CRS Reports

Pedal to the Metal: Commerce Recommends Revving Up Trade Measures on Steel and Aluminum

Feb 21, 2018

FY2018 Defense Spending Under an Interim Continuing Resolution

Feb 20, 2018

Medicare and Budget Sequestration

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

Feb 16, 2018

Agriculture Funding in the Bipartisan Budget Act of 2018

Feb 16, 2018

How Many People Experience Homelessness?

Feb 16, 2018

Discretionary Spending Levels Under the Bipartisan Budget Act of 2018

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

Feb 15, 2018

Has the Economy Reached Full Employment? If So, Will It Stay There?

The unemployment rate has fallen from 10% in 2009 to 4.1% today, its lowest since 2000. Several other labor market indicators also point to an economy at or near full employment. If unemployment gets too low, it could plant the seeds for a future recession. An overheating economy can temporarily surge past full employment, but a recession typically follows to restore labor market equilibrium. Fiscal and monetary policy can help avoid—or exacerbate—overheating. What Is Full Employment? The economy has achieved full employment when it reaches the lowest sustainable unemployment rate consistent with stable inflation (called the natural rate of unemployment). Below the natural rate, economic theory predicts that excessive demand for labor would drive wages up at an unsustainable pace, causing an increase in general price inflation. As discussed in CRS In Focus IF10443, Introduction to U.S. Economy: Unemployment, by Jeffrey M. Stupak, the economy reaches full employment before the unemployment rate reaches zero. Has the Economy Reached Full Employment? In only one of the seven economic expansions since 1970 did the unemployment rate fall below the current 4.1% (3.9% at times in 1999-2000). Unemployment is below the Congressional Budget Office’s (CBO’s) natural rate estimate of 4.7%, a view shared by most economists. Thus, the United States may have reached full employment (see Figure 1), despite higher unemployment for minorities, less-educated Americans, and certain geographic regions. In the last expansion, the lowest unemployment rate was 4.4%. Figure 1. Unemployment Rate 1948-2018 / Source: Bureau of Labor and Statics (BLS). Note: Recessions are shaded. Most other labor market indicators are also consistent with full employment. As shown in Figure 2, broader measures of labor underutilization (available only since 1994) are currently lower than the last expansion’s low and almost as low as during the 1990s expansion’s low. Only underemployment (involuntary part-time workers) remains slightly higher than it was in the 1990s. Figure 2. Broader Measures of Labor Underutilization 1994-2018 / Source: BLS. Note: Definitions are available BLS’s website. One measure that has shown less improvement is the labor force participation rate (LFPR), consisting of the employed and unemployed. (Individuals without jobs are classified as unemployed only if they are actively seeking work; otherwise, they are classified as “not in the labor force.”) The LFPR experienced an unprecedented drop in the 2000s and only a relatively small recovery in the current expansion. The aging of the workforce can explain part of this decline, as older workers have a lower LFPR. But even the prime-age (aged 25-54) LFPR is still lower than usual, as shown in Figure 3. Between 2013 and 2015, the prime-age male LFPR rate fell to its lowest level since the data series began in 1948. It has since risen modestly to 89%, but is still lower than at any time before 2009. Likewise, the prime-age female LFPR is still more than two percentage points below its peak in 2000, and about one percentage point below the 2007-2009 recession. If more individuals could be enticed back into the labor force, then employment would still have room to grow before reaching full employment. However, research indicates that workers who have been out of the labor force for an extended period of time are less likely to rejoin it. Figure 3. Labor Force Participation Rate, Age 25-54 1990-2018 / Source: BLS. Is the Labor Market Too Hot or Just Right? Unemployment always follows the same cyclical pattern—it drops to its lowest point in the expansion near the end of the expansion and then rises as the economy shifts into a recession. Sometimes the subsequent recession is caused by overheating (of which, low unemployment is a symptom), and sometimes it has other causes, as discussed in CRS Insight IN10853, What Causes a Recession?, by Marc Labonte. Although the pattern is always the same, no single threshold unemployment rate has consistently triggered a recession because the estimated natural rate has fluctuated between 4.7% and 6.3% since 1949, according to CBO. Further, the exact timing differs across cycles—it has taken zero to 18 months from unemployment’s lowest point before the next recession started. Thus, although the unemployment rate is currently lower than CBO’s estimate of full employment has ever been, it might stay that way for some time. Overheating would become more likely if employment continued to grow at its current pace. At full employment, employment can only grow as fast as workers are added to the labor force. In 2017, the labor force grew by 94,000 workers and employment grew by 158,000 workers per month; that pace of employment growth has been exceeded in recent months. If employment continues to grow faster than the labor force in 2018, the unemployment rate would soon surpass its lowest level since 1970. Inflation does not point to an overheating economy so far. It has remained below the Federal Reserve’s (Fed’s) goal of 2% in recent years by its preferred measure, with no upward trend. Individuals’ median wages have increased more quickly in the last year than previously in the expansion, but are still increasing more slowly than they did in the previous two expansions. Policy Developments The standard macroeconomic prescription to prevent overheating is to tighten fiscal and monetary policy. Fiscal policy is tightened through changes to spending or revenue that decrease the budget deficit. Monetary policy is tightened through higher short-term interest rates. Some economists would likely assign blame for overheating (and the subsequent recession) to the policy error of not tightening policy enough to prevent it. The Fed has been tightening monetary policy since 2015, but at a gradual pace that has kept policy stimulative on balance. A key question among economists is whether the Fed is “behind the curve” on raising rates to prevent overheating or whether its gradual approach is justified by low inflation. Fiscal policy, in contrast, has been expansionary instead of contractionary, in large part, as a result of the tax cuts enacted in December 2017 (P.L. 115-97) and the recent agreement to increase spending (P.L. 115-123). As a result, the budget deficit is projected to be high despite an economy at or near full employment.

Feb 15, 2018

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

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

Feb 14, 2018

The Half Trillion Dollar Ruling: Latest Dodd-Frank Case Narrows “Skin-in-the-Game” Rule

Feb 14, 2018

Beyond Bitcoin: Emerging Applications for Blockchain Technology

Feb 14, 2018

Hunting and Fishing on Federal Lands and Waters: Overview and Issues for Congress

This report provides an overview of issues related to hunting and fishing on federal lands. Each year millions of individuals participate in hunting and fishing activities, bringing in billions of dollars for regional and national economies. Due to their popularity, economic value, constituent appeal, and nexus to federal land management issues, hunting and fishing issues are perennially addressed by Congress. Congress addresses these issues through oversight, legislation, and appropriations, which target issues such as access to federal lands and waters for sportsperson activities, and striking the right balance among hunting and fishing and other recreational, commercial, scientific, and conservation uses. Most federal lands and waters are open to hunting and/or fishing; stakeholders contend that these areas provide many hunters and anglers with their only or best access to hunting and fishing. This is especially the case in the western United States. Federal lands and waters account for nearly 640 million acres (28%) of the 2.3 billion acres in the United States. Federal land management agencies manage recreational activities, including hunting and fishing, on federal lands. Four land management agencies—the Bureau of Land Management (BLM), U.S. Fish and Wildlife Service (FWS), and National Park Service (NPS) within the Department of the Interior (DOI), and the U.S. Forest Service (FS) within the Department of Agriculture (USDA)—manage over 95% of federal lands, while the rest is administered by other agencies within DOI, the Department of Defense (DOD), the U.S. Army Corps of Engineers (USACE), and others. Federal land management agencies have hunting and fishing policies that are derived from statutes establishing the agencies as well as federal and state laws pertaining to hunting and fishing. In general, federal land management agencies have hunting and fishing policies that are either open unless closed or closed unless open, depending on the mission of the agency. In the case of the former, the default status of lands is open to hunting and fishing unless closed by the relevant agency. For these agencies, recreation, including hunting and fishing, is often included within the mission of the agency. For lands that are closed unless open, hunting and fishing are often a secondary use and allowed only when compatible with the primary purpose or mission of the agency or the federal land unit. Overall, based on CRS analysis of agency data, more than 80% of federal lands and waters appear to be open to hunting in some capacity. Several federal statutes are applicable to hunting and fishing either directly or indirectly. For example, the Migratory Bird Treaty Act of 1918 provides the federal government with the authority to regulate the hunting of migratory birds in the United States. Similarly, the Migratory Bird Hunting and Conservation Stamp Act (better known as the Duck Stamp Act) authorizes the requirement for hunters to obtain a federal stamp to hunt migratory birds. Alternatively, federal laws may indirectly relate to hunting and fishing, such as the Federal Aid in Wildlife Restoration Act (also known as the Pittman-Robertson Act), which directs tax revenues from certain hunting and fishing equipment to states for wildlife restoration and hunter education. In the 115th Congress, hunting and fishing issues have been addressed through oversight and proposed legislation. These bills (e.g., H.R. 3668 and H.R. 4489, and S. 733 and S. 1460) reflect some of the key issues being deliberated by Congress. These issues include access to federal lands for hunting and fishing, procedures for closing certain lands to these activities, the transport of firearms on federal lands, and the use of specific ammunition and tackle in hunting and fishing. Although there is general agreement among Members of Congress regarding the importance of balancing sportsperson activities and other activities on federal lands, the question of what the appropriate balance is, and the best means of achieving it, has in some cases been contentious.

Feb 14, 2018

EU Sanctions on Russia Related to the Ukraine Conflict

Feb 13, 2018

The Oil Spill Liability Trust Fund Tax: Reauthorization Issues and Legislation in the 115th Congress

Feb 12, 2018

Defense Science and Technology Funding

Defense science and technology (Defense S&T) is a term that describes a subset of Department of Defense (DOD) research, development, testing, and evaluation (RDT&E) activities. The Defense S&T budget is the aggregate of funding provided for the three earliest stages of DOD RDT&E: basic research, applied research, and advanced technology development. Defense S&T is of particular interest to Congress due to its perceived value in supporting technological advantage and its importance to key private sector and academic stakeholders. Advocates of strong and sustained Defense S&T funding assert that Defense S&T funding plays important and unique roles in the DOD innovation system, supporting medium-term, evolutionary technologies and incremental innovation that help improve existing products and systems, as well as longer-term, revolutionary technologies providing U.S. technological dominance, deterring conflict, and, when necessary, defeating adversaries. Both evolutionary and revolutionary technologies are viewed by most warfighters and policymakers as central to U.S. national security as well as to the lives of those serving in uniform. In FY2017, Defense S&T was $13.4 billion, nearly six times the FY1978 level of $2.3 billion. Most growth occurred from FY1978 to FY2006, at a compound annual growth rate (CAGR) of 6.4%. From FY2006 to FY2017, growth was slower (0.1% CAGR). Most of the growth and volatility was in advanced technology development. In FY2017 constant dollars, Defense S&T funding peaked at $16.2 billion in FY2005 and declined by $2.8 billion through FY2017. In FY2016, basic research accounted for $2.2 billion of the Defense S&T total. The Navy accounted for the largest share of DOD basic research (29.2%), followed by the Defense-Wide agencies (27.6%), Air Force (23.0%), and Army (20.3%). Universities and colleges performed nearly half ($1.1 billion, 48.8%) of DOD basic research in FY2016; DOD and other intramural federal laboratories performed 22.9%; industry, 18.2%; other non-profits, 7.5%; federally funded research and development centers (FFRDCs), 0.7%; and others, 2.0%. A number of recommendations have been put forth by various organizations regarding the appropriate level of funding for Defense S&T and DOD basic research, as well as the level of funding for investments in research supporting potentially revolutionary advancements. A 1998 Defense Science Board (DSB) report recommended setting Defense S&T at 3.4% of total DOD funding. In 2001, the Quadrennial Defense Review recommended that 3.0% of total DOD funding be directed toward Defense S&T. In FY1996, Defense S&T was at the 3.0% level. It subsequently fell to 1.7% in FY2011 and has since risen to 2.2%. An alternative approach recommended by the DSB in 1998 was to set Defense S&T at a percentage of DOD RDT&E, similar to the industry ratio of research funding to total R&D funding (which it calculated for the pharmaceutical industry as 24%). In 2015, the Coalition for National Security Research (CNSR), a coalition of industry, universities, and associations, recommended a target of 20%. At the time of the DSB report, S&T’s share of DOD RDT&E was approximately 21%. After rising to 21.5% in FY2000, Defense S&T’s share fell to 15.2% in FY2011, and then rose to 17.9% in FY2016. With respect to DOD basic research, the Council on Competitiveness (2004) and the CNSR (2015) recommended a target of at least 20% of Defense S&T. As a share of Defense S&T, basic research declined from 14.6% in FY1996 to 11.0% in FY2006, then began a steady rise to 18.4% in FY2015. In FY2016, basic research’s share of Defense S&T was 17.4%. In its 1998 report, the DSB recommended that one-third of Defense S&T be devoted to research targeted toward revolutionary technological advancements. The Defense Advanced Research Projects Agency (DARPA) has been the lead DOD agency focused on revolutionary R&D. In FY2017, DARPA accounted for 21.6% of Defense S&T.

Feb 12, 2018

Family First Prevention Services Act (FFPSA)

The Family First Prevention Services Act (FFPSA) was enacted as part of Division E of the Bipartisan Budget Act of 2018 (H.R. 1892). Among other changes, FFPSA expands federal support for services to prevent the need for children to enter foster care, while adding new restrictions on federal room and board support for some foster children placed in group care settings. With limited exceptions, the enacted provisions match the standalone FFPSA provisions approved by the House in June 2016 (H.R. 5456, 114th Congress). New Support for Prevention of Foster Care FFPSA responds to longstanding criticism that most federal child welfare dollars are available only after a child has been removed from the home. It amends the federal foster care program (included in Title IV-E of the Social Security Act) to authorize federal support for (1) in-home parent skills-based programs; and (2) substance abuse and mental health treatment services. Beginning with FY2020, federal support for these services and programs will be available for up to 12 months for any child a state determines is at “imminent risk” of entering foster care, and to the child’s parents or kin caregivers so long as the service would enable that child to remain safely in the parent’s home or with a kin caregiver. Also as of FY2020, any state or eligible tribe electing to provide these prevention services and programs under its Title IV-E program will be entitled to receive federal funding equal to at least 50% of their cost, as long as the services and programs met certain evidence-based standards, and the spending was above the state’s “maintenance of effort” (MOE) level. The Congressional Budget Office (CBO) estimates that these FFPSA provisions would increase federal spending over 10 years (FY2018-FY2027) by $1.480 billion. New Limits on Support for Children Placed in Group Care Separately, FFPSA will restrict availability of Title IV-E room and board support (“maintenance payments”) for children in foster care who are placed in non-foster family homes unless that placement is made to meet clinical or other treatment or service needs. Use of congregate (or group) care has been declining nationally, although there is wide variation across and within states in both the extent and causes of use. For any child not placed in family foster care, FFPSA will limit federal Title IV-E foster care room and board payments to just 14 days unless the child is placed in one of a handful of specified settings. Among those listed settings is a “qualified residential treatment program” (QRTP), that, as verified by an assessment within 30 days of the child’s QRTP placement, is able to meet the child’s specific clinical, emotional, or behavioral health needs. The enacted provisions vary slightly from those in the 2016 bill, in that they add settings providing high-quality residential care and supportive services to children who are victims of (or at risk of) sex trafficking to the list of foster care living arrangements where support may be available for more than 14 days; provide that registered nursing and clinical staff must only be onsite of a QRTP to the extent the program’s treatment model requires this (instead of during all business hours); stipulate that a QRTP does not need to have a direct employee/employer relationship with required nursing and behavioral staff; require that the 30-day assessment done to determine the appropriateness of a QRTP for a child acknowledges the importance of keeping siblings together; and clarify that the new limitation on room and board support does not preclude Title IV-E support for case planning and other administrative work, carried out on behalf of otherwise-eligible children. Generally, the provisions related to a child’s placement setting are effective with FY2020, although states may delay the effective date for up to two years. Any state that does so, however, must also postpone seeking federal support for Title IV-E prevention activities for the same period of time. Separately, and effective with FY2019, the modified proposal requires states to have procedures for background checks to be carried out on any adult working in group care settings where foster children are placed. CBO estimates these proposals, as modified in the funding legislation, would decrease federal spending across FY2018-FY2027 by $641 million. Substance Abuse Treatment Services, Kinship Care Navigators, and Other Services and Programs Authorized or Extended FFPSA makes other changes to boost efforts to address substance abuse in child welfare involved families, support kin, and extend existing child welfare programs. These include extending regional partnership grants to improve outcomes for children and families affected by parental substance abuse; permitting federal room and board support under Title IV-E for children placed with their parents in residential family-based substance abuse treatment centers; permitting Title IV-E support of kinship navigators; requiring states to review their licensing requirements for foster family homes; extending the Promoting Safe and Stable Families and Child Welfare Services programs authorized under Title IV-B of the Social Security Act, (including maintaining support for the Court Improvement Program); authorizing one-time grants to support recruitment and retention of foster parents; requiring states (as of FY2028) to use electronic interstate case-processing to permit greater speed and cost efficiency in placement of foster children across state lines; extending federal Adoption and Legal Guardianship Incentive Payments; and amending the Chafee Foster Care Independence Program to permit these services to be made available to older youth, along with other changes. While not all of these provisions are expected to increase federal spending, CBO estimates those that do (primarily kinship navigators and the IV-B program extension) will increase federal spending across FY2018- FY2027 by $210 million. Temporary Reduction in Adoption Assistance Support FFPSA temporarily halts (from January 1, 2018, through June 30, 2024) increased federal support for adoption assistance available for certain children adopted before their 2nd birthday. CBO estimates this policy change will decrease federal spending across FY2018-FY2027 by $505 million.

Feb 9, 2018

Farm Bill Primer: Support for Veteran Farmers and Ranchers

Feb 9, 2018

Association Health Plans: Some Key Aspects of the Labor Department’s Proposed Rule

Feb 9, 2018

Digital Currencies: Sanctions Evasion Risks

Feb 8, 2018

Financial Innovation: “Cryptocurrencies”

Feb 7, 2018

National Flood Insurance Program: Selected Issues and Legislation in the 115th Congress

The National Flood Insurance Program (NFIP) was established by the National Flood Insurance Act of 1968 (NFIA, 42 U.S.C. §4001 et seq.), and was most recently reauthorized until February 8, 2018 (P.L. 115-120). The general purpose of the NFIP is both to offer primary flood insurance to properties with significant flood risk, and to reduce flood risk through the adoption of floodplain management standards. A longer term objective of the NFIP is to reduce federal expenditure on disaster assistance after floods. The NFIP also engages in many “non-insurance” activities in the public interest: it disseminates flood risk information through flood maps, requires community land use and building code standards, and offers grants and incentive programs for household- and community-level investments in flood risk reduction. Unless reauthorized or amended by Congress, the following will occur on February 8, 2018: (1) the authority to provide new flood insurance contracts will expire and (2) the authority for NFIP to borrow funds from the Treasury will be reduced from $30.425 billion to $1 billion. The House passed H.R. 2874, the 21st Century Flood Reform Act, on November 14, 2017 on a vote of 237-189. H.R. 2874 would authorize the NFIP until September 30, 2022. Three bills have been introduced in the Senate to reauthorize the NFIP: S. 1313 (Flood Insurance Affordability and Sustainability Act of 2017), S. 1368 (Sustainable, Affordable, Fair, and Efficient (SAFE) National Flood Insurance Program Reauthorization Act of 2017), and S. 1571 (National Flood Insurance Program Reauthorization Act of 2017). None of these bills have yet been taken up by the committee of jurisdiction. Issues which Congress may consider in the context of reauthorization include (1) NFIP solvency and debt; (2) premium rates and surcharges; (3) affordability; (4) increasing participation in the NFIP; (5) the role of private insurance and barriers to private sector involvement; (6) recurrent flooding and properties with multiple losses; (7) administrative reforms; (8) non-insurance functions of the NFIP such as floodplain mapping and flood mitigation; and (9) future flood risks, including future catastrophic events. The Federal Emergency Management Agency (FEMA) has identified the need to increase flood insurance coverage across the nation as a major priority for the current reauthorization and beyond, with a goal of doubling flood insurance coverage by 2023 through the increased sale of both NFIP and private policies. The NFIP’s premium rates do not reflect the full risk of loss because of various legislative requirements, which may exacerbate the program’s fiscal exposure. The categories of properties which pay less than the full risk-based rate are determined by the date when the structure was built relative to the date of adoption of the Flood Insurance Rate Map, rather than the flood risk or the ability of the policyholder to pay. A reformed NFIP rate structure could have the effect of encouraging more private insurers to enter the primary flood market; however, full risk-based premiums could be unaffordable for some households. Although the NFIP has always had borrowing authority from Congress, an approach has not been developed by which the NFIP can repay catastrophic flood losses. To ensure the future financial solvency of the NFIP after catastrophic events, FEMA has suggested that a systematic analysis may consider the costs and benefits of using the reserve fund, borrowing authority, reinsurance, other forms of risk transfer, and perhaps a Treasury backstop at some catastrophic loss level. This report summarizes key insurance reform provisions in recent legislation, identifies issues for congressional consideration as part of the possible reauthorization of the NFIP, and describes selected provisions which relate to the issues listed above in the bill to reauthorize the NFIP passed by the House (H.R. 2874, the 21st Century Flood Reform Act) and the bills yet to be considered by the Senate (S. 1313, S. 1368, and S. 1571).

Feb 7, 2018

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

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

Feb 6, 2018

Iraq: In Brief

Iraq’s government declared military victory against the terrorist insurgents of the Islamic State group (IS, aka ISIS/ISIL) in December 2017, and Iraqis are shifting their attention toward recovery and the country’s political future. Security conditions have improved (Figure 1) but remain fluid, and daunting resettlement, reconstruction, and reform needs occupy citizens and decision makers. National legislative elections are scheduled for May 2018, and campaigning reflects issues stemming from the 2014-2017 conflict with the Islamic State as well a range of preexisting internal disputes and governance challenges. Ethnic, religious, regional, and tribal identities remain politically relevant, as do partisanship, personal rivalries, economic disparities, and natural resource imbalances. Iraq’s neighbors and other outsiders continue to pursue their interests in the country, at times cooperatively and at times in competition. Iraqi Prime Minister Haider al Abadi is seeking reelection in May, but rivals from other factions and movements are running as competitors. While Iraq’s major ethnic and religious constituencies are each politically diverse, many Iraqis advance similar demands for improved security, government effectiveness, and economic opportunity. Prime Minister Abadi and other politicians increasingly employ cross-sectarian political and economic narratives, but identity-driven politics continue to influence developments across the country. The Kurdistan Region of northern Iraq (KRI) enjoys considerable administrative autonomy under the terms of Iraq’s 2005 constitution, and the Kurdistan Regional Government (KRG) expects to hold legislative and presidential elections sometime in 2018. The KRG held a controversial advisory referendum on independence on September 25, 2017, amplifying political tensions with the national government and prompting criticism from the Trump Administration and the United Nations Security Council. In October 2017, the national government imposed a ban on international flights to and from the KRI, and Iraqi security forces moved to reassert security control of disputed areas that had been secured by Kurdish forces after the Islamic State’s mid-2014 advance. Much of the oil-rich governorate of Kirkuk—long claimed by Iraqi Kurds—returned to national government control, and resulting controversies have riven Kurdish politics. Iraqi and Kurdish security forces remain deployed across from each other along contested lines of control while their respective leaders are engaged in negotiations over a host of sensitive issues. Internally displaced Iraqis are returning home in greater numbers, but stabilization and reconstruction needs in areas liberated from the Islamic State are extensive. As of early 2018, an estimated 2.5 million internally displaced persons (IDPs) remain, and authorities seek up to $100 billion for reconstruction activities expected to last for years. Paramilitary forces have grown stronger and more numerous since 2014, but have yet to be fully integrated into national security institutions. Some figures associated with the Popular Mobilization Forces (PMF) militias that were organized to fight the Islamic State are participating in the 2018 election campaign and may cooperate with or challenge Prime Minister Abadi, including individuals with ties to Iran. In general, U.S. engagement with Iraqis since 2011 has sought to reinforce Iraq’s unifying tendencies and avoid divisive outcomes. At the same time, successive Administrations have sought to keep U.S. involvement and investment minimal relative to the 2003-2011 era, pursuing U.S. interests through partnership with various entities in Iraq and the development of those partners’ capabilities—rather than through extensive deployment of U.S. military forces. U.S. economic assistance bolsters Iraq’s ability to attract lending support and seeks to improve the Iraqi government’s effectiveness and public financial management. The United States is the leading provider of humanitarian assistance to Iraq and also supports post-IS stabilization activities across the country through grants to United Nations agencies and other entities. The Trump Administration has sustained a cooperative relationship with the Iraqi government and has requested funding to support Iraq’s stabilization and continue security training for Iraqi forces beyond the completion of major military operations against the Islamic State. The nature and extent of the U.S. military presence and mission in Iraq is evolving in 2018 as conditions on the ground change and newly elected Iraqi officials make their training needs and requests clearer.

Feb 6, 2018

Farm Bill Primer: Federal Programs Supporting New Farmers

Feb 6, 2018

Federal Spending on Benefits and Services for People with Low Income: In Brief

Need-Tested Programs; Means-Tested Programs; Poverty; Low-Income; Cash Assistance; Medical Assistance; Housing Assistance; Educational Assistance; Social Services; Employment and Training.

Feb 6, 2018

The North American Development Bank

Feb 6, 2018

The 2018 National Defense Strategy

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

Feb 5, 2018

The 2018 National Defense Strategy: Fact Sheet

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

Feb 5, 2018

U.S. Foreign Assistance to Latin America and the Caribbean: FY2018 Appropriations

The United States provides foreign assistance to the nations of Latin America and the Caribbean to support development and other U.S. objectives. U.S. policymakers have emphasized different strategic interests in the region at different times, from combating Soviet influence during the Cold War to promoting democracy and open markets since the 1990s. Over the past year, the Trump Administration has sought to reduce foreign aid significantly and refocus U.S. assistance efforts in the region to address U.S. domestic concerns, such as irregular migration and transnational crime. FY2018 Request For FY2018, the Trump Administration requested $1.1 billion to be provided to Latin America and the Caribbean through foreign assistance accounts managed by the State Department and the U.S. Agency for International Development (USAID). This would be $614 million, or 36%, less than the $1.7 billion of U.S. assistance the region received in FY2017. The proposal would cut funding for nearly every type of assistance and would reduce aid for every Latin American and Caribbean nation. The Trump Administration also proposed the elimination of the Inter-American Foundation, a small, independent U.S. foreign assistance agency that promotes grassroots development in the region. The Administration’s efforts to scale back U.S. assistance could have significant implications for U.S. policy in Latin America and the Caribbean. The proposed cuts could accelerate U.S. efforts to transition countries in the region away from traditional development assistance and toward other forms of bilateral engagement. Reductions in State Department-managed security assistance could lead to the Department of Defense taking on a larger role in U.S. security cooperation. Moreover, the Administration’s proposed cuts, combined with other policy shifts, could contribute to a relative decline in U.S. influence in the region. Legislative Developments On January 22, 2018, President Trump signed into law a fourth short-term continuing resolution (P.L. 115-120, preceded by P.L. 115-96, P.L. 115-90 and P.L. 115-56), which funds foreign aid programs at the FY2017 level, reduced by 0.6791%, through February 8, 2018. As Congress considers appropriations for the remainder of FY2018, it may draw from the Department of State, Foreign Operations, and Related Programs appropriations measures for FY2018 that were passed by the House (H.R. 3362, H.Rept. 115-253, which was included as Division G of House-passed H.R. 3354) and reported in the Senate (S. 1780, S.Rept. 115-152). The bills and their accompanying reports do not specify appropriations levels for every Latin American and Caribbean nation. Nevertheless, the amounts the measures designate for several significant initiatives indicate that total funding for the region would exceed the Administration’s request: The House bill would provide $615 million to continue implementation of the U.S. Strategy for Engagement in Central America; the Senate bill would provide $600 million. The Administration requested $460 million. The House bill would provide nearly $336 million to support the peace process and security and development efforts in Colombia; the Senate bill would provide $391 million. The Administration requested $251 million. The House bill would provide nearly $137 million to support security and rule-of-law efforts in Mexico; the Senate bill would provide at least $144 million. The Administration requested $88 million.

Feb 5, 2018

What Causes a Recession?

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

Feb 2, 2018

Defense Advanced Research Projects Agency: Overview and Issues for Congress

The Defense Advanced Research Projects Agency (DARPA), established in 1958, is an agency within the Department of Defense (DOD) responsible for catalyzing the development of technologies that maintain and advance the capabilities and technical superiority of the United States military. DARPA-funded research has made important science and technology contributions that have led to the development of both military and commercial technologies, such as precision guided missiles, stealth, the Internet, and personal electronics. DARPA has a culture of risk-taking and tolerance for failure that has led experts, some Members of Congress, and others to view DARPA as a model for innovation both inside and outside of the federal government. The “DARPA model” is characterized by a flat organization that empowers its tenure-limited program managers with trust, autonomy, and the ability to take risks on innovative ideas. Congress has aided DARPA’s efforts by granting the agency certain flexible acquisition and personnel hiring authorities, which have allowed DARPA to engage with people and entities that may have otherwise been reluctant to interact and do business with DOD. The President’s FY2018 budget request proposed $3.17 billion for DARPA, an increase of $281 million or 9% above FY2017 enacted levels. The proposed request would continue the trend of increasing the proportion of DARPA funding allocated to basic and applied research. The President’s request would also increase DARPA’s share of DOD’s science and technology (Defense S&T) budget to 24%. Since FY1999 DARPA’s share of the Defense S&T budget has remained relatively steady, averaging 23%. Congress is currently debating funding levels for defense activities, including research and development. Some Members of Congress, think tanks, and other experts have expressed concern that the United States military is losing its technological advantage and have called for increased innovation within DOD to address the perceived decline in U.S. technical dominance. In this context, the 115th Congress may consider several related issues, including the appropriate level of funding for DARPA; the effectiveness of the agency in transitioning technologies to the military services and the commercial sector; the role to be played by DARPA in any efforts by the new Under Secretary of Defense for Research and Engineering to increase innovation at DOD; and the mechanism by which DARPA integrates ethical, legal, and social considerations into its research and development projects.

Feb 2, 2018

Domestic Solar Manufacturing and New U.S. Tariffs

Feb 2, 2018

Evolving Assessments of Human and Natural Contributions to Climate Change

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

Feb 1, 2018

FEMA Individual Assistance Programs: In Brief

When the President declares a major disaster pursuant to the Robert T. Stafford Disaster Relief and Emergency Assistance Act (P.L. 93-288), the Federal Emergency Management Agency (FEMA) advises the President about types of federal assistance administered by FEMA available to disaster victims, states, localities, and tribes. The primary types of assistance provided under a major disaster declaration include funding through the Public Assistance program, Mitigation Assistance programs, and the Individual Assistance program. The Public Assistance program provides federal financial assistance to repair and rebuild damaged facilities and infrastructure. Mitigation Assistance programs provide funding for jurisdictions, states, and tribes to ensure damaged facilities and infrastructure are rebuilt and reinforced to better withstand future disaster damage. Finally, the Individual Assistance program provides funding for basic needs for individuals and households following a disaster. Eligible activities under the Individual Assistance program include funding for such things as mass care, crisis counseling, and temporary housing. FEMA advises the President on the type of individual assistance to be granted following each disaster, and works with state and local authorities in determining what assistance programs would best suit the needs within the disaster area. FEMA makes this determination based on a list of criteria designed to align federal disaster assistance with unmet needs in disaster-impacted areas. This report provides a short summary of the types of individual assistance programs administered by FEMA following a disaster. This report also provides a summary of the criteria FEMA uses in determining which individual assistance programs may be made available to impacted areas following a major disaster declaration, and discusses a proposed rule to change these criteria.

Jan 31, 2018

Elementary and Secondary Education Act: Overview of Title I-A Academic Accountability Provisions

Jan 31, 2018

Real Wage Trends, 1979 to 2016

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

Jan 30, 2018

Financial Reform: Savings Associations or “Thrifts”

Jan 29, 2018

Justice Kennedy Retires: Initial Considerations for Congress

Jan 28, 2018

Taxes and Fees Enacted as Part of the Affordable Care Act

Jan 26, 2018

AT&T-Time Warner Merger Overview

Jan 26, 2018

Shining a Light on the Solar Trade: Investigation Leads to Tariffs on Solar Energy-Related Imports (Part I)

Jan 26, 2018

Shining a Light on the Solar Trade: Investigation Leads to Tariffs on Solar Energy-Related Imports (Part II)

Jan 26, 2018

2017 Disaster Supplemental Appropriations: Overview

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

Jan 25, 2018

The Bahamas: An Overview

Jan 24, 2018

Labor, Health and Human Services, and Education: FY2018 Appropriations

This report offers an overview of actions taken by Congress and the President to provide FY2018 appropriations for accounts funded by the Departments of Labor, Health and Human Services, and Education, and Related Agencies (LHHS) appropriations bill. This bill includes all accounts funded through the annual appropriations process at the Departments of Labor (DOL) and Education (ED). It also provides annual appropriations for most agencies within the Department of Health and Human Services (HHS), with certain exceptions (e.g., the Food and Drug Administration is funded via the Agriculture bill). Finally, the LHHS bill provides funds for more than a dozen related agencies, including the Social Security Administration (SSA). As of the date of this report, FY2018 annual appropriations for LHHS have not been enacted into law. The House and Senate appropriations committees have reported their respective versions of the LHHS bill to their parent chambers (H.R. 3358 and S. 1771). While the LHHS bill has not yet received initial floor consideration in the Senate, the text of the House committee-reported version was initially considered as part of the omnibus appropriations bill, the Make America Secure and Prosperous Appropriations Act, 2018 (H.R. 3354), which passed the House on September 14, 2017. (As bill-wide numbers that incorporate the budgetary effects of the LHHS-related floor amendments to H.R. 3354 are generally not available, the House budget numbers in this report are based on H.R. 3358 as reported by the House Appropriations Committee. The LHHS-related amendments that were offered during floor consideration of H.R. 3358 are discussed in Appendix B.) FY2018 Continuing Resolutions: Temporary funding for LHHS has been provided by four continuing resolutions (CRs). The first was enacted on September 8, 2017 (H.R. 601, Division D; P.L. 115-56). With limited exceptions, this CR generally funded discretionary LHHS programs through December 8, 2017, at FY2017 levels minus a reduction of about two-thirds of one percent (-0.6791%). A second CR extended the expiration date of the first CR through December 22, 2017 (H.J.Res. 123; P.L. 115-90). A third CR extended the expiration date through January 19, 2018 (H.R. 1370; P.L. 115-96). After a funding gap that commenced on January 20, 2018, a fourth CR was enacted two days later that extended funding through February 8, 2018 (H.R. 195). FY2018 LHHS House Action: The House Appropriations Committee’s version of the FY2018 LHHS appropriations bill was ordered reported by the full committee on July 19, 2017, by a vote of 28-22, and reported to the House on July 24 (H.R. 3358). This bill would provide $168.9 billion in discretionary LHHS funds, a 2.6% decrease from FY2017 enacted levels. This amount is 13.4% more than the FY2018 President’s request. In addition, the House committee bill would provide an estimated $817.4 billion in mandatory funding, for a combined total of $986.3 billion for LHHS as a whole. The distribution of discretionary funding is as follows: DOL: $10.6 billion, 12.6% less than FY2017. HHS: $77.6 billion, 0.7% less than FY2017. ED: $66.0 billion, 3.2% less than FY2017. Related Agencies: $14.7 billion, 1.1% less than FY2017. FY2018 LHHS Senate Action: The Senate Appropriations Committee reported its version of the FY2018 LHHS appropriations bill on September 7, 2017, by a vote of 29-2 (S. 1771). This bill would provide $174.4 billion in discretionary LHHS funds. This is 0.6% more than FY2017, and 17.2% more than the FY2018 President’s request. In addition, the Senate committee bill would provide an estimated $817.4 billion in mandatory funding, for a combined total of $991.9 billion for LHHS as a whole. The distribution of discretionary funding is as follows: DOL: $12.0 billion, 0.5% less than FY2017. HHS: $79.8 billion, 2.1% more than FY2017. ED: $68.3 billion, 0.04% more than FY2017. Related Agencies: $14.4 billion, 3.6% less than FY2017. FY2018 President’s Budget Request: On May 23, 2017, the Trump Administration released the FY2018 President’s budget. The President requested $148.9 billion in discretionary funding for accounts funded by the LHHS bill, which is a decrease of 14.1% from FY2017 levels. In addition, the President requested $815.8 billion in annually appropriated mandatory funding, for a total of $964.7 billion for the LHHS bill as a whole. The distribution of discretionary funding is as follows: DOL: $9.7 billion, 19.4% less than FY2017. HHS: $63.0 billion, 19.3% less than FY2017. ED: $62.9 billion, 7.8% less than FY2017. Related Agencies: $13.2 billion, 11.1% less than FY2017.

Jan 24, 2018

Security of Air Cargo Shipments, Operations, and Facilities

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

Jan 24, 2018

Banking Law: An Overview of Federal Preemption in the Dual Banking System

Banks play a critical role in the United States economy, channeling funds from savers to borrowers and thereby facilitating economic activity. To address the risks of bank failures and excessive risk-taking, and the problem that consumers at times lack the information or expertise to make sound choices concerning financial products and services, both federal and state lawmakers have imposed a host of regulations on commercial banks. The United States has what is referred to as a “dual banking system,” in which banks can choose to apply for a charter from a state banking authority or a federal charter from the Office of the Comptroller of the Currency (OCC), a bureau within the Department of the Treasury. A bank’s choice of chartering authority is also a choice of primary regulator, as state regulatory agencies serve as the primary regulators of state-chartered banks, and the OCC serves as the primary regulator of national banks. Despite receiving their authorities from state law, state banks are subject to many federal laws. Among other federal laws, state banks are subject to certain federal tax, consumer protection, and antidiscrimination laws. Similarly, although they receive their powers from federal law, national banks are not wholly immune from state law. Rather, national banks are often subject to generally applicable state laws concerning contracts, torts, property rights, and debt collection when those laws do not conflict with or frustrate the purpose of federal law. Nonetheless, federal law preempts state laws that interfere with the powers of national banks. In Barnett Bank of Marion County, N.A. v. Nelson, the Supreme Court held that the National Bank Act of 1864 (NBA) preempts state laws that “significantly interfere” with a “national bank’s exercise of its powers”—a standard that lower courts have applied to hold a wide variety of state laws preempted. The Court has also issued two decisions on the preemptive scope of a provision of the NBA limiting “visitorial powers” over national banks to the OCC, holding that the provision extends to the operating subsidiaries of national banks, but does not bar state judicial law enforcement actions against national banks. Finally, the OCC has taken a broad view of the preemptive effects of the NBA, a view that it has reaffirmed after the passage of the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 (Dodd-Frank). This report provides an overview of the respective roles of the federal government and the states in regulating banking. The report begins by providing a general overview of the doctrine of federal preemption, before discussing the American “dual banking system.” It then addresses several key areas where preemption issues have arisen with respect to banking law, including (1) the standard for implied preemption of state laws that interfere with the powers of national banks adopted by the Supreme Court in Barnett Bank; (2) the Court’s decisions in two cases concerning “visitorial powers” over national banks, Watters v. Wachovia Bank, N.A. and Cuomo v. Clearing House Association, L.L.C.; and (3) interpretive letters and rules concerning federal preemption issued by the OCC. The report also discusses the provisions in Dodd-Frank concerning preemption of state consumer protection laws, and their interpretation by courts and the OCC. Finally, the report concludes by discussing issues that are likely of interest to the 115th Congress concerning preemption, including provisions in the Financial CHOICE Act of 2017 regarding which entities may benefit from NBA preemption of state usury laws.

Jan 23, 2018

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

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

Jan 19, 2018

America’s Water Resources Infrastructure: Approaches to Enhanced Project Delivery

Jan 18, 2018

Financial Reform: Custody Banks and the Supplementary Leverage Ratio

Jan 18, 2018

Emergency Alerting—False Alarm in Hawaii

Jan 17, 2018