hindered efforts to address the country’s significant fiscal and security challenges. (See CRS Report R43616, El Salvador: Background and U.S. Relations.) The scale of Bukele’s victory demonstrated voters’ dissatisfaction with the apparent corruption in both major parties. The attorney general’s office has brought corruption cases against the past three Salvadoran presidents. Francisco Flores (ARENA, 1999-2004) passed away while awaiting trial for allegedly embezzling donations from Taiwan destined for earthquake relief. In 2018, former President Saca (ARENA, 2004-2009) pled guilty to charges of embezzling some $300 million; he is serving a 10-year prison sentence. Former President Mauricio Funes (FMLN, 2009-2014) received political asylum in Nicaragua after prosecutors found evidence he embezzled some $350 million in public funds. Potential Implications for El Salvador and Its Relations with the United States For more than a decade, El Salvador has had the lowest levels of growth and investment and the highest homicide rate in Central America. Bukele’s supporters hope his business experience and relative political independence can help change the country’s trajectory, but his lack of support in the National Assembly (GANA has 10 of 84 seats) could present governing challenges. Critics have questioned how Bukele intends to pay for the many infrastructure projects, including a new airport and railway line, included in his recently announced “Plan Cuscatlán.” As mayor of San Salvador, Bukele demonstrated a willingness to negotiate certain issues with gang leaders. Bukele has vowed not to adopt militarized anti-gang approaches but has not clearly defined his proposals for addressing the country’s gang problem. President-elect Bukele has said he will seek to maintain close relations with the United States and to give Salvadorans hope so they will be able to envision a future in their country rather than migrating to the United States. His willingness to tackle corruption could bolster bilateral cooperation on one of the central objectives of the U.S. Strategy for Engagement in Central America. Bukele also could shift El Salvador’s foreign policy into closer alignment with the United States. He has criticized repression in Venezuela and Nicaragua, a significant departure from the current government’s position. Likewise, he has said he will revisit, but may not reverse, the Sánchez Cerén government’s August 2018 decision to abandon relations with Taiwan in favor of China, a move the Trump Administration sharply criticized. Migration is likely to remain an irritant in bilateral relations, given the difficulty of reducing migrant flows in the short-term and Bukele’s intention to advocate for Salvadoran migrants in the United States, such as the roughly 200,000 nationals whose Temporary Protected Status (TPS) (relief from removal) is scheduled to expire in September 2019. Looking ahead, the 116th Congress may consider the type and level of foreign assistance to provide to El Salvador and the other Northern Triangle countries (Guatemala and Honduras); how to work with the Bukele government to address security, economic, and immigration issues; and how to continue the last attorney general’s recent successes in combating corruption.

Feb 6, 2019

U.S.-Vietnam Relations

Feb 6, 2019

LNG as a Maritime Fuel: Prospects and Policy

The combination of growing liquefied natural gas (LNG) supplies and new requirements for less polluting fuels in the maritime shipping industry has heightened interest in LNG as a maritime fuel. The use of LNG as an engine (“bunker”) fuel in shipping is also drawing attention from federal agencies and is beginning to emerge as an issue of interest in Congress. In 2008, the International Maritime Organization (IMO) announced a timeline to reduce the maximum sulfur content in vessel fuels to 0.5% by January 1, 2020. Annex VI of the International Convention for the Prevention of Pollution from Ships requires vessels to either use fuels containing less than 0.5% sulfur or install exhaust-cleaning systems (“scrubbers”) to limit a vessel’s airborne emissions of sulfur oxides to an equivalent level. An option for vessel operators to meet the IMO 2020 standards is to install LNG-fueled engines, which emit only trace amounts of sulfur. Adopting LNG engines requires more investment than installing scrubbers, but LNG-fueled engines may offset their capital costs with operating cost advantages over conventional fuels. Savings would depend on the price spread between LNG and fuel oil. Recent trends suggest that LNG may be cheaper in the long run than conventional fuels. LNG bunkering requires specialized infrastructure for supply, storage, and delivery to vessels. To date, the number of ports worldwide that have developed such infrastructure is limited, although growth in this area has accelerated. Early adoption of LNG bunkering is occurring in Europe where the European Union requires a core network of ports to provide LNG bunkering by 2030. LNG bunkering is also advancing in Asia, led by Singapore, the world’s largest bunkering port. Asian countries, together with Australia and the United Arab Emirates, have about 10 coastal ports offering LNG bunkering, with another 15 projects in development. LNG bunkering in the United States currently takes place in Jacksonville, FL, and Port Fourchon, LA—with a third facility under development in Tacoma, WA. Bunkering of LNG-fueled cruise ships using barges also is planned for Port Canaveral, FL. The relative locations of other U.S. ports and operating LNG terminals suggest that LNG bunkering could be within reach of every port along the Eastern Seaboard and in the Gulf of Mexico. On the West Coast, the ports of Los Angeles and Long Beach, CA, are near the Costa Azul LNG terminal in Ensenada, MX. Seattle and Tacoma are adjacent to the proposed Tacoma LNG project. Since 2015, Jones Act coastal ship operators have taken steps to transition their fleets to use cleaner burning fuels, including LNG. Shippers of dry goods to Alaska, Hawaii, and Puerto Rico have taken delivery or have ordered LNG-fueled and LNG-capable vessels from U.S. shipyards in Philadelphia, PA, and Brownsville, TX. Another company operates five LNG-powered offshore supply vessels built in Gulfport, MS. Depending upon LNG conversions, the global LNG bunker fuel market could grow to several billion dollars by 2030. If U.S. LNG producers were to supply a significant share of this market—on the strength of comparatively low LNG production costs—LNG bunkering could increase demand for U.S. natural gas production, transportation, and liquefaction. Opportunities in LNG-related shipbuilding might be more limited, as most shipbuilding occurs overseas, although domestically-constructed LNG bunkering barges could be one area of economic growth. Finally, engineering and construction firms could benefit from new opportunities to develop port infrastructure for LNG storage and transfer. However, while vessel conversion to LNG fuel may increase demand for U.S.-produced natural gas, it partially could be offset by reduced demand for U.S.-produced crude oil or refined products. Furthermore, while LNG can reduce direct emissions from vessels, fugitive emissions and environmental impacts from natural gas production and transportation could reduce overall emissions benefits. While the LNG industry has experienced few accidents, the Coast Guard has been developing new standards to address unique safety and security risks associated with LNG in vessel operations. The overarching consideration about LNG bunkering in the United States is uncertainty about how the global shipping fleet will adapt to the IMO sulfur standards over time. This uncertainty complicates decisions related to both private investment and public policy. Although Congress has limited ability to influence global shipping, it could influence the growth of LNG bunkering through the tax code and regulation, or through policies affecting the LNG industry or domestic shipping industry as a whole. Evaluating the potential implications of LNG bunkering within the context of broader energy and environmental policies may become an additional consideration for Congress. If LNG bunkering expands significantly, Congress also may examine the adequacy of existing measures to ensure the safety and security of LNG vessels, storage, and related facilities.

Feb 5, 2019

Committee on Foreign Investment in the United States (CFIUS)

Feb 5, 2019

The Congressional Review Act: Defining a “Rule” and Overturning a Rule an Agency Did Not Submit to Congress

Feb 5, 2019

H.R. 1 and S. 1: Overview and Related CRS Products

Feb 5, 2019

The Debt Limit

Feb 5, 2019

The World Oil Market and U.S. Policy: Background and Select Issues for Congress

The United States, as the largest consumer and producer of oil, plays a major role in the world market. Policy decisions can affect the price of oil and petroleum products (e.g., gasoline) for U.S. consumers and companies operating in U.S. oil production, transportation, and refining sectors. Congress considers policies that can affect the world oil market, including trade, sanctions, protection of trade routes, the Strategic Petroleum Reserve (SPR), and alternative fuel standards. Technological advancements, supportive policies, and other aspects of the U.S. oil industry have reversed a multidecade downward trend in U.S. oil production. In 2018, U.S. oil production nearly doubled compared to 2008. The United States is also the number one consumer of crude oil and refined petroleum products in the world. The pricing of crude oil contributes to the price consumers pay for petroleum products in the United States. Congress has maintained an interest in oil policy. Following the 1973 Organization of Arab Petroleum Exporting Countries (OAPEC) oil embargo, Congress passed the Energy Policy and Conservation Act of 1975 (EPCA; P.L. 94-163). In response to rapid price escalation and perceived scarcity, the EPCA, among many other things, restricted U.S. produced crude oil exports. As the oil sector evolved, Congress has amended the EPCA. The Consolidated Appropriations Act, 2016 (P.L. 114-113) repealed Section 103 of the EPCA removing any restrictions to crude oil exports. Supply, demand, price, and other factors all combine and interact with one another to create the world oil market. Saudi Arabia, historically, has been the world’s leading oil producer and along with the Organization of the Petroleum Exporting Counties (OPEC) has held enough spare capacity to influence global oil supply and prices. World oil demand typically follows world economic conditions. Oil prices are set in the world market and are primarily a function of supply and demand fundamentals, but also a number of other factors, such as quality, location, and transport infrastructure availability (e.g., pipelines). While the world oil market historically follows the world economy, supply generally does not follow demand smoothly and this results in price volatility. As economies grow, so too does the demand for crude oil and petroleum products, including fuels, paints, lubricants, and plastics. China and India are forecasted by the International Energy Agency (IEA) to contribute a large portion of oil demand growth, representing around 20% of total world demand by 2023. Asia, by IEA’s forecast, will remain a net importer of crude oil through 2023. Oil policy can be influential as a response to or in anticipation of undesirable international behavior or as a means to bring balance and stability to an otherwise volatile market. OPEC, especially in conjunction with other major producers (e.g., Russia), can exert influence on the oil market. Several bills introduced in the 115th Congress addressed the U.S. relationship with OPEC, such as the No Oil Producing and Exporting Cartels (NOPEC) Act of 2018 (H.R. 5904 and S. 3214). The United States has utilized the oil market as a political tool. National oil companies (NOCs) operate under government ownership or are companies under influence by national governments. The United States, by placing sanctions on crude oil and crude oil-related industries, can send a message to those governments. Physical threats to oil supply still exist, particularly along certain trade routes. For instance, roughly 24% of the world oil market transited the Strait of Hormuz in the first half of 2018. A disruption to world supply along trade routes could permeate into geopolitical relationships, secondary industries (e.g., petrochemicals, agriculture), and the economy at large. The United States plays a multifaceted role in the world oil market, which may affect policy decisions for Congress. Congress has in the past enacted legislation to promote a stable, reliable supply of oil. For example, the EPCA created the SPR and established the Corporate Average Fuel Economy (CAFE) standard for vehicles, in part, as strategies to reduce U.S. exposure to future supply disruptions. Additionally, Congress has enacted legislation to diversify transportation fuels, including tax credits for electric vehicles and the Renewable Fuel Standard. As the oil market continues to evolve, Congress may want to consider these and other major policy options that could include international trade policies, infrastructure, diversification of transportation fuels, and funding in research and development.

Feb 4, 2019