CRS Reports

The Islamic State: Background, Current Status, and U.S. Policy

Apr 26, 2018

Covert Action and Clandestine Activities of the Intelligence Community: Selected Definitions in Brief

While not defined by statute, DOD doctrine describes clandestine activities as “operations sponsored or conducted by governmental departments in such a way as to assure secrecy or concealment” that may include relatively passive intelligence collection information gathering operations. Unlike covert action, clandestine activities do not require a presidential finding but may require notification of Congress. This definition differentiates clandestine from covert, using clandestine to signify the tactical concealment of the activity. By comparison, covert operations are “planned and executed as to conceal the identity of or permit plausible denial by the sponsor.” Since the 1970s, Congress has established and continued to refine oversight procedures in reaction to instances where it had not been given prior notice of intelligence activities—particularly covert action—that had significant bearing on United States national security. Congress, for example, had no foreknowledge of the CIA’s orchestration of the 1953 coup that overthrew Iran’s only democratically elected government, or of the U-2 surveillance flights over the Soviet Union that ended with the Soviet shoot-down of Francis Gary Powers in 1960. Eventually, media disclosures of the CIA’s domestic surveillance of the anti-Vietnam War movement and awareness of the agency’s covert war in Laos resulted in Congress taking action. In 1974, Congress began its investigation into the scope of past intelligence community activities that provided the basis for statutory provisions for intelligence oversight going forward. The 1974 Hughes-Ryan Amendment to the Foreign Assistance Act of 1961 (§32 of P.L. 93-559) provided the earliest provisions for congressional oversight of covert action. In the late 1970s, Congress established a permanent oversight framework, standing up the House Permanent Select Committee on Intelligence (HPSCI) and the Senate Select Committee on Intelligence (SSCI). These committees were given exclusive oversight jurisdiction of the intelligence community. Recent events in North Korea, Yemen, and elsewhere have underscored the important function Congress can have in influencing the scope and direction of intelligence policy that supports United States national security. However, despite Congress’s work during the past decades to establish statutory provisions for conducting intelligence oversight, those efforts have not always achieved Congress’s desired result. For example, there has been occasional confusion over whether the congressional intelligence or defense committees have jurisdiction for oversight purposes. This confusion is due in part to overlapping or mutually supporting missions of the military and intelligence agencies, particularly in the post-9/11 counterterrorism environment. Intelligence and military activities fall under different statutory authorities, but they may have similar characteristics that warrant congressional notification (e.g., a need to conceal United States sponsorship and serious risk of exposure, compromise, and loss of life).

Apr 25, 2018

U.S. Funding to the United Nations System: Overview and Selected Policy Issues

Members of Congress are responsible for authorizing and appropriating U.S. funding to the United Nations (U.N.) system. Over the years, congressional interest in U.N. funding has largely focused on three key questions: What are appropriate levels of U.S. funding to U.N. entities? Are U.S. contributions used as efficiently and effectively as possible? How, if at all, should the United States leverage U.S. contributions to achieve its policy priorities in U.N. bodies? U.N. System Funding The U.N. system is made up of interconnected entities including specialized agencies, funds and programs, peacekeeping operations, and the U.N. organization itself. The U.N. Charter requires each U.N. member to contribute to the expenses of the organization. U.N. bodies are funded by a combination of assessed and voluntary contributions. Assessed contributions are required dues shared among U.N. member states to pay for the expenses of the organization. The U.N. regular budget, peacekeeping operations, and specialized agencies are funded mainly by assessed contributions. Voluntary contributions fund U.N. funds, programs, and offices. The budgets for many of these bodies may fluctuate annually depending on contribution levels. Organizations such as the U.N. Children’s Fund (UNICEF) and U.N. Development Program (UNDP) are financed mainly by voluntary contributions. U.S. Contributions The United States is the largest financial contributor to the U.N. system, providing 22% of the U.N. regular budget and 28.43% of U.N. peacekeeping budgets. In FY2017, it contributed more than $8.5 billion to U.N. entities through the State, Foreign Operations, and Related Programs (SFOPS) appropriations act. Congress usually authorizes the majority of U.S. contributions to the U.N. system as part of Foreign Relations Authorization Acts, with appropriations provided to the Department of State and U.S. Agency for International Development (USAID) to meet obligations. When authorization bills are not enacted, Congress has waived the authorization requirements and appropriated funds through annual SFOPS appropriations acts. The Trump Administration’s FY2018 and FY2019 budgets proposed significant reductions in U.N. funding. Selected Policy Issues Since the United Nations was established in 1945, Members of Congress have considered a number of ongoing issues related to U.N. funding: U.S. assessment levels. Some policymakers are concerned that current assessment levels result in the United States providing the bulk of funding to U.N. entities, particularly the U.N. regular budget, while having minimal influence on the organization’s budget processes. Some are concerned that the U.S. peacekeeping assessment of 28.43%, which Congress capped at 25%, is too high. Others argue that the U.S. assessment reflects its commitment to the United Nations, affirms U.S. global leadership, and encourages other countries to fund the organization. U.S. withholdings. Over the years, Congress has withheld full or partial funding from selected U.N. bodies and activities. Some Members of Congress have debated the effectiveness of such withholdings in furthering U.S. interests in U.N. bodies, as well as the potential impact on U.N. operations. U.S. arrears. For the past several decades, the United States has accumulated arrears for some U.N. entities and activities, including U.N. peacekeeping. Some Members continue to discuss the impact of these arrears and whether they should be paid. U.S. funding and U.N. reform. Congress has enacted legislation linking U.S. funding to specific U.N. reform benchmarks. Some policymakers oppose such actions due to concerns that they may interfere with U.S. influence and ability to conduct diplomacy in U.N. bodies. Others suggest that the United States should use its position as the largest financial contributor to push for certain U.N. reforms. Tracking U.S. contributions. The manner in which the United States provides funding to the U.N. system is complex and often difficult to track in a timely and accurate manner. Congress has enacted several U.N. funding reporting requirements over the years. While some of these efforts have provided useful snapshots of U.S. funding during particular time periods or to select U.N. bodies, for a number of reasons few have comprehensively captured the full scope of U.S. funding to the U.N. system. This report will be updated as events warrant. For a brief overview of U.N. funding, see CRS In Focus IF10354, United Nations Issues: U.S. Funding to the U.N. System.

Apr 25, 2018

Closing the Flood Insurance Gap

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

Apr 24, 2018

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

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

Apr 24, 2018

Army Futures Command

The Issue The Army’s post-Cold War development of major combat systems has been characterized by a number of high-profile program cancellations, such as Crusader, an artillery system cancelled in 2002 after having spent $2.2 billion; Comanche, a helicopter program cancelled in 2004 after having spent $7.9 billion; and the Future Combat System (FCS), cancelled in 2009 after having spent $18.1 billion. In addition to the expenditure of resources, these cancellations have impeded the development of newer, more capable systems, permitting potential adversaries to achieve battlefield parity and, in some cases, superiority over U.S. ground combat systems. The Army describes the issue as follows: The Army’s current requirements and capabilities development practices take too long. On average, the Army takes from 3 to 5 years to approve requirements and another 10 years to design, build, and test new weapon systems. The Army is losing near-peer competitive advantage in many areas: we are outranged, outgunned, and increasingly outdated. Private industry and some potential adversaries are fielding new capabilities much faster than we are. The speed of change in war fighting concepts, threats, and technology is outpacing current Army modernization constructs and processes. The Proposed Solution: Army Futures Command In November 2017, the Army established a Modernization Task Force to examine the options for establishing an Army Futures Command intended to establish unity of command and effort that consolidates the Army’s modernization process under one roof. Currently, Army modernization activities are primarily spread among Forces Command (FORSCOM), Training and Doctrine Command (TRADOC), Army Materiel Command (AMC), Army Test and Evaluation Command (ATEC), and the Army Deputy Chief of Staff G-8. Intended to be a 4-star headquarters consisting of 500 or fewer military and civilian personnel largely drawn from existing Army commands, Army Futures Command is planned to be established in an urban environment with ready access to academic, technological, and industrial expertise. A decision on its location is expected in the summer of 2018. Reportedly, most Army Futures Command personnel are to remain with their current commands and only the headquarters group will relocate. The Army intends Army Futures Command to achieve an initial operational capability in the summer of 2018 and full operational capability about a year later. Army Futures Command Modernization Priorities Army Futures Command Cross Functional Teams are intended to manage the Army’s six current modernization priorities: Long Range Precision Fires: Modernize cannon artillery for extended range and volume and increased missile capabilities to restore Army dominance in range. Next Generation of Combat Vehicles: Develop prototypes leading to replacement of the current fleet of infantry fighting vehicles, and later tanks, in manned, unmanned, and optionally manned variants. Future Vertical Lift: Incorporate manned, unmanned, and optionally manned variant vertical lift platforms to provide superior speed, range, endurance, altitude, and payload capabilities. Network: Develop expeditionary infrastructure solutions to fight reliably on the move in any environment. Air and Missile Defense: Ensure future combat formations are protected from modern and advanced air and missile delivered fires, including drones. Soldier Lethality: Develop the next generation of individual and squad weapons; improve body armor, sensors, and radios; and develop a synthetic training environment. Potential Issues for Congress How will existing Army Commands be re-aligned to support the creation of Army Futures Command? If the missions of existing commands are significantly changed as a result of re-alignment, is there potential to further consolidate existing Army Commands to create greater efficiencies, and could this result in a workforce reduction? How will the creation of Army Futures Command change the Army’s modernization process? Will Army Futures Command merely superimpose another layer of bureaucracy on a slightly modified process, or will it result in a completely new way of doing business? Will new or modified Department of Defense and/or legislative authorities be required to support Army Futures Command? How will Army Futures Command operate within the overall context of the Department of Defense acquisition process? What metrics will the Army employ to demonstrate to Congress that Army Futures Command has made a demonstrable improvement in the Army’s modernization process? How will Army Futures Command manage dedicated contractors to ensure that it does not become “overgrown” with contractor support? While it is relatively easy to establish a new organization and related processes, it is much more difficult to change the culture of the organization. What are some of the anticipated organizational cultural change challenges, and how does Army leadership plan to address these challenges?

Apr 24, 2018

Global Human Rights: The Department of State’s Country Reports on Human Rights Practices

Apr 24, 2018

Veterans’ Employment

Apr 24, 2018

Australia, China, and the Indo-Pacific

Recent debate in Australia on regional strategic challenges has focused on China’s rising influence, the durability of the U.S.-Australian alliance, and how Australia should respond and position itself relative to related changes in Indo-Pacific power dynamics. This debate is framed by increasing concern in Australia about the influence of China and those who promote its interests, despite the fact that China remains a key economic and trade partner. Australia’s outlook is also affected by uncertainty about the Trump Administration’s transactional approach to the alliance with Australia and U.S. engagement with the region. Australia’s China Debate A 2017 Lowy Institute poll found that 77% of Australians view the alliance relationship with America as important for Australia’s security while 46% said that China “is likely to become a military threat to Australia in the next 20 years.” The poll also found that 79% see “China as more of an economic partner than military threat.” Of those polled, 60% felt that President Trump “causes them to have an unfavourable opinion of the United States.” For many years, Australian perceptions of China, particularly among business and political elites, have been shaped by China’s role as the leading destination for Australian exports. According to the Australian Trade and Investment Commission, “China is Australia’s number one export market, our largest source of international students, our most valuable tourism market, a major source of foreign direct investment and our largest agricultural goods market.” The China-Australia Free Trade Agreement entered into force in 2015. The Australian Secret Intelligence Organization has pointed to the growing level of harmful espionage and foreign interference operations being carried out in Australia that have sought to obtain sensitive government and corporate information and to influence public debate. Prime Minister Turnbull introduced a legislative overhaul of intelligence and espionage laws in December 2017. These espionage, foreign interference, and foreign influence reforms would enhance existing espionage, secrecy, treason, sabotage, and related offenses, and introduce new offenses targeting these areas. China’s activities in the South Pacific are raising concerns in Canberra. Reportedly, China and Vanuatu have held discussions to establish a Chinese military presence in Vanuatu, a small island nation located between Australia and American Samoa. Australia and New Zealand have warned China against building this military base, which would be China’s first overseas facility in the South Pacific. Some critics outside government question the underlying assumptions and support for the alliance with the United States. Former Prime Ministers Paul Keating and Malcolm Fraser became critical of the alliance and called on Australia to undertake a more independent foreign policy. More recently, Australian academic Hugh White’s Quarterly Essay “Without America: Australia in the New Asia” asserts that “America will cease to play a major role in Asia, and China will take its place as the dominant power.” He asks, how should Australia position itself given this dynamic? Australian views of China are being shaped by revelations about how China is seeking to gain influence there. A June 2017 Four Corners television documentary, Power and Influence, the February 2018 book Silent Invasion: China’s Influence in Australia by Australian author Clive Hamilton, and Prime Minister Turnbull’s former Senior Advisor on China John Garnaut’s March 2018 article in Foreign Affairs, “How China Interferes in Australia,” all detail China’s efforts to expand its influence in Australia. According to Hamilton, the central thesis of Silent Invasion is that “the influence of the Chinese Communist Party and its sympathizers in Australia on the major institutions of Australian democracy and public life is much greater than previously thought, and in fact Australia has been the target of an extensive campaign of influence by the Chinese state.” One review of Silent Invasion labeled it a “McCarthyist manifesto.” For Hamilton’s response see “Why the Critics are Wrong.” Two widely reported cases alleging China’s influence with Australian politicians involve former Labor Senator Sam Dastyari and former Liberal Trade Minister Andrew Robb. Australia’s Foreign Affairs and Defense Policy Australian foreign affairs and defense policies are articulated in the 2017 Foreign Policy White Paper and the 2016 Defense White Paper. Accordingly, Australia “supports the deep engagement of the United States in the economic and security affairs of the region” and observes, “The roles of the United States and China and the relationship between them will continue to be the most strategically important factors in the Indo-Pacific region to 2035. A strong and deep alliance [with the United States] is at the core of Australia’s security and defence planning.” Prime Minister Turnbull stated in his 2017 Keynote Address to the Shangri la Dialogue, “In this brave new world we cannot rely on great powers to safeguard our interest. We have to take responsibility for our own security and prosperity while recognising we are stronger when sharing the burden of collective leadership with trusted partners and friends.” Australia’s Evolving Indo-Pacific Partnerships In recent years, Australia has developed a network of partnerships with Indo-Pacific nations that augment Australia’s bilateral alliance relationship with the United States. Australia’s strategic relationship with Japan is its most developed relationship with an Asian nation. The 2007 Joint Declaration on Security Cooperation provides a foundation for a wide range of Australia-Japan security cooperation. Australia and Japan share a common vision for a free, open, stable, and prosperous Indo-Pacific region based on a rules-based order. The two nations are reportedly negotiating a reciprocal access agreement to facilitate joint operations and exercises. Turnbull made a state visit to India in April 2017. In their Joint Statement, Turnbull and Prime Minister Narendra Modi reaffirmed their “commitment to a peaceful and prosperous Indo-Pacific.” The two leaders also noted “the strategic and economic interests of both countries are converging which opens up opportunities for working together in a rapidly changing region.” Australia is also once again working with India, Japan, and the United States through a quadrilateral dialogue, and in March 2018 Australia and Vietnam also signed a Strategic Partnership.

Apr 23, 2018

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

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

Apr 20, 2018

Registered Apprenticeship: Federal Role and Recent Federal Efforts

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

Apr 20, 2018

DOE Office of Electricity Delivery and Energy Reliability: Organization and FY2019 Budget Request

Apr 20, 2018

The President’s Authority to Use the National Guard or the Armed Forces to Secure the Border

Apr 19, 2018

A Peace Treaty with North Korea?

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

Apr 19, 2018

Department of State, Foreign Operations and Related Programs: FY2019 Budget and Appropriations

The Trump Administration submitted to Congress its FY2019 budget request on February 12, 2018. The proposal includes $41.86 billion for the Department of State, Foreign Operations, and Related Programs (SFOPS). Of that amount, $13.26 billion would be for State Department operations, international broadcasting, and related agencies, and $28.60 billion for foreign operations. With the enactment of the Bipartisan Budget Act of 2018 (BBA; P.L. 115-123, February 9, 2018), which raised discretionary spending limits set by the Budget Control Act of 2011 (BCA; P.L. 112-25), the Administration’s FY2019 foreign affairs funding request is entirely within enduring (base) funds; no Overseas Contingency Operations (OCO) funding is in the SFOPS request for the first time since FY2012. Comparing the request with the FY2018-enacted funding levels, the FY2019 request represents a 22.7% decrease in SFOPS funding. The proposed State and related agency funding would be 18.23% below FY2018 enacted and the foreign operations funding would be reduced by 24.7%. In the State and related programs budget, cuts are proposed for the diplomatic security accounts (the Worldwide Security Protection programmatic allocation within the Diplomatic and Consular Programs account and, separately, the Embassy Security, Construction, and Maintenance account), contributions to international organizations, and contributions for international peacekeeping activities. In the foreign operations budget, cuts would be applied across all accounts, with disproportionately large cuts proposed for humanitarian assistance, multilateral assistance, and funding for bilateral development programs focused on agriculture, education, and democracy promotion. This report provides an account-by-account comparison of the FY2019 SFOPS request to the FY2018-enacted funding in Appendix A. The International Affairs (function 150) budget in Appendix B provides a similar comparison. This report will be updated to reflect congressional activity on FY2019 appropriations.

Apr 18, 2018

2018 Summit of the Americas

Apr 18, 2018

The International Space Station (ISS) and the Administration’s Proposal to End Direct NASA Funding by 2025

Apr 18, 2018

Department of Housing and Urban Development (HUD): FY2019 Budget Request Fact Sheet

Overview of FY2019 President’s Budget request for the Department of Housing and Urban Development (HUD).

Apr 17, 2018

The National Flood Insurance Program (NFIP), Reinsurance, and Catastrophe Bonds

Insurance generally serves to transfer risk from one entity who does not want to bear that risk to another entity that does. An initial insurance purchase, such as homeowners buying a policy to cover damage to their home, however, is often only the first transfer of that risk. The initial (or primary) insurer may then transfer (or cede) some or all of this risk to another company or investor, such as a reinsurer. Such risk transfers are, on the whole, a net cost for primary insurers, just as purchasing insurance is a net cost for homeowners. The Homeowner Flood Insurance Affordability Act of 2014 (P.L. 113-89) revised the authority of the National Flood Insurance Program (NFIP) to secure reinsurance from “private reinsurance and capital markets.” Risk transfer from the private market could reduce the likelihood of the Federal Emergency Management Agency (FEMA) needing to borrow from the Treasury to pay claims. In addition, this could allow the NFIP to recognize some of its flood risk up front through the premiums it pays for risk transfers rather than after the fact borrowing from the Treasury. Using reinsurance to cover losses that occur in the more extreme years could help the NFIP to reduce the volatility of its losses over time. However, because reinsurers understandably charge the NFIP premiums to compensate for the assumed risk as well as the reinsurers’ costs and profit margins, the primary benefit of reinsurance is to manage risk, not to reduce the NFIP’s long-term fiscal exposure. Reinsurance The most common form of risk transfer is for a primary insurer to purchase a policy covering its risks from another (re)insurer. The primary insurer would typically continue to service the policy, while the reinsurer operates in the background. Reinsurance is particularly important to smaller insurers, who may not be large enough to spread local risks that are geographically correlated, such as a storm hitting a particular area. Reinsurers, however, often have the scope to diversify their risks on a global scale. It is also not uncommon for reinsurers to transfer (or retrocede) risks to other reinsurers. National Flood Insurance Program (NFIP) Purchase of Reinsurance Begun in September 2016 with a small amount to test the market, larger reinsurance purchases began in January 2017, as FEMA purchased $1.042 billion of reinsurance for an annual premium of $150 million. The reinsurance covered 26% of losses between $4 billion and $8 billion arising from a single flooding event. FEMA has so far paid over $8.6 billion in claims for Hurricane Harvey, triggering a full claim on the 2017 reinsurance. FEMA purchased $1.46 billion of reinsurance in January 2018, for a premium of $235 million. The agreement is structured to cover losses in 2018 above $4 billion for a single flooding event, covering 18.6% of losses between $4 billion and $6 billion, and 54.3% of losses between $6 billion and $8 billion. Catastrophe Bonds In addition to reinsurance, new forms of “alternative” risk transfer have also been developed. One category of alternative risk transfer instruments are known as insurance linked securities (ILS)—financial instruments whose values are driven by insurance loss events. The most common form of ILS are catastrophe bonds (or cat bonds), which are structured somewhat like other bonds, but whose payout is dependent on the occurrence of a particular catastrophe, like a hurricane or earthquake of a particular strength. Catastrophe bonds were first used in the private sector in the mid-1990s following Hurricane Andrew and the Northridge earthquake. Catastrophe bonds transfer major natural disaster risks to capital market investors. Such bonds are tradable and access global capital markets more directly than reinsurance, where a reinsurer acts as an intermediary. Catastrophe bonds are structured so that payment depends on the occurrence of an event of a defined magnitude or that causes an aggregate insurance loss in excess of a stipulated amount. Only when these specific triggering conditions are met do investors begin to lose their investment. There are three main types of triggers Indemnity—bonds triggered by the actual losses experienced by the sponsoring insurer following the occurrence of a specified event; e.g., a bond triggered if an insurer’s residential property losses from a hurricane in Florida exceeded $25 million in 2018; Industry Loss—bonds triggered by a predetermined threshold of industry-wide losses following the occurrence of a specified event; e.g., a bond triggered if a total of all insurers’ residential property losses from floods in 2018 exceeded $20 billion; or Parametric—bonds triggered by the actual physical conditions occurring during a disaster such as wind speed or earthquake size; e.g., a bond triggered by an eight-meter storm surge hitting New Orleans in 2018. The public sector has become increasingly interested in the use of bonds. In 2009, Mexico became the first sovereign to issue cat bonds and the World Bank is now one of the largest participants in the catastrophe bond market. The New York City Metropolitan Transit Authority issued catastrophe bonds to protect against storm surge. According to the insurer Swiss Re, more than $10.5 billion in catastrophe bonds were issued in 2017, with the overall amount outstanding at $278.0 billion. NFIP and Catastrophe Bonds In April 2018, FEMA announced that it would seek to transfer NFIP risk to private markets through an ILS transaction. According to the notice of procurement, this would happen through a reinsurance procurement in which the reinsurer acts as a transformer to transfer NFIP-insured flood risk through the issuance of a catastrophe bond, to be effective for a term of “likely” three years. The notice also indicates that proceeds from the issuance of the catastrophe bond would be transferred into a reinsurance trust account, with FEMA as the sole beneficiary, for satisfying claims under the reinsurance agreement between FEMA and the transforming reinsurer. Thus, apparently, the catastrophe bonds would not be issued by the United States as a sovereign entity, but instead would be issued by the private reinsurer. The amount of the cat bond and the precise design are not yet known.

Apr 17, 2018

Legal Authorities Under the Controlled Substances Act to Combat the Opioid Crisis

According to the Centers for Disease Control and Prevention, the annual number of drug overdose deaths involving prescription opioids (such as hydrocodone, oxycodone, and methadone) and illicit opioids (such as heroin and non-pharmaceutical fentanyl) has more than quadrupled since 1999. A November 2017 report issued by the President’s Commission on Combating Drug Addiction and the Opioid Crisis also observed that “[t]he crisis in opioid overdose deaths has reached epidemic proportions in the United States ... and currently exceeds all other drug-related deaths or traffic fatalities.” How the current opioid epidemic happened, and who may be responsible for fueling it, are complicated questions, though reports suggest that several parties likely played contributing roles, including pharmaceutical manufacturers and distributors, doctors, health insurance companies, rogue pharmacies, and drug dealers and addicts. Many federal departments and agencies are involved in efforts to combat opioid abuse and addiction, including a law enforcement agency within the U.S. Department of Justice, the Drug Enforcement Administration (DEA), which is the focus of this report. The primary federal law governing the manufacture, distribution, and use of prescription and illicit opioids is the Controlled Substances Act (CSA), a statute that the DEA is principally responsible for administering and enforcing. The CSA and DEA regulations promulgated thereunder establish a framework through which the federal government regulates the manufacture, distribution, importation, exportation, and use of certain substances which have the potential for abuse or psychological or physical dependence, including opioids. Congress enacted the CSA in 1970 to facilitate the availability of controlled substances for authorized medical, scientific, research, and industrial purposes, while also preventing these substances from being diverted out of legitimate channels for illegal purposes such as drug abuse and drug trafficking activities. The CSA aims to protect the public’s health and safety from dangers posed by highly addictive or dangerous controlled substances that are diverted into the illicit market, while also ensuring that patients have access to pharmaceutical controlled substances for legitimate medical purposes such as the treatment of pain. This report describes the current federal legal regime governing opioids and other controlled substances under the CSA and its implementing regulations, including (1) the classification of various plants, drugs, and chemicals into one of five schedules based on the substance’s medical use, potential for abuse, and safety or dependence liability; (2) who must register with the DEA in order to receive authorization to handle the substances (such as drug manufacturers, wholesale distributors, doctors, hospitals, pharmacies, and scientific researchers); (3) what obligations registrants must satisfy in order to maintain a valid registration (such as keeping records of drug inventories and transactions, submitting reports to the DEA, and providing security measures to safeguard controlled substances); and (4) the DEA’s administrative, civil, and criminal authorities for enforcing regulatory compliance with the CSA (such as suspending or revoking a registrant’s legal authority to handle controlled substances if the DEA Administrator finds that the registrant has “committed such acts as would render his registration ... inconsistent with the public interest.”). The report then examines DEA initiatives and actions taken, pursuant to its legal authorities under the CSA, which specifically target the abuse of opioids. The report concludes by discussing selected opioid-related legislative proposals in the 115th Congress that would amend the CSA.

Apr 16, 2018

Regulatory Reform 10 Years After the Financial Crisis: Systemic Risk Regulation of Non-Bank Financial Institutions

When large, interconnected financial institutions become distressed, policymakers have historically faced a choice between (1) a taxpayer-funded bailout, and (2) the destabilization of the financial system—a dilemma that commentators have labeled the “too-big-to-fail” (TBTF) problem. The 2007-2009 financial crisis highlighted the significance of the TBTF problem. During the crisis, a number of large financial institutions experienced severe distress, and the federal government committed hundreds of billions of dollars in an effort to rescue the financial system. According to some commentators, the crisis underscored the inadequacy of existing prudential regulation of large financial institutions, and of the bankruptcy system for resolving the failure of such institutions. In response to the crisis, Congress passed and President Obama signed the Dodd-Frank Wall Street Reform and Consumer Protection Act (Dodd-Frank) in 2010. Titles I and II of Dodd-Frank are specifically directed at minimizing the systemic risk created by TBTF financial institutions. In order to minimize the risks that large financial institutions will fail, Title I of Dodd-Frank establishes an enhanced prudential regulatory regime for certain large bank holding companies and non-bank financial companies. In order to “resolve” (i.e., reorganize or liquidate) systemically important financial institutions, Title II establishes a new resolution regime available for such institutions outside of the Bankruptcy Code. The Title I regime applies to (1) all bank holding companies with total consolidated assets of $50 billion or more, and (2) any non-bank financial companies that the Financial Stability Oversight Council (FSOC) designates as systemically important. To date, FSOC has designated four non-bank financial companies for enhanced supervision: AIG, GE Capital, Prudential, and MetLife. However, FSOC has rescinded its designations of AIG and GE Capital as a result of changes to those companies, and MetLife successfully challenged its designation in federal court, leaving Prudential as the sole remaining designee as of the publication of this report. Legislation that would repeal FSOC’s authority to designate non-banks for enhanced supervision has passed the House of Representatives (H.R. 10), and a bill that would alter FSOC’s designation process and standards in more limited ways has also been introduced in the House (H.R. 4061). Title II of Dodd-Frank creates an “Orderly Liquidation Authority” (OLA) pursuant to which the Federal Deposit Insurance Corporation (FDIC) can serve as the receiver for failing financial companies that pose a significant risk to the financial stability of the United States. The OLA, which was developed as an alternative to the Bankruptcy Code, is similar to the mechanisms the FDIC uses to resolve failed commercial banks. The OLA grants the FDIC broad powers to manage the liquidation or sale of a failed financial company, and Title II includes provisions that offer financial institutions more robust protections against “runs” by their derivatives counterparties than they would have under the Bankruptcy Code. The FDIC, Federal Reserve, and Office of the Comptroller of the Currency have promulgated a number of rules that have important consequences for the OLA concerning the FDIC’s powers as receiver, its general strategy for resolving failed institutions, “loss-absorbing capacity” requirements for certain bank holding companies, and derivatives contracts. There have also been a number of proposals to reform Title II. A bill that would (among other things) repeal Title II passed the House in June 2017, and bills to amend the Bankruptcy Code to allow it to deal more effectively with the failure of large financial institutions have been introduced in the House and the Senate (H.R. 10 (115th Cong.), H.R. 1667 (115th Cong.), S. 1840 (114th Cong.)).

Apr 12, 2018

ATF’s Ability to Regulate “Bump Stocks”

Apr 11, 2018

Class Action Lawsuits: A Legal Overview for the 115th Congress

A class action is a procedure by which a large group of entities (known as a “class”) may challenge a defendant’s allegedly unlawful conduct in a single lawsuit, rather than through numerous, separate suits initiated by individual plaintiffs. In a class action, a plaintiff (known as the “class representative,” the “named representative,” or the “named plaintiff”) may sue the defendant not only on his own behalf, but also on behalf of other entities (the “class members”) who are similarly situated to the class representative in order to resolve any legal or factual questions that are common to the entire class. Courts and commentators have recognized that class actions can serve several beneficial purposes, including economizing litigation and incentivizing plaintiffs to pursue socially desirable lawsuits. At the same time, however, class actions can occasionally subject defendants to costly or abusive litigation. Moreover, because the class members generally do not actively participate in a class action lawsuit, class actions pose a risk that the class representative and his counsel will not always act in accordance with the class members’ best interests. In an attempt to balance the benefits of class actions against the risks to defendants and class members, Federal Rule of Civil Procedure 23 establishes a rigorous series of prerequisites that a federal class action must satisfy. For similar reasons, Rule 23 also subjects proposed class action settlements to the scrutiny of the federal courts. This report serves as a primer on class action litigation in the federal courts. It begins by discussing the purpose of class actions, as well as the risks class actions may pose to defendants, class members, and society at large. The report also discusses the prerequisites that a class action must satisfy before a court may “certify” it—that is, before a federal court may allow a case to proceed as a class action. An Appendix to the report also contains a reference chart that graphically illustrates those prerequisites for class certification. The report then discusses Rule 23’s restrictions on the parties’ ability to settle a certified class action. The report concludes by identifying ways in which Congress could modify the legal framework governing class actions if it were so inclined, with a particular focus on a bill currently pending in the 115th Congress that would effectuate a variety of changes to the class action system.

Apr 11, 2018

The Bipartisan Budget Act of 2018 and an FY2019 Budget Resolution

The Bipartisan Budget Act of 2018 (BBA 2018, P.L. 115-123), enacted February 9, 2018, amended the statutory discretionary spending limits for FY2018 and FY2019. BBA 2018 comprised several other components as well, one of which was related to a congressional budget resolution for FY2019. These BBA 2018 “budget resolution” provisions (which may be referred to as a “deemer” or a budget resolution substitute) provide the House and Senate with enforceable levels of spending and revenue for FY2019 in ways that a “traditional” budget resolution would. While it is not unusual for Congress to employ such budget resolution substitutes, these substitutes differ from a “traditional” budget resolution in several ways. The idea of a “traditional” budget resolution means a budget resolution as defined by the Congressional Budget Act, which specifies the way that a budget resolution shall be developed and considered and what components it must include. Budget resolution substitutes, such as the one in the BBA 2018, are not developed or considered in the manner specified by the Congressional Budget Act, nor do they include all of the components required by the act. Further, traditional budget resolutions often reflect a budget plan that differs from current law, while substitutes such as the BBA 2018 provisions set budgetary levels that are a reflection of baseline levels of spending and revenue that would occur if existing law were left unchanged. Additionally, traditional budget resolutions often include provisions triggering the budget reconciliation process; substitute provisions do not. These provisions, however, do not preclude Congress from acting on a traditional budget resolution for FY2019. This means that Congress still has the option to consider a budget resolution for FY2019 even if it differs from the levels and components included in the BBA 2018 budget resolution provisions.

Apr 10, 2018

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

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

Apr 10, 2018

Overview of Long-Term Services and Supports

Apr 10, 2018

The Smart Grid: Status and Outlook

The electrical grid in the United States comprises all of the power plants generating electricity, together with the transmission and distribution lines and systems that bring power to end-use customers. The “grid” also connects the many publicly and privately owned electric utility and power companies in different states and regions of the United States. However, with changes in federal law, regulatory changes, and the aging of the electric power infrastructure as drivers, the grid is changing from a largely patchwork system built to serve the needs of individual electric utility companies to essentially a national interconnected system, accommodating massive transfers of electrical energy among regions of the United States. The modernization of the grid to accommodate today’s more complex power flows, serve reliability needs, and meet future projected uses is leading to the incorporation of electronic intelligence capabilities for power control purposes and operations monitoring. The “Smart Grid” is the name given to this evolving intelligent electric power network. The U.S. Department of Energy (DOE) describes the Smart Grid as “an intelligent electricity grid—one that uses digital communications technology, information systems, and automation to detect and react to local changes in usage, improve system operating efficiency, and, in turn, reduce operating costs while maintaining high system reliability.” In 2007, Congress passed the Energy Independence and Security Act (P.L. 110-140). Title XIII of the act described characteristics of the Smart Grid and directed DOE to establish a Smart Grid Investment Matching Grant (SGIG) program to help support the modernization of the nation’s electricity system. In 2014, DOE concluded that the adoption of Smart Grid technologies was accelerating but at varying rates “depending largely on decision-making at utility, state, and local levels.” DOE noted that the nation’s electricity system is in the midst of “potentially transformative change,” with challenges for Smart Grid deployment remaining with respect to grid-connected renewable and distributed energy sources and adaptability to current and future consumer-oriented applications. Costs of deploying the Smart Grid remains an issue, and study estimates vary. While some DOE programs have supported grid modernization, Congress has not explicitly appropriated funding for deployment of the Smart Grid since the American Recovery and Reinvestment Act of 2009 (P.L. 111-5). In its 2014 study, DOE estimated historical and forecast investment in the Smart Grid as approximately $32.5 billion between 2008 and 2017, averaging $3.61 billion annually in the period. If this level of investment remains constant, it would put spending well below levels the Electric Power Research Institute (in 2011) and the Brattle Group (in 2008) estimated were needed to fully build the Smart Grid by approximately 2030. From 2010 to 2015, $3.4 billion in SGIG grants supported 99 projects resulting in $8 billion in grid modernization. Congress could provide funding to help bridge the funding gap if it chooses to accelerate adoption of the Smart Grid. A number of near-term trends—including electric vehicles, environmental concerns, and the ability of customers to take advantage of real-time pricing programs to reduce consumer cost and energy demand—would benefit from investments in Smart Grid enabled technologies. While concerns such as cybersecurity and privacy exist, most electric utilities appear to view Smart Grid systems positively. Costs could be reduced and system resiliency improved by further integration of automated switches and sensors, even considering the cost of a more cybersecure environment. But with the potentially high costs of a formal transition, some see the deployment of the Smart Grid continuing much the same as it has, with a gradual modernization of the system as older components are replaced.

Apr 10, 2018

Business Investment Spending Slowdown

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

Apr 9, 2018

Lame Duck Sessions of Congress, 1935-2016 (74th-114th Congresses)

A “lame duck” session of Congress occurs whenever one Congress meets after its successor is elected but before the end of its own constitutional term. Under present conditions, any meeting of Congress between election day in November and the following January 3 is a lame duck session. Prior to 1933, when the Twentieth Amendment changed the dates of the congressional term, the last regular session of Congress was always a lame duck session. Today, however, the expression is primarily used for any portion of a regular session that falls after an election. Congress has held 21 lame duck sessions since the implementation of the Twentieth Amendment. From the first modern lame duck session in 1941 to 1998, the sessions occurred sporadically. Beginning in 2000, both houses of Congress have held a lame duck session following every election. In this report, the data presentation is separate for the sporadic period (76th-105th Congresses) and the consistent period (106th-present) in order to identify past and emerging trends. Lame duck sessions can occur in several ways. Either chamber or both chambers may (1) provide for an existing session to resume after a recess spanning the election; (2) continue meeting in intermittent, or pro forma, sessions during the period spanning the election; or (3) reconvene after an election pursuant to contingent authority granted to the leadership in a recess or adjournment resolution. Two other possibilities have not occurred: (4) Congress could set a statutory date for a new session to convene after the election, then adjourn its existing session sine die; and (5) while Congress is in recess or sine die adjournment, the President could call it into extraordinary session at a date after the election. During both the sporadic and the consistent periods, election breaks have usually begun by mid-October and spanned between one and two months. Congress has most often reconvened in mid-November and adjourned before Christmas so that the lame duck session lasted about a month. However, in four out the past five Congresses, lame duck sessions have continued into January, producing later adjournments, longer sessions, and more days convened in daily sessions. Lame duck sessions have been held for a variety of reasons. Their primary purpose is to complete action on legislation. However, they have also been used to prevent recess appointments and pocket vetoes, to consider motions of censure or impeachment, or to keep Congress assembled on a standby basis. In recent years, most lame duck sessions have focused on program authorizations, trade agreements, appropriations, and the budget. This report will be updated after any additional lame duck session occurs.

Apr 6, 2018

Tax Incentives for Opportunity Zones: In Brief

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

Apr 5, 2018

Reconsidering the Strategic Petroleum Reserve

Apr 5, 2018

Immigration Consequences of Criminal Activity

Congress’s power to create rules governing the admission of non-U.S. nationals (aliens) has long been viewed as plenary. In the Immigration and Nationality Act (INA), as amended, Congress has specified grounds for the exclusion or removal of aliens, including on account of criminal activity. Some criminal offenses, when committed by an alien who is present in the United States, may render that alien subject to removal from the country. And certain criminal offenses may preclude an alien outside the United States from being either admitted into the country or permitted to reenter following an initial departure. Further, criminal conduct may disqualify an alien from certain forms of relief from removal or prevent the alien from becoming a U.S. citizen. In some cases, the INA directly identifies particular offenses that carry immigration consequences; in other cases, federal immigration law provides that a general category of crimes, such as “crimes involving moral turpitude” or an offense defined by the INA as an “aggravated felony,” may render an alien ineligible for certain benefits and privileges under immigration law. The INA distinguishes between the treatment of aliens who have been lawfully admitted into the United States and those who are either seeking admission into the country or are physically present in the country without having been lawfully admitted. Aliens who have been lawfully admitted into the country may be removed if they engage in conduct that renders them deportable, whereas aliens who have not been legally admitted into the United States—including both aliens seeking initial entry into the United States as well as those who are physically present in the country but were never lawfully admitted—may be excluded or removed from the country if they have engaged in conduct rendering them inadmissible. Although the INA designates certain criminal activities and categories of criminal activities as grounds for inadmissibility or deportation, the respective grounds are not identical. Moreover, a conviction for a designated crime is not always required for an alien to be disqualified on criminal grounds from admission into the United States. But for nearly all criminal grounds for deportation, a “conviction” (as defined by the INA) for the underlying offense is necessary. Additionally, although certain criminal conduct may disqualify an alien from various immigration-related benefits or forms of relief, the scope of disqualifying conduct varies depending on the particular benefit or form of relief at issue. This report identifies the major criminal grounds that may bar an alien from being admitted into the United States or render an alien within the country removable. The report also discusses additional immigration consequences of criminal activity, including those that make an alien ineligible for certain relief from removal, including cancellation of removal, voluntary departure, withholding of removal, and asylum. The report also addresses the criminal grounds that render an alien ineligible to adjust to lawful permanent resident (LPR) status, as well as those grounds barring LPRs from naturalizing as U.S. citizens. The report also discusses the scope of several general criminal categories referenced by the INA, including “crimes involving moral turpitude,” “aggravated felonies,” and “crimes of violence.”

Apr 5, 2018

Statutory Interpretation: Theories, Tools, and Trends

In the tripartite structure of the U.S. federal government, it is the job of courts to say what the law is, as Chief Justice John Marshall announced in 1803. When courts render decisions on the meaning of statutes, the prevailing view is that a judge’s task is not to make the law, but rather to interpret the law made by Congress. The two main theories of statutory interpretation—purposivism and textualism—disagree about how judges can best adhere to this ideal of legislative supremacy. The problem is especially acute in instances where it is unlikely that Congress anticipated and legislated for the specific circumstances being disputed before the court. While purposivists argue that courts should prioritize interpretations that advance the statute’s purpose, textualists maintain that a judge’s focus should be confined primarily to the statute’s text. Regardless of their interpretive theory, judges use many of the same tools to gather evidence of statutory meaning. First, judges often begin by looking to the ordinary meaning of the statutory text. Second, courts interpret specific provisions by looking to the broader statutory context. Third, judges may turn to the canons of construction, which are presumptions about how courts ordinarily read statutes. Fourth, courts may look to the legislative history of a provision. Finally, a judge might consider how a statute has been—or will be—implemented. Although both purposivists and textualists may use any of these tools, a judge’s theory of statutory interpretation may influence the order in which these tools are applied and how much weight is given to each tool. This report begins by discussing the general goals of statutory interpretation, reviewing a variety of contemporary as well as historical approaches. The report then briefly describes the two primary theories of interpretation employed today, before examining the main types of tools that courts use to determine statutory meaning. The report concludes by exploring developing issues in statutory interpretation.

Apr 5, 2018

UPDATE: The End of the Deferred Action for Childhood Arrivals Program: Some Immediate Takeaways

Apr 5, 2018

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

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

Apr 4, 2018

Federal Research and Development (R&D) Funding: FY2019

President Trump’s budget request for FY2019 includes approximately $131.0 billion for research and development (R&D), of which $118.056 billion is included in the President’s budget and an estimated additional $12.9 billion in nondefense discretionary R&D is requested as part of an addendum to the President’s budget. The additional funding requested in the addendum followed enactment of the Bipartisan Budget Act of 2018 (P.L. 115-123), which raised defense and nondefense discretionary spending caps for FY2018 and FY2019. The budget documents released by the Office of Management and Budget (OMB) did not specify how the additional funding was to be allocated by agency, but agencies appear to have included this proposed funding in their budget justifications, and this funding is included in the agency analyses in this report. Final FY2018 funding had not been enacted at the time the President’s FY2019 budget was prepared; therefore, the budget included the FY2017 actual funding levels, 2018 annualized continuing resolution (CR) levels, and the FY2019 request levels. Subsequent to the release of the President’s budget, Congress enacted the Consolidated Appropriations Act, 2018 (P.L. 115-141), appropriating full-year funding for FY2018, rendering the CR levels identified in the budget no longer relevant. Therefore, this report compares the President’s request for FY2019 to the FY2017 level. Total federal FY2018 R&D funding amounts will not be known until agencies report that information to OMB. As agencies publish their FY2018 R&D levels, the agency sections of this report will be updated to reflect that information and to make comparisons to the President’s FY2019 request. This report will also be updated to reflect House and Senate appropriations actions on the President’s FY2019 request. In FY2018, OMB adopted a change to the definition of development, applying a more narrow treatment it describes as “experimental development.” This approach was intended to better harmonize the reporting of U.S. R&D funding data with the approach used by other nations. The new definition is used in this report. Under the new definition of R&D (applied to both FY2017 and FY2019 figures), and including the estimated $12.9 billion included in the budget addendum, President Trump is requesting approximately $131.0 billion for R&D for FY2019, an increase of $5.7 billion (4.5%) above the FY2017 level. OMB notes that under the previous definition, total federal R&D would be $38.7 billion higher, or approximately $170 billion. Adjusted for inflation, the President’s FY2019 R&D request represents a constant-dollar increase of 1.2% above the FY2017 actual level. Funding for R&D is largely concentrated among a few departments and agencies. In FY2017, eight federal agencies received 96.3% of total federal R&D funding, with the Department of Defense (39.3%) and the Department of Health and Human Services (27.3%) combined accounting for more than two-thirds of all federal R&D funding. President’s Trump’s FY2019 budget is largely silent on funding levels for a number of multiagency R&D initiatives. However, some activities supporting these initiatives are discussed in agency budget justifications and are reported in the agency analyses in this report. The request represents the President’s R&D priorities; Congress may opt to agree with none, part, or all of the request, and it may express different priorities through the appropriations process. In recent years, Congress has completed the annual appropriations process after the start of the fiscal year. Failure to complete the process by the start of the fiscal year and the accompanying use of continuing resolutions can affect agencies’ execution of their R&D budgets, including the delay or cancellation of planned R&D activities and the acquisition of R&D-related equipment.

Apr 4, 2018

Data, Social Media, and Users: Can We All Get Along?

Introduction In March 2018, media reported that voter-profiling company Cambridge Analytica had exceeded Facebook’s data use policies by collecting data on millions of Facebook users. Cambridge Analytica did this by working with a researcher to gain access to the data, so the company itself was not the entity seeking access to the information. This allowed Cambridge Analytica to “scrape” or download data from users who had granted access to their profiles, as well as those users’ Facebook friends (whose profiles the first user had access to, but for which the friends did not authorize access). At this time, it is publicly unknown what data were accessed. Facebook hired a digital forensics firm to audit the event. Based on media reporting and old Facebook applications, user profile data such as interests, relationships, photos, “likes,” and political affiliation may have been accessible, but not all data held by Facebook appear to have been accessed by an outside party. Additionally, as initial access to a user’s profile was granted via an app, other information about the user, such as other apps installed on the device and Internet Protocol addresses, may have been accessed. With this information, Cambridge Analytica built profiles of potential voters to test messaging and target advertisements. In addition to ads on Facebook, search engine optimization may have been used to drive users toward ads and other web content (i.e., blogs) outside Facebook. This event could be characterized as a data breach despite Facebook systems not being breached (i.e., hacked) because a third party was able to access data that neither users nor Facebook intended to share. Rather than compromise a vulnerability in Facebook’s information technology (IT), Cambridge Analytica compromised weak security controls and violated Facebook’s data policies. This breach is akin to an insider exceeding authorized access to retrieve information, or an outsider using information they were authorized to access for purposes prohibited by contractual agreement. In response to this incident, some Members of Congress have questioned Facebook and have invited Facebook CEO Mark Zuckerburg to testify before House and Senate committees. This Insight examines policy issues surrounding this incident and provides options for Congress to consider. While this event has started discussions on election security and social media company requirements to report advertising, this Insight addresses data security concerns without discussing the impacts or consequences of data use. Issues This is not Facebook’s first major privacy and data security incident. In 2011, the Federal Trade Commission (FTC) entered into a consent order with Facebook following an investigation into the company’s privacy practices at the time. The FTC went further and released guidance so other companies could avoid enforcement actions. In an unusual step, the FTC has publicly confirmed opening an investigation on Facebook’s data security and privacy practices in light of the media reports about Cambridge Analytica. While Facebook’s, the FTC’s, Congress’s, and other investigations continue, the public will learn more about this event and its implications. However, initially, this event has ignited a public debate on data ownership, usage, security, and privacy. Data Ownership, Rights, and Usage Consumers’ expectations and reality on who owns data and how data may be used are commonly misaligned. In Europe and Canada, data about individuals are generally considered to always remain their data; they have a right to the data, a right to expect the data be secured, a right to know exactly how those data are used, and a right to remove those data from the service hosting it. However, in the United States, general data regulation does not exist. Individual regulations exist, but those are targeted at specific types of entities (e.g., the Safeguard Rule for financial firms and HIPAA health information standards for payers and providers of healthcare). Once data are submitted to another entity, they are generally considered to be under that entity’s ownership, and any data that entity generates from submitted data belongs to that entity—barring a separate agreement between the parties dictating data ownership and usage. Data Security and Privacy Data security is not generally prescribed by law for the information technology sector. Instead, companies make IT security investments as part of managing corporate risk. Mitigating this risk may be material to their investors or beneficial to their users. In the U.S. system, privacy rules are in place to ensure privacy of an individual from the government. However, privacy of individuals from other entities (e.g., other individuals or corporations) is a matter of state law and private agreements (e.g., contracts). This places a higher burden on individuals to understand the risk of generating and sharing data, as well as reviewing and understanding individual agreements with different services with which they engage. Options for Congress Oversight Congress has provided oversight of data security practices at private companies in the past. Following the Equifax data breach last year, Congress held hearings on the incident and encouraged the industry to adopt stronger security postures and provide consumers relief. Hearings can inform legislation, advance debate, and drive private action in hopes of avoiding governmental action. Legislation Options for Congress to legislate in response to the Facebook incident include (but are not limited to) defining national expectations for data ownership and privacy; establishing expectations for liability when unauthorized parties access data; and creating data breach notification rules. Examples of such rules are the European Union’s General Data Protection Regulation (GDPR) and Canada’s Personal Information Protection and Electronic Documents Act (PIPEDA). These options would alter companies’ relationship with data. Currently, data are cheaply collected, analyzed, and used for profit, enabling free access to large portions of the Internet and other IT services. Placing restrictions on data would alter the business models of these Internet-enabled companies and services. The question then becomes one of tradeoffs—does the free use of data create a national harm or is it a necessity for America remaining a leader in innovation, and what are the consequences of each? In considering legislative options, Congress could also consider granting regulatory authority to a federal agency or agencies, or it could create a new federal entity to regulate companies. It appears that agencies do not currently have authority to regulate the data security at social media companies. Instead, data security may be enforced at a company pursuant to a consent order with the FTC after an unfair or deceptive practice investigation. Regulation The IT sector (including social media companies) currently faces little federal regulation. This stems from a desire to promote innovation. However, absent from that argument is the enormous social and economic impact of some IT companies. For instance, the reported number of Facebook users affected by this event is greater than the estimated populations of New York and Texas combined, and Facebook has a larger market capitalization (over $400 billion) than JP Morgan Chase (over $300 billion). Congress could consider several models for regulation, including Government Regulation—a government agency directly regulates an industry through an exercise of statutory authority with accountability to the President and Congress (e.g., the Nuclear Regulatory Commission’s relationship with nuclear facilities). Quasi-Governmental Regulation—an organization with public and private sector characteristics, like a government corporation, regulates under a statutory authority and has accountability to the President and Congress (e.g., the Federal Deposit Insurance Corporation). Regulation by Nongovernmental Elements—a nongovernmental entity exercises regulatory authority in cooperation with, or under the oversight of, a governmental agency (e.g., the North American Electric Reliability Corporation writes standards which are accepted and enforced by the Federal Energy Regulatory Commission). Self-Regulatory Organizations (SROs)—organizations that act under a federal statute or authority, which can be overseen by a government agency (e.g., the Financial Industry Regulatory Authority) and federally chartered organizations that have exclusive jurisdiction over a specific subject (e.g., the U.S. Olympic Committee governing U.S. participation in the Olympic games). If Congress were to grant regulatory authority to a federal agency or agencies, agency action would probably fit into a three-step framework. First, an authorized entity creates the regulation which industry must follow. This is also called rulemaking. Next, an agency could examine or supervise for compliance with the regulation. If a company is found to be not in compliance with the regulation, the agency could enforce the regulation (e.g., suing the company or issuing a fine). Congress may grant authority to different agencies for each step in this framework. Should Congress legislate and/or grant regulatory authority to a new or existing entity, Congress may likely have an interest in conducting oversight of how that authority is executed. Another option, which does not require congressional action, is for industry-based SROs to prescribe standards (e.g., the Payment Card Industry Data Security Standards). In such instances, the government does not compel participation in the scheme, though industry-specific factors might make nonparticipation difficult.

Apr 4, 2018

Can Aliens in Immigration Proceedings Be Detained Indefinitely? High Court Rules on Statutory, but not Constitutional Authority

Apr 3, 2018

Universal Basic Income Proposals for the United States

Apr 3, 2018

Dominican Republic

Apr 2, 2018

U.S. Trade Policy Primer: Frequently Asked Questions

Congress plays a major role in U.S. trade policy through its legislative and oversight authority. Since the end of World War II, U.S. trade policy has focused on fostering an open, rules-based global trading system, liberalizing markets by reducing trade and investment barriers through negotiations and agreements, and enforcing trade commitments and related laws. International trade and investment issues can affect the overall health of the U.S. economy and specific sectors, the success of U.S. businesses, U.S. employment opportunities, and the overall standard of living of Americans. The benefits and costs of international trade and the future direction of trade policy are active areas of interest for many in Congress. This report addresses frequently asked questions regarding U.S. trade policy and is intended to assist Members and staff who may be new to trade issues. The report provides context for basic trade concepts and data on key U.S. trade and investment trends. It also addresses how U.S. trade policy is formulated and describes the trade and investment policy tools used to advance U.S. objectives. The report is divided into five sections: The Basics of Trade explains key economic concepts, including why countries trade, the benefits and costs of trade expansion, and the role of global value chains in international trade. The section also highlights common trade terms and principles. U.S. Trade Trends provides data on U.S. trade relationships, the U.S. trade deficit, and sector-specific issues related to manufacturing, agriculture, services, and digital trade. Formulation of U.S. Trade Policy describes key objectives and functions of trade policy. The section outlines the roles of Congress, the executive branch, private stakeholders, and the judiciary in the formulation and implementation of U.S. trade policy. U.S. Trade Policy Tools explains some of the key vehicles for advancing U.S. trade policy objectives, including trade negotiations and agreements, special trade programs, trade remedies, trade adjustment assistance, and export promotion programs and controls. Link Between International Investment and Trade explains the motivations of foreign direct investment (FDI) and its relationship to trade. The section provides data on top sources of FDI in the United States as well as destinations of U.S. FDI abroad, and explains the role of investment agreements and the Committee on Foreign Investment in the United States (CFIUS). This report is intended as an introduction to U.S. trade policy and does not provide in-depth coverage of all trade and investment issues. For more detail on U.S. trade policy issues, refer to the following CRS products: CRS Report R44717, International Trade and Finance: Overview and Issues for the 115th Congress, coordinated by Mary A. Irace and Rebecca M. Nelson. CRS In Focus IF10156, U.S. Trade Policy: Background and Current Issues, by Shayerah Ilias Akhtar, Ian F. Fergusson, and Brock R. Williams. CRS Report R44546, The Economic Effects of Trade: Overview and Policy Challenges, by James K. Jackson. CRS In Focus IF10619, The U.S. Trade Deficit: An Overview, by James K. Jackson.

Apr 2, 2018

Army Corps of Engineers: FY2018 Appropriations

Apr 2, 2018

Securities Exchanges: Regulation and Reform Proposals (Section 501 of S. 2155, Section 496 of H.R. 10, and H.R. 4546)

Mar 30, 2018

Overview of the Federal Tax System in 2018

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

Mar 29, 2018

Federal Requirements on Private Health Insurance Plans

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

Mar 29, 2018

Tricks of the Trade: Section 301 Investigation of Chinese Intellectual Property Practices Concludes (Part I)

Mar 29, 2018

S. 2155 and Enhanced Regulation for Large Banks

Title I of the 2010 Dodd-Frank Act (12 U.S.C. Ch. 53.) imposed a number of enhanced prudential regulatory requirements for bank holding companies and foreign banks operating in the United States with more than $10 billion or $50 billion in assets, depending on the requirements. These requirements were primarily intended to reduce the systemic risk posed by large financial institutions, which was a major feature of the 2007-2009 financial crisis. Section 401 of S. 2155, which the Senate passed on March 14, 2018, would raise the asset threshold at which these requirements are applied to banks. These requirements also apply to nonbank financial firms that have been designated as “systemically important” by the Financial Stability Oversight Council (FSOC), which S. 2155 does not modify. For the policy debate surrounding S. 2155, see CRS Report R45073, Economic Growth, Regulatory Relief, and Consumer Protection Act (S. 2155) and Selected Policy Issues, coordinated by David W. Perkins. Table 1 shows how the current asset thresholds for enhanced regulation would be altered under S. 2155. These provisions can be divided into three broad categories: requirements, implemented through rulemaking, that large institutions must adhere to on an ongoing basis; emergency powers that may only be imposed under certain conditions, such as if there is a finding that an institution poses a threat to financial stability; and assessments on large institutions to finance the administration of certain duties. S. 2155 would raise the threshold for automatic application of most of the enhanced prudential standards from $50 billion to $250 billion in assets. In addition, if a bank under $250 billion in assets had been designated as a globally systemically important bank (G-SIB) by the Financial Stability Board, the requirements would automatically apply. For requirements found in Section 165 of the Dodd-Frank Act, which includes all of the ongoing requirements, S. 2155 would provide the Federal Reserve (Fed) with discretion to apply these requirements to banks in the $100 billion to $250 billion asset range on a case-by-case and bank-by-bank basis if necessary to promote financial stability or the bank’s safety and soundness. This discretionary authority is not provided for other enhanced requirements that are not found in Section 165, which are most of those classified in Table 1 as emergency powers. Table 1. Changes to Enhanced Regulation Thresholds for Banks Under S. 2155 (billions of dollars) ProvisionCurrent ThresholdProposed Threshold Ongoing Requirements Risk committee (for public companies) $10 automatic at $50, below $50 at Fed’s discretion Supervisory stress tests $50 automatic at $100 Chief risk officer requirement $50 automatic at $250, $100-$250 at Fed’s discretion Company-run stress tests $10 automatic at $250, $100-$250 at Fed’s discretion Living wills $50 automatic at $250, $100-$250 at Fed’s discretion Liquidity requirements $50 automatic at $250, $100-$250 at Fed’s discretion Counterparty credit limits $50 automatic at $250, $100-$250 at Fed’s discretion Capital planning $50 automatic at $250, $100-$250 at Fed’s discretion Credit exposure report $50 automatic at $250, $100-$250 at Fed’s discretion Emergency Powers 15-1 debt to equity limit $50 automatic at $250, $100-$250 at Fed’s discretion FSOC reporting requirements $50 automatic at $250 Authority to prevent mergers, acquisitions, and to require divestitures $50 automatic at $250 Approval of acquisitions $50 automatic at $250 Management interlocks $50 automatic at $250 Early remediation requirements $50 automatic at $250 FDIC enhanced examination and enforcement powers $50 automatic at $250 Assessments To finance large firm regulation $50 automatic at $100, tailored for $100-$250 To finance the Office of Financial Research $50 automatic at $250 Source: CRS. Note: All provisions also automatically apply to G-SIBs under S. 2155. These requirements are mostly implemented and overseen by the Fed. Most, but not all, of the first set of requirements have already been implemented, whereas the second set of emergency powers have never been invoked since Dodd-Frank’s enactment. For more information on these requirements and a list of banks with more than $50 billion in assets, see CRS Report R45036, Bank Systemic Risk Regulation: The $50 Billion Threshold in the Dodd-Frank Act, by Marc Labonte and David W. Perkins. In addition to the threshold changes, S. 2155 also makes changes to some of the requirements in Table 1. Other prudential requirements that apply only to the largest banks, but do not derive from the Dodd-Frank Act (such as Basel III requirements), are largely unchanged by S. 2155. Foreign Banks Currently, foreign banking organizations that have more than $50 billion in global assets and operate in the United States are also potentially subject to enhanced regulatory requirements. S. 2155 would replace that threshold with $250 billion in global assets (with Fed discretion to impose individual standards between $100 billion and $250 billion). In practice, for foreign banks with more than $50 billion in global assets, the implementing regulations have imposed significantly lower requirements on those with less than $50 billion in U.S. nonbranch assets compared with those with more than $50 billion in U.S. nonbranch assets. Foreign banks with more than $50 billion in U.S. nonbranch assets must form intermediate holding companies (IHCs) for their U.S. operations, which are essentially treated as equivalent to U.S. banks for purposes of applicability of the enhanced regime and bank regulation more generally. The manager’s amendment to S. 2155 clarified that the increase in the $50 billion threshold would not invalidate a 2014 rule (which implemented requirements for an IHC, capital planning, stress tests, risk management, and liquidity) for foreign banks with more than $100 billion in global assets and would not limit the Fed’s authority to require the establishment of an IHC or implement enhanced prudential standards for foreign banks with more than $100 billion in global assets. Thus, it would remain at the discretion of the Fed how to tailor enhanced regulation for foreign banks with a smaller U.S. presence, including what IHC threshold to use.

Mar 29, 2018

Bureau of Reclamation: FY2018 Appropriations

Mar 28, 2018

Venezuela’s Petroleum Sector and U.S. Sanctions

Mar 27, 2018

Temporary Assistance for Needy Families: Work Requirements

Mar 27, 2018