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On June 2, 2014, the United States Supreme Court overturned Carol Bond's conviction under the Chemical Weapons Convention Implementation Act as a matter of congressional intent rather than Congress's constitutional authority. The Court concluded that Congress could not have intended the Act to reach "run of the mill" local crimes like Mrs. Bond's. It had been anticipated that the Court might take the opportunity to clarify the scope of Congress's legislative authority under the treaty power. It elected instead to emphasize, for purposes of statutory interpretation, the Constitution's structural constraints on federal intrusions into the domain of the states. On numerous occasions, Carol Bond, a microbiologist, coated the car door handles and mailbox of her husband's paramour with a mixture of toxic chemicals. Although Mrs. Bond's efforts were clumsily done, the victim did on one such occasion sustain a minor chemical burn on her thumb. Mrs. Bond was eventually implicated and indicted in federal court for possession and use of a chemical weapon in violation of 18 U.S.C. 229(1)(a). Reserving the right to appeal, she pled guilty and was sentenced to imprisonment for six years. On appeal, Mrs. Bond argued that the implementing statute under which she was convicted was either unconstitutional or inapplicable. The United States Court of Appeals for the Third Circuit initially ruled that she lacked standing to raise the constitutional issue, since the Tenth Amendment exists for the protection of state, not individual, rights. The Supreme Court disagreed and returned the case to the Court of Appeals for a decision on the merits. Mrs. Bond's constitutional claim was grounded on the argument that the legislation is an intrusion upon sovereign prerogatives of the states with respect to local criminal offenses. The government has responded that (1) the authority to negotiate and ratify the Chemical Weapons Convention comes within the President's constitutional treaty making power; (2) enactment of legislation to implement the Convention comes within Congress's authority to make laws necessary and proper to carry into execution the President's treaty making power; and (3) Mrs. Bond's conduct was condemned by a literal reading of the implementing legislation's criminal proscriptions. To prevail on her constitutional challenge, Mrs. Bond needed to reconcile her position with the Supreme Court's decision in Missouri v. Holland. In Missouri v. Holland , state officials sought to enjoin federal enforcement of the Migratory Bird Treaty Act, which they argued constituted an intrusion on state authority in violation of the Tenth Amendment. Prior to ratification of the treaty, lower federal courts had held that the Tenth Amendment limited Congress's constitutional authority to enact a similar measure. The state argued that the treaty could not vest Congress with legislative power that would otherwise rest beyond its constitutional reach. The Supreme Court, speaking through Justice Holmes, began with the observation that it was "not enough to refer to the Tenth Amendment, reserving the powers not delegated to the United States, because by Article II, §2, the power to make treaties is delegated expressly.... If the treaty is valid there can be no dispute about the validity of the statute under Article I, §8, as a necessary and proper means to execute the powers of the Government." The treaty collided with no explicit constitutional prohibition. The only question was whether the treaty was "forbidden by some invisible radiation from the general terms of the Tenth Amendment." Justice Holmes did not suggest that the question might never be answered in a state's favor; only that the state's interest was insufficient in the case before the Court. Missouri claimed exclusive authority over the birds within its domain. The treaty protected birds with international migratory habits, threatened with extinction by virtue of the hunting practices in some of the states they traversed. The federal interest was substantial, and Missouri's interest was not enough to cast doubt on the validity of the treaty or its implementing statute. Although the Court in Holland identified no Tenth Amendment-implicit, contextual limits on Congress's legislative authority, it has done so in other cases. Thus, the Court has held that Congress may not "commandeer the legislative processes of the States by directly compelling them to enact and enforce a federal regulatory program." Moreover, it has been said that legislation cannot be considered Necessary and Proper, if it fails to recognize the contextual limitations that flow from the Constitution's presumption of dual federal-state sovereignty. All of which proved to be of no avail for Mrs. Bond in the Third Circuit. The court concluded that the Convention was a proper subject for the President's treaty making power. Moreover, "with practically no qualifying language in Holland to turn to, [appellate courts] are bound to take at face value the Supreme Court's statement that 'if the treaty is valid there can be no dispute about the validity of the statute ... as a necessary and proper means to execute the powers of the Government,'" federalism concerns notwithstanding. A concurring member of the panel, however, expressed the hope that the Supreme Court would "flesh out the most important sentence in the most important case about the constitutional law of foreign affairs, and in doing so, clarify (indeed curtail) the contours of federal power to enact laws that intrude on matters so local that no drafter of the Convention contemplated their inclusion in it." Mrs. Bond contended that the focus of the Chemical Weapons Convention and its implementing legislation are so distinct that Congress could not have intended them to apply to her conduct. The nature of the statute made her claim creditable; its breadth made it difficult. The United States signed the Convention on the Prohibition of Development, Production, Stockpiling and Use of Chemical Weapons and On Their Destruction (the Convention) in Paris on January 13, 1993. The President supplied a capsulized description of the Convention when he transmitted it to the Senate: The convention will require States Parties to destroy their chemical weapons and chemical weapons production facilities under the observations of international inspectors; subject States Parties' citizens and businesses and other nongovernmental entities to its obligations; subject States Parties' chemical industry to declarations and routine inspection; and subject any facility or location in the State Party to international inspection to address other States Parties' compliance concerns. The Convention requires signatories to condemn within their jurisdictions those activities it has agreed to forego. More specifically, "each State Party is prohibited from ... (b) Using chemical weapons under any circumstances , including retaliatory use (which many countries protected under the Geneva Protocol of 1925).... " Each nation must establish corresponding restrictions upon individuals and entities found within its own jurisdiction. That is, "each State Party must ... (c) Extend its penal legislation enacted under subparagraph (a) above to any activity prohibited to a State Party under the Convention undertaken anywhere by natural persons, possessing its nationality, in conformity with international law." The Senate did not readily give its advice and consent on the Convention. The Senate Foreign Relations Committee held six days of hearings towards the close of the 103 rd Congress. The committee heard further witnesses during the 104 th , and issued a favorable executive report under which the Senate's advice and consent would have been subject to 7 conditions and 11 declarations. Even so, the Convention apparently lacked the votes, for it was never brought to the floor. Pressed by time deadlines within the Convention during the 105 th Congress, the Senate discharged the Foreign Relations Committee from further consideration of the Convention. The Senate only then gave its advice and consent subject to page after page of conditions—none of them addressed to the criminal penalties which the Convention obligated the United States to enact with respect to the use of chemical weapons. Implementing proposals appeared in both the House and Senate shortly thereafter. The Senate held hearings and passed an amended version of its bill. A year later, the proposal that became the Chemical Weapons Convention Implementation Act was tucked in towards the end of the 900-plus-page Omnibus Consolidated and Emergency Supplemental Appropriations measure. Throughout the ratification debate, the principal concerns were the protection of United States businesses subject to international inspection and doubts that the pact would lead to international chemical weapons disarmament. The need to protect American industry during the international inspection process drove the compromises necessary for Senate passage of implementing legislation. There can be little doubt, however, that Mrs. Bond's conduct fell within a literal reading of the implementing legislation. The legislation outlaws knowingly using a chemical weapon. A chemical weapon is any toxic chemical, and a toxic chemical is any chemical that "can cause death, temporary incapacitation or permanent harm to humans or animals." The legislation does establish several exceptions, such as the exceptions for possession by members of the Armed Forces or the exceptions for use for peaceful purposes "related to an industrial, agricultural, research, medical, or pharmaceutical activity or other activity." Neither these nor any of the other exceptions, however, seem to fit Mrs. Bond's conduct. On appeal, the Third Circuit conceded that the implementation legislation's "breadth is certainly striking, seeing as it turns each kitchen cupboard and cleaning cabinet in America into a potential chemical weapons cache." Nor was it impressed with the government's decision to press prosecution. Yet at the end of the day, Mrs. Bond's conduct satisfied the statute's broadly drafted elements. The Third Circuit affirmed her conviction and set the stage for Supreme Court review. The Supreme Court unanimously agreed that Mrs. Bond's conviction must be overturned. For a majority of the Court, the primacy of the states over criminal matters provided a presumption of statutory construction that could not be rebutted in Mrs. Bond's case. For the three concurring Justices—Scalia, Thomas, and Alito—the constitution does not permit the federal government to outlaw Mrs. Bond's conduct based on the treaty power. Chief Justice Roberts, writing for the Court, began his analysis with a reminder that the federal government may exercise only those legislative powers which can be traced to a specific grant in the Constitution, and, more importantly, that the states are the residual domain of criminal law. The Constitution grants the federal government no power to enact and enforce general criminal laws, although it may enact and apply specific prohibitions incidental to the powers which it has been given, such as the power to regulate interstate and foreign commerce or the power to implement treaties. Before considering Mrs. Bond's constitutional challenges, the Court thought it prudent to determine whether the federal government enjoyed statutorily authority to prosecute her. Yet, it interpreted the statute using constitutional principles: These precedents make clear that it is appropriate to refer to basic principles of federalism embodied in the Constitution to resolve ambiguity in a federal statute. In this case, the ambiguity derives from the improbably broad reach of the key statutory definition given the term—"chemical weapon"—being defined; the deeply serious consequences of adopting such a boundless reading; and the lack of any apparent need to do so in light of the context from which the statute arose—a treaty about chemical warfare and terrorism. We conclude that, in this curious case, we can insist on a clear indication that Congress meant to reach purely local crimes, before interpreting the statute's expansive language in a way that intrudes on the police power of the States. The Court felt Congress gave no such indication. In fact, the statute's language and context convey a different message. The statute speaks of chemical weapons, not the household chemicals an expansive reading would encompass. The context reflects an international concern that nations or their agents might develop and maintain the capacity to engage in chemical warfare, not that individuals would use the materials at hand to settle a domestic dispute. "In sum," said the Court, "the global need to prevent chemical warfare does not require the Federal Government to reach into the kitchen cupboard, or to treat a local assault with a chemical irritant as the deployment of a chemical weapon. There is no reason to suppose that Congress—in implementing the Convention on Chemical Weapons—thought otherwise." Justices Scalia, Thomas, and Alito agreed that Mrs. Bond's conviction should be overturned, but on constitutional rather than statutory grounds. Justice Scalia, in an opinion joined by Justices Thomas and Alito, wrote that the statute clearly outlawed Mrs. Bond's conduct. He characterized the majority opinion as rewriting the statute, yet leaving it in a form in which its exact prohibitions cannot be discerned. For Justice Scalia, the treaty making power is the power to make treaties, not to implement them. The authority to implement a treaty must come from one of the other enumerated powers. The government asserted that the treaty-making power authorized the statute under which Mrs. Bond was convicted. In the eyes of the concurring Justices, it did not, and it could not. Justice Thomas offered a separate concurrence to emphasize that in his mind "the Treaty Power can be used to arrange intercourse with other nations, but not to regulate purely domestic affairs." Justice Alito joined much of Justice Thomas's concurrence and expressed the view "that the treaty power is limited to agreements that address matters of legitimate international concern.... But insofar as the Convention may be read to obligate the United States to enact domestic legislation criminalizing conduct of the sort at issue in this case, which typically is the sort of conduct regulated by the States, the Convention exceeds the scope of the treaty power." A majority of the Supreme Court preferred not to use Mrs. Bond's conviction as a vehicle to define the scope of Congress's legislative authority under the treaty power. It may be that there is no majority view of the scope of the treaty power. It may be that a majority would prefer to clarify the scope of treaty power without having to find that the federal government has overstepped its constitutional bounds. It may be that a majority considered the Bond case an aberration, and found the fact pattern of "this curious case" ill-suited to demonstrate the bounds of the treaty power. It may be a majority of the Court finds the Missouri v. Holland declaration a satisfactory statement of the law. It may be a majority preferred to resolve the case on statutory grounds so as not to call in question other treaty implementing legislation. It may be, as Court opinion stated, that a majority would simply prefer to resolve cases using principles of statutory rather than constitutional construction, whenever possible. It may be that several of these factors were in play. The only thing that can be said with certainty is that the Third Circuit's opinion has been reversed, and the case remanded there for disposition consistent with the Supreme Court's opinion.
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The Chemical Weapons Convention obligates the United States to outlaw the use, production, and retention of weapons consisting of toxic chemicals. The Chemical Weapons Convention Implementation Act outlaws the possession or use of toxic chemicals, except for peaceful purposes. In Bond v. United States, the Supreme Court concluded that Congress had not intended the Act to reach a "run of the mill" assault case using a skin irritating chemical. Carol Anne Bond, upon discovering that her husband had impregnated another woman, repeatedly dusted the woman's mail box, front door knob, and car door handles with a toxic chemical. Mrs. Bond was indicted in federal court and pled guilty to possessing a chemical weapon in violation of Section 229 of the Act, but reserved the right to appeal. The United States Court of Appeals for the Third Circuit rejected her constitutional challenge. A concurring member of the panel, however, urged the Supreme Court to clarify the nearly century-old pronouncement in Missouri v. Holland, "if the treaty is valid there can be no dispute about the validity of the statute ... as a necessary and proper means to execute the powers of the Government." The concurring judge observed that, "since Holland, Congress has largely resisted testing the outer bounds of its treaty-implementing authority. But if ever there was a statute that did test those limits, it would be Section 229. With its shockingly broad definitions, Section 229 federalizes purely local, run-of-the mill criminal conduct.... Sweeping statutes like Section 229 are in deep tension with an important structural feature of our Government: The States possess primary authority for defining and enforcing the criminal law." The Supreme Court found it unnecessary to decide the treaty power issue. Instead, it ruled Congress did not intend the Act to apply to Mrs. Bond's conduct. The Convention did not require a criminal statute sweeping enough to encompass Mrs. Bond's conduct. If Congress intended to reach that deeply into an area within the primacy of the state authority, the Court said, its intention would have to more apparent. Three concurring members of the Court would have held that the federal government lacked the constitutional authority under the treaty power to punish Mrs. Bond. The question of whether application of the statute might be sustained under the Commerce Clause was not before the Court.
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The appropriate size and role of the government is one of the most fundamental and enduring debates in American politics. What role does the state play in economic activity? How is the economy affected by government intervention? Many of the arguments surrounding the proper size of government are economic in nature, and these are discussed in this report. Government activity affects the economy in four ways: The government produces goods and services, including roads and national defense. Less than half of federal spending is devoted to the production of goods and services. The government transfers income through both the tax system and outlays. Popular perception typically focuses on transfers across income classes through the progressive income tax system and means-tested benefits, referred to as vertical redistribution. But vertical redistribution is dwarfed by horizontal redistribution, transfers unrelated to income class. The largest beneficiaries of transfers are the elderly, through programs such as Social Security. The government collects taxes, and that alters economic behavior. For instance, taxes on labor change the incentives to work, while taxes on specific goods (e.g., gasoline) change the incentive to consume and produce those goods. The government regulates economic activity for a number of reasons, including environmental protection, workplace safety, and consumer protection. The economic impact of regulation is probably the hardest and most contentious to measure of the four types of government economic activity. Before assessing how the government affects economic activity, it is necessary to agree upon how to measure the size of the government. For a number of reasons, this exercise is less straightforward than it may seem. The size of government can be expressed in a number of different units of measurement. Should the size of government be measured in dollars, on a per capita basis, by total employees, or as a percentage of GDP? Each measurement has its advantages, but some measurements have more shortcomings than others. If measured in dollars, then those dollars should be adjusted for inflation. The purpose of measurement is to gauge the resources at the government's disposal, and a dollar of tax revenue in 1946 would buy $11 of goods and services in 2009 because of inflation. Measuring the size of government by the number of employees is imprecise because the government can substitute capital for labor over time to accomplish the same tasks with fewer employees. For example, the government's purchase of computers has rendered many clerical jobs obsolete. The federal government can also pay workers in the private labor force through contracts and grants or allow state and local government workers to deliver federal programs in place of federal public servants. One estimate puts the number of private and state and local government workers working for the federal government at more than seven times the size of the federal workforce. Comparisons over time that do not incorporate demographic change are arguably misleading because government spending per capita is more meaningful than total government spending: $458.4 billion in federal spending in 1946 amounted to $3,242 per person then, but would only finance $1,493 per person in 2009. But over long periods of time, because of the power of compounding, any level of government spending will appear to be insignificant unless it is expressed as a fraction of gross domestic product (GDP) (a measurement that incorporates inflation and population growth). In 1944, at the height of World War II, federal spending was about one-third of today's federal budget in constant (inflation-adjusted) dollars. Yet outlays in 1944 accounted for 43.7% of GDP, whereas the budget in 2008 accounted for a little more than half that (24.7% of GDP). Nevertheless, some argue that stating the size of government as a percentage of GDP understates increases in government spending in the short term, particularly in years when growth is high. For example, those who claim that government spending increased sharply in 2000 point to the fact that it increased by 2.5% in constant dollars. Those who claim the increase was modest point to the fact that it fell by 0.2 percentage points of GDP. Because this report focuses on long-term trends, all measurements are made as a percentage of GDP. The size of the government can be measured by expenditures (outlays) or revenues (receipts). 5 At times when the budget deficit is large, the difference between the two measures is significant, as seen in Figure 1 . Measured by receipts, the size of government in the post-war period peaked in 2000. Measured by outlays, the size of government peaked in 1983. In 2000, the peak year as measured by receipts, outlays were at their lowest level since 1966. Government has grown since 2000 when measured by outlays, and shrunk measured by receipts. There are two main reasons why outlays might be considered a better measure of the size of government than receipts. First, receipts are more volatile than outlays and are only indirectly controlled by legislators. They are particularly sensitive to economic conditions. Receipts did not peak in 2000 because of changes in the tax code, but because of the interaction between the tax code and the rapid growth in (taxable) income. Second, outlays and revenues can temporarily diverge because of budget deficits. But eventually, the budget must be brought back into balance. Therefore, cutting taxes without corresponding spending cuts does not permanently reduce the size of government, and measuring the size of government by revenues gives the misleading impression that government is smaller than it is. Furthermore, although people often refer to the burden of high taxes, that burden cannot be avoided in the long run through deficits because deficits impose a burden that is every bit as real as taxes. In other words, a given level of spending requires the resources of individual taxpayers, whether deficit financed or tax financed; all that changes is the timing of its incidence. Although it is sometimes argued that deficits hold down the growth in spending for political reasons, deficits directly increase the outlays needed to maintain a fixed level of government services in the future by increasing interest payments on the national debt. In other words, if spending is constant over time, a $1 tax cut today will lead to a tax increase of $1 plus compounded interest in the future. This raises a further question: if interest payments are the direct result of deferring payments for past spending to the present, should they be included in comparisons of the size of government over time? Including net interest payments, as current practice does, makes the government appear to be larger following periods of large deficits relative to the period before the deficits. Excluding them gives a different budget picture: for example, high interest payments in the 1990s and 2000s obscure the fact that other outlays at the time were as small as they had been in the 1960s. Because this report focuses on long-term trends, it measures the size of government by spending. When measured by outlays, the size of government followed an upward trend until 1983, and followed a downward trend until 2000. Outlays rose from 14.7% of GDP in 1947 to 23.5% in 1983. They then fell to 18.4% of GDP in 2000, and have increased since. Outlays were below 20% of GDP from 1947 to 1974 (with the exception of 1953 and 1968), above 20% of GDP from 1975 to 1996, and were below 20% of GDP from 1997 to 2002, but have been above 20% of GDP again in 2006 and since 2008. A look at total spending masks large compositional changes in spending over the post-war period. In a nutshell, the government's largest activity has gone from national defense in the 1960s to transfers to the elderly today. Defense spending peaked at 9.5% of GDP in 1968, and then fell to 4.7% of GDP in 1978. It then rose to 6.2% of GDP in 1986, before beginning a sharp decline to 3.0% of GDP in 2001. It began rising again and stood at 4.6% of GDP in 2009. At the same time, mandatory spending (excluding net interest) has risen from 4.9% of GDP in 1962 to 14.7% in 2009. In the long run, much of the growth in mandatory spending has been in programs for which the elderly are major beneficiaries. Non-defense discretionary spending, which includes spending on transportation, education, the environment, and numerous other government activities, grew from 3.4% of GDP in 1962 to 5.2% in 1980. It has been below 4% of GDP since 1984, and stood at 4.1% of GDP in 2009. Net interest on the publicly held national debt grew significantly in the 1980s and 1990s because of the government's budget deficits. In the post-war period to the 1980s, it had always been below 2% of GDP; in the 1980s and early 1990s, it exceeded 3% of GDP. The surge in the deficit since 2008 has not led to a significant increase in net interest to date because of unusually low interest rates. It is useful to remember that federal spending is overwhelmingly devoted to a handful of activities. Defense spending, Social Security, Medicare, and Medicaid accounted for nearly two-thirds of all federal outlays in 2009. Thus, any proposal to reduce the government's size would be unlikely to make much of a dent in overall spending unless it reduced one or more of these programs. Government transfers and government purchases of goods and services have different and distinct effects on the economy. Economists draw a distinction between government outlays spent on goods and services (purchased from the private sector or produced directly by the government) and outlays that transfer resources from one set of private individuals (taxpayers) to another. Because a significant portion of government spending is devoted to government transfers to individuals, much of the revenue collected through taxation is ultimately spent by the private sector on private sector goods and services (after it is transferred by the government). Government transfers do not employ U.S. capital and labor (except to administer those transfers) in the same way as government production of goods and services. Government transfers basically shift private sector spending from one group of private individuals to another. By shifting income from its market allocation, government transfers still have an effect on the economy, however, because the transfers and taxes to finance them alter the incentives to work and save. The merits of government transfers cannot typically be evaluated on the basis of economic efficiency alone, because they often pursue social goals. By contrast, government production of goods and services falls comfortably within the framework of economic efficiency based on whether the spending addresses a market failure, as explained in the next section. Transfers can result in vertical redistribution, transfers among income classes, or horizontal redistribution, transfers unrelated to income class. Most transfers on the spending side of the budget result in horizontal redistribution. For example, the largest portion of government transfers are directed to the elderly, notably through Social Security. (Social Security contains an element of vertical redistribution in that the tax-benefit formula is more favorable as income declines, but its main function is horizontal redistribution.) Another large category of transfers is devoted to interest on the national debt, which represents a transfer from taxpayers to bondholders. Transfers also include net subsidies to government corporations, which are discussed below. The largest portion of government production is directed to national defense. The distinction between government transfers and government production of goods and services becomes important when making historical comparisons. Total federal outlays have remained in the range of 20% with a slow upward trend for most of the post-war period, but this masks large changes in the composition of federal outlays. Since the 1950s, outlays for federal production and transfers have moved in the opposite direction. While government production was nearly three times as large as government transfers in the early 1950s, production is only half as large as transfers today. Measuring the size of government by receipts or outlays omits tax expenditures. Tax expenditures are defined in the Congressional Budget Act of 1974 ( P.L. 93-344 ) as "revenue losses attributable to provisions of the Federal tax laws which allow a special exclusion, exemption, or deduction from gross income or which provide a special credit, a preferential rate of tax, or a deferral of liability." They take many forms and cover many policy areas; a Senate Budget Committee compendium identifies 186 corporate or income tax expenditures in current law. Revenue loss attributable to these tax expenditures totaled $1.2 trillion in FY2008. This is larger than total discretionary spending (defense and non-defense) in FY2008, yet tax expenditures do not show up directly on the outlay or revenue side of the budget. Table 1 lists the largest tax expenditures. As a comparison, the tax expenditure for the deduction of mortgage interest is larger than the entire FY2008 appropriation for the Department of Housing and Urban Development (HUD). Economists would argue that, in many ways, tax expenditures are equivalent to government spending, and which is preferable depends on which is a more effective or efficient way of achieving any particular goal. For example, a $1,000 child tax credit is equivalent to the government sending a check for $1,000 to parents who have eligible children and meet the credit's income requirements. Similarly, a tax deduction for mortgage interest for a taxpayer in the 33% marginal income tax bracket is equivalent to the government sending the taxpayer a check for 33 cents for every dollar of mortgage interest paid. From a revenue perspective, the equivalence comes from the fact that marginal rates must be raised to the same extent to finance an expenditure whether it is a tax expenditure or an outlay. Because tax provisions are permanent (unless they include an expiration date), however, revenue loss from specific expenditures may rise over time automatically without congressional action, unlike appropriated spending. If this equivalence argument is correct, measures of the size of government that omit tax expenditures drastically underestimate its size. Measuring the size of government by receipts or outlays omits offsetting receipts and collections. The outlay and revenue totals discussed here and in the federal budget are net measures, and do not include offsetting receipts and collections. These are the income that the government receives, primarily from business-like activities (many are user fees). Mostly, the offsetting receipts and collections go directly toward the provision of those activities for which they were collected, in some cases without appropriation. These include receipts collected directly by the government for health care premiums through Medicare, national park user fees, and proceeds from the sale of government resources. They also include receipts collected by government corporations (defined below) such as the Postal Service, the Export-Import Bank, and the Federal Deposit Insurance Corporation. The receipts and collections are not included in revenues, and the outlays that they fund are subtracted from total outlays. OMB justifies the exclusion of offsetting receipts and collections from the budget on the grounds that "[t]he budget focuses on ... outlays and receipts that measure governmental activity rather than a combination of governmental and market activity." What should be realized is that even if offsetting collections and receipts are not included in the budget as revenues because they represent choices made in the marketplace (i.e., they are not compulsory like taxes), removing them from revenues also causes the activities that they finance to be removed from the outlay side of the budget. Some budget analysts argue that this keeps many of the financed activities outside the oversight and deliberation of the annual appropriation process. Regardless of whether offsetting receipts and collections finance "public goods" or (government-provided) "private goods," when thinking about the size of the government in relation to private economic activity, it may be sensible to include them, and they are not an insignificant sum. In 2009, offsetting collections and receipts totaled $424 billion, about 12% as large as outlays included in the budget. Table 2 lists the largest offsetting receipts and collections in 2008. To the extent that offsetting collections and receipts have grown over time, removing them from the budget arguably underestimates the growth in the size of government. When considering government ' s influence on the economy, it is best to include government spending at the state and local level. When state and local government spending is included, the decline in the size of the government since 1983 is smaller because of the corresponding increase in the size of state and local government. State and local government outlays grew from 7.1% of GDP in 1950 to 9.8% in 1983. But unlike the federal government, state and local outlays have grown since 1983, equaling 11.4% of GDP in 2009. The growth in state and local government is larger (and the growth in the federal government is smaller) if one includes federal grants to state and local governments, which have grown from 0.7% of GDP in 1950 to 3.8% of GDP in 2009. In contrast to the federal government, at the state and local level government purchases significantly exceeds government transfers. Should government corporations be included in discussions involving the size of government? Should government-sponsored enterprises be included? Government corporations are government agencies that provide market services and raise revenue that partly or fully cover their expenses. The Postal Service, AMTRAK, and the Federal Deposit Insurance Corporation are prominent examples. For the most part, their revenues and expenses occur outside of the budget. Surpluses are returned to the Treasury and the corporation may receive appropriated subsidies or loans from general revenues. The activities of these agencies are recorded in the federal budget only in-so-far as they receive subsidies or federal loans, or generate surpluses. They do not have shareholders, and raise capital through the Treasury's Federal Financing Bank. Some raise capital independently of the government; for example, the Tennessee Valley Authority issues its own bonds. In economic terms (business decisions, budgets, products, and so on), these corporations may more closely resemble private businesses, and have little input from the executive branch or legislature in day-to-day decision making. Nevertheless, the organizations are part of the government, and not privately owned. In that way, the major difference between them and the rest of the government is that they provide goods and services that are sold in the market, whereas typically the government provides non-market goods (e.g., education, defense, and highways). Sometimes the government corporations compete with private corporations (e.g., package delivery by the Postal Service), and sometimes they have a monopoly (e.g., letter delivery by the Postal Service). Government corporations account for about 1% of national income, a fraction that has stayed relatively constant over time. In addition, there are "quasi-government" organizations with more distant ties to the government than government corporations, but distinct from the private sector. These include RAND, the Smithsonian Institution, and government sponsored enterprises (GSEs), such as Fannie Mae and Freddie Mac. What they have in common are legal characteristics that in some way link them to the government. For example, the GSEs were federally chartered by the government and have special borrowing privileges from the U.S. government. However, they are shareholder-owned corporations with management structures independent of the government and did not receive government appropriations (although their ties to government increase the firms' market value.) In 2008, Fannie Mae and Freddie Mac were taken into conservatorship by the federal government and began to receive direct financial support. To many critics, this outcome confirmed that quasi-governmental organizations should be viewed as fundamentally governmental in nature. The focus on an annual cash flow budget neglects the fact that policy decisions made today can have long-run consequences that are not reflected in today ' s budget. This can occur in a number of ways. Many recent tax cuts and spending programs are being phased in over a number of years. For example, under P.L. 107-16 , signed into law in 2001, the estate tax will not be eliminated until 2010. Spending on multi-year projects can lead to implicit future spending commitments even if explicit commitments are not made. For example, once a military hardware investment project begins, it may be highly impractical to stop funding the project before it has been completed. Nevertheless, defense spending, like all discretionary spending is assumed to grow at the rate of inflation in the budget baseline, and future budget totals are not adjusted for multi-year spending projects. Mandatory spending can increase with no change in law when the number of eligible beneficiaries increases. The example of this phenomenon that dwarfs all others under current policy is entitlement spending on the aged. Under current policy, the retirement of the baby boomers and the increase in life expectancy are projected to cause spending on Social Security, Medicare, and Medicaid to increase from 7.4% of GDP in 2000 to 18.5% of GDP in 2050. While the spending increase will not occur until the future, the promises to increase spending have already been made. These promises are not reflected in the current year budget, and unlike a private pension plan, the payroll taxes being collected from baby boomers while they work are not set aside to fund the future obligations they have secured under current law. In all, one recent study estimated that the government's total future unfunded liabilities equaled $44.2 trillion in present value terms. Some budget analysts have argued that the budget should be measured using a different accounting method (e.g., accrual accounting) so that liabilities incurred today are recorded in today's budget. Different accounting methods might tell a significantly different story about changes in the size of government over time. The shortcoming of cash flow budgeting as a measure of size of government can be expressed in the question: does the more than doubling of elderly entitlement spending as a percentage of GDP projected under current policy really imply any growth in the size of government when the benefits any individual is entitled to remain the same? Economic conditions can temporarily alter the size of government . In the absence of policy changes, economic conditions cause mandatory spending and revenue levels to automatically change, a phenomenon known as "automatic stabilizers." For example, when the economy enters a recession, benefits paid under certain mandatory spending programs such as unemployment insurance automatically rise and revenues automatically fall as taxable income falls. CBO estimates that the recession automatically reduced revenues by $222 billion and increased outlays by $85 billion in 2009. Changing economic conditions may also lead to policy changes that temporarily alter outlays or revenues. In 2009, economic stimulus legislation ( P.L. 111-5 ) was enacted that increased spending by $575 billion and decreased revenues by $212 billion over 10 years. About 90% of the costs occur in the first three years. The 2008 financial crisis led to the authorization of $700 billion for the Troubled Assets Relief Program (TARP; P.L. 110-343 ) and government conservatorship of Fannie Mae and Freddie Mac. Because of government accounting conventions, the ongoing budgetary costs of these actions were largely recorded in 2009. Although this spending is scheduled to wind down as economic conditions improve, some commentators argue that government programs that are introduced on a temporary basis tend to ultimately result in permanent increases in government spending. Spending and tax revenue are not the only ways to think about the size of the government. The government can arguably have a bigger (smaller) role in the economy without spending more (less). Government regulation (in the form of laws, regulations, or mandates) undoubtedly has an economic impact every bit as real as spending or taxation, but the cost of regulation is difficult to quantify and is not measured overall by any official source. Recent policy debates on health care reform, financial regulatory reform, and offshore oil drilling illustrates that regulation can have a large influence over economic activity. And yet to ignore it in discussions of the size of government could be misleading. For example, consider a government proposal to reduce the consumption of a product (gasoline, cigarettes, alcohol, and so on). The government could reduce consumption by paying people not to use the product or paying them to use an alternative, which would be counted as an increase in government outlays. The government could tax the product to reduce its use by making it more costly, which would be counted as an increase in government revenues. Or it could pass regulations forbidding or restricting its use, which would not show up on either side of the budget's ledger. Yet all three proposals could be crafted to have the exact same effect on the quantity of the good consumed. How can policymakers determine the appropriate role of the government in the economy? Most economists judge the economic merit of any government program based on its effect on economic efficiency. Does larger government raise economic efficiency or lower efficiency? The only overarching answer that can be offered is: it depends. Economic theory is clear that government intervention has the potential to improve efficiency when market failures exist, but is likely to reduce efficiency when markets are already "perfect," which is defined below. In reality, government intervenes both in cases of market failure and in cases where markets are already operating relatively efficiently. As a result, some government policies raise economic efficiency and some lower efficiency. By no means are all spending decisions made by the government today justified on efficiency grounds. If it were possible to isolate and eliminate all actions that lowered efficiency, economic welfare could hypothetically be improved by reducing the size of government. Likewise, one could identify areas where government intervention could improve currently uncorrected market failures and a larger government would theoretically improve economic efficiency. Before discussing what constitutes a market failure, it is useful to define economic efficiency, which differs from popular parlance. As opposed to its popular usage, economic efficiency does not involve economic growth, wealth, or productivity. In fact, there are examples where efficiency is at loggerheads with these goals. Generally, an outcome is economically efficient if the marginal cost of producing one more unit of a good is equivalent to the marginal benefit of consuming one more unit of the good. When markets function perfectly, which is defined as a market with many buyers and sellers, no barriers to entry, perfect information, and the costs and benefits of the transaction are completely borne by the buyer and seller, an economically efficient outcome will occur and government intervention can only reduce efficiency. When there are market failures, government intervention has the potential to improve efficiency by moving away from the economically inefficient outcome produced by the market. Although economic efficiency is easy to define theoretically, discord arises when applied to actual government policies. Typically, an efficiency-enhancing measure cannot be produced without being accompanied by efficiency-reducing side effects. For example, without our criminal justice system markets could not operate, but a criminal justice system cannot be operated without taxes that are likely to take a efficiency-reducing form. While there is a broad consensus that a tax-financed criminal justice system is efficiency-improving on net at some level, there is likely to be disagreement as to whether the benefit derived from a marginal increase in resources devoted to criminal justice from current levels would exceed the costs of a marginal increase in taxation to finance it. Furthermore, the democratic process is conducive to compromises that include a mixture of efficiency-enhancing and efficiency-reducing measures. Judging the balance between the two is unlikely to produce wide consensus. Economic theory can describe the economic benefits (and costs) of a broad policy approach, but cannot predict how the compromise that emerges from the legislative process will differ from the policy as originally conceived. Measuring efficiency gains and losses of any proposal is more difficult when other policies are also distorting a market. (Personal differences in opinion on these matters go a long way toward explaining the wide ideological diversity within the economics profession.) To understand when government intervention in the economy can increase economic efficiency, it is necessary to define a market failure. Before doing so, it is useful to give examples of what is not a market failure: inequality, poverty, fraud, discrimination, bankruptcy, layoffs, high prices, and so on are not market failures, as defined by economic theory. While they are undesirable phenomena which may be valid targets of public policy, they are problems that either are not economic in nature, or do not meet the definition of economic inefficiency: they do not involve a mismatch between marginal cost and marginal benefit. Economic theory has identified the following major types of market failures: Some beneficial goods will not be provided by the market because they are "non-excludable" (people cannot be prevented from using the good) and they are "non-rival" (one person's use of the good does not diminish another's use). For those two reasons, a private producer has no incentive to supply the good. Economists refer to goods meeting these two criteria as "public goods," which are often provided only by the government. The classic example of a public good is national defense. Although private armies might be capable of defending the country, there is no incentive to form a private army because nobody would voluntarily pay for its services as a result of the "free rider problem": once an army is in place, it has no means to defend its customers from attack without also defending non-customers. Only government, with the power of taxation, can raise the funds to finance an army. Similar public goods include basic knowledge, which once discovered can be enjoyed by all, and the civil and criminal justice system, much of which (e.g., property rights, dispute settlement, contract enforcement) makes market transactions possible. Because public goods are not transacted through the marketplace, it is difficult to determine whether government overspends or underspends on their provision. The value of any given public good is different for different people, and the political process rather than the marketplace must sort their preferences. For example, could an acceptable level of national defense be attained at lower cost? Or is the nation not secure enough at current levels of spending? During peacetime, these questions cannot be definitively answered. Another type of good that cannot be efficiently provided by the market is a common resource, such as the environment, ocean fishing, and certain water supplies. Unlike public goods, these resources are rival—a fish or glass of water consumed by one person cannot be consumed by another. But the resources are not excludable because they cannot be assigned property rights. For that reason, they may be overconsumed and can be depleted or even exhausted over time in the absence of government intervention. As a result, government control or regulation is necessary for an efficient and sustainable use of the resources. It is no coincidence that some of the common resources in danger of "depletion" are those such as ocean fishing and the environment that do not fall within the exclusive jurisdiction of a single national government—with no single sovereign entity, over-consumption is harder to prevent. Although the government has the potential to achieve economic efficiency through the regulation of common resources, its intervention may not move the resource closer to efficient use in practice. For example, many governments have subsidized the fishing industry, potentially exacerbating the depletion of ocean fisheries. Because common resources also cannot be valued through the marketplace, estimating the appropriate level of government intervention is difficult. One reason perfect competition leads to economically efficient outcomes is because any one producer does not have enough market power to push prices above marginal cost. Monopoly producers can do so to earn "economic rents" (excess profits) by reducing production to an inefficiently low level. (Theoretically, there could also be buyers with monopoly power, in which case the outcome would be economically inefficient because price would be driven below marginal cost.) Monopoly can occur for many reasons, including barriers to entry—legal or natural—and economies of scale. In the narrowest definition of the word, a market with a single producer, monopolies tend to exist only when marginal cost is continually declining (producing one more good is always less expensive than producing the previous good). This special case, known as a natural monopoly, tends to occur in markets where consumption of a good is non-rival (one person's consumption does not come at the expense of another's); utilities (such as electricity, water, cable, telephone) are the most common examples. In most markets, neither a natural monopoly nor perfect competition exists. The best description for what does exist is termed monopolistic competition, where each company makes a product that is distinct but highly substitutable with its rival (e.g., the Big Mac vs. the Whopper in the fast-food hamburger market), so that each company has some market power. In monopolistic competition, production is still inefficiently low, but closer to the efficient point than in a pure monopoly, and economic rents do not exist. As the number of firms increases and difference between products decreases, the monopolistic competition outcome approaches the perfect competition case. Economic theory suggests that governments can increase economic efficiency by increasing a monopoly's production to its efficient point through regulation or direct ownership. Both approaches have been used historically for utilities. Over the past three decades, questions have been raised whether government intervention can truly raise economic efficiency even in the case of natural monopolies, given the political intervention, complexity, lack of profit motive, and distorted incentives that regulation produces for the monopoly. Some economists have argued that even when significant market concentration exists, with the exception of the natural monopolies, the potential for competition is powerful enough to deter producers from maximizing monopoly rents even when robust competition does not currently exist. It is noteworthy that government has rarely attempted to intervene to improve efficiency in monopolistic competition, even though a theoretical case could be made to do so. In cases where it has, such as the airline and trucking industries, economic regulation has widely been deemed a failure and largely eliminated. Monopolies are not always less efficient than perfect competition, and sometimes they are fostered by the government for that reason. For example, as required by the Constitution, the government grants patents and copyrights so that inventors and authors can enjoy monopoly profits for their work. Without these government-created monopolies, there would frequently not be sufficient incentive to undertake those activities. In the market for many goods and services, all the costs and benefits inherent in the consumption and production of a good are borne by the buyer and seller. But some goods also create "externalities" in their consumption or production. Positive externalities are benefits enjoyed by third parties, negative externalities are costs borne by third parties. Again, it is difficult to determine how much government intervention is required to correct an externality since the externality cannot be valued in the marketplace. Pollution is the classic case of a negative externality. Society as a whole bears the cost of environmental degradation, and there is no incentive for the consumer or producer to take these societal costs into account. As a result, from a societal perspective the good is overproduced and overconsumed in the free market outcome. If a good generates a negative externality, it does not mean that good should not be consumed. It means that to maximize social welfare, the consumption of the good should be reduced to the level that reflects its social costs. Vaccines are an example of a positive externality. When someone is vaccinated against a communicable disease, society as a whole benefits since that person can no longer contract the disease and spread it to others. From a societal perspective, vaccines would be underproduced and underconsumed in the absence of government intervention. Some social goals are often popularly justified on the grounds that they generate positive externalities, but the criteria to qualify as an externality are strict and economists are divided if social goals qualify. For example, home ownership is often viewed as generating positive externalities because home owners are viewed as having higher incomes, having higher rates of civic participation, and committing fewer crimes than renters. However, it is not clear that home ownership causes incomes and civic participation to be higher and crime to be lower or if it just happens to be correlated with other personal attributes that cause these outcomes. Similar arguments apply to education. Competitive markets only work efficiently when both buyer and seller are well-informed. In some markets, the buyer may be more informed than the seller, or vice versa. When this happens, the market outcome is inefficient. For example, in insurance markets, buyers know more about their riskiness than sellers. As a result, only buyers with higher risks will tend to purchase more insurance because they are more certain that the benefit of the insurance will exceed the cost. This pushes up the price of insurance and hampers insurers' efforts to pool risk. When government is able to provide information to the uninformed party or make participation mandatory, it can move the market back to an efficient outcome. For auto insurance, many state governments make (some) insurance mandatory to avoid the problem of asymmetric information. For employment insurance, the government provides the insurance directly. The insurance market is also distorted by moral hazard, which occurs when the insured party acts more recklessly as a result of the insurance. For example, some drivers may be more likely to speed or run red lights when they become insured, pushing up the price of automobile insurance. Asymmetric information is also used as a rationale for financial regulation. Referred to as the principal-agent problem, the manager of a company or bank may not have the same incentives (e.g., the costs of risk-taking) as shareholders or depositors. Information disclosure and accounting laws can increase the information available to monitor the behavior of managers. Finally, the assumption in economic theory that people make rational, optimal economic decisions that maximize their well-being may be invalid in many cases. Without this assumption, an array of possible government interventions has the potential to improve well-being. An assumption that individuals do not optimize underlies diverse arguments such as Social Security is necessary because people do not save enough, primary education should be mandatory, the Federal Reserve should prevent financial bubbles, and drug use should be illegal. By its nature, the failure to optimize in any given market is the hardest to prove or disprove. Much economic analysis is based on the construction of theoretical models based on optimizing individuals, which are then tested against empirical evidence. In many cases, the models may be a good approximation of reality not because everyone is rational, but because any individuals making different mistakes nearly cancel each other out. A failure of the evidence to match the model is not necessarily proof that individuals are not optimizing; the model could simply be mis-specified. Thus far, robust, testable models in which individuals do not optimize have not attained widespread use. Economic theory characterizes taxes as reducing economic efficiency by "distorting" (changing) the behavior being taxed relative to all other behavior, thus moving behavior away from the efficient market allocation where marginal benefit equals marginal cost. (This is the case if the behavior being taxed does not result in negative externalities; if it does, then the market allocation was not efficient to begin with.) Thus, a sales tax on a specific good (e.g., passenger air travel) changes the choice between the taxed good and non-taxed goods, as well as the relationship between taxed goods and saving. Likewise, a wage tax shifts a worker's allocation of his time between labor and leisure away from an efficient balance (the balance that maximizes his welfare). (In the real world, there is also the possibility that taxes on labor inefficiently shift behavior from taxable compensation to non-taxable compensation, such as non-taxable benefits.) Is economic efficiency reduced on balance by taxation? That question cannot be answered in isolation of the other side of the government balance sheet. Taxes finance government, and, as described above, certain government interventions can increase economic efficiency. Whether any given policy increases or decreases economic efficiency depends on whether the efficiency cost of the taxes needed to finance it outweighs the policy's benefits. Furthermore, efficiency losses are difficult to estimate, particularly in the presence of other policies that change the market outcome. This is why no broad statement can be made about whether the overall size of government is inefficiently large or small. Economic theory suggests that the efficiency loss from a tax increases geometrically as the tax increases. This suggests that as government gets larger (and tax rates get higher), fewer new government programs would generate efficiency gains large enough to offset the efficiency losses caused by their financing. And yet, the efficiency losses of high taxes should not be overstated. That is because not all taxes distort behavior. For example, a capitation tax (a fixed dollar tax that everyone must pay) results in no efficiency loss no matter how high taxes are set because there is no way to avoid the tax, short of death or emigration. While the example of a capitation tax is extreme, in general economists assert that the efficiency losses from taxation could be much lower than they are in our current system if the tax base were broadened so that an equivalent amount of revenue could be raised with lower marginal tax rates. It is exemptions, deductions, tax credits and the like that narrow the tax base and require marginal tax rates to be as high as they are; if the tax base were broadened, spending could be judged more on its own merits than on the costs of financing it. Unlike the case for a smaller government, where economists are sharply divided, the case for a broader tax base garners wide consensus among economists. This suggests that considering the optimal size of government is best done on the spending side. The efficiency case against taxes is more a case for tax reform than tax reduction. The case for broadening the tax base raises a further point: putting aside the spending side of the budget, not all tax cuts increase economic efficiency. From an economic perspective, unless they correct for an externality, tax expenditures (credits, exemptions, exclusions, deductions, preferential rates, or deferrals) reduce efficiency by creating distortions in economic behavior. In many ways, they are economically equivalent to spending, and the economic distortions they create are no different than the distortions created by an equivalent spending policy. A $1,000 child tax credit is no different than the government paying every eligible parent $1,000 per child. Likewise, the mortgage interest deduction is no different than paying every mortgage-holder in the 15% tax bracket $0.15 for every dollar in mortgage interest they pay. It is only reductions in marginal rates that increase economic efficiency. Just like spending, tax expenditures increase economic efficiency only if they distort behavior that suffers from a market failure, and they are not generally better or worse than an equivalent spending provision at doing so. If tax expenditures are not aimed at correcting a market failure, they can divert economic resources from efficient production to the inefficient pursuit of the economic rents that the tax code creates, such as "tax shelters." Other tax expenditures cause marginal rates to be higher without any meaningful change in the targeted behavior. For example, there is little evidence that more children are born as a result of the child tax credit. If that is the case, the credit mainly serves as a transfer to parents from taxpayers—in economic terms, a "windfall" since parents need not change anything to receive the credit. The case for tax simplification is also based on the goals of minimizing administrative cost, complexity, and evasion, all of which create economic costs in addition to the efficiency costs discussed above. It is crucial to remember that any policy also has non-economic costs and benefits. Economic efficiency is certainly not the only criterion for public policy. Equity, fairness, and justice are just a few social goals that economists cannot judge quantitatively. There are many social goals that policymakers may wish to pursue, and they often consider whether social benefits outweigh the efficiency loss. For example, a civil and criminal justice system is not maintained primarily for its effect on economic efficiency, but for its effect on justice, equity, morality and fairness. A progressive income tax system is less economically efficient than a capitation tax. But economics says nothing about whether the capitation tax is more socially desirable because it cannot weigh the efficiency loss against the equity motive for having a progressive tax system. No economist can offer a precise estimate of whether the economic costs and benefits of any proposal will outweigh its social costs and benefits. Economists can, however, evaluate how to achieve a social goal in the least economically costly way. For example, economists generally applauded the government's decision to deal with the social costs of worker displacement from NAFTA by coupling free trade with worker retraining programs and extended unemployment benefits for displaced workers. This was viewed by economists as more economically efficient than preventing worker displacement through trade barriers, so that the gains from trade to consumers can still be enjoyed. In some cases public sector provision of a social goal may be more economically efficient than private sector provision. For example, it may not be possible for the private sector to efficiently provide unemployment insurance because of the asymmetric information problems described above. Government provision of unemployment insurance can potentially achieve efficiency while simultaneously contributing to the social goal of preventing economic hardship. Likewise, some economists have argued that income redistribution can only be carried out at an efficient level by the state because it is a public good prone to under-provision in the marketplace because of the free-rider problem. Arguments surrounding the size of government are often posed in terms of their effects on economic growth. Like the section on efficiency, this section argues that the effect of government spending on economic growth can only be judged on a case-by-case basis. But more generally, the problem with using growth as a policy evaluation criterion is that it tells nothing about overall welfare, which includes non-economic benefits, such as quality of life. Unlike efficiency, economists view growth, at best, as one effect of a policy to be considered and not a goal in and of itself. Even in cases where the effect on growth is positive, society may be made worse off. As a thought experiment, consider the effects of a mandatory 80-hour work week: it would be expected to increase economic growth, but society would be worse off. Nonetheless, since economic efficiency cannot be easily measured, growth will often be the best alternative criterion available. The question of the relationship between the size of government and economic growth is of a long-term nature. Thus, it is useful to make a distinction between short-term fluctuations in growth due to the business cycle and the long-term, sustainable growth rate of the economy. For that reason, arguments for or against larger government cannot be based on the ability of an increase in the budget deficit to increase aggregate spending in the economy in the short run. Notice that these short run effects are consistent with certain definitions of both larger government (higher spending with constant taxes) and smaller government (constant spending with lower taxes). Long-term growth (increases in output) is caused by increases in the labor supply (hours worked or number of workers), the physical capital stock, or productivity. When the size of the labor force grows with the population, there would be no effect on per capita growth, however. Growth in the physical capital stock is made possible by national savings (or borrowing from abroad). For the size of the government to affect long-term growth, it must affect one of these three sources of growth. All four types of government behavior (spending, transfers, taxes, and regulation) have the potential to influence these three sources of growth. A portion of gross domestic product (GDP) is produced by the government. Like a private firm, the government purchases inputs from the private sector (e.g., the military purchases tanks and airplanes from private defense contractors) and labor (e.g., soldiers) to produce a final good or service (e.g., national defense). But unlike a firm, most government goods and services, like defense, are not bought and sold in the private market, and so there is no way to value them. Nevertheless, these goods and services are part of the nation's GDP. To prepare the GDP accounts, the Bureau of Economic Analysis values government production, unlike private production, by measuring the inputs rather than the output. This makes it difficult to measure the effect of government production on the economy empirically, even if there are good empirical reasons for believing it to have an effect. There is little reason to believe government spending has any direct effect on increases in the labor force since the number of jobs available expands to accommodate increases in the labor force over the long run, but it may affect productivity gains over time. Some have argued that the lack of competition and the profit incentive in the government sector leads to less innovation and lower productivity gains over time. Empirical tests of the proposition may yield little meaningful information, however, because of the way that government GDP is recorded. In the private sector, productivity growth occurs when the same inputs yield higher output than previously. Since government GDP is based on inputs and output is not measurable (because it is not bought and sold in the marketplace), there is no direct way to tell how much government productivity is growing over time. There is also the question of magnitude: are differences between public and private sector productivity growth rates significant enough to have a meaningful effect on economic growth? As a thought experiment, consider that government output (including state and local) accounted for about 20% of GDP in 2008. If private sector productivity growth is 2% and government productivity growth is only half as high, total output growth will only be 0.2 percentage points lower a year than if productivity were the same in both sectors. In that case, reducing government production by half would only raise productivity growth by 0.1 percentage points. (Likewise, if the government's productivity growth rate were higher than the private sector's, the effect would be too small to make much of an impact on the overall productivity rate.) If anything, this calculation may overstate the productivity differential since some government output is produced by private sector contractors who presumably have productivity growth rates similar to the rest of the private sector. Finally, some government goods and services, while possibly subject to lower productivity growth in their production, alter private sector productivity growth. For example, government enforcement of property rights may lead to more entrepreneurial activity, and a new road may reduce the costs of shipping private sector goods to market. In these cases, reducing government spending could lower total productivity growth (by lowering private sector productivity growth) even if government productivity growth is lower than private sector productivity growth. Increasing other government goods and services could lower private sector productivity growth. Thus far, this section has focused on government spending on consumption goods and services. But government spending can also finance public capital goods, which increases the national capital stock in the same way as private investment. Government spending on capital investment (roads, structures, ports, and so on) increases output by increasing the nation's capital stock in the same way that private capital investment does. As seen in Figure 5 , annual non-defense capital investment spending has stayed relatively constant in recent decades at less than 0.5% of GDP at the federal level, and 2% of GDP at the state level (which is partly financed by federal grants). Defense capital investment has followed a downward trend in peacetime, from about 3% of GDP in the 1960s to less than 1% of GDP since the 1990s; in war times, defense investment has increased above the trend (although not in recent years). It is less clear that defense investment has the same positive effect on measured GDP growth as non-defense investment since it is an investment in the intangible good "security." Some would argue that government spending on research and development (R&D) should be included in measures of investment spending, and some would include spending on education and training because it increases the nation's "human capital stock." Federal spending on R&D has trended down from about 2% of GDP in the 1960s to about 1% of GDP today; throughout this period, it has been split about evenly between defense and non-defense. Whether an additional dollar of spending on government output directly increases or decreases growth depends on what it is replacing. To the extent that government capital spending replaces private consumption, there will be a net increase in economic growth through a higher capital stock. Conversely, to the extent that government consumption spending replaces private investment, there will be a net decrease in growth. Whether government or private investment yields a higher rate of return for the economy will vary on a case-by-case basis, and both are prone to diminishing returns to investment as investment spending is increased. Government spending on transfers to individuals has no direct effect on the level of aggregate private output, aside from administrative costs. Transfers only affect the distribution of private output: the transfer recipient uses transfer funds to buy goods and services from the private sector or to save rather than the taxpayer who finances the transfers. The effect on economic growth of transfers comes from the distortion in incentives caused by the transfer, both on the taxpayer, as discussed in the next section, and the recipient. Since the largest recipients of transfers are retirees, it is useful to consider the effects on that group. Social Security payments and other government pensions and age-based transfers may reduce the private saving rate by replacing private saving for retirement (although the offset would not be one for one since some retirees do not save adequately for their retirement). Since these transfers are financed on a pay-as-you-go basis, there is arguably no public saving to offset the reduction in private saving, reducing national saving. The programs may also lead to earlier retirement than would otherwise occur, reducing output through a smaller labor force. Transfers for the elderly also incorporate a number of insurance-like functions, protecting the elderly against the risk of disability, outliving their assets, spousal death, and so on. These insurance-like functions may reduce the need for private precautionary saving. Are transfers to the elderly ill-advised because they may reduce economic growth? This example illustrates why efficiency is a better economic criterion for judging programs than growth. The relevant question is not whether the insurance-like qualities of these transfers reduce private saving, but whether the government can provide insurance more efficiently than the private sector because of market failures in the private insurance market (adverse selection, moral hazard, and incomplete markets.) In other words, market failures in the insurance market can lead to individuals saving too much, and government intervention has the potential to make them better off by reducing the risky contingencies for which they were previously saving. As a result of government intervention, saving (and economic growth) would fall, but economic efficiency would increase. Another major category of transfers are means-tested transfers. Means-tested transfers can potentially reduce growth by creating an incentive for recipients to keep income or wealth or hours worked below the point where benefits are phased out. The incentive can be reduced by phasing transfers out more slowly as income increases. The effect of means-tested transfers on economic growth are often weighed against their effect on non-economic goals. Economists are least fond of transfers that are economically inefficient and do not serve any broad social goal. For example, subsidies to specific industries or sectors of the economy may reduce economic efficiency by causing over-production in those industries. The introduction of an industrial subsidy would be expected to lead to a one-time reduction in GDP as the economy's resources are reallocated to a less efficient outcome. (It is less clear if industrial subsidies would reduce economic growth on an ongoing basis; they may do so if they reduce competition and the incentive to innovate.) At the same time, the benefits of the subsidy are highly concentrated and generally do not accrue to broad groups on a non-discriminatory basis. For example, workers in the industry being subsidized are made better off even though their income level and employment situation may be superior to those in other industries that are not being subsidized. By changing economic behavior, taxes have the potential to affect overall growth. Taxes on saving could change saving rates, and thereby investment rates, and taxes on labor could change the labor supply. Theoretically, income tax reduction, which affects saving and labor, could increase or decrease economic growth. That is because a tax cut affects behavior in two ways. First, it increases the rewards to work or save relative to leisure or consumption, respectively, giving the worker an incentive to work or save more. This is known as the substitution effect. Second, it increases the worker's after-tax income, such that he must work or save less to achieve a given standard of living. This gives him an incentive to work or save less, and is known as the income effect. Theoretically, there is no way to know whether the substitution or income effect dominates for any given tax; it is an empirical question. Empirically, the evidence is divided on the size and even direction of the effects on saving and labor. Some studies have concluded that labor supply increases in response to tax cuts, others that it falls. In any case, most studies find the response to be small. There is evidence that the response of certain demographic groups are greater than others. Working-aged male adults are overwhelmingly already employed full-time, so there is relatively little scope for them to enter the labor market or greatly increase their hours in response to a tax cut. On the other hand, female employment rates are lower, and there is some evidence that there is a larger labor supply response to tax cuts among females in high-income households. The labor supply of workers near the beginning or end of their career may also be more sensitive to changes in tax rates. Casual observation is consistent with small overall effects on labor. The average work week declined through the 1960s and 1970s, and has stayed relatively constant since, despite the decline in marginal income tax rates since the 1980s. The male labor force participation rate has followed a downward trend since the 1960s, and the female participation rate rose dramatically for much of the post-war period, but has been relatively constant since the 1990s. The effect of a change in taxes on labor supply is likely to be a one-time effect: once individuals have adjusted their labor supply in response to a tax cut, they will not continue to increase or decrease it in the future. Thus, a change in taxes is expected to have only a one-time effect on growth through the labor supply channel. The empirical evidence on saving is particularly inconclusive. At a glance, one can see that the household saving rate has been in steady decline over the past few decades—and was close to zero in the past several years—despite a downward trend in marginal income tax rates and taxes on capital, and a dramatic expansion in tax-favored savings accounts since the 1980s. Because saving is not motivated solely by tax rates, a simple comparison between the two cannot be made. To explain the empirical behavior of saving requires matching the data to some theoretical notion of why people save. Because the motives for saving are complex, the theoretical models used by economists become very complex even under simple assumptions. Not only the level of taxes, but also the structure of the tax code affects economic growth. To the extent that "loopholes" in the tax code do divert resources from the pursuit of efficient market activity, this too lowers economic growth, although it is difficult to estimate the size of this effect, and whether there is a one-time reduction in growth when the loophole is introduced or an ongoing reduction in growth. Evaluating the effects of tax cuts on growth cannot be done in isolation. To finance a tax cut, spending must be reduced, other taxes must be raised, or the government must borrow. If a tax cut is financed through lower spending or raising other taxes, then the effect of those changes on long-run growth (which could be negative or positive, depending on the policy change) would need to be weighed against the tax cut. If the tax cut is financed through borrowing, its effect on long-run growth is likely to be negative because borrowing reduces national saving, unless the positive effects on private saving and labor supply are large enough to offset the reduction in national saving. Estimating the effect of regulation on growth is difficult, and can only be done on a case-by-case basis. Some regulations reduce output by diverting resources to non-economic compliance costs. Undoubtedly, other regulations enhance growth, such as the positive effects of the rule of law on commerce. Some regulations may reduce a firm's output directly, such as environmental regulations, but be offset (partially or wholly) by indirect positive economic effects, such as through an improvement in public health. It is important to distinguish between a regulation's one-time effect on output (and growth), and its permanent effect on growth. In the long run, most one-time effects are swamped by the compounding of growth. For example, if environmental regulations raise firms' production costs, reducing the demand for their product, their output will fall. But after the one-time fall, the regulation may have little effect on how much their output grows in the future. The government affects economic activity through four primary channels: government production of goods and services, transfer payments, taxation, and regulation. Measuring the size of government is not a straightforward exercise. Relying on annual federal outlays excludes several types of government intervention including state and local outlays, tax expenditures, government corporations, and offsetting receipts and collections; as a result, the government appears to be smaller than it is in reality. Annual measures of government also neglect future unfunded liabilities implicit in current policy. Measuring the economic impact of regulation is difficult, and is not done comprehensively or consistently. Government intervention increases economic efficiency when it rectifies market failures and reduces efficiency when it distorts perfectly competitive markets. Political choices may lead to second-best outcomes, however, and some therefore argue that accepting market failures can be preferable to government intervention in some cases. To be efficiency-enhancing, government spending must have greater benefits than only efficiency-reducing taxes that finance it. Likewise, tax cuts will only increase overall efficiency if they are financed by reductions in relatively less efficient spending or increases in relatively less efficient taxes. In general, marginal tax reductions tend to be efficiency increasing, while many tax expenditures are efficiency decreasing. Deficit-financed tax cuts do not increase efficiency if they are financed by larger tax increases in the future. Not all government spending is created equally. Economists universally agree that some government spending, on a well-functioning legal system, for example, increases economic efficiency and growth. Agreement is nearly as universal that some government spending, on subsidies to industries, for example, reduces economic efficiency or growth. In between are policies that are a jumble of efficiency-enhancing and efficiency-reducing provisions. For this reason, no general conclusions can be drawn about the overall size of the government's effect on the economy. It is conceivable that a very large government could devote all of its spending on efficiency-enhancing policies and a very small government could devote all of its spending on efficiency-reducing policies, or vice versa. Many policies that reduce economic efficiency or growth may meet social or non-economic goals (equity, fairness, and so on) that make them worthwhile. Currently, government transfers to individuals are nearly twice as large as government spending on goods and services, and the primary goal of most transfers is probably not economic efficiency. Government intervention increases (decreases) long-term growth with policies that foster (hinder) greater work effort, capital accumulation, and technological innovation. Economic growth is not a clear normative goal such as economic efficiency, however. Some growth-enhancing policy measures may reduce economic welfare. In any case, economic growth has historically been stable over long periods of time, suggesting that market forces tend to be stronger than the growth effects of policy changes. In sum, there is not an economic rationale for either "big" or "small" government, per se. It is not so much the size of government as what government does with its spending, transfer, tax, and regulatory policies that affects economic efficiency and growth. The financial crisis of 2008 led to a sharp but temporary increase in government outlays as a share of GDP. Because of government accounting conventions, the ongoing costs of TARP and government conservatorship of Fannie Mae and Freddie Mac were mostly counted in the 2009 budget. Fiscal stimulus legislation led to a significant increase in spending from 2009 to 2011, with minimal effects after 2011. Assuming these programs are allowed to expire as scheduled, spending will fall from its recent peak under current policy. Overall spending will not fall all the way back to pre-crisis levels, however, because it will be offset by growth in other spending, notably growth in net interest and entitlement spending as a result of the aging of society. The increase in the government's influence on the economy through recent or proposed regulatory changes is more difficult to quantify.
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The size and role of the government is one of the most fundamental and enduring debates in American politics. Economics can be used to analyze the relative merits of government intervention in the economy in specific areas, but it cannot answer the question of whether there is "too much" or "too little" government activity overall. That is not to say that one cannot find many examples of government programs that economists would consider to be a highly inefficient, if not counterproductive, way to achieve policy goals. Reducing inefficient government spending would benefit the economy; however, reducing efficient government spending would harm it, and reducing the size of government could involve either one. Government intervention can increase economic efficiency when market failures or externalities exist. Political choices may lead to second-best economic outcomes, however, and some argue that, for that reason, market failures can be preferable to government intervention. In the absence of market failures and externalities, there is little economic justification for government intervention, which lowers efficiency and probably economic growth. But government intervention is often based on the desire to achieve social goals, such as income redistribution. Economics cannot quantitatively value social goals, although it can often offer suggestions for how to achieve those goals in the least costly way. The government intervenes in the economy in four ways. First, it produces goods and services, such as infrastructure, education, and national defense. Measuring the effects of these goods and services is difficult because they are not bought and sold in markets. Second, it transfers income, both vertically across income levels and horizontally among groups with similar incomes and different characteristics. Third, it taxes to pay for its outlays, which can lower economic efficiency by distorting behavior. Not all taxes are equally distortionary, however, so there are ways of reducing the costs of taxation without changing the size of government. Furthermore, deficit spending does not allow the government to escape the burden of taxation since deficits impose their own burden. Finally, government regulation alters economic activity. The economic effects of regulation are the most difficult to measure, in terms of both costs and benefits, yet they cannot be neglected because they can be interchangeable with taxes or government spending. There are many different ways to measure the size of the government, making its economic effects difficult to evaluate. Budgeting conventions are partly responsible: tax expenditures, offsetting receipts and collections, and government corporations are all excluded from the budget. But some governmental functions, like regulation, simply cannot be quantified robustly. Discussions about the overall size of government mask significant changes in the composition of government spending over time. Spending has shifted from the federal to the state and local level. Federal production of goods and services has fallen, while federal transfers have grown significantly. In 2009, nearly two-thirds of federal spending is devoted to Social Security, Medicare, Medicaid, and national defense. Thus, there is limited scope to alter the size of government without fundamentally altering these programs. The share of federal spending devoted to the elderly has burgeoned over time, and this trend is forecast to continue. The size of government has increased significantly since the financial crisis of 2008 as a result of the government's unplanned intervention in financial markets and subsequent stimulus legislation. Much of the increase in government spending is temporary and could be reversed when financial conditions return to normal, although many question how easy it will be for the government to extricate itself from new commitments it has made.
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T his report identifies and briefly summarizes the 21 budget reconciliation measures enacted into law during the period covering 1980, when reconciliation procedures were first used by both chambers, through 2017. The budget reconciliation process is an optional procedure that operates as an adjunct to the budget resolution process established by the Congressional Budget Act of 1974. The chief purpose of the reconciliation process is to enhance Congress's ability to change current law in order to bring revenue, spending, and debt-limit levels into conformity with the policies of the annual budget resolution. Reconciliation is a two-stage process. First, reconciliation directives are included in the budget resolution, instructing the appropriate committees to develop legislation achieving the desired budgetary outcomes. Reconciliation directives instruct specified committees to develop legislation changing existing law in order to alter revenue, spending, or debt-limit levels to conform with budget resolution policies. Over the years, compliance with reconciliation directives has been determined on the basis of the net revenue or spending effects of all changes in the legislation. A particular reconciliation measure, therefore, may have included changes that raised spending as well as changes that reduced spending, changes that raised revenue as well as changes that reduced revenue, or both, and still adhered to the overall budgetary goals. If the budget resolution instructs more than one committee in a chamber, then the instructed committees submit their legislative recommendations to their respective Budget Committees by the deadline prescribed in the budget resolution; the Budget Committees incorporate them into an omnibus budget reconciliation bill without making any substantive revisions. In cases where only one committee has been instructed, the process allows that committee to report its reconciliation legislation directly to its parent chamber, thus bypassing the Budget Committee. The second step involves consideration of the resultant reconciliation legislation by the House and Senate under expedited procedures. Among other things, debate in the Senate on any reconciliation measure is limited to 20 hours (and 10 hours on a conference report) and amendments must be germane and not include extraneous matter. The House Rules Committee typically recommends a special rule for the consideration of a reconciliation measure in the House that places restrictions on debate time and the offering of amendments. If the House and Senate do not reach final agreement on a budget resolution, then the reconciliation process is not triggered. As an optional procedure, reconciliation has not been used in every year that the congressional budget process has been in effect. Reconciliation was not used during the first several years of the congressional budget process and, more recently, was not used in years immediately following successful action on a budget summit agreement. In 1990, for example, the George H. W. Bush Administration successfully negotiated a budget summit agreement with Congress that was reflected in the FY1991 budget resolution. Pursuant to reconciliation directives in that resolution, Congress and the President enacted the Omnibus Budget Reconciliation Act of 1990. Reconciliation was not used in the following two years, involving budget resolutions for FY1992 and FY1993. In nine years, 1998 (for FY1999), 2002 (for FY2003), 2004 (for FY2005), 2006 (for FY2007), 2011-2014 (for FY2012-2015), and 2016 (for FY2017), the House and Senate did not agree on a budget resolution. Beginning with the first use of reconciliation by both the House and Senate in 1980, reconciliation has been used in a majority of years. Congress has sent the President 25 reconciliation acts over the years: 21 were signed into law, President Clinton vetoed three, and President Obama vetoed one (and the vetoes were not overridden). The 25 reconciliation measures sent to the President are shown in Table 1 . Reconciliation practices in the House and Senate vary and change over time. In earlier years, spending and revenue changes were incorporated into a single measure. In the Omnibus Reconciliation Act of 1980, for example, about $8 billion in deficit reduction for FY1981 was split fairly evenly between spending reductions and revenue increases. In more recent years, revenue and spending changes have often been segregated into separate reconciliation measures. For the FY2006 budget cycle, for example, the Deficit Reduction Act of 2005 was a spending reconciliation bill, and the Tax Increase Prevention and Reconciliation Act of 2005 was a revenue reconciliation bill. Most recently, however, the Health Care and Education Reconciliation Act of 2010 included significant changes in both spending and revenues. Reconciliation directives in a single budget resolution sometimes lead to more than one reconciliation measure, as indicated above for the FY2006 budget cycle. Multiple reconciliation measures also were considered in calendar years 1982 and 1997. Finally, the consideration of reconciliation measures sometimes extends into a succeeding year. Action on reconciliation measures initiated in 1983, 1985, and 2005 was not completed until the following year. Although in these instances legislative action spilled over into the following year, the initial year was retained in the titles of the acts (e.g., the Deficit Reduction Act of 2005 was enacted in 2006). In the FY2010 budget cycle, the budget resolution containing reconciliation directives was adopted in 2009 but the reconciliation legislation was not considered until 2010. A brief description of each of the 21 reconciliation measures enacted into law is provided in the Appendix . The laws are presented in chronological order. For each reconciliation law listed in the Appendix , some of the major subject areas affected by the revenue or spending changes are identified, but no determination is made as to whether the specific changes involved increases or decreases. The subject areas identified range from fairly specific (e.g., Nuclear Regulatory Commission fees) to quite broad (e.g., Medicare), with broad subject areas sometimes encompassing dozens or hundreds of separate provisions. Some of the reconciliation measures included in the listing were very lengthy and complicated, involving the legislative proposals of many different House and Senate committees. Accordingly, the subject areas identified in the listing should be regarded as illustrative and not comprehensive. The source from which the summary information was drawn is indicated for each law by a bracketed reference at the end of the summary. 1.Omnibus Reconciliation Act of 1980 P.L. 96-499 (December 5, 1980) This act, signed into law by President Jimmy Carter, was the first reconciliation bill to pass the House and Senate. It was estimated to reduce the FY1981 deficit by $8.276 billion, including $4.631 billion in outlay reductions and $3.645 billion in revenue increases. Major spending changes affected such areas as child nutrition subsidies; interest rates for student loans; "look back" cost-of-living adjustment (COLA) benefit provisions for retiring federal employees; highway obligational authority; railroad rehabilitation, airport development, planning, and noise control grants; veterans' burial allowances; disaster loans; Medicare and Medicaid; unemployment compensation; and Social Security. Major revenue changes affected such areas as mortgage subsidy bonds; payment of estimated corporate taxes; capital gains on foreign real estate investments; payroll taxes paid by employers; telephone excise taxes; and the alcohol import duty. [1980 Congressional Quarterly Almanac, pp. 124-130] 2.Omnibus Budget Reconciliation Act of 1981 P.L. 97-35 (August 13, 1981) President Ronald Reagan used this act, along with a nonreconciliation bill, the Economic Recovery Tax Act of 1981 ( P.L. 97-34 ), to advance much of his agenda in his first year in office. This act was estimated to reduce the deficit by $130.6 billion over three years, covering FY1982-FY1984. Major spending changes affected such areas as health program block grants; Medicaid; television and radio licenses; Food Stamps; dairy price supports; energy assistance; Conrail; education program block grants; Impact Aid and the Title I compensatory education program for disadvantaged children; student loans; and the Social Security minimum benefit. [1981 Congressional Quarterly Almanac, pp. 256-266] 3.Tax Equity and Fiscal Responsibility Act of 1982 P.L. 97-248 (September 3, 1982) This act, one of two reconciliation measures signed by President Reagan in 1982, was estimated to increase revenues by $98.3 billion and reduce outlays by $17.5 billion over three years, covering FY1983-FY1985. Major spending changes affected such areas as Medicare, Medicaid, aid to families with dependent children (AFDC), child support enforcement (CSE), supplemental security income (SSI), unemployment compensation, and interest payments on U.S. savings bonds. Major revenue changes affected such areas as the alternative minimum tax, medical and casualty deductions, pension contribution deductions, federal employee payment of the FICA tax for Medicare coverage, accelerated depreciation and investment tax credits, corporate tax payments, foreign oil and gas income, corporate tax preferences, construction deductions, insurance tax breaks, "safe-harbor leasing," corporate mergers, withholding on interest and dividends, aviation excise taxes, unemployment insurance, telephone and cigarette excise taxes, and industrial development bonds. [1982 Congressional Quarterly Almanac, pp. 29-39 and 199-204] 4.Omnibus Budget Reconciliation Act of 1982 P.L. 97-253 (September 8, 1982) This act, the second of two reconciliation measures signed by President Reagan in 1982, was estimated to reduce outlays by $13.3 billion over three years, covering FY1983-FY1985. Major spending changes affected such areas as payments to farmers, dairy price supports, Food Stamps, inflation adjustments for federal retirees, lump-sum premiums for Federal Housing Administration housing insurance, user fees on Veterans Administration-backed home loans, veterans' compensation and benefits, and reduction in the membership of the Federal Communications Commission and the Interstate Commerce Commission. [1982 Congressional Quarterly Almanac, pp. 199-204] 5.Omnibus Budget Reconciliation Act of 1983 P.L. 98-270 (April 18, 1984) Initial consideration of this act occurred in 1983, but final action did not occur until 1984. It was estimated to reduce the deficit by $8.2 billion over four years, covering FY1984-FY1987. Major spending changes affected such areas as limitation and delay of federal civilian employee pay raises, delay of federal civilian and military retirement and disability COLAs, delay of veterans' compensation COLAs, and disaster loans for farmers. [1983 Congressional Quarterly Almanac, pp. 231-239, and 1984 Congressional Quarterly Almanac, p. 160] 6.Consolidated Omnibus Budget Reconciliation Act of 1985 P.L. 99-272 (April 7, 1986) Initial consideration of this act occurred in 1985, but final action did not occur until 1986. The act was estimated to reduce the deficit by $18.2 billion over three years, covering FY1986-FY1988. Major spending changes affected such areas as student loans, highway spending, veterans' medical care, Medicare, Medicaid, and trade adjustment assistance. Major revenue changes affected such areas as the cigarette tax, excise taxes supporting the Black Lung Trust Fund, unemployment tax exemptions, taxation of railroad retirement benefits, airline employee income subject to taxation, and the deduction of research expenses of multinational firms. [1986 Congressional Quarterly Almanac, p. 521 and pp. 555-559] 7.Omnibus Budget Reconciliation Act of 1986 P.L. 99-509 (October 21, 1986) The reconciliation measure covered the period of FY1987-FY1989. An estimated $11.7 billion in deficit reduction contributed to the avoidance of a sequester (i.e., across-the-board spending cuts in nonexempt programs to eliminate a violation of the applicable deficit target under the Balanced Budget and Emergency Deficit Control Act) for FY1987. Major spending changes affected such areas as Medicare, Medicaid, agricultural income support payments, loan asset sales, federal employee retirement programs, federal subsidy for reduced-rate postage, federal financing for fishing vessels or facilities, retirement age limits, and elimination of the trigger for Social Security COLAs. Major revenue changes affected such areas as the tax treatment of the sale of the federal share of Conrail, commercial merchandise import fee, increased penalty for untimely payment of withheld taxes, denial of certain foreign tax credits, and the oil-spill liability trust fund. [1986 Congressional Quarterly Almanac, pp. 559-576] 8.Omnibus Budget Reconciliation Act of 1987 P.L. 100-203 (December 22, 1987) The reconciliation measure covered the period of FY1988-FY1990 and was the final reconciliation measure signed by President Reagan. Together with an omnibus appropriations act ( P.L. 100-202 ), the reconciliation act implemented the $76 billion in deficit reduction over FY1988 and FY1989 called for in a budget summit agreement reached after a sharp decline in the stock market in October. Major spending changes affected such areas as Medicare, Medicaid, agricultural target prices, farm income support payments, deferral of lump-sum retirement payments to federal employees, Postal Service payments into retirement and health benefit funds, the Guaranteed Student Loan program, Nuclear Regulatory Committee license fees, and National Park user fees. Major revenue changes affected such areas as home mortgage interest deduction, deduction of mutual fund expenses, "completed contract" method of accounting, repeal of installment-sales accounting, "master-limited" partnerships, and accelerated payments of corporate estimated taxes. [1987 Congressional Quarterly Almanac, pp. 615-627] 9. Omnibus Budget Reconciliation Act of 1989 P.L. 101-239 (December 19, 1989) The act, signed into law by President George H. W. Bush, was estimated to contain $14.7 billion in deficit reduction, which represented about half of the deficit reduction envisioned in a budget summit agreement reached earlier in the year (the remaining savings were expected to occur largely in annual appropriations acts). Major spending changes affected such areas as Medicare, Medicaid, veterans' housing loans, agricultural deficiency payments and dairy price supports, the Supplemental Loans for Students program, Federal Communications Commission and Nuclear Regulatory Commission fees, vaccine injury compensation amendments, and the Maternal and Child Health Block Grant program. Major revenue changes affected such areas as the exclusion for employer-provided education assistance, targeted-jobs tax credit, mortgage revenue bonds, self-employed health insurance, low-income housing credit, treatment of junk bonds, and research and experimentation credits. [1989 Congressional Quarterly Almanac, pp. 92-113] 10. Omnibus Budget Reconciliation Act of 1990 P.L. 101-508 (November 5, 1990) This five-year reconciliation act, covering FY1991-FY1995, implemented a large portion of the deficit reduction required by an agreement reached during a lengthy budget summit held at Andrews Air Force Base. According to the Senate Budget Committee, the act was estimated to reduce the deficit by $482 billion over five years, including $158 billion in revenue increases and $324 billion in spending cuts and debt service savings. Major spending changes affected such areas as Medicare, Medicaid, agricultural loans, acreage reduction, deposit insurance premiums, mortgage insurance premiums, collection of delinquent student loans, Occupational Safety and Health Administration penalties, AFDC, CSE, SSI, unemployment compensation, child welfare and foster care, Social Security, abandoned mines, Environmental Protection Agency, federal employee retirement and health benefits, veterans' compensation and disability payments, airport ticket fees, customs user fees, and tonnage duties. Major revenue changes affected such areas as individual income tax rates, the alternative minimum tax, limitation on itemized deductions, excise taxes on alcoholic beverages and tobacco products, motor fuel excise taxes, and Superfund tax extension. The public debt limit was increased from $3.123 trillion to $4.145 trillion. [1990 Congressional Quarterly Almanac, pp. 138-173] 11. Omnibus Budget Reconciliation Act of 1993 P.L. 103-66 (August 10, 1993) This five-year reconciliation act, covering FY1994-FY1998, was signed by President Bill Clinton in the first year of his Administration. According to the Senate Budget Committee, the act reduced the deficit by $496 billion over five years, including $241 billion in revenue increases and $255 billion in spending cuts and debt service savings. Major spending changes affected such areas as Medicare, Medicaid, Food Stamps, auction of the radio spectrum, student loan programs, veterans' benefits, agricultural price supports, crop insurance, liabilities of the Postal Service, and Nuclear Regulatory Commission fees. Major revenue changes affected such areas as a fuels tax increase, maximum individual income tax rates, maximum corporate income tax rate, small business tax incentives, empowerment zones, and unemployment insurance surtax. The public debt limit was increased from $4.145 trillion to $4.9 trillion. [1993 Congressional Quarterly Almanac, pp. 107-139] 12. Personal Responsibility and Work Opportunity Reconciliation Act of 1996 P.L. 104-193 (August 22, 1996) This six-year reconciliation act, covering FY1997-FY2002, was estimated to reduce the deficit by $54.6 billion over that period. Major spending changes affected such areas as temporary assistance for needy families (TANF), work requirements, SSI, CSE, restrictions on benefits for illegal aliens, Child Care and Development Block Grant, child nutrition, Food Stamps, teenage pregnancies, and abstinence education. [1996 Congressional Quarterly Almanac, pp. 6-3 through 6-24] 13. Balanced Budget Act of 1997 P.L. 105-33 (August 5, 1997) This five-year reconciliation act, covering FY1998-FY2002, was one of two reconciliation acts signed by President Clinton in 1997 and largely contained spending provisions. According to the Senate Budget Committee, the two acts together reduced the deficit by $118 billion over five years, including spending cuts and debt service savings of $198 billion and $80 billion in revenue reductions. Major spending changes affected such areas as Medicare, Medicaid, children's health initiative, electromagnetic spectrum auction, Food Stamps, TANF, SSI, increased contributions to the Civil Service Retirement System, subsidized housing, and veterans' housing. The public debt limit was increased from $5.5 trillion to $5.95 trillion. [1997 Congressional Quarterly Almanac, pp. 2-27 through 2-30 and pp. 2-47 through 2-61] 14. Taxpayer Relief Act of 1997 P.L. 105-34 (August 5, 1997) The second of the two reconciliation measures enacted in 1997, this five-year reconciliation act, covering FY1998-FY2002, largely included revenue provisions. Major revenue changes affected such areas as a child tax credit, education tax incentives (including the HOPE tax credit, the lifetime learning credit, and education savings accounts), home office deductions, capital gains tax cut, the "Roth IRA," gift and estate tax exemptions, corporate alternative minimum tax repeal, renewal of the work opportunity tax credit, and the airline ticket tax. [1997 Congressional Quarterly Almanac, pp. 2-27 through 2-46] 15. Economic Growth and Tax Relief Reconciliation Act of 2001 P.L. 107-16 (June 7, 2001) This 11-year reconciliation act, covering FY2001-2011, advanced President George W. Bush's tax-cut agenda during the first year of his Administration. According to the Senate Budget Committee, revenue reductions, together with outlay increases for refundable tax credits, reduced the projected surplus by $1.349 trillion over FY2001–FY2011. The tax cuts were scheduled to sunset in 10 years in order to comply with the Senate's ''Byrd rule'' against extraneous matter in reconciliation legislation (Section 313 of the Congressional Budget Act of 1974). Major revenue changes affected such areas as individual income tax rates, the "marriage penalty," child tax credit, estate and gift taxes, individual retirement accounts and pensions, charitable contributions, education incentives, health insurance tax credit, flexible spending accounts, research and experimentation tax credit, and adoption tax credit and employer adoption assistance programs. [CRS Report RL30973, 2001 Tax Cut: Description, Analysis, and Background , by David L. Brumbaugh et al.] 16. Jobs and Growth Tax Relief Reconciliation Act of 2003 P.L. 108-27 (May 28, 2003) This 11-year reconciliation act, covering FY2003-2013, was estimated to reduce revenues by $349.667 billion over that period. Major revenue changes affected such areas as the acceleration of certain previously enacted tax reductions (including expansion of the child tax credit and the 10% bracket), increased bonus depreciation and Section 179 expensing, taxes on dividends and capital gains, the Temporary State Fiscal Relief Fund, and special estimated tax rules for certain corporate estimated tax payments. [Joint Committee on Taxation, Estimated Budget Effects of the Conference Agreement for H.R. 2 , The "Jobs and Growth Tax Relief Reconciliation Act of 2003," JCX-55-03, May 22, 2003] 17. Deficit Reduction Act of 2005 P.L. 109-171 (February 8, 2006) This five-year reconciliation act, covering FY2006-FY2010, was one of two reconciliation acts signed by President George W. Bush in 2006 (initial consideration of both measures occurred in 2005). This act, the spending reconciliation bill, was estimated to reduce the deficit over the five-year period by $38.810 billion. Major spending changes affected such areas as Medicare, Medicaid, State Children's Health Insurance Program (SCHIP), student loan interest rates and lenders' yields, electromagnetic spectrum auction, digital television conversion, grants for interoperable radios for first responders, low-income home energy assistance program (LIHEAP), Federal Deposit Insurance Corporation premium collections, agricultural conservation programs, Katrina health care relief, and Pension Benefit Guarantee Corporation (PBGC) premiums. [CRS Report RL33132, Budget Reconciliation Legislation in 2005-2006 Under the FY2006 Budget Resolution , by Robert Keith] 18. Tax Increase Prevention and Reconciliation Act of 2005 P.L. 109-222 (May 17, 2006) This act, the second of two reconciliation bills enacted in 2006, was the revenue reconciliation bill. It was estimated to increase the deficit over the five-year period covering FY2006-FY2010 by $69.960 billion. Major revenue changes affected such areas as tax rates on dividends and capital gains, the alternative minimum tax for individuals, delay in payment date for corporate estimated taxes, controlled foreign corporations, Foreign Sales Corporation/ Extraterritorial Income binding contract relief, elimination of the income limitations on Roth IRA conversions, and withholding on government payments for property and services. [CRS Report RL33132, Budget Reconciliation Legislation in 2005-2006 Under the FY2006 Budget Resolution , by Robert Keith] 19. College Cost Reduction and Access Act of 2007 P.L. 110-84 (September 27, 2007) This six-year reconciliation act, covering FY2007-FY2012, was estimated to reduce the deficit over that period by $752 million. Major spending changes affected provisions relating to lenders and borrowers involved with the Federal Family Education Loan program and the William D. Ford Direct Loan program. [CRS Report RL34077, Student Loans, Student Aid, and FY2008 Budget Reconciliation , by Adam Stoll, David P. Smole, and Charmaine Mercer] 20. Health Care and Education Reconciliation Act of 2010 P.L. 111-152 (March 30, 2010) This reconciliation act, which resulted from reconciliation directives in the FY2010 budget resolution (adopted in 2009) for the five-year period encompassing FY2010-FY2014, modified the Patient Protection and Affordable Care Act ( P.L. 111-148 , March 23, 2010) and also contained changes in federal postsecondary education programs. According to the Congressional Budget Office and the staff of the Joint Committee on Taxation, the changes made by the reconciliation act, combined with the changes made by the Patient Protection and Affordable Care Act, were estimated to reduce the deficit by $109 billion over five years (FY2010-FY2014) and by $143 billion over 10 years (FY2010-FY2019). 21. An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018 P.L. 115-97 (December 22, 2017) This reconciliation act resulted from reconciliation directives in the FY2018 budget resolution (adopted in October 2017) for the 10-year period encompassing FY2018-FY2027. The reconciliation act includes permanent and temporary changes to the tax code and directs the Secretary of the Interior to implement a certain oil and gas leasing program. More specifically, the act temporarily reduces most individual income tax rates, modifies tax brackets for individuals, increases the standard deduction and the child tax credit, repeals deductions for personal exemptions, repeals or limits certain itemized deductions, and increases the exemption amounts for the individual alternative minimum tax. (These temporary changes take effect on January 1, 2018, and are scheduled to expire after 2025.) The act permanently repeals the penalties associated with the "individual mandate" (which requires that most people obtain health insurance coverage). The act makes permanent modifications to business taxation. Most notably, the law replaces the graduated corporate tax rate structure (with a maximum rate of 35%) with a flat 21% tax rate. The law also provides a reduction from qualified business income of up to 20% for pass-through businesses. The act also significantly alters the tax treatment of U.S. multinational corporations. Lastly, the act directs the Secretary of the Interior to implement an oil and gas leasing program for the coastal plain of the Arctic National Wildlife Refuge and would affect oil and gas leases and the Strategic Petroleum Reserve. The Congressional Budget Office and the staff of the Joint Committee on Taxation estimated the legislation to reduce revenue by about $1.65 trillion and decrease outlays by $194 billion over the 2018-2027 period. The bill is therefore estimated to increase the deficit by $1.46 trillion over that period, excluding effects from macroeconomic feedback.
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The budget reconciliation process is an optional procedure that operates as an adjunct to the budget resolution process established by the Congressional Budget Act of 1974. The chief purpose of the reconciliation process is to enhance Congress's ability to change current law in order to bring revenue, spending, and debt-limit levels into conformity with the policies of the annual budget resolution. This report identifies and briefly summarizes the 21 budget reconciliation measures enacted into law during the period covering 1980, when reconciliation procedures were first used by both chambers, through 2017.
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On January 4, 2012, President Obama exercised his recess appointment power and appointed three individuals—Terrence F. Flynn, Sharon Block, and Richard F. Griffin, Jr.—to be members of the National Labor Relations Board (NLRB or Board). Whether the President had authority to make these appointments pursuant to the Recess Appointments Clause was at issue in the 2014 Supreme Court case National Labor Relations Board v. Noel Canning . This case marked the first time that the Court would examine the scope of the Recess Appointments Clause. This report provides an overview of the Recess Appointments Clause, as well as the unique factual circumstances of the NLRB recess appointments. The report also reviews the Supreme Court's decision in Noel Canning , and discusses some of the practical implications at issue for the NLRB in the aftermath of the Court's decision. The U.S. Constitution allocates specific roles to both the President and the Senate in the appointment of government officials. The Constitution establishes two methods by which the President may make appointments. The Appointments Clause, which establishes the principal method of appointment, requires that the President: " shall nominate, and by and with the Advice and Consent of the Senate , shall appoint Ambassadors, other public Ministers and Consuls, Judges of the supreme Court, and all other Officers of the United States, whose Appointments are not herein otherwise provided for, and which shall be established by Law." Thus, while the Appointments Clause authorizes the President to nominate principal officers of the United States, a nominee cannot assume the powers of the office for which she has been nominated until confirmed by the Senate. The Constitution also provides an alternative method of appointment that may be exercised only "during the Recess of the Senate." The Recess Appointments Clause establishes that: The President shall have Power to fill up all Vacancies that may happen during the Recess of the Senate, by granting Commissions which shall expire at the End of their next Session. The Recess Appointments Clause permits the President to make temporary appointments unilaterally during periods in which the Senate is not in session. It has generally been opined that the Clause was crafted to enable the President to ensure the operation of the government during periods when the Senate was not in session and therefore unable to perform its advice and consent function. Though designed to ensure administrative continuity, Presidents also have exercised their recess appointment power for tactical or political purposes throughout the history of the republic, giving rise to significant political and legal controversy. Interpretations and the President's application of the recess appointment power have evolved over time, likely due to the inherent textual ambiguities of the Recess Appointments Clause. Most prominent among these lingering questions is the proper interpretation of the two phrases that form the very foundation of the Clause: "the Recess of the Senate" and "Vacancies that may happen." With respect to the former, what is meant by "the Recess"? Specifically, is the President's recess appointment authority triggered only during inter-session recesses (recesses between enumerated sessions of Congress) or may he also exercise his authority during intra-session recesses (recesses that occur within an enumerated session of Congress)? Regarding the latter, must the vacancy arise during the recess in which the President exercises his appointment authority, or is it sufficient that the vacancy merely exist at the time the Senate is in recess and the appointment made? Prior to the Supreme Court's decision in Noel Canning , only a handful of courts engaged in any significant interpretive analysis of the Recess Appointments Clause. Those three decisions— United States v. Allocco , United States v. Woodley , and Evans v. Stephens — upheld recess appointments to the judiciary and arguably interpreted the Clause in a broad manner, such that a variety of circumstances could be viewed as triggering the use of the President's recess appointment power. The traditionally prevailing view of the Recess Appointments Clause has been that the President is authorized to make recess appointments during an inter- or intra-session recess of the Senate to any vacancy regardless of when the vacancy occurred. Despite an arguably settled interpretation of the President's recess appointment power, at least from the executive branch's perspective and congressional acquiescence on the matter, the unique facts underlying President Obama's recess appointments of Flynn, Block, and Griffin, Jr. brought the inherent tensions of the appointments process into stark focus. The NLRB consists of a board of five officials appointed by the President with the advice and consent of the Senate. At least three Board members are needed to sustain a quorum. In 2011, the NLRB had only three Board members, with one of the three scheduled to vacate his seat by the end of the first session of the 112 th Congress. In an effort to prevent membership from dropping below the number required to sustain a quorum, President Obama nominated Terrence F. Flynn to be a member on January 5, 2011. The President also formally nominated Sharon Block and Richard F. Griffin, Jr., to be members of the NLRB on December 15, 2011. By December 17, 2011, the Senate had not acted on any of these nominations. On this date, the Senate adopted a unanimous consent agreement in which the body adjourned, but scheduled a series of pro forma sessions every three to four days to occur from December 20, 2011, until January 23, 2012. The unanimous consent agreement established that "no business" would be conducted during the pro forma sessions and that the second session of the 112 th Congress would begin at 12:00 pm on January 3, 2012, as required by the Constitution. As none of the three nominees were confirmed, the President, citing Senate inaction and asserting that the Senate was in recess despite the pro forma sessions, exercised his recess appointment power to appoint Mr. Flynn, Ms. Block, and Mr. Griffins, Jr., on January 4, 2012, the date between the January 3 and January 6 pro forma sessions. Acting with its newly appointed members, the NLRB issued an administrative decision against the Noel Canning Corporation (a Pepsi distributor and bottler) in February 2012, ruling that the company had violated the National Labor Relations Act (NLRA) by failing to reduce to writing a collective bargaining agreement with a local Teamsters Union. Noel Canning challenged the NLRB's decision in the U.S. Court of Appeals for the D.C. Circuit (D.C. Circuit), claiming that three members of the Board were invalidly appointed and that, as a result, the Board lacked a quorum to issue the decision. The D.C. Circuit ruled that the appointments were constitutionally invalid because the President may only make recess appointments during an inter-session recess when the Senate adjourns sine die and only to those vacancies that arise during that inter-session recess. The D.C. Circuit's interpretation of the Clause was contrary to the holdings of the other three federal circuit courts that had earlier examined and supported a broad interpretation of the phrases "the Recess of the Senate" and "Vacancies that may happen." The Supreme Court granted the government's petition for writ of certiorari , and heard oral argument on January 13, 2014. A unanimous Supreme Court affirmed the judgment of the D.C. Circuit, concluding that the three recess appointments to the NLRB were constitutionally invalid. However, the Court was sharply divided when it came to the reasoning for why the appointments were infirm. Despite adopting a broad reading of the Recess Appointments Clause, such that the President can make appointments during an inter- or intra-session recess of longer than 10 days to any vacancy, the majority of the Court ruled the appointments invalid because it determined that the Senate was only in an intra-session recess of three days, a period of time deemed insufficient to trigger the President's recess appointment power. A minority of Justices, in contrast, ruled the appointments invalid based on a narrow interpretation of the Clause as articulated by the D.C. Circuit. Under their view, the President lacked authority to make these recess appointments because no inter-session recess occurred as the Senate did not adjourn sine die , and moreover, the vacancies to which the members were appointed were pre-existing vacancies. Between January 4, 2012, the date of appointment for the three NLRB members at issue in Noel Canning , and August 5, 2013, when the Board consisted of three Senate-confirmed members, it is believed that the NLRB issued approximately 700 decisions and approved the appointments of several regional directors. The Court's June 2014 decision has called into question the validity of the Board's actions during this 19-month period. Since the Court's decision, the Board has attempted to clarify how it will address its relevant actions. On July 9, 2014, for example, the NLRB's General Counsel indicated that the agency had already set aside its orders in 43 cases that were pending in federal appellate courts when Noel Canning was decided. In addition, on July 18, 2014, the NLRB unanimously ratified all of the administrative, personnel, and procurement matters taken by the Board between January 4, 2012 and August 5, 2013. Although the NLRB has not indicated formally how it will address the remaining decisions that were issued during the relevant period, its approach is likely to follow the actions taken by the agency in 2010, when approximately 550 Board decisions were similarly called into question following the Supreme Court's decision in New Process Steel, L.P. v. National Labor Relations Board . In New Process Steel , a case involving the validity of a collective bargaining agreement, the Court considered whether, following a delegation of the NLRB's powers to a three-member panel, two members could continue to exercise the delegated authority after the departure of the group's third member. For 27 months, between January 1, 2008 and April 5, 2010, the Board operated with just two members after the third member's term expired. Focusing on the plain meaning of Section 3(b) of the National Labor Relations Act, the Court emphasized that "a straightforward understanding of the text . . . coupled with the Board's longstanding practice, points us toward an interpretation of the delegation clause that requires a delegee group to maintain a membership of three." The Court's decision in New Process Steel effectively invalidated the decisions that were issued during the 27-month period. Shortly after the Court ruled in New Process Steel , the NLRB outlined its plans for handling "returned cases." The Board indicated that it would seek to have 96 cases that were pending on appeal before a federal court of appeals or the Supreme Court remanded for further consideration. The cases would be considered by a three-member panel that included the two Board members who were involved with the original decisions. The remaining two members of the five-person Board could participate in the reconsideration, but would not be required to be involved. By March 2013, new decisions were issued by the Board on all of the returned cases. It appears that the Board closed most of the remaining two-member cases that were not pending before a federal court of appeals or the Supreme Court. In a fact sheet , the Board stated simply that "nearly all of the remaining two-member cases were closed under the Board's processes with no review required." Given the composition of the three-member panel, some speculated that most employers chose not to challenge the two-member decisions because it seemed likely that the outcome would not be any more favorable. For example, one commentator observed: "[I]t may not be worth the time and expense for the vast majority of employers to challenge the two-member board decisions." Although the NLRB has not outlined its plans for cases that were decided between January 4, 2012, and August 5, 2013, in the same way that it did following New Process Steel , it does appear that the Board is approaching the cases pending on appeal in a similar fashion. In addition to setting aside Board orders in 43 cases, the NLRB has also filed motions with the various federal courts of appeals to return cases to the Board for further action. While the NLRB's General Counsel has noted that the Board could potentially reconsider cases that did not reach the courts of appeals, he also observed that parties would probably not seek reconsideration by the Board if they received a satisfactory ruling or if a dispute has been resolved. Following New Process Steel , for example, new decisions were issued in roughly only one-fifth of the cases decided by the two-member Board. In August 2014, the NLRB began its reconsideration of cases held in abeyance pending the Court's decision in Noel Canning . To date, the same three-member panel has been used to reconsider these cases. In each case, the panel considered the administrative law judge's decision and the record in light of the exceptions and briefs de novo. Thus far, the panel has adopted the judge's recommended order in each case. While the Board appears to be acting upon cases that were pending on appeal either through reconsideration or by setting aside its prior orders, it has taken a different approach with regard to its administrative, personnel, and procurement actions between January 4, 2012, and August 5, 2013. As noted, on July 18, 2014, the Board ratified its administrative, personnel, and procurement actions during that period. The Board explained that it ratified its past actions "to remove any question concerning the validity of actions undertaken during that period." The doctrine of ratification is derived from the principles of agency law and recognizes a principal's ability to approve the prior actions of its purported agent. Although some may contend that ratification amounts to nothing more than a "rubberstamp" of past actions, at least some courts have sustained ratifications, particularly when it seems that redoing administrative proceedings will yield the same outcome. For example, in Federal Election Commission v. Legi-Tech, Inc ., a 1996 case involving ratification and the enforcement actions of a reconstituted Federal Election Commission, the D.C. Circuit explained that "forcing the Commission to start at the beginning of the administrative process, given human nature, promises no more detached and 'pure' consideration of the merits of the case than the Commission's ratification decision reflected." In 2010, following the Court's decision in New Process Steel , the NLRB ratified all personnel, administrative, and procurement actions taken by the two-member Board between January 1, 2008 and April 5, 2010. The Board explained that the ratification "is intended to remove any question that may arise regarding this period during which the Board was reduced to two Members." It appears that the NLRB's 2010 ratification has not been questioned. The absence of any legal challenges to the 2010 ratification might arguably suggest that the Board's recent ratification of administrative, personnel, and procurement actions between January 4, 2012, and August 5, 2013, might be similarly uncontroversial. While Noel Canning has required the NLRB to revisit its decisions and actions between January 4, 2012, and August 5, 2013, the decision has also allowed the Board to seek reconsideration of at least one decision involving a recess appointee who was not involved with that case. In National Labor Relations Board v. New Vista Nursing and Rehabilitation , a case decided after the D.C. Circuit's consideration of Noel Canning , but before the Supreme Court's June 2014 decision, the U.S. Court of Appeals for the Third Circuit (Third Circuit) vacated a Board order on the grounds that one member of the three-member panel that issued the order was improperly appointed. New Vista, the operator of a nursing and rehabilitative care center, had argued that because NLRB member Craig Becker was appointed during an intra-session recess, he was not validly appointed under the Recess Appointments Clause. If Becker was not validly appointed, the relevant panel would have included only two members in contravention of the NLRA and New Process Steel . Like the D.C. Circuit in Noel Canning , the Third Circuit concluded that the Recess Appointments Clause contemplates appointments only during breaks between enumerated or annual sessions of the Senate. Becker was appointed during an intra-session recess that began on March 26, 2010 and ended on April 12, 2010. During this time, the Senate was not holding pro forma sessions. Finding Becker's appointment to be invalid, the Third Circuit concluded that the three-member panel "acted without power and lacked jurisdiction when it issued the order." In light of the Supreme Court's Noel Canning decision, however, the NLRB has sought a rehearing of New Vista . On August 11, 2014, the Third Circuit granted the Board's petition for rehearing.
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On January 4, 2012, President Obama exercised his recess appointment power and appointed three individuals—Terrence F. Flynn, Sharon Block, and Richard F. Griffin, Jr.—to be members of the National Labor Relations Board (NLRB or Board). Whether the President had authority to make these appointments pursuant to the Recess Appointments Clause was at issue in the 2014 Supreme Court case National Labor Relations Board v. Noel Canning. The case marked the first time that the Court would examine the scope of the Recess Appointments Clause. This report provides an overview of the Recess Appointments Clause, as well as the unique factual circumstances of the NLRB recess appointments. In Noel Canning, a unanimous Supreme Court concluded that the three recess appointments were constitutionally invalid. The Court was sharply divided, however, when it came to the reasoning for why the appointments were infirm. Despite adopting a broad reading of the Recess Appointments Clause, the majority of the Court ruled the appointments invalid because it determined that the Senate was only in an intra-session recess of three days, a period of time deemed insufficient to trigger the President's recess appointment power. The report also discusses some of the practical implications at issue for the NLRB in the aftermath of the Court's decision, and examines how the Board will address the roughly 700 decisions that were issued between January 4, 2012, and August 5, 2013, when the NLRB consisted of three Senate-confirmed members. Although the NLRB has not formally outlined its plans for these decisions, its approach is likely to follow the actions taken by the agency in 2010, when approximately 550 Board decisions were similarly called into question as a result of the Supreme Court's decision in New Process Steel, L.P. v. National Labor Relations Board. In July 2014, the NLRB's General Counsel indicated that the agency had already set aside its orders in 43 cases that were pending in federal appellate courts when Noel Canning was decided. In addition, to setting aside these orders, the Board has also filed motions with the various federal courts of appeals to return other pending cases to the Board for further action.
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Unlike natural gas or fuel oil, electricity cannot be easily stored. However, interest in electric power storage (EPS) has been growing with technological advancements that can make storage a more practical means of integrating renewable power into the electricity grid and achieving other operating benefits. This report summarizes the technical, regulatory, and policy issues that surround implementation of EPS. The report is organized as follows: This introductory section concludes with a brief discussion of certain key power system concepts. The next section describes EPS technology. This is followed by an analysis of barriers to the deployment of storage systems. The concluding section discusses areas of potential congressional interest, including oversight and current legislation. In addition to electric power storage, this report refers to power plants, transmission lines, and distribution lines. These facilities, which constitute the major components of the existing electric power system, are briefly described and illustrated below ( Figure 1 ): Generating plants produce electricity, using either combustible fuels such as coal, natural gas, and biomass; or non-combustible energy sources such as wind, solar energy, and nuclear fuel. Transmission lines carry electricity from power plants to demand centers. The higher the voltage of a transmission line the more power it can carry. Current policy discussions focus on the high-voltage network (230 kilovolts (kV) rating and greater) used to move large amounts of power long distances. Near customers a step-down transformer reduces voltage so the power can be carried by low-voltage distribution lines for final delivery. As discussed later in this report, EPS can be used throughout the power system, depending on the technology employed and the application. References will made in this report to megawatts and megawatt-hours. These are related but different concepts. A megawatt is a measure of a storage or generating unit's capacity , while a megawatt-hour is a measure of the unit's energy output. Capacity is the potential instantaneous output of a generating or storage unit, measured in watts. Energy is the actual amount of electricity generated by a power plant or released by a storage device during a time period, measured in watt-hours. The units are usually expressed in thousands (kilowatts and kilowatt-hours) or millions (megawatts and megawatt-hours). For example, the maximum amount of power a 1,000 megawatt (MW) power plant can generate in a year is 8.76 million megawatt-hours (Mwh), calculated as: 1,000 MW x 8,760 hours in a year = 8.76 million Mwh. EPS systems are sometimes discussed in terms of their capacity to energy ratios; that is, the ratio of peak instantaneous output (MW) to total energy released (Mwh) before the unit must be recharged. A high ratio indicates that the unit discharges rapidly, while a low ratio indicates that the unit releases its energy over a longer period of time. Perhaps paradoxically, the storage of electricity does not usually involve the storage of the electric energy itself. Rather, the storage device converts the electricity to another form—such as the kinetic energy in a spinning flywheel or the potential energy in water that has been pumped to a higher elevation—and then later converts the energy from the new form back to electricity. With the exception of hydroelectric pumped storage, EPS technologies are still in various stages of development. This section of the report discusses the storage technologies and their applications. The technologies are summarized in Table 1 . EPS technologies can be broadly categorized into two groups, each of which is discussed below: centralized bulk power storage and distributed storage. This section also discusses the relationship between EPS and the smart grid. Centralized bulk power storage facilities are relatively large and complex installations designed to store large amounts of electricity. Capacities range from tens to hundreds of megawatts, and the units can supply power to the grid for hours at a time. The primary form of centralized bulk power storage—and in fact the only form of EPS of any type in commercial and widespread use—is hydroelectric pumped storage (HPS). In an HPS system, pumps are used during off-peak periods, when surplus cheap electricity can be generated elsewhere on the power system, to move water to a reservoir at a higher elevation than the water source. During peak periods, when power is scarce and expensive, the water in the reservoir is released to move backward through the system, where it drives hydraulic turbines to produce electricity. About 70% of the power used to pump the water up into the reservoir is recovered when the process is reversed (see Figure 2 ). There are currently 37 operational HPS facilities in the United States with a total capacity of 19,696 MW. By comparison, total generating capacity in the United States is about 1 million MW. Of the 37 operational HPS facilities, 34 plants with 89% of the total capacity were built prior to 1991. The last facility was completed in 1995. While plans have been discussed for additional projects it is unlikely that many more HPS facilities will be built. This is because the number of suitable sites is limited and there are environmental objections to the construction of large hydroelectric projects. The other form of centralized bulk power storage is compressed air energy storage (CAES). In this system compressors are used to inject air into a cavern developed within a salt dome or into another suitable geologic formation. To recover the power the compressed air is released, heated using a natural gas-fired combustion turbine, and used to help drive a turbine generator. A schematic of a CAES system is shown below ( Figure 3 ). Prototype CAES plants were built in 1978 in Germany (290 MW) and in 1991 in Alabama (the McIntosh plant, 110 MW). There are reportedly many sites in the United States suitable for construction of CAES units, and because the units have a relatively small above-ground footprint they may face less public opposition than HPS developments. New projects have been announced but construction has not started. The CAES technology is still evolving. For instance, the designers of the 1991 plant in Alabama are now seeking to build units using an improved "second generation" technology. One use of centralized bulk power storage systems is displacement of peaking generation. The cheap power captured in the facility during low-demand hours, such as the evening, can be used during the day to meet high loads in place of expensive-to-operate peaking power plants. An operationally related concept is price arbitrage, in which the cheap power stored at night is sold at a high price during the day. A new potential use for centralized bulk storage would be to compensate for the variability in output from wind and solar plants. For example, in some parts of the country the strongest and most consistent winds blow at night when demand is low. This surplus wind power can be captured in a storage facility and then used to meet demand during the day. Stored electricity (captured from any generating source) can also be used to backstop wind and solar power if weather conditions are unfavorable. As discussed later in this report, the degree to which wind power in particular needs backup storage is disputed. Distributed multipurpose power storage includes facilities dispersed through the power system and used to meet specific, local needs for power. The facilities can be located at generating plants, on the power transmission or distribution systems, or at an end-user site. The facilities are typically small but this may change as technologies mature. All of these technologies are still in the developmental stage. The following distributed power storage technologies and applications are discussed below: Batteries. Flywheels. Solar thermal storage. Residential electricity storage. Commercial-scale cooling storage. Storage and the smart grid. Although battery technology is still under development, commercial applications exist in the United States and elsewhere. Figure 4 shows a 34-MW battery facility in Japan used in conjunction with a 51-MW wind farm. The facility uses sodium sulfur (NaS) batteries produced by a Japanese manufacturer, NGK Insulators. American Electric Power (AEP), a large domestic power company, deployed a 1-MW NaS battery (the size of a double-decker bus and weighing 77 tons) in 2006 in Charleston, WV. The project was funded in part by the Department of Energy (DOE). The battery was connected to the distribution system and is charged in the evening when demand is low; by providing power as needed during higher-demand daytime periods it alleviates an overloading problem and defers the need to build a new substation. In 2008 AEP installed two 1-MW batteries near Milton, WV, to relieve another distribution system overloading problem. Other existing or planned battery installations include: AES Energy Storage, an affiliate of the large power project developer AES Inc., has connected a 1-MW array of batteries carried in a truck trailer to the grid in Pennsylvania, and a similar 2-MW array at a wind farm it owns in California. These projects use lithium ion technology supplied by A123Systems in Massachusetts. Xcel Energy, a Midwestern utility, is testing a trailer-carried 1-MW NaS battery at a wind farm it owns in Minnesota. The project has government and university partners. AEP installed three facilities of 2 MW each at sites in Ohio, West Virginia, and Indiana in 2008, and a 4-MW facility in Texas in 2009. The company reportedly aims to install 1,000 MW of battery capacity throughout its system by 2020. The New York Metropolitan Transit Authority installed a 1-MW NaS battery in January 2009. The battery stores inexpensive off-peak power in the evening to run natural gas compressors used for refueling buses during the day. The installation is a demonstration project funded in part by the state and federal governments and industry trade associations. Batteries can provide several different services to the power system. Depending on the technology, batteries can provide a local source of power for several hours, displacing or deferring the need for additional generating, transmission, or distribution capacity; provide a backup source of power to a local area if other parts of the grid fail (referred to as "islanding"); and provide grid "regulation," a service described immediately below in the flywheel discussion. A flywheel stores electricity in the form of mechanical energy in a spinning wheel or tube. In storage mode power is used by a motor to spin-up the flywheel. To recover power, the flywheel drives a generator ( Figure 5 ). About 85% to 90% of the stored power can be recovered. With current technology individual flywheel units have a capacity of about 25 kilowatts (kw). These can be deployed in integrated arrays to produce megawatt-scale installations. Beacon Power, a Massachusetts firm, is currently operating a 2-MW pilot facility in that state and hopes to expand to 5 MW by the end of 2009. The firm has also received a $2 million grant from New York State and tentative approval for a $43 million federal loan guarantee to help support construction of a 20-MW plant in New York. A 1-MW facility is being planned in conjunction with AEP for installation in Ohio. These projects are intended to provide regulation service to the power grid, a service which, as noted above, can also be provided by battery facilities. In this context "regulation" refers to the need for power grid operators to precisely match, moment to moment, the supply and demand for electricity. If supply and demand go too far out of synch, the power system can become unstable, consumer electrical equipment and appliances can be damaged, and ultimately the grid can fail. Because demand is constantly changing, the output of some power plants on a power system is constantly varied, up and down, to match demand. Because power plants generally operate most efficiently at a steady state, constant small-scale adjustments increase fuel costs and wear and tear on the generators. Although current flywheels can provide power for up to 15 minutes, regulation depends on their moment-to-moment ability to move power on and off of the grid. The need for regulation service may increase in the future as more wind and solar power with variable, weather-dependent output is connected to the power system. Regulation service from conventional generators has worked reliably for decades, but in principle a storage device such as a flywheel or battery could provide the service more efficiently. Flywheels and some types of batteries are EPS options for providing this capability. Another service that is essential to maintaining the stability of the grid is reactive power supply. As explained by the Federal Energy Regulatory Commission (FERC): Almost all bulk electric power in the United States is generated, transported and consumed in an alternating current (AC) network. Elements of AC systems produce and consume two kinds of power: real power (measured in watts) and reactive power (measured in volt-amperes reactive, or var). Real power accomplishes useful work (e.g., running motors and lighting lamps). Reactive power supports the voltages that must be controlled for system reliability. Reactive power supply is essential for reliably operating the electric transmission system. Inadequate reactive power has led to voltage collapses and has been a major cause of several recent major power outages worldwide. And while the August 2003 blackout in the United States and Canada was not due to a voltage collapse as that term has been traditionally used, the final report of the U.S.-Canada Power System Outage Task Force (April 2004) said that "insufficient reactive power was an issue in the blackout." Dynamic capacitive reactive power supplies were exhausted in the period leading up to the blackout. Although generating plants produce real and reactive power, additional reactive power must be injected at various points throughout a power grid. This is currently accomplished by specialized devices, but flywheels are another potential option. Solar thermal and photovoltaic power are alternative means of harnessing sunlight to produce electricity. Photovoltaic power, probably the better-known technology, uses solar cells to directly convert sunlight to electricity. Solar thermal plants, also referred to as concentrated solar power (CSP), concentrate sunlight to heat a working liquid, such as water, to produce steam that drives a power-generating turbine. Several parabolic trough-type CSP installations have operated successfully in California since the 1980s, and the 64-MW Nevada Solar One plant began operating in 2007. Several new solar thermal projects, with capacities in the hundreds of megawatts, are in development. A potential advantage of solar thermal systems is the ability to produce electricity when sunlight is weak or unavailable by storing solar heat, such as in the form of molten salt. In such a system the concentrated solar energy is used to melt salts (such as sodium and potassium chloride). A heat exchanger (also referred to as a steam generator) is used to capture heat from the salt to produce steam, which then drives a power turbine ( Figure 6 ). Reportedly up to 93% of the stored energy can be recaptured for steam production. Molten salt storage was used at the test Solar One/Two plant in the United States, and is being used now at the 50-MW Andasol 1 plant in Spain (a second 50-MW block is under construction and a third is planned). The Spanish plant can run at full load for 7.5 hours using stored heat. The disadvantage of adding molten salt storage to a CSP plant is the additional cost and complexity. For example, the developer of the 400-MW Ivanpah CPS project in California decided not to use molten salt storage in the project in order to reduce costs and make the project "commercially viable by getting rid of the extras." The decision on whether to add storage to a project pivots on the balance between the incremental costs and the additional revenues available by being able to provide firm service over an extended operating day. Batteries can be used to store electricity in individual homes, either in battery banks or in the battery packs of plug-in hybrid electric vehicles (PHEV), or at small sites serving a group of homes. Each approach has different technical and economic issues. Fixed in-home storage involves installing a bank of batteries in the house, and is often discussed in conjunction with installing a home solar photovoltaic (PV) system. The idea is that surplus PV power generated during the day can be stored and used when less sunlight is available or home demand is high. With current battery technology these systems can be bulky, require power conversion electronics, and require significant maintenance and replacement time and expense. More advanced battery technology could reduce costs and improve performance. PHEVs have battery packs that can be charged through a home's power system. As with fixed in-home battery banks, the notion is to use off-peak power to charge the battery. These systems and the vehicles that would use them are still under development but have garnered a great deal of interest and government and industry attention. The interaction between in-home storage and the power system is complex. The electricity stored in the batteries can be viewed as a resource only for and under the control of the homeowner. An alternative concept, which is closely tied to the notion of a smart grid (discussed below), is that the utility would have control over the operation of the batteries. For example, utility control of a large network of distributed batteries could allow the utility to rely on power stored in the batteries during off-peak hours, such as the evening, to meet daily peak demands. This approach requires less construction of transmission and generation facilities than with traditional utility methods. However, it also means that the utility and not the homeowner would have control over charging and discharge cycles. Utility control may be problematic in particular for PHEVs, since a homeowner planning a relatively long late afternoon trip may not want the utility taking power out of his or her vehicle's battery pack to meet mid-day system peaks. On the other hand, some degree of utility control and/or government regulation will be needed to prevent situations where homeowners try to charge PHEV batteries during peak periods, which would increase system costs and perhaps degrade system reliability. In-home storage also competes with the concept of "net metering." Net metering provides for a utility to buy surplus power generated by the home PV system (or other generating system). The system owner then receives either a cash payment or electricity in kind when home demand exceeds PV output. Net metering arrangements vary by locality and may provide superior economics to home power storage. Multi-home electricity storage involves a small battery facility that would serve several homes, perhaps half-a-dozen, with several hours of storage. The facility would be owned, controlled, and maintained by the local utility, and would be used for peak shaving, as a backup power supply, and for power quality control. This kind of centralized facility would presumably benefit from economics of scale compared to individual home battery banks, but the homeowner would also lose control of the storage. Additional metering, wiring, and billing enhancements would be needed for a centralized facility to be used to collect surplus power from a home's PV system and send it back when needed. Cooling storage devices use electricity during non-peak hours, such as the evening, to turn water to ice. During the day and particularly at times when electricity demand would normally be at its peak, such as midday or the afternoon on a summer business day, the ice can be used to cool air, displacing air conditioning load. This type of storage is currently economical for commercial and industrial establishments, such as office buildings. Cooling storage is a commercial technology sold by several vendors. Cooling storage affects the power system by shaving peak demand and shifting load . As shown below in Figure 7 , by cutting air conditioning load during the day the cooling storage cuts peak demand. This reduces the need to operate, or even to build, some relatively high-priced natural-gas-fired peaking plants. However, the load is not eliminated, but shifted to the non-peak hours when the storage system makes ice. The effect of the load shifting and peak shaving is likely to be a reduction in total costs to consumers. This is for three reasons: The shifted load would be met in most utility systems by coal or natural gas combined cycle plants that are under-utilized in the evening. These are cheaper to operate than peaking plants. However, to the extent that carbon dioxide emissions are a concern, shifting more load to coal-fired plants may be an issue. In restructured markets, power prices for all generators are set by the price of the marginal—that is, highest priced—generating unit to operate during a certain time period, such as hourly. By reducing the peak load on generating units, and therefore the need to operate higher-cost peaking units, peak shaving can have a substantial impact on total power costs. Making ice during relatively cooler evening hours is somewhat more efficient than running air conditioning during the hottest daytime hours. This efficiency gain can essentially eliminate any power losses in the storage process. The economics of cooling storage can be improved by a load management "aggregator." The aggregator is a kind of broker that combines the capacity of multiple cooling storage installations into a block that can be sold to a utility as a single, guaranteed load management resource. Cooling storage is limited to the cooling season and by the amount of capacity that can be installed, which is a function of the amount of air conditioning load in suitable buildings. In climates that experience high summer and winter demand it would be preferable to have storage that can shave peaks year-round. Power grid modernization proposals are often made under the rubric of the "smart grid," a term that encompasses technologies that range from advanced meters in homes to advanced software in transmission control centers. There is no standard definition of the smart grid. For the purposes of this report, the smart grid can be viewed as a suite of technologies that give the grid the characteristics of a computer network, in which information and control flows between and is shared by individual customers and utility control centers. The technologies would allow customers and the utility to better manage electricity demand, and include self-monitoring and automatic-protection schemes to improve the reliability of the system. Although grid technology has not been static over the years, the smart grid concept would implement capabilities well beyond any existing electric power system. The smart grid involves integrated operation of the power system from the home to the power plant and could encompass management of centralized and distributed EPS. In principle a smart grid system would optimize the full range of available resources—including the various kinds of distributed storage and net metering distributed generation—to meet multiple needs, including peak shaving, backup power in the case of outages, electricity regulation, and ensuring that distributed battery systems are charged during non-peak hours. The close relationship between the development of storage and the smart grid is reflected in the smart grid policy statement recently promulgated by FERC. The policy identifies EPS as one of "four key functionalities" that the smart grid must implement. A recent DOE report finds that: The ability to accommodate a diverse range of generation types, including centralized and distributed generation as well as diverse storage options, is central to the concept of a smart grid. Through these generation and storage types, a smart grid can better meet consumer load demand, as well as accommodate intermittent renewable-energy technologies. Distributed resources can be used to help alleviate peak load, provide needed system support during emergencies, and lower the cost of power provided by the utility. The report also observes that many technical challenges remain before the smart grid and associated technologies can be fully deployed, noting that "accommodating a large number of disparate generation and storage resources requires anticipation of intermittency, unavailability, while balancing costs, reliability, and environmental emissions." Like electricity storage, the smart grid is for the most part a developmental rather than operational technology. Other than installation of smart meters in some localities (which permit interactive communication and in some cases appliance control between homes and utility control centers) deployment of the "full" smart grid, which would include optimization of storage and other resources, has not progressed beyond pilot projects. EPS does not fit neatly into traditional utility planning, or current regulatory and financing structures, which have approached power system needs with central station power plants and large transmission projects. As one analysis notes: We know from years of operating pumped hydroelectric facilities that incorporating them into market and grid operations is a nontrivial task. Optimally scheduling the use of these facilities in a market with dynamic pricing can be a complicated problem. There are not so many of these facilities in use, however, that the problems have had to be generally solved for scale application. Today, though, we can foresee a future with many electric storage systems out there—at wind farms and other generation sites, grid-connected at transmission and distribution substations, and deployed along distribution feeders and behind the meters. Storage will represent a new class of electric infrastructure apparatus and will require that we develop new algorithms, tools, protocols, and regulatory paradigms for planning, financing, and operating these assets. The greatly increased flexibility that storage brings to the electric system will best be exploited only when we have the right new methods and understanding in place. This section of the report discusses environmental, cost, regulatory, and institutional issues which may impede the deployment of EPS systems. The only EPS technology that is both technically mature and widely used is hydroelectric pumped storage. However, there will probably be few opportunities to build more HPS plants in the United States. Two limiting factors are lack of suitable site and high cost. As shown in Table 2 , the estimated cost of building a new HPS facility is $2,500 to $4,000 per KW of capacity, exclusive of financing (which can be very significant) and certain other costs (see the notes to the table). This is, roughly speaking, in the range of costs for building a new coal plant at the low end ($2.5 billion) and a new nuclear power plant at the high end ($4 billion). Perhaps even more important than the cost of HPS are the perceived environmental impacts, including flooding of valleys to create reservoirs and damage to wildlife habitats. Environmental objections to HPS are so severe that they have delayed the operation of completed plants. For example, an HPS facility at the Richard B. Russell Dam and Lake in Georgia was essentially completed in the mid-1980s, but did not enter service until 2002 due to environmental litigation and related testing. The HPS capacity at the Harry S. Truman Dam and Reservoir in Missouri has never been used commercially for environmental reasons. Other storage technologies do not have the same environmental issues as HPS (although issues may arise if storage systems become more common ), but they appear to share the HPS issue of high cost. The Electric Power Research Institute (EPRI) capital cost estimates shown in Table 2 are roughly comparable to those of the current range of conventional fossil and nuclear generating technologies. However, the operating times of conventional power plants are, with the exception of peaking units, measured in days and months, rather than the hours and minutes of storage technologies. Also, storage systems generally return to the grid less power than they store. Consequently, storage devices have fewer kilowatt-hours of output to spread their costs over than conventional generators, which increases the cost per kwh. The Table 1 estimates, which EPRI is planning to update in a more comprehensive form by the end of 2009, also do not account for maintenance, battery replacement, and financing expenses. Storage technology continues to evolve and with more advanced systems and economies of scale from mass production the costs could decline. Nonetheless, for the time being it seems fair to treat EPS as generally a high-cost suite of technologies. There are current federal incentives and grants that can help to compensate for these high costs, as discussed later in the report. But for a long-term and sustainable role in the power system, it appears that storage will need revenue from premium applications, and revenue from multiple value streams that reflect the many uses to which storage can be put. For example, a flywheel facility might provide: Regulation service, which according to one analyst may produce system benefits 5 to 10 times greater than peak shaving and load shifting. Emergency backup reserve power to the grid (referred to as "spinning reserve") for short periods. Reactive power to the grid for voltage support. Batteries can be used for distribution system support to maintain reliability and defer investments in new power lines and substations, voltage regulation, as a form of spinning reserve, for generating unit "black start," and to provide power to a local area in the event of a blackout. A CAES plant can be used for price arbitrage, load leveling, and voltage regulation. Other examples can be added. However, to monetize these services the highly regulated electric market must have rates and payment arrangements that account for the benefits from EPS. As discussed below, this regulatory framework is still evolving. This section begins with a background review of electric power regulation in the United States, and then discusses regulatory issues as they pertain to electric power storage. The regulation of electric power in the United States is a patchwork quilt of federal and state authorities. The most important distinction to make is between traditional and restructured state markets. As explained by DOE, in the many states that continue to operate traditional markets, many investor-owned utilities (IOUs), municipal, and cooperative utilities: still provide electric service under a traditional vertically integrated business model, owning and operating generation, transmission, and distribution facilities and measures while selling "bundled" retail service to their end-use consumers. These utilities provide retail service under a "cost-of-service" model; thus, their rates reflect their costs of providing service plus a reasonable return (or in the case of not-for-profit co-ops and public power systems, a financial reserve). In these traditional markets, allowable costs, retail rates, and operating practices are monitored and controlled by a state public utility commission. New investments, such as in power plants, power lines, or EPS facilities, must be approved by the state commission. Traditional regulation continues to be predominant in the Southeast, Northwest, and other western states outside of California. Beginning in the 1990s, restructured markets developed in many states in the Northeast, New England, much of the Midwest, Texas, and California. For the most part these were areas with high electric prices where the state governments concluded that introducing more competition into the power markets could drive down rates and improve service. There is no standard form of restructured market, but some typical elements include: Vertically integrated utilities sold their power plants to independent power producers. The utilities are now "wires" companies that buy power wholesale from the generating companies. Wholesale electricity prices not covered by contracts are set daily or hourly by a bidding process managed by a centralized market maker, the regional transmission organization (RTO). The RTO also establishes market rules and tariffs generally, including tariffs for setting the prices of "ancillary services" such as voltage regulation and spinning reserve. RTOs also take over operation of the transmission network in a region or large state, although utilities continue to own their systems, and set rules for how the grid is managed. In the restructured markets, state commissions continue to set the framework for retail rates. But since these rates must reflect, at least over the long term, the wholesale cost of power, consumers are more exposed to market fluctuations than in traditional states. Additionally, because RTO markets set wholesale prices based on the marginal—that is, highest cost—bid, consumers in restructured states pay rates that reflect these marginal prices rather than the retail rates based on average costs that are set by commissions in traditional markets. Both the traditional and restructured markets are subject, in important respects, to federal regulation. Wholesale electricity rates and transmission rates are under the aegis of FERC. Although FERC has moved over the years from cost-of-service regulation to encouraging market-based rates, the operation of these markets, if not individual rates and prices, remains tightly regulated. All tariffs for market-based rates, other rules and regulations of RTOs, and generally any activity by RTOs and jurisdictional utilities that impact operation of the interstate power markets require FERC approval. Restructured and traditional power markets pose different challenges to EPS projects. Restructured markets by design expose and put a price on the multiple services that compose the power market, including the ancillary services that storage can provide, such as regulation and spinning reserve. This can allow storage projects, which can be expensive, to exploit multiple revenue streams. The constantly changing market prices in restructured markets also provide additional opportunities to use EPS for price arbitrage. Countering these advantages, restructured markets operate using complex rules that have probably not been designed to accommodate the specific characteristics of electricity storage, such as the ability of a single facility to serve transmission and generation functions or the short discharge duration of some storage technologies. An example of the regulatory complications that can ensnare EPS projects is the Lake Elsinore Advanced Pumped Storage (LEAPS) project, a rare case of a proposed new HPS facility. In 2006 FERC designated LEAPS as an advanced transmission technology, but the California ISO (CAISO, the organization that runs the power market in most of the state) concluded it should be treated as a generating unit. This ruling was eventually upheld by FERC, "effectively leaving [the] storage [project] in a state of limbo." It may seem odd that an HPS project, using the one storage technology with a long track record, should fall between the cracks in the regulatory system. However, HPS projects were for the most part constructed years ago in a different and much simpler regulatory environment, and although the technology has been used for decades the handful of HPS facilities has not produced an extensive or definitive set of regulatory precedents. The quandary is summarized by one analysis: Transmission owners with assets managed by independent system operators (ISO) can't put storage assets in their [regulated] rate base, because those assets also provide [deregulated] generation services. Similarly, distribution utilities frequently can't justify the cost of energy storage only on the basis of its distribution-system benefits. And generation companies struggle to make energy storage pay off, because the market hasn't yet developed bilateral contracts that value the full range of energy storage services. In 2008 and 2009, RTOs began to change their rules, procedures, and operating software systems to account for electricity storage. ISO New England, the New York ISO, and the Midwest ISO (MISO) have all adopted temporary or permanent rules changes to facilitate the use of EPS for regulation services. However, these changes do not address other storage services or the potential contribution of large-scale storage projects. For example, one power company has asked FERC to require MISO to begin discussing "with stakeholders potential modifications to its Tariff or business practices to allow the incorporation of the long-term storage technologies." In a development that may prove significant, a FERC commissioner stated in July 2009 that the agency is exploring whether to adopt a national EPS pricing policy that would address such issues as the ability of storage devices to act as both generation and transmission facilities. Traditional markets, where rates for vertically integrated utilities are set for a bundle of services by state utility commissions, present a simpler but still problematic environment for storage projects. Because in these markets separate prices are often not exposed for individual services, such as spinning reserve, it can be difficult to decide how to value a storage project. EPS may also compare unfavorably with alternative technologies with more cost and technical certainty. For example, quick-start combustion turbines are a mature technology that can be used for spinning reserve, regulation, and black start. They do not have other capabilities that storage can provide, such as price arbitrage, but this may be outweighed in the eyes of utility commissions by the fact they are known commodities. One utility executive said that: "if the cost of that [electricity storage] solution for now is 30% higher than a traditional solution, then you've got to have a willingness on the part of regulators or governmental agencies to either go ahead and put things in rate base that are a little more expensive for now, knowing that what we're doing is incubating a new technology." Alternatively, incentives must be found "that enable you to make up that cost differential—in the case of storage it seems like it's coming up around 30%." On the other hand, utility commissioners may be reluctant to spend ratepayer money on what they view as technological experiments. Another consideration are the economic incentives utilities face in traditional markets. In these markets the allowed rate of return is in part a function of the size of the utility's "rate base"—that is, the amount of capital invested in plant and equipment. Other things being equal, the larger a utility company's capital investments the more money it will be allowed to earn in rates. This incentive can make public utility commissions skeptical of utility plans to invest in expensive new technologies. Many analysts have identified a need to expand the national transmission system. The objectives of system expansion include renewable energy development, transmission line congestion relief, and reliability improvement. Proposals for how to plan and implement transmission grid expansion can be categorized as follows: National transmission "interstate highway" system . This concept envisions multi-billion-dollar development of a new network of high-voltage transmission lines spanning the continent. Planning has not proceeded past general concepts. Major interregional projects . These projects involve long-distance, interregional transmission construction, though not at the scale of the national system discussed above. Regional development . This concept would rely on local and nearby renewable resources rather than distant resources. An example is serving Northeastern demand for renewable power with PV generation, off-shore wind farms, and hydroelectric power imports from Quebec. Integrated Solutions . This approach aims to give full attention to non-transmission and non-generation alternatives, in addition to large-scale transmission projects. These alternatives include small-scale transmission projects, local renewable resources, demand response and energy efficiency, and EPS. Although this is the most comprehensive planning approach, it also makes transmission planning into something much more akin to development of a complete electric system plan for a region. Integrated planning implies involvement of a large range of stakeholders, complex analyses, consideration of long-term economic objectives, and perhaps a time-consuming process. Electricity storage potentially fits into all of these approaches to transmission planning, but in perhaps different ways. For example, large centralized storage facilities might play a role in national or regional transmission projects intended to bring large amounts of wind power from the northern plains to cities; distributed storage could be used in the regional planning approaches. But one question is to what extent will EPS be considered at all. These varying approaches to transmission planning reflect major divides in views of the future of the power system. One divide is between those who believe that major, long-distance transmission development is unavoidable, largely to access new sources of renewable power, and the alternative view that local resource development can obviate much of the need for new transmission lines. A second, perhaps even more fundamental divide, is between traditional utility approaches to resolving power systems issues—which focus on central station power plants and large transmission projects—and new approaches which rely on diverse resources. EPS is an example of an alternative resource that does not fit easily into the traditional utility paradigm. This is in part because many storage technologies are distributed rather than centralized, and in part because single storage technologies can serve multiple purposes—it is a peg that fits into several holes, round and square, of different sizes. Which transmission planning approach—or approaches—are ultimately adopted will be the result of policy decisions informed by many technical, cost, and political considerations. The degree to which EPS plays a role in these planning decisions and planning processes may be influenced in part by federal policy, as discussed in the next section of the report. As noted above, EPS faces regulatory, economic, and institutional barriers to widespread acceptance. This concluding section of the report discusses oversight and legislative approaches to addressing these barriers that may be of interest to Congress. Electricity storage is one of several technologies and methods of meeting power demand that are of current congressional interest (including distributed generation, renewable power, and demand response ) which do not fit the traditional power industry paradigm. That paradigm involves reliance on large-scale central power plants and long-distance transmission lines to meet demand. As noted above, this raises the question of how quickly and effectively the power industry and its federal and state regulators will be willing to pursue and deploy new approaches that are cost-effective. A DOE study sums up the adoption issue: A utility that is guaranteed [by regulators] to receive cost recovery of either a transmission or generation project, or both, may have little incentive to put an energy storage project in place. Rather than invest in energy storage technology, a utility may simply opt to construct a transmission and/or generation facility, the costs of which are more likely to be approved and recovered. In addition, state utility regulators may be reluctant to allow cost recovery for an innovative energy storage technology. State utility regulators may instruct the utility to rely on proven technology to address issues that could be solved through energy storage technology. As discussed above, efforts are underway at the state and federal level to address the regulatory issues. But because utility regulation is decentralized in the United States, this is likely to be a lengthy process that Congress may want to monitor. Another possible issue for congressional oversight is whether executive agencies are taking appropriate cognizance of EPS in studies and actions. This is part of the larger issue of whether executive agencies, like their counterparts in industry and the states, are considering the full range of non-traditional solutions (when they are cost-effective) to power systems needs. Two recent studies of electric power issues, one by DOE and another by FERC, illustrate potential oversight issues. In 2008 DOE published 20% Wind Energy by 2030: Increasing Wind Energy's Contribution to U.S. Electricity Supply , a major study that "examines some of the costs, challenges, and key impacts of generating 20% of the nation's electricity from wind energy in 2030." A major issue in integrating large amounts of wind capacity into the power system is the variability of wind power. Large-scale wind integration requires steps to compensate for the times when wind power is either reduced or unavailable due to weather conditions. To date this has not been a major issue because few areas have sufficient wind power to create integration issues, but this is expected to change in the future. The conventional approach to wind integration is to install quick-start natural gas-fired combustion turbine power plants to back up wind power. Other options that have been proposed include geographic dispersion of wind farms, improved wind power forecasting techniques, implementation of demand response and smart grid technologies and procedures, aggregation of utility control areas, and EPS. However, DOE's study essentially disregards the EPS option. There is no unanimity of opinion on the extent to which EPS will be needed, if at all, to integrate large amounts of wind and other renewable power capacity into the grid. The American Wind Association, for example, believes that electricity storage is too costly and is unnecessary for wind integration. However, this opinion is not universally held. For example, a recent North American Electric Reliability Corp. (NERC) study of renewable integration concluded that "Additional flexible resources, such as demand response, plug-in hybrid electric vehicles, and storage capacity, e.g., compressed air energy storage (CAES), may help to balance the steep ramps associated with variable generation." A white paper issued by the American Society of Chemical Engineers concluded that large-scale electricity storage "is the critical technology needed by renewable power if it is to become a major source of baseload dispatchable power to eventually replace fossil/nuclear plants." The chief of the PJM Interconnection, the operator of the power grid in much of the Middle Atlantic and Midwest, believes that 1,000 MW or more of CAES will be needed on the PJM system to support growing wind capacity, and two utilities in California have recently announced proposed CAES and battery projects to facilitate wind power integration. With this diversity of opinions, it is unclear why the DOE study would not take more cognizance of options like EPS and demand response as part of the suite of tools available to integrate wind into the power system. Another example of a perhaps narrow agency focus is a recent FERC study, A National Assessment of Demand Response Potential . In response to a mandate included in the Energy Independence and Security Act of 2007, the report assesses the demand response potential, state by state, for the period 2010 through 2019. The estimates are made for several scenarios which incorporate varying levels of technological advancements and changes to rate structures, including: Dynamic rates, in which the rates charged for electricity vary daily or in real time to reflect wholesale power prices and scarcity in electricity supplies. This is a substantial departure from the average price rates typically charged to residential customers. Dynamic rates combined with "enabling technologies" that automatically respond to high power prices by reducing a home's electricity demand. Direct load control of consumer equipment, such as air conditioners, by the utility. Interruptible tariffs, in which large industrial and commercial customers agree to reduce demand under certain conditions in return for a financial incentive. Other programs aimed at reducing demand as needed from large industrial and commercial customers. Some of these approaches to demand response are currently routine or can be easily implemented, such as interruptible tariffs and direct load control. Dynamic rates, as noted, would represent a substantial change for residential customers and have been controversial. The enabling technologies that can augment dynamic rates have been pilot tested at a residential scale but not widely deployed. Depending on the scenario, the study assumes up to universal installation of smart meters, 60% to 70% customer participation in dynamic pricing, and 60% of customers using enabling technologies. A potential oversight issue is whether FERC has been unnecessarily restrictive in the choice of technologies and options it examined for reducing and shifting peak demands (a central goal of demand response programs). The report states that: Other examples [of currently high-cost options] include battery storage and thermal energy storage. Both items hold the potential to significantly reduce peak demand on a permanent basis by shifting it to off-peak periods. As in the case of photovoltaic arrays, cost is a significant barrier to their rapid market penetration today. Another example is behind-the-meter generation which includes a diverse set of technologies including small conventional generation units that are used as back-up generation during emergencies and cogeneration systems that combine heat and power, largely in industrial process applications. It is not clear why universal roll-out of smart meters (itself a multi-billion-dollar expense), widespread deployment of thermostats that respond to power prices, or large-scale implementation of dynamic pricing (a ratemaking approach currently almost unknown in the residential sector) would be more likely than deployment of EPS systems by 2019. Also unclear is the treatment of distributed generation—which in the industrial and commercial sectors has been used routinely for decades —as a developmental option. FERC perhaps had to limit the range of options it could consider in its demand response report, but this study and the DOE wind report also reflect the risks of not giving fuller attention to the full range of options available to meet power system needs. As discussed below, two major pieces of proposed legislation before the 111 th Congress both treat EPS as a demand response option for managing peak loads. To the degree that Congress is interested in the advancement of EPS technology, it may want to monitor how this option is being considered in agency studies and programs. This section of the report reviews the treatment of electric power storage in three current legislative proposals: S. 1091 , the Storage Technology of Renewable and Green Energy Act of 2009 (STORAGE Act). H.R. 2454 , the American Clean Energy and Security Act of 2009 (ACES). S. 1462 , the American Clean Energy Leadership Act of 2009 (ACELA). This section also summarizes the financial incentives available to EPS projects in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ). The STORAGE Act would amend the tax code to create incentives for EPS deployment. These incentives include: A 20% business investment tax credit for investments in EPS systems that deliver stored power for sale, and have a minimum output capacity of 0.5 MW during a four-hour delivery period. A 20% business investment tax credit for investments in EPS systems located at the consumer site, and used primarily to store and deliver renewable energy generated onsite that is used to reduce onsite peak power demand. These can be small systems: the minimum required output is five kilowatts during a four-hour delivery period. A 30% residential tax credit for an EPS system installed in a home, and used primarily to store and deliver renewable energy generated onsite that is used to reduce onsite peak power demand. No minimum size requirements are specified. The bill would allow government and cooperative power agencies to issue Clean Renewable Energy Bonds for storage projects. The STORAGE Act was introduced on May 20, 2009, and referred to the Finance Committee. As of late August 2009 no further action had been taken on the bill. ACES is a climate change and energy policy act passed by the House on June 26, 2009, and referred to the Senate. Many of the objectives of the bill, including increased use of renewable power, peak demand reductions, and reductions in carbon emissions, might be facilitated by cost-effective EPS. With respect to transmission planning, the bill would establish a national transmission planning policy that takes: into account all significant demand-side and supply-side options, including energy efficiency, distributed generation, renewable energy and zero-carbon electricity generation technologies, smart-grid technologies and practices, demand response, electricity storage, voltage regulation technologies, high capacity conductors … superconductor technologies, underground transmission technologies, and new conventional electric transmission capacity and corridors. The bill's peak demand reduction section also specifies EPS as one of the technologies that can be used to meet reduction goals. ACELA is an energy bill that was introduced on July 16, 2009, when it was reported out of the Senate Energy Committee. The bill includes a peak reduction and load shifting goal that would be met through the "widespread implementation" of several demand response technologies, including dynamic pricing, smart grid technology, distributed generation, and electricity storage. The bill would also establish a multi-faceted national transmission policy. The first principle listed is "support for the development of new renewable energy generation capacity," but there are numerous other objectives, including cost savings, reliability enhancement, reduced power plant emissions, and maximizing "the contribution of demand side management (including energy efficiency and demand response), energy storage, distributed generation resources, and smart grid investments." Transmission planning would be required to reflect these policy objectives. Both ACES and ACELA therefore anticipate transmission planning processes that would take the integrated approach discussed earlier in this report. Both bills also include electricity storage among the demand response technologies that can be used to meet goals for reducing peak demand. If either bill becomes law, Congress may want to monitor whether storage and other non-traditional approaches actually receive appropriate attention from industry, regulators, and executive agencies. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) added or expanded funding and incentives for electricity storage. However, many of the programs seem to be focused primarily on one application, battery technology for pure electric and plug-in hybrid electric vehicles. ARRA provides $6.0 billion that is expected to leverage more than $60 billion in federal loan guarantees for transmission grid construction that supports renewable energy projects. These guarantees can presumably be used to support applicable EPS projects. This new loan guarantee program expands the existing innovative technology loan guarantee program created by the Energy Policy Act of 2005 (EPACT05). Although the EPACT05 program is limited to supporting "pre-commercial" innovative technology, the new program can also support commercial technology. Qualifying projects must be capable of starting construction no later than September 30, 2011. ARRA provides $300 million for a Department of Defense "Near Term Energy Efficiency Technology Demonstrations and Research" program. According to the conference committee report, electricity storage is one of the applications to which this money can be applied. The act provides $4.5 billion to DOE's Office of Electricity Delivery and Energy Reliability for grid modernization and related technologies, such as electricity storage. The law establishes a tax credit that can be used to re-equip, expand, or establish a facility that is designed to manufacture equipment that is used to produce, for example, electricity storage systems for electric/hybrid vehicles, renewable energy systems, fuel cells, and other specified technologies. The law allows for up to $2.3 billion in credits. ARRA establishes a new program of $2.0 billion for facility funding grants to manufacturers of advanced battery and battery system components. Covered activities include the production of lithium ion batteries, hybrid electrical systems, system components, and software. ARRA modifies an existing tax credit for the purchase of new plug-in vehicles (plug-in hybrids and pure electric vehicles) to cap the per-vehicle credit at $7,500 for light-duty vehicles and heavy-duty vehicles up to 14,000 pounds gross weight. The law adds $2.4 billion to an existing $800 million Energy Conservation Bond program. The bonds can be applied to many purposes, including advanced automobile batteries and advanced battery manufacturing technology. To the extent that Congress is interested in widespread adoption of cost effective EPS technologies, it may want to oversee the extent to which these incentives are committed to electricity storage devices other than vehicle battery systems.
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Unlike natural gas or fuel oil, electricity cannot be easily stored. However, interest in electric power storage (EPS) has been growing with technological advancements that can make storage a more practical means of integrating renewable power into the electricity grid and achieving other operating benefits. This report summarizes the technical, regulatory, and policy issues that surround implementation of EPS. Electricity storage is one of several non-traditional technologies and methods of meeting power demand that are of current congressional interest (others include distributed generation, renewable power, and demand response). EPS and these other alternatives do not fit the traditional power industry paradigm, which involves reliance on large-scale central power plants and long-distance transmission lines to meet demand. This raises the question of how quickly and effectively the power industry and its regulators will be willing to pursue and deploy new approaches. Electricity storage is also currently a relatively high-cost technology, another factor that could delay its deployment. The report identifies several areas for possible congressional oversight, including: Power industry and state regulator acceptance of storage technologies. Integration of storage into transmission system planning, including integration of renewable power into the electricity grid. Federal executive agency focus on EPS as a solution to power system needs. The application of incentives for electric power storage development included in the American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5). The report discusses how the provisions of several pending bills relate to the development of electric power storage, including S. 1091, the Storage Technology of Renewable and Green Energy Act of 2009 (STORAGE Act); H.R. 2454, the American Clean Energy and Security Act of 2009 (ACES); and S. 1462, the American Clean Energy Leadership Act of 2009 (ACELA). This report will be updated as warranted.
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The Internet has become a central part of the American economy, delivering innovative products while eliminating the need for inefficient middlemen. However, the free flow of information facilitated by the Internet has also created problems with copyright and trademark infringement. The problem is significant; as much as 6% of the U.S. gross national product is generated by industries supported by intellectual property laws. A recent report contends that nearly 24% of all Internet traffic worldwide is infringing. Piracy of the content created by movie, music, and software companies, and the sale of counterfeit goods that include inauthentic clothing, pharmaceutical drugs, and consumer electronics, negatively impacts the American economy. Although the Government Accountability Office cautions that it is difficult to precisely quantify the economy-wide impacts of piracy, it is believed to be a serious problem. However, many websites trafficking in copyrighted content or counterfeit goods are registered and operate entirely in foreign countries. These foreign "rogue sites" often provide creative content and physical goods protected by U.S. intellectual property law to people located within the United States. S. 968 , the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP Act), and H.R. 3261 , the Stop Online Piracy Act (SOPA), are legislative responses to the jurisdictional problem of holding foreign websites accountable for piracy and counterfeiting. The bills also authorize new enforcement mechanisms against domestic sites that facilitate infringing activities. These bills would create new obligations for U.S.-based domain name servers, Internet advertisers, search engines, and financial transaction providers to address such harm to intellectual property rights holders. There has been considerable public debate about the changes to existing law that are proposed by these two bills. An alternative legislative measure, the Online Protection and Enforcement of Digital Trade Act (OPEN Act; S. 2029 , H.R. 3782 ) has been introduced in response to the concerns raised about the PROTECT IP Act and SOPA. Congress passed the Digital Millennium Copyright Act (DMCA) in 1998 in an effort to adapt copyright law to an evolving digital environment. Title II of the DMCA added a new Section 512 to the Copyright Act (Title 17 of the U.S. Code) in order to limit the liability of service providers against claims of copyright infringement relating to online materials. This "safe harbor" immunity is available only to parties that qualify as a "service provider" as defined by the DMCA, and only after the provider complies with certain eligibility requirements. In exchange for immunity from liability, the DMCA requires service providers to cooperate with copyright owners to address infringing activities conducted by the providers' customers. The DMCA's safe harbors greatly limit service providers' liability based on the specific functions they perform. The safe harbors correspond to four functional operations of a service provider that might otherwise constitute copyright infringement: (1) transitory digital network communications, (2) system caching, (3) storage of information on systems or networks at direction of users, and (4) information location tools. One safe-harbor-qualifying condition common to three of the four categories is the requirement that upon proper notification by the copyright owner of online material being displayed or transmitted without authorization, a service provider must "expeditiously" remove or disable access to the allegedly infringing material. This "notice and takedown" obligation does not apply when the service provider functions as a passive conduit of information under 17 U.S.C. Section 512(a) (offering transitory digital network communications), but is a condition that must be met to obtain shelter under the remaining three safe harbor provisions. As indicated by the eligibility conditions in each subsection of Section 512(b)-(d), the notice and takedown procedure varies slightly for each. To prevent abuse of the notice and take-down procedure, Section 512(f) provides damages, costs, and attorneys' fees to any service provider that is injured by a knowing, material misrepresentation that an item or activity is infringing. For example, any person who sends a "cease and desist" letter to a service provider, with the knowledge that the claims of copyright infringement are false, may be liable to the accused infringer for damages. As noted earlier, the DMCA's safe harbor provisions do not confer absolute immunity from legal liability for copyright infringement. Although they ensure that qualifying service providers are not liable for monetary relief, they may be liable for limited injunctive relief. For example, a service provider that provides "transitory digital network communications" may be subject to the following injunctive relief: an order restraining the service provider from providing access to a subscriber or account holder of the service provider's system or network who is using the provider's service to engage in infringing activity and is identified in the order, by terminating the accounts of the subscriber or account holder that are specified in the order; an order restraining the service provider from providing access, by taking reasonable steps specified in the order to block access, to a specific, identified, online location outside the United States. In the case of service providers that provide either (1) system caching, (2) storage of information on systems or networks at direction of users, or (3) information location tools, the court may grant injunctive relief with respect to a service provider in one or more of the following forms: an order restraining the service provider from providing access to infringing material or activity residing at a particular online site on the provider's system or network; an order restraining the service provider from providing access to a subscriber or account holder of the service provider's system or network who is engaging in infringing activity and is identified in the order, by terminating the accounts of the subscriber or account holder that are specified in the order; such other injunctive relief as the court may consider necessary to prevent or restrain infringement of copyrighted material specified in the order of the court at a particular online location, if such relief is the least burdensome to the service provider among the forms of relief comparably effective for that purpose. One public interest group has praised the importance of the DMCA's safe harbor provisions to the development of the Internet: Without these protections, the risk of potential copyright liability would prevent many online intermediaries from providing services such as hosting and transmitting user-generated content. Thus the safe harbors have been essential to the growth of the Internet as an engine for innovation and free expression. Some have called for Congress to pass legislation that would expand the DMCA to include notice and takedown provisions regarding trademark infringement and other illegal conduct such as spam, phishing, and fraud. The Prioritizing Resources and Organization for Intellectual Property Act of 2008 (PRO-IP Act) strengthened existing forfeiture provisions for use in cases involving criminal copyright infringement and trademark counterfeiting. The PRO-IP Act allows civil forfeiture of "[a]ny property used, or intended to be used, in any manner or part to commit or facilitate the commission of [criminal copyright infringement or trafficking in counterfeit goods]." The Department of Justice and U.S. Immigration and Customs Enforcement (ICE) have recently begun to use this civil forfeiture authority in an innovative way—to seize and forfeit domain names of websites that are being used for criminal activity, in this case websites that are involved in selling counterfeit goods and distributing pirated merchandise and copyrighted digital materials. Domain name registrars redirect traffic from the seized domains to a government website explaining that the domain name has been seized by ICE. However, the sites remain online and accessible through their Internet protocol addresses. Between June 30, 2010, and November 28, 2011, ICE seized 350 domain names associated with Internet piracy in its initiative called "Operation In Our Sites." Of these 350 seized domain names, 116 have been forfeited to the U.S. government. In order to obtain domain name seizure warrants, ICE agents present evidence of criminal trademark violations or criminal copyright infringement that is occurring on the website to a federal magistrate judge. In order to issue the warrant, the judge must determine, by a standard of probable cause, that the domain name is being used in violation of federal criminal laws. Due process protections are part of this process, as described by the ICE Director: As with all judicially authorized seizure warrants, the owners of the seized property have the opportunity to challenge the judge's determination through a petition. If a petition is filed, a hearing is held in a federal court to determine the validity of the affidavit supporting the seizure, at which point the government would have the burden of proof.… Under existing federal law, the website owner may also choose to demand return of the property through the law enforcement agency itself, by writing a letter to ICE.… Further, if the website owner determines he or she does not wish to pursue either of these avenues of due process, a challenge may be filed directly with the law enforcement agency conducting a forfeiture action under administrative processes. The assistant deputy director of ICE has explained that several factors are taken into account before the agency decides which domain name should be seized, including the popularity of the website, which often correlates with its profitability; whether the website is commercial in nature and earns a substantial amount of money—those that run advertisements, sell subscriptions, or sell merchandise; and whether seizing a site will have a substantial impact on piracy. However, the global nature of the Internet presents problems to the civil forfeiture approach used by ICE. Only domain names registered within the United States and subject to ICE's jurisdiction may be seized. The Anticybersquatting Consumer Protection Act (ACPA) includes two provisions that provide individuals with remedies against abuses of the domain name system. First, it provides a means to protect against trademark dilution through the domain name system. Second, it provides anticybersquatting protections for individuals. ACPA allows trademark owners to file a lawsuit against domain name registrants and their licensees for trademark dilution. Such suits are permissible if the domain name is identical or confusingly similar to a mark that was distinctive or famous at the time the domain name was registered, or infringes upon names or insignias of the American Red Cross or United States Olympic Committee. If the registrant is found to have registered the domain name in bad faith, ACPA authorizes a court to order that the domain name be forfeited, canceled, or transferred to the trademark owner. ACPA also authorizes in rem actions directly against a domain name that infringes upon a trademark, where personal jurisdiction cannot be obtained over the owner of the infringing domain name or if the owner cannot be identified by the trademark owner. ACPA also allows individuals to sue cybersquatters, defined as one who intends to profit by registering and subsequently selling a domain name that is comprised of or confusingly similar to the first individual's name without consent. The court may award injunctive relief to the plaintiff, "including the forfeiture or cancellation of the domain name or the transfer of the domain name to the plaintiff." The Unlawful Internet Gambling Enforcement Act (UIGEA), which Congress passed in 2006 as Title VIII of the SAFE Port Act, seeks to cut off the flow of revenue to unlawful Internet gambling businesses. UIGEA prohibits gambling-related businesses from accepting checks, credit card charges, electronic transfers, and similar payments in connection with unlawful Internet gambling. Anyone who violates this prohibition of UIGEA is subject to a criminal fine of up to $250,000 (or $500,000 if the defendant is an organization), imprisonment of up to five years, or both. In addition, upon conviction of the defendant, the court may enter a permanent injunction enjoining the defendant from making bets or wagers "or sending, receiving, or inviting information assisting in the placing of bets or wagers." The Attorney General of the United States or a state attorney general may bring civil proceedings to enjoin a transaction that is prohibited under UIGEA. UIGEA directed the Board of Governors of the Federal Reserve System and the Treasury Department to promulgate regulations that require "each designated payment system, and all participants therein, to identify and block or otherwise prevent or prohibit restricted transactions through the establishment of policies and procedures" reasonably calculated to have that result. The final rule adopted by the Federal Reserve and the Treasury Department identifies five relevant payment systems that could be used in connection with, or to facilitate, the "restricted transactions" used for Internet gambling: Automated Clearing House System (ACH), card systems, check collection systems, money transmitting business, and wire transfer systems. The rule defines a "restricted transaction" to mean any transactions or transmittals involving any credit, funds, instrument, or proceeds that the UIGEA prohibits any person engaged in the business of betting or wagering from knowingly accepting, in connection with the participation of another person in unlawful Internet gambling. The rule directs participants in the designated systems, unless exempted, to "establish and implement written policies and procedures reasonably designed to identify and block or otherwise prevent or prohibit restricted transactions," and then provides non-exclusive examples of reasonably compliant policies and procedures for each system. Some Members of Congress have criticized UIGEA for being, in their view, ineffective at stopping Internet gambling by millions of Americans. "Rogue" Internet pharmacies engage in practices that are illegal, such as selling unapproved or counterfeit drugs or dispensing drugs without a prescription. In response to the problem of rogue Internet pharmacies and the illegal sale of prescription controlled substances over the Internet, the 110 th Congress passed the Ryan Haight Online Pharmacy Consumer Protection Act of 2008 (hereinafter called "Ryan Haight Act"), which amends the federal Controlled Substances Act to expressly regulate online pharmacies that dispense controlled substances by mandating that the pharmacy post specific information on its website, and that the pharmacy register with and submit certain reports to the Drug Enforcement Administration. The Ryan Haight Act requires that delivery, distribution, or dispensing of controlled substances over the Internet must be pursuant to a "valid prescription" (defined by the statute as a prescription that is issued for a legitimate medical purpose in the usual course of professional practice, by a practitioner who has conducted at least one medical evaluation of the patient in the physical presence of the practitioner). The Ryan Haight Act also clarifies and enhances the penalties for illegal distributions of controlled substances over the Internet. According to the White House 2010 National Drug Control Policy, the Ryan Haight Act has "already had a significant impact on reducing the number of illegal Internet pharmacies." On September 20, 2010, Senator Leahy with Senator Hatch introduced the Combating Online Infringement and Counterfeits Act (COICA). The Senate Judiciary Committee voted to report COICA favorably to the Senate, with an amendment in the nature of a substitute. However, no public hearing was held to consider COICA before the end of the 111 th Congress, and the full Senate did not act on the legislation before the end of the congressional term. At the request of Senator Coburn, the Senate Judiciary Committee in the 112 th Congress held a hearing February 16, 2011, on the topic of "Targeting Websites Dedicated To Stealing American Intellectual Property." This hearing considered the scope of intellectual property theft over the Internet and the problem of "rogue websites" that exclusively traffic in infringing material, issues that COICA was designed to address. On May 12, 2011, Senator Leahy introduced S. 968 , the PROTECT IP Act. On May 26, 2011, the Senate Committee on the Judiciary voted to report the legislation to the full Senate, with an amendment in the nature of a substitute. Senator Wyden then placed a hold on the bill, indicating his intent to object to any unanimous consent request to proceed, a sentiment that has been since joined by Senators Moran, Cantwell, and Paul. The Senate Judiciary Committee held a hearing on June 22, 2011, entitled "Oversight of Intellectual Property Law Enforcement Efforts" that included testimony from ICE and other agencies charged with enforcement of intellectual property laws online. On July 22, 2011, Senator Leahy filed a written report. On December 17, 2011, Senator Reid presented a cloture motion on a motion to proceed to S. 968 , the PROTECT IP Act, with a roll call vote scheduled to be held on January 24, 2012. Senator Wyden expressed his intent to filibuster the bill. On October 26, 2011, Representative Lamar Smith, chairman of the House Judiciary Committee, introduced H.R. 3261 , the Stop Online Piracy Act (SOPA). The House Judiciary Committee held a hearing on SOPA on November 2, 2011. On December 12, 2011, Representative Smith released a manager's amendment in the nature of a substitute to H.R. 3261 . On December 15 and 16, the House Judiciary Committee held markup sessions in which the committee considered 60 amendments that were filed to the manager's amendment. However, the committee did not complete the markup and postponed continuation of the SOPA markup "due to House schedule." On January 14, 2012, the White House responded to an online petition submitted under the Obama Administration's "We the People" initiative that urged the President to veto the SOPA bill. In an online post written by the Intellectual Property Enforcement Coordinator Victoria Espinel, the U.S. Chief Technology Officer Aneesh Chopra, and Cybersecurity Coordinator Howard Schmidt, the White House explained that it would support online piracy legislation that "provides prosecutors and rights holders new legal tools to combat online piracy originating beyond U.S. borders." However, the White House stated that it "will not support legislation that reduces freedom of expression, increases cybersecurity risk, or undermines the dynamic, innovative global Internet." Several websites, including Wikipedia, Reddit, and Mozilla, participated in a 24-hour shutdown of their webpages on January 18 in order to express their opposition to the PROTECT IP Act and SOPA. The online protests, increased public awareness and negative opinions concerning the bills, and largely unfavorable media coverage, contributed to several Members of Congress withdrawing their support for the legislation in its current form. On January 20, 2012, Senator Reid announced that, "in light of recent events," he was postponing the cloture vote that had been scheduled for the PROTECT IP Act on January 24, although he expressed his hope that a compromise could be reached between supporters and opponents of the legislation "in the coming weeks." Moments after Senator Reid's announcement, Chairman Smith released a statement that the House Judiciary Committee would similarly postpone consideration of SOPA "until there is wider agreement on a solution" to the online piracy problem. The following is a brief summary of the key provisions of S. 968 , as reported in the Senate. S. 968 focuses on Internet sites that are "dedicated to infringing activities." An "Internet site dedicated to infringing activities," as defined by the bill, is an Internet site that has no significant use other than engaging in, enabling, or facilitating (1) copyright infringement; (2) circumvention of copyright protection systems; or (3) the sale, distribution, or promotion of goods, services, or materials bearing a counterfeit mark. The term also encompasses websites that facts or circumstances suggest are used primarily as a means for engaging in or enabling those activities. The PROTECT IP Act also defines "nondomestic domain name" as a domain name for which the domain name registry is not located in the United States. The PROTECT IP Act would authorize the Attorney General to file a civil action against a person who registers a nondomestic domain name used by an Internet site dedicated to infringing activities, or against a person who owns or operates such an Internet site. This provision is unlikely to be invoked often because these individuals are rarely located in the United States and are therefore difficult to prosecute domestically. If through due diligence the Attorney General cannot find such a person, the Attorney General may commence an in rem action against a nondomestic domain name used by an Internet site dedicated to infringing activities. In such an action, a federal court may issue a temporary restraining order, a preliminary injunction, or an injunction against the domain name if the domain name is used within the United States to access the Internet site and the Internet site harms U.S. intellectual property rights holders. A federal law enforcement officer (with prior court approval) may serve a copy of such court order (to cease and desist from undertaking any further activity as an Internet site dedicated to infringing activities) to the following entities that would be required to take the specified actions: Operators of non-authoritative domain name servers: Non-authoritative domain name servers are intermediary servers used to resolve a domain name to its Internet protocol address. They do this by retaining a copy of information stored on an authoritative domain name server. Operators of these servers, generally Internet service providers, are directed to prevent access to seized domain names through the least burdensome technically feasible means. Financial transaction providers: Companies that facilitate online transactions, such as credit card companies, are required to prevent their service from completing transactions between customers located within the United States and the Internet site. Internet advertising services: Internet advertising services are required to stop selling advertising to and providing advertising for the Internet site. Information location tools: Search engines such as Google and Yahoo must take technically feasible measures to remove or disable access to the Internet site. The PROTECT IP Act authorizes the Attorney General to bring an action for injunctive relief against any of the third parties that receive this court order and knowingly and willfully fail to comply with the obligations described above. A defendant in such an action may establish an affirmative defense by showing that it does not have the technical means to comply without incurring an unreasonable economic burden. A qualifying plaintiff may bring suit for civil injunctive relief against a person who registered a domain name used by an Internet site dedicated to infringing activities, or the owner/operator of such an Internet site. Because this provision does not use the term "nondomestic" to limit the term "domain name," this action by a qualifying plaintiff is available against the owner/operator of any Internet site dedicated to infringement (whether domestic or foreign) or the registrant of such domain name. This provision gives a new "private right of action" to intellectual property rights holders who are harmed by the activities occurring on the domestic or foreign Internet site dedicated to infringing activities. If through due diligence a qualifying plaintiff is unable to find such a person (or no such person has an address within the United States), the qualifying plaintiff may bring suit against a domain name used by an Internet site dedicated to infringing activities. In response, a federal court may issue a temporary restraining order, a preliminary injunction, or an injunction, against the domain name if the domain name is used within the United States to access the Internet site and the site harms U.S. intellectual property rights holders. Should the court grant the injunctive relief, the qualifying plaintiff (with prior court approval) may serve a copy of the court's cease and desist order to the following entities, which would then be responsible for taking the specified actions: Financial transaction providers: Companies that facilitate online transactions, such as credit card companies, are required to prevent their service from completing transactions between customers located within the United States and the Internet site. Internet advertising services: Internet advertising services are required to stop selling advertising to and providing advertising for the Internet site. The PROTECT IP Act authorizes a qualifying plaintiff to bring an action for injunctive relief against any party receiving this court order that knowingly and willfully fails to comply with such order. A defendant in such an action may establish an affirmative defense by showing that it does not have the technical means to comply without incurring an unreasonable economic burden. The PROTECT IP Act specifies that Rule 65 of the Federal Rules of Civil Procedure (FRCP) will govern how a federal court may issue injunctive relief in either an action brought by the Attorney General against a nondomestic entity, or an action brought by a qualifying plaintiff against domestic or nondomestic parties. Rule 65 of the FRCP provides that a "court may issue a preliminary injunction only on notice to the adverse party," and that a "court may issue a temporary restraining order without written or oral notice to the adverse party or its attorney only if (1) specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition; and (2) the movant's attorney certifies in writing any efforts made to give notice and the reasons why it should not be required." Thus, Rule 65 requires that, prior to the issuance of a preliminary injunction, the party that is the target of the injunction is entitled to notice and an opportunity to be heard. However, an ex parte temporary restraining order (with no notice to the adverse party) may be granted if the party seeking the order satisfies the stringent requirements described above. The Attorney General is also required by S. 968 to provide notice of the alleged violation and intent to proceed under the act to the registrant of the domain name or to the owner/operator of the Internet site, by using the postal or email address of the registrant/owner or by some other means that the court finds necessary. The PROTECT IP Act places a similar notice requirement upon the quantifying plaintiff. Any person bound by a court order (registrant of the domain name, owner/operator of the Internet site, financial transaction provider, Internet advertising service) may file a motion with the court to modify, suspend, or vacate the order; the court may grant such relief if the court finds that either (1) the Internet site associated with the domain name is no longer, or never was, dedicated to infringing activities, or (2) the interests of justice require it. To encourage financial transaction providers and Internet advertising services to "self-police," the PROTECT IP Act makes them immune from liability for voluntarily taking action against an Internet site, so long as they act in good faith on credible evidence that the Internet site is dedicated to infringing activities. S. 968 provides immunity from liability to more actors when they refuse to provide services to "infringing Internet sites that endanger the public health." An "infringing Internet site that endangers the public health" is an Internet site that sells, dispenses, or distributes counterfeit prescription medicine. Domain name registries, domain name registrars, financial transaction providers, search engines, and Internet advertising services may refuse to provide services to such Internet sites when they have a good faith belief that the site is infringing. The PROTECT IP Act requires reports to Congress regarding the effectiveness of the act and its effect on Internet technologies, from the following government entities: the Attorney General, the Register of Copyrights, the Secretary of Commerce, and the Government Accountability Office. As introduced, SOPA contains two titles: (1) Combating Online Piracy and (2) Additional Enhancements to Combat Intellectual Property Theft. Prior to the titles are savings and severability clauses. The first savings clause pronounces that "Nothing in this Act shall be construed to impose a prior restraint on free speech or the press protected under the 1 st amendment to the Constitution." The second savings clause explains that nothing in Title I of this act shall be construed to enlarge or diminish copyright infringement liability for any cause of action under the Copyright Act, including any limitations on liability that the Copyright Act provides. The severability clause explains that if any provision of this act is held to be unconstitutional, the other provisions of the act are not to be affected by that determination. Whether an Internet site may be subject to an action by the Attorney General under SOPA depends on if it qualifies as a "foreign infringing site." Section 102(a) of SOPA provides a definition of a "foreign infringing site" to mean 1. the Internet site (or portion thereof) is a U.S.-directed site and is used by users in the United States, 2. the owner/operator of such Internet site "is committing or facilitating the commission of" criminal trademark and copyright infringement, and 3. the Internet site would be subject to seizure in the United States by the Attorney General if such site were a domestic Internet site. Section 102(b) of SOPA authorizes the Attorney General to commence either an in personam action against a registrant of a domain name used by a foreign infringing site (or the owner/operator of such site), or an in rem action against a foreign infringing site or the foreign domain name used by such site. An in rem action is only permitted where, after diligence by the Attorney General, the domain name's registrant or the site's owner cannot be found. Federal district courts are authorized by SOPA, following the commencement of these actions, to issue a temporary restraining order, a preliminary injunction, or an injunction against the registrant of the domain name used by the foreign infringing site, or the owner/operator of the foreign infringing site, to cease and desist from undertaking any further activity as a foreign infringing site. A process server on behalf of the Attorney General, who obtains prior approval of the court, may serve a copy of the court's cease and desist order on third parties that fall within the following four categories; these parties that receive the court order are then required to take the actions specified below. A service provider is required to take "technically feasible and reasonable measures designed to prevent access by its subscribers located within the United States to the foreign infringing site (or portion thereof) that is subject to the order, including measures designed to prevent the domain name of the foreign infringing site (or portion thereof) from resolving to that domain name's Internet Protocol address. Such actions shall be taken as expeditiously as possible, but in any case within 5 days after being served with a copy of the order, or within such time as the court may order." An Internet search engine is required to "take technically feasible and reasonable measures, as expeditiously as possible, but in any case within 5 days after being served with a copy of the order, or within such time as the court may order, designed to prevent the foreign infringing site that is subject to the order, or a portion of such site specified in the order, from being served as a direct hypertext link." A payment network provider is required to "take technically feasible and reasonable measures, as expeditiously as possible, but in any case within 5 days after being served with a copy of the order, or within such time as the court may order, designed to prevent, prohibit, or suspend its service from completing payment transactions involving customers located within the United States or subject to the jurisdiction of the United States and the payment account" that is used by the foreign infringing site and through which the payment network provider would complete such payment transactions. An Internet advertising service is required to "take technically feasible and reasonable measures, as expeditiously as possible, but in any case within 5 days after being served with a copy of the order, or within such time as the court may order, designed to prevent its service from providing advertisements to or relating to the foreign infringing site that is subject to the order or a portion of such site specified in the order; cease making available advertisements for the foreign infringing site or such portion thereof, or paid or sponsored search results, links, or other placements that provide access to such foreign infringing site or such portion thereof; and cease providing or receiving any compensation for advertising or related services to, from, or in connection with such foreign infringing site or such portion thereof." SOPA authorizes the Attorney General to bring an action for injunctive relief against any party that receives this court order and knowingly and willfully fails to comply with the obligations described above. A defendant in such an action may establish an affirmative defense by showing that it does not have the technical means to comply without incurring an unreasonable economic burden. SOPA also authorizes the Attorney General to bring an action for injunctive relief against "any entity that knowingly and willfully provides or offers to provide a product or service designed or marketed for the circumvention or bypassing of measures" that were taken by any of the parties that received the court order. Whether an Internet site (that may be either domestic or foreign) may be subject to a private right of action by a "qualifying plaintiff" under SOPA depends on if the Internet site is one that is "dedicated to theft of U.S. property." An intellectual property right holder who is "harmed by" the activities of such an Internet site is classified by SOPA as a "qualifying plaintiff." SOPA provides a definition of the term "Internet site is dedicated to theft of U.S. property" to mean 1. an Internet site, or a portion thereof, that is a U.S.-directed site and is used by users within the United States; and 2. either: a. "the U.S.-directed site is primarily designed or operated for the purpose of, has only limited purpose or use other than, or is marketed by its operator or another acting in concert with that operator for use in, offering goods or services in a manner that engages in, enables, or facilitates:" (1) copyright infringement, (2) circumvention of copyright protection systems, or (3) the sale, distribution, or promotion of goods, services, or materials bearing a counterfeit mark, or b. the operator of the U.S.-directed site: i. "is taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the U.S.-directed site to carry out acts that constitute" copyright infringement or circumvention of copyright protection systems, or ii. "operates the U.S.-directed site with the object of promoting, or has promoted, its use to carry out acts that constitute" copyright infringement or circumvention of copyright protection systems, "as shown by clear expression or other affirmative steps taken to foster infringement." Subsection 103(b) of SOPA authorizes a qualifying plaintiff to send written notifications to payment network providers and Internet advertising services regarding an Internet site that is dedicated to the theft of U.S. property. Such notification must, among other things, include the following items: Identify the Internet site that is allegedly dedicated to the theft of U.S. property, including the domain name or Internet Protocol address of such site. Identify specific facts to support a claim that the Internet site is dedicated to theft of U.S. property, and that "clearly show that immediate and irreparable injury, loss, or damage will result to the holder of the intellectual property right harmed by the activities" of such Internet site "in the absence of timely action by the payment network provider or Internet advertising service." "Information reasonably sufficient to establish that the payment network provider or Internet advertising service is providing payment processing or Internet advertising services for such site." "A statement that the holder of the intellectual property right has a good faith belief that the use of the owner's works or goods in which the right exists, in the manner described in the notification, is not authorized by the holder, its agent, or law." A payment network provider or Internet advertising service is required to "take technically feasible and reasonable measures, as expeditiously as possible, but in any case within 5 days after" delivery of the notification, that are, respectively, "designed to prevent, prohibit, or suspend its service from completing payment transactions involving customers located within the United States and the Internet site" or "prevent its service from providing advertisements to or relating to the Internet site." The owner/operator of the Internet site may file a "counter notification" to the payment network provider or Internet advertising service that states (under penalty of perjury) that the owner/operator/registrant of the Internet site "has a good faith belief that it does not meet the criteria of an Internet site dedicated to theft of U.S. property." SOPA provides liability (in the form of damages, costs, and attorneys' fees) for any provider of a notification or counter notification who, respectively, knowingly materially misrepresents that a site is an Internet site dedicated to the theft of U.S. property, or that such site does not meet the criteria of an Internet site dedicated to the theft of U.S. property. If a counter notification is filed, or if a payment network provider or Internet advertising service fails to comply with its obligations upon receiving the notification, Section 103(c) of SOPA allows the qualifying plaintiff to commence an in personam action against the registrant of the domain name used by the Internet site, or the owner/operator of the Internet site. If the qualifying plaintiff cannot find these individuals through due diligence, he or she may bring an in rem action against the Internet site or the domain name used by such site. SOPA authorizes federal district courts, following the commencement of this action by the qualifying plaintiff, to issue a temporary restraining order, a preliminary injunction, or an injunction against the registrant/owner/operator of the Internet site, to cease and desist from undertaking any further activity as an Internet site dedicated to theft of U.S. property. A qualifying plaintiff who obtains prior approval of the court may serve a copy of the court's cease and desist order on payment network providers and Internet advertising services, which are then required to take the same measures as required of these parties under the action brought by the Attorney General described above. If the qualifying plaintiff demonstrates to the federal court probable cause to believe that any of these third parties that received the court order has not complied with its obligations, the court shall require the entity to explain why an order should not be issued directing it to comply with the obligations and to impose a monetary sanction. An entity against whom this relief is sought may establish an affirmative defense by showing that it does not have the technical means to comply without incurring an unreasonable economic burden. SOPA would require courts to follow Rule 65 of the Federal Rules of Civil Procedure (FRCP) in deciding whether to issue injunctive relief in either an action brought by the Attorney General against a nondomestic entity, or an action brought by a qualifying plaintiff against domestic or nondomestic parties. Rule 65 of the FRCP provides that a "court may issue a preliminary injunction only on notice to the adverse party," and that a "court may issue a temporary restraining order without written or oral notice to the adverse party or its attorney only if: (A) specific facts in an affidavit or a verified complaint clearly show that immediate and irreparable injury, loss, or damage will result to the movant before the adverse party can be heard in opposition; and (B) the movant's attorney certifies in writing any efforts made to give notice and the reasons why it should not be required." Thus, Rule 65 requires that, prior to the issuance of a preliminary injunction, the party that is the target of the injunction is entitled to notice and an opportunity to be heard. However, an ex parte temporary restraining order (with no notice to the adverse party) may be granted if the party seeking the order satisfies the stringent requirements described above. SOPA requires the Attorney General to provide notice of the alleged violation and intent to proceed under the act to the registrant of the domain name or to the owner/operator of the Internet site, by using the postal or email address of the registrant/owner or by some other means that the court finds necessary. The bill requires qualifying plaintiffs to provide similar notice. SOPA provides immunity from liability to third parties for their actions taken to reasonably comply with the court order. Any person bound by the court order (registrant of the domain name, owner/operator of the Internet site, service provider, Internet search engine, payment network provider, Internet advertising service) may file a motion with the court to modify, suspend, or vacate the order; the court may grant such relief if the court finds that either (1) the Internet site associated with the domain name is no longer, or never was, a foreign infringing site, or (2) the interests of justice require it. To encourage certain third parties to "self-police," SOPA provides immunity from any cause of action for service providers, payment network providers, Internet advertising services, Internet search engines, domain name registries, or domain name registrars, that voluntarily take action against an Internet site, so long as they act in the reasonable belief that (1) the Internet site is a foreign infringing site or is dedicated to theft of U.S. property, and (2) the action is consistent with the entity's terms of service or other contractual rights. SOPA also provides immunity from liability to service providers, payment network providers, Internet advertising services, advertisers, Internet search engines, domain name registries, or domain name registrars, when they, in good faith and based on credible evidence, stop providing or refuse to provide services to "an Internet site that endangers the public health." "An Internet site that endangers the public health" is defined by subsection (c) to mean an Internet site that is primarily designed or operated for the purpose of, has only limited purpose or use other than, or is marketed by its operator for use in (1) offering/selling/dispensing/distributing prescription medicine without a valid prescription, or (2) offering/selling/dispensing/distributing prescription medicine that is adulterated or misbranded. SOPA requires the Register of Copyrights to "conduct a study on the enforcement and effectiveness of this title and on any need to amend the provisions of this title to adapt to emerging technologies." SOPA also requires the Intellectual Property Enforcement Coordinator (IPEC), in consultation with the Secretaries of the Treasury and Commerce, the United States Trade Representative, the Chairman of the Securities and Exchange Commission, and the heads of other departments and appropriate agencies, to identify and conduct an analysis of notorious foreign infringers whose activities cause significant harm to holders of intellectual property rights in the United States. The IPEC is required to submit a report to Congress that includes, among other things, "an examination of whether notorious foreign infringers have attempted to or succeeded in accessing capital markets in the United States for funding or public offerings," and "whether notorious foreign infringers that engage in significant infringing activity should be prohibited by the laws of the United States from seeking to raise capital in the United States, including offering stock for sale to the public." Section 201 of SOPA would amend the criminal copyright statutes (17 U.S.C. §506, 18 U.S.C. §2319) to provide additional criminal penalties for unlawful public performances of copyrighted works over the Internet using technology such as "streaming." This section authorizes a maximum five-year prison sentence for those who, without authorization, willfully stream commercially valuable copyrighted material for purposes of commercial advantage or private financial gain. In addition, this section would authorize misdemeanor and felony penalties for non-commercial willful public performance by means of digital transmission, during any 180-period, of 1 or more copyrighted works, where the total retail value of the public performance exceeds $1,000. For a detailed analysis and discussion of the changes that Section 201 would make to existing law, see CRS Report R41975, Illegal Internet Streaming of Copyrighted Content: Legislation in the 112 th Congress , by [author name scrubbed]. Section 202 of SOPA would amend 18 U.S.C. Section 2320 (the criminal offense of trafficking in counterfeit goods or services) to include the intentional importation, exportation, or trafficking of counterfeit drugs. This section also provides penalties if this criminal offense involves a good or service that, "if it malfunctioned, failed, or was compromised, could reasonably be foreseen to cause" (1) serious bodily injury or death, (2) disclosure of classified information, (3) impairment of combat operations, or (4) other significant harm, to a member of the Armed Forces, law enforcement agency, or national security or critical infrastructure. In order for a person to be liable under this new provision, the person must possess "knowledge that the good or service is falsely identified as meeting military standards or is intended for use in a military or national security application, or a law enforcement or critical infrastructure application." Section 203 of SOPA would increase the penalties for the criminal offense of theft of trade secrets by someone who intends or knows that the offense will benefit any foreign government (18 U.S.C. §1831(a)), from the existing 15 years in prison to 20 years, and from a $500,000 fine to "not less than $1,000,000 and not more than $5,000,000." If this offense is committed by organizations, the penalty is changed from the existing fine of "not more than $10,000,000" to "not more than the greater of $10,000,000 or 3 times the value of the stolen trade secret to the organization (including expenses for research and design or other costs of reproducing the trade secret that the organization has thereby avoided)." Section 204 of SOPA directs the U.S. Sentencing Commission to review and, if appropriate, amend the Federal Sentencing Guidelines and policy statements applicable to persons convicted of intellectual property offenses, trafficking in counterfeit goods or services, and economic espionage. Section 205 of SOPA directs the Secretary of State and the Secretary of Commerce, in consultation with the Register of Copyrights, to "ensure that the protection in foreign countries of the intellectual property rights of United States persons is a significant component of United States foreign and commercial policy in general, and in relations with individual countries in particular." This section also requires the Secretary of State and the Secretary of Commerce, in consultation with the Register of Copyrights, to "appoint at least one intellectual property attaché to be assigned to the United States embassy or diplomatic mission (as the case may be) in a country in each geographic region covered by a regional bureau of the Department of State." Numerous concerns have been raised about the provisions of the PROTECT IP Act and SOPA by a variety of organizations, including human rights and civil liberties groups, technology companies, law professors, public interest groups, and consumer organizations. These concerns, and the responses by the legislation's supporters (the bills' sponsors as well as organizations representing intellectual property rights holders, labor unions, and small and large businesses that manufacture and sell goods), can be organized broadly into the following categories. Some commentators are concerned that the expansive definitions used by the bills to describe an Internet site that is "dedicated to infringing activity" (PROTECT IP Act) or an Internet site that is "dedicated to theft of U.S. property" (SOPA) could impact non-infringing content that is legitimate speech protected by the First Amendment. Editorials from several major newspapers have also expressed serious reservations about the overly broad definitions. Others claim that the legislation will give owners of copyrighted content "broad censorship powers." These concerns are heightened by fears that the act provides insufficient legal process. Opponents of the legislation argue that repressive foreign regimes could cite U.S. domain name seizures to justify online suppression of speech. Eric Schmidt, executive chairman of Google, compared the domain name blocking approach to China's attempts to stifle free speech. He warned that any legislative measure that authorizes domain name blocking could set a disastrous precedent if done the wrong way. There is concern that backing away from an open and global Internet could set "a precedent for other countries ... to use DNS [domain name system] mechanisms to enforce a range of domestic policies, erecting barriers on the global medium of the Internet. Non-democratic regimes could seize on the precedent to justify measures that would hinder online freedom of expression and association." However, supporters of the legislation note that "[a]ll existing copyright protections are applicable to the Internet" and that "injunctions are a longstanding, constitutionally sanctioned way to remedy and prevent copyright violations." The Register of Copyrights also has stated that she does not believe that shutting down a website that is devoted to infringing activity would violate the First Amendment or that it constitutes censorship, yet she also stressed that "[c]are must be taken to ensure that noninfringing expression is not unnecessarily suppressed and that the relief is effective but narrowly tailored." Supporters also point to Supreme Court precedents in favor of injunctions for copyright infringement, even when the copyrighted material is a matter of public debate. Nevertheless, these supporters concede that "the most troublesome First Amendment concerns" would be raised "where an entire website could be blocked or seized for a single, or just a few, [infringing] offenses." Yet they assert that neither the PROTECT IP Act nor SOPA would permit such an result. In addition, supporters of the legislation argue that the legislation provides sufficient procedural protections by incorporating Rule 65 of the Federal Rules of Civil Procedure as the basis for governing the process by which federal judges may issue a temporary restraining order, preliminary injunction, or injunction. As explained earlier in this report, Rule 65 provides certain procedural safeguards, including requiring notice to the allegedly infringing website and providing an opportunity for that party to be heard and defend themselves before an order is issued. Foreign entities would be entitled to these same procedural safeguards as U.S.-based website operators. Opponents of the legislation have raised concerns that the bills, if either is enacted into law, may affect the integrity of the Internet. They claim that "DNS blocking itself could affect the Internet's reliability, security, and performance." Other commentators have called the domain name blocking approach ineffective, noting that the Internet sites will still remain available through their Internet protocol addresses: [D]omain name address resolution takes place throughout the Internet, not just by larger ISPs and registries. Indeed, there are as many as a million worldwide domain names "resolvers," and it is unlikely U.S. courts could or would order all of them to comply with a blocking order. But incomplete blocking could seriously undermine the integrity of this key feature of the Web's architecture, incentivizing truly rogue Web site operators to use shadow registration systems or simply forgo domain names and rely solely on IP addresses. A group of Internet network engineers have argued that DNS filtering requirements under both bills "is incompatible with" implementation of the new security protocols known as DNS Security Extensions (DNSSEC), which have been promoted and supported by the federal government to further national cybersecurity goals. They warn that "[a] legal mandate to operate DNS servers in a manner inconsistent with end-to-end DNSSEC would therefore interfere with the rollout of this critical security technology and stifle this emerging platform for innovation." Supporters respond that taking down infringing Internet sites is akin to "whac-a-mole" and that the law must provide sufficient authority to combat this problem. Furthermore, supporters believe the DNS blocking provisions of the legislation are key to preventing foreign sites from infringing American intellectual property rights: Reaching sites originating outside the U.S. is critical to fighting a worldwide epidemic that is destroying the ability of the [content owners] to obtain the financing needed to produce future [content].... Internet sites that steal and distribute American intellectual property are often foreign-owned and operated, or reside at domain names that are not registered through a U.S.-based registry or registrar, setting them outside the scope of U.S. law enforcement. The Justice Department and rights holders are currently limited in their options for legal recourse, even when the website is directed at American consumers and steals American-owned intellectual property. Supporters also observe that site blocking and filtering technology that is often used to combat spam, malware, and viruses, have had "no adverse impact on the Internet." Furthermore, they argue that there is no technical reason why DNS filtering and DNSSEC need to be incompatible; rather, network engineers can and will find a way to make the required changes to the DNSSEC code to ensure no such conflict occurs. There is considerable consternation from opponents of the legislation that the problems they have identified will be exacerbated by including the new enforcement mechanisms available to intellectual property rights holders. They worry that content owners will use the private right of action to stifle Internet innovation and protect outdated business models. "[T]he Internet and digital technologies can be highly disruptive of traditional business models for reasons having nothing to do with infringement." Additionally, technology companies are concerned that they will be unable to cope with thousands of suits from content owners. They argue that these suits will overwhelm their ability to handle requests and ultimately increase costs for consumers. "We believe that the currently proposed private litigation-based process will, however unintentionally, become a one-sided litigation machine with rights owners mass-producing virtually identical cases against foreign domain names for the purpose of obtaining orders to serve on U.S. payment and advertising companies." Proponents of the legislation argue that online infringement is rampant and that law enforcement lacks the resources to deter infringing activities. Additionally, they point out that in an action brought by a qualifying plaintiff, the court order may only be served on payment processors and online advertisers to require them to cut off financial ties to the Internet site; therefore, content owners lack the power under either bill to block domain names or websites. In contrast, the Attorney General can serve the court order on DNS operators (PROTECT IP Act), service providers (SOPA), and search engines to require them to prevent access to infringing websites (in addition to having the authority to serve the court order on the financial intermediaries). As the Register of Copyrights has explained, the enforcement structure provided by the bills: appropriately provides much broader tools and flexibility to the Attorney General than it provides to copyright owners. This is a sound policy choice at this time. The Department of Justice has experience fighting online infringers, will use resources carefully, must exercise prosecutorial discretion in bringing actions, and must plead its case to the court and obtain a court-issued order before proceeding. Put another way, while the copyright industries are extremely important (and certainly a point of pride with respect to the U.S. economy), [the legislation] recognizes that many sectors rely on, invest in, and contribute to the success of the Internet. It is for this reason that [the legislation] puts only limited tools in the hands of copyright owners, and provides the Attorney General with the sole authority to seek orders against search engines and Internet service providers. Section 512(m) of the Digital Millennium Copyright Act (DMCA) (17 U.S.C. §512(m)) explains that a service provider that seeks a safe harbor from liability (as described earlier in this report) is not required to "monitor[] its service or affirmatively seek[] facts indicating infringing activity" as a condition of enjoying such safe harbor. Critics of SOPA note that, unlike the PROTECT IP Act, SOPA appears to effectively repeal 17 U.S.C. Section 512(m) and erode the safe harbor protections available to many Internet companies under the DMCA with its definition of an "Internet site [] dedicated to theft of U.S. property" (applicable to actions by qualifying plaintiffs). Such definition includes an operator of a U.S.-directed site that "is taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the U.S.-directed site to carry out acts that constitute" copyright infringement or circumvention of copyright protection systems. In the view of SOPA's critics, this definition would mean that companies that host user-generated content websites (such as YouTube) and operators of cloud computing storage services (such as Dropbox) would need to monitor, filter, and otherwise police user behavior for infringing activities, in order to avoid being covered by the definition. In addition, while SOPA does not directly modify the DMCA safe harbor provisions, SOPA "creates uncertainty about whether court orders issued against 'foreign infringing sites' and 'sites dedicated to theft' might disqualify an online service provider from the DMCA safe harbors." This "legal uncertainty for Internet companies" means that "SOPA will significantly deter current and future Internet businesses from investing in new ventures." Others point out that although the "notice and takedown" provisions of the DMCA may be abused by content owners making erroneous claims, the consequence is the blocking or removal of such content, whereas under SOPA's notification process available to qualifying plaintiffs, the consequence for false claims is that the money to the website is stopped. They note that such funds (that the website may depend on to exist) may be cut off merely "based on an allegation of harm that falls short of an allegation of infringement." Supporters of SOPA observe that while the DMCA has worked well for copyright holders and service providers to address online infringement, the DMCA's "notice and takedown" procedures are ineffective against foreign rogue sites; furthermore, the DMCA does not apply to trademark infringement and does not address the use of financial intermediaries such as payment processors and Internet advertising services. Other supporters contend that SOPA's notification process is less likely to be misused than the DMCA's "notice and takedown" procedure, because under the latter, a service provider has an incentive to remove infringing content in order to preserve its safe harbor from liability. In contrast, Internet advertisers and payment processors "don't have business incentives to comply with bad faith notices under SOPA. Each site they are ordered to block is, presumably, a paying customer or revenue source." Thus, not many such companies would be willing to "rubber-stamp any and every order that cuts into their bottom line without some way of making sure the site at issue is one that genuinely falls within the scope of" SOPA. Other supporters disagree that SOPA will diminish investment in new technology ventures or stifle innovation. They believe that "strong copyright law promotes innovation," and observe that "[m]any of the loudest voices opposing rogue sites legislation are the same critics who predicted disaster in the wake of the DMCA, the NET Act (No Electronic Theft Act), and the unanimous Supreme Court decision in Grokster . Yet since those events occurred, the Internet has grown by leaps and bounds, innovation is off the charts and access to technology is at an all time high." As noted earlier in this report, House Judiciary Chairman Lamar Smith released a manager's amendment in the nature of a substitute to H.R. 3261 on December 12, 2011. The manager's amendment offers several substantial changes to SOPA, several of which would more closely align the provisions of SOPA with those in the PROTECT IP ACT, including the following: Adds additional savings clauses, including one that clarifies that nothing in title I of SOPA shall be construed to impose a duty on service providers to monitor activity on their network or service. Another savings clause specifies that service providers are not required take actions that would impair the security or integrity of the domain name system. Removes the non-judicial "written notification procedure" that was originally available to rights holders, leaving only one private enforcement mechanism for rights holders under SOPA (the same one provided by the PROTECT IP Act)– they must seek the authorization of a court in order to create a legal obligation on the part of payment processors and Internet advertisers to cease doing business with the offending website. Revises SOPA's definition of a "U.S.-directed site" to expressly require that the website be a foreign Internet site, thus removing domestic websites from the scope of the act's provisions. (Note that the PROTECT IP Act permits private plaintiff actions against domestic websites). Changes the definition of "foreign infringing site" (which applies to the Section 102 action by the Attorney General) to remove the requirement that the owner/operator of the site is committing or facilitating the commission of criminal trademark and copyright infringement. Instead, the definition of a "foreign infringing site" is a website that "is being operated in a manner that would, if it were a domestic Internet site, subject it (or its associated domain name) to seizure or forfeiture in the United States" under exiting law. Changes the definition of an "Internet site dedicated to theft of U.S. property" (which applies to the Section 103 action by private plaintiffs) to require that in order for a website to meet such definition, the website's violation of copyright must be for purposes of commercial advantage or private financial gain. (The PROTECT IP Act does not contain such a requirement). In addition, the revised definition eliminates SOPA's original language that would have encompassed a website offering goods or services in a manner that "engages in, enables, or facilitates" infringement. (The PROTECT IP Act uses these three verbs in its definition of an Internet site dedicated to infringing activities.). Finally, the revised definition drops language that would have included a website that "is taking, or has taken, deliberate actions to avoid confirming a high probability of the use of the U.S.-directed site to carry out acts that constitute" copyright infringement or circumvention of copyright protection systems. Provides a new section (Section 104) that states: "In any case in which only a specifically identified portion of an Internet site is identified by the court as a foreign infringing site or as an Internet site dedicated to theft of U.S. property, and made subject to an order [under section 102 and 103], the relief granted under such subjection, and the obligations of any entity served with a copy of an order … shall be confined to that specified portion so identified and made subject to the order. Nothing in the order shall be interpreted to impose obligations on any entity served with a copy of the order with respect to any other portion of an Internet site not specified in the order." Deletes SOPA's original requirement that service providers take "measures designed to prevent the domain name of the foreign infringing site (or portion thereof) from resolving to that domain name's Internet Protocol address." Instead, the manager's amendment allows a service provider to take "such measures as it determines to be the least burdensome, technically feasible, and reasonable means designed to prevent access by its subscribers located within the United States to the foreign infringing site that is subject to the order." Deletes SOPA's "5 day" time limit within which third parties would have had to satisfy their obligations to take actions against the foreign infringing site; rather, the manager's amendment provides that "[s]uch actions shall be taken as expeditiously as possible." On December 17, 2011, Senator Wyden, along with Senators Cantwell and Moran, introduced S. 2029 , the Online Protection and Enforcement of Digital Trade Act (OPEN Act), to serve as an alternative to the PROTECT IP Act and SOPA. S. 2029 has been referred to the Senate Committee on Finance. On January 18, 2012, Representative Darrell Issa introduced a version of the OPEN Act in the House, H.R. 3782 , which is nearly identical to S. 2029 . H.R. 3782 has been jointly referred to the House Ways and Means Committee and to the House Judiciary Committee. The following is a brief summary of the key provisions of the OPEN Act. Section 337 of the Tariff Act of 1930 (19 U.S.C. §1337), as amended, prohibits unfair methods of competition or other unfair acts in the importation of products into the United States. It also prohibits the importation of articles that infringe valid U.S. patents, copyrights, processes, trademarks, or protected design rights. The International Trade Commission (ITC) is an independent, quasi-judicial federal government agency responsible for investigating and arbitrating complaints of unfair trade practices under section 337. The primary remedy employed by the ITC is to order the U.S. Customs and Border Protection (CBP) to stop imports from entering the border. Additionally, the ITC may issue cease and desist orders against individuals determined to be violators of intellectual property rights. The majority of unfair competition acts asserted under Section 337 involve allegations of patent infringement. The OPEN Act would amend the Tariff Act of 1930 to insert after Section 337 a new section 337A, entitled "Unfair Trade Practices Relating to Infringement of Copyrights and Trademarks By Certain Internet Sites." The OPEN Act defines "infringing activity" to mean an activity that constitutes copyright infringement; circumvention of copyright protection systems; or the sale, distribution, or promotion of goods, services, or materials bearing a counterfeit mark. It defines an "Internet site dedicated to infringing activity" to mean an Internet site that is (1) foreign, (2) conducts business directed at U.S. residents, and (3) "has only limited purpose or use other than engaging in infringing activity and whose owner or operator primarily uses the site" to willfully commit copyright infringement, circumvent copyright protection systems, or use counterfeit marks on products and services (emphasis added). The OPEN Act provides several exclusions from this definition of an "Internet site dedicated to infringing activity," including (1) if the Internet site has a practice of complying with DMCA notice and takedown requests, (2) if the Internet site qualifies for a Section 512 DMCA safe harbor from liability, or (3) if the Internet site distributes content and goods that do not infringe a copyright or trademark. The OPEN Act declares that it is an unfair practice in import trade, and thus a violation of the new section 337A that it would add to the Tariff Act of 1930, for an Internet site dedicated to infringing activity to facilitate imports into the United States. The ITC would be empowered to make the determination as to whether there has been such a violation. The only websites that may be investigated by the ITC are ones that have a nondomestic domain name; if the ITC discovers that the accused domain name is a domestic one, the ITC is required to terminate or not initiate the investigation and then refer the matter to the Attorney General for further proceedings as the Attorney General determines is appropriate. In addition, the OPEN Act requires the ITC to terminate, or not initiate, an investigation of a domain name if the operator of the associated Internet site provides a legal notice on the site that states that the operator consents to the jurisdiction and venue of the U.S. district courts. The OPEN Act charges the ITC with the power and duty to investigate an alleged violation on its own initiative or upon receiving a complaint filed by a rights holder. An owner of a copyright or trademark that is the subject of the infringing activity on a nondomestic website may file a complaint with the ITC alleging, under oath, that the Internet site dedicated to infringing activity is being operated or maintained in violation of section 337A. The OPEN Act requires the complainant to send a notice of the complaint to the registrant of the domain name at its postal and e-mail addresses, if they are reasonably available. In addition, the OPEN Act specifies that the complaint must identify (and notify) any financial transaction provider or Internet advertising company that may be required to take measures against the offending website, if the ITC determines that there has been a section 337A violation. The OPEN Act requires the ITC to determine, with respect to each section 337A investigation, whether or not the Internet site is operated or maintained in violation of section 337A. Final ITC determinations may be appealed to the U.S. Court of Appeals for the Federal Circuit. The Senate version of the OPEN Act also provides the President with an opportunity to disapprove of any ITC determination "for policy reasons" no later than 60 days after the determination is made; such presidential disapproval nullifies the determination. In contrast, the House version of the OPEN Act allows the President to disapprove of any ITC determination "for policy reasons" at any time after the ITC has made a determination regarding a foreign website. The OPEN Act permits the ITC, in administering a section 337A proceeding, to allow the submission of information electronically, hold hearing electronically or obtain testimony electronically, or "by such means as the Commission determines allows participation in proceedings … at as low a cost as possible to participants in the proceedings." The OPEN Act provides the ITC with the power to issue an order against the Internet site dedicated to infringing activity to cease and desist such activity, after the ITC makes the determination that such Internet site is in violation of the new section 337A. The ITC may grant a temporary or preliminary cease and desist order against the Internet site if the complainant files with the ITC chairperson (or his designee) a petition requesting such order. The OPEN Act mandates that the ITC chairperson, prior to issuing a temporary or preliminary cease and desist order, must give the owner/operator of the Internet site an opportunity to be heard (which may include submitting information electronically). The ITC chairperson may issue such an order if he determines that "there is reason to believe" that an Internet site dedicated to infringing activity is operated or maintained in violation of section 337A. The OPEN Act specifies that the ITC chairperson follow the provisions of rule 65 of the Federal Rules of Civil Procedure in deciding whether to issue the temporary or preliminary cease and desist order. If the complainant makes a showing of "extraordinary circumstances," the ITC chairperson may make a determination regarding the petition for a temporary cease and desist order on an expedited basis; otherwise, the ITC chairperson is required to make a determination within 30 days. The cease and desist order may last no longer than 14 days after its issuance, although the ITC chairperson may extend the order for additional periods of 14 days for good cause or with consent of the entity against which the order is issued. In order to discourage the filing of frivolous petitions for temporary or preliminary cease and desist orders, the ITC chairperson may require the complainant to post a bond; such bond may be forfeited to the owner of the Internet site if the ITC later determines that the Internet site was not in violation of section 337A. If the ITC "reasonably believes that a financial transaction provider or an Internet advertising service" is supplying services to an Internet site that is subject to a cease and desist order, the ITC may allow the complainant to serve a copy of the order upon the financial transaction provider or Internet advertising service. Upon receipt of the order, financial transaction providers must take measures, as expeditiously as reasonable, to prevent or prohibit completion of payment transactions by the provider to the Internet site, and Internet advertising services must take technically feasible measures, as expeditiously as reasonable, to cease serving advertisements to the Internet site. The OPEN Act confers immunity from civil actions for these third parties that take any act reasonably designed to comply with these obligations (or that make a good faith effort to comply). The Attorney General may bring an action for injunctive relief against any person subject to a cease and desist order who knowingly and willfully fails to comply with the order. A defendant in such an action may assert an affirmative defense that the defendant lacks the technical means to comply with the order without incurring an unreasonable economic burden. The OPEN Act also confers immunity from liability (under any federal or state law) to a financial transaction provider or Internet advertising service for ceasing or refusing to provide services to an Internet site that the providers believe (in good faith and based on credible evidence) to be an Internet site that is primarily designed for the purpose of offering, selling, dispensing, or distributing any prescription medication without a valid prescription. (The PROTECT IP Act and SOPA contain a similar provision, although the two bills would extend such immunity to service providers, search engines, domain name registries and registrars in addition to financial transaction providers and Internet advertising companies.). The OPEN Act allows the ITC to appoint hearing officers, to be called "section 337 judges," to preside at the taking of evidence at section 337 and 337A hearings and to make initial and recommended decisions in investigations brought under section 337 and 337A of the Tariff Act of 1930. A section 337 judge is required to possess a minimum of seven years of legal experience and be licensed to practice law; the OPEN Act allows the ITC to promulgate regulations regarding other qualifications of the section 337 judges, including technical expertise and experience in IP matters. While the PROTECT IP Act and SOPA rely primarily on the authority of federal judiciary for their enforcement measures, the OPEN Act places the responsibility of addressing online piracy and counterfeiting upon the International Trade Commission. In addition, the OPEN Act does not apply to Internet service providers and search engines and thus does not require or encourage domain name system filtering as a potential action against offending websites. The OPEN Act also only applies to foreign websites, whereas the PROTECT IP Act (as reported) and SOPA (as introduced) could apply to domestic websites in certain circumstances. Finally, the OPEN Act does not provide rights holders with a private right of action against rogue websites in federal courts; rights holders instead must seek relief through the ITC.
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The global nature of the Internet offers expanded commercial opportunities for intellectual property (IP) rights holders but also increases the potential for copyright and trademark infringement. Piracy of the content created by movie, music, and software companies and sales of counterfeit pharmaceutical drugs and consumer products negatively impact the American economy and can pose risks to the health and safety of U.S. citizens. Although rights holders and law enforcement agencies currently have some legal tools to pursue domestic infringers, they face difficult challenges in enforcing IP laws against actors located abroad. Many websites trafficking in pirated copyrighted content or counterfeit goods are registered and operate in foreign countries. These foreign "rogue sites" sell subject matter that infringes U.S. copyrights and trademarks to U.S. consumers, yet the website operators remain beyond the reach of U.S. courts and authorities. Some believe that legislation is necessary to address the jurisdictional problem of holding foreign websites accountable for piracy and counterfeiting. On May 12, 2011, Senator Leahy introduced S. 968, the Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act (PROTECT IP Act), that would allow the Attorney General to seek an injunction from a federal court against a domain name used by a foreign website that engages in, enables, or facilitates infringement; such court order may then be served on U.S.-based domain name servers, Internet advertisers, search engines, and financial transaction providers, which would be required to take actions such as preventing access to the website or suspending business services to the site. IP rights holders may also sue to obtain a cease and desist order against the operator of an Internet site dedicated to infringement (whether domestic or foreign) or the domain name itself. On October 26, 2011, Representative Lamar Smith introduced H.R. 3261, the Stop Online Piracy Act (SOPA). SOPA is similar to the PROTECT IP Act yet is broader in scope by including several provisions not found in S. 968, such as those that increase the criminal penalties for online streaming of copyrighted content, create criminal penalties for trafficking in counterfeit drugs, and require the appointment of dedicated IP personnel in U.S. embassies. There has been considerable public debate about the PROTECT IP Act and SOPA. Critics claim these measures amount to "Internet censorship" and that they would impair free speech. There are also concerns that the legislation will disrupt the technical integrity of the Internet. Supporters of the bills argue that in order to reduce digital piracy and online counterfeiting, new enforcement mechanisms are vital for U.S. economic growth and needed to protect public health and safety. After intense lobbying against the legislation, Senator Reid on January 20, 2012, postponed a cloture vote that had been scheduled for the PROTECT IP Act, and Representative Smith announced that the House Judiciary Committee would similarly postpone consideration of SOPA, until a compromise could be reached between supporters and opponents of the legislation. An alternative to these bills is the Online Protection and Enforcement of Digital Trade Act (OPEN Act; S. 2029, H.R. 3782) that would authorize the International Trade Commission (ITC) to investigate foreign websites that allegedly engage in willful IP infringement. The ITC may issue a cease and desist order against the infringing foreign website; such an order may be used by the rights holder to oblige financial transaction providers or Internet advertising services to stop doing business with the website. Unlike the PROTECT IP Act and SOPA, the OPEN Act does not apply to domestic websites and also would not require search engines or domain name servers to block access or disable links to foreign websites.
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This report focuses on FY2016 appropriations for Interior, Environment, and Related Agencies. It first presents a brief overview of the agencies in the bill. It then describes the appropriations enacted for FY2016 in Division G of the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ), on December 18, 2015. The report next sets out earlier action on FY2016 funding for Interior, Environment, and Related Agencies. This section includes a description of the appropriations requested by the President for FY2016 and a comparison of the President's request and appropriations enacted for FY2015. It also includes a comparison of the FY2016 appropriations reported by the House and Senate Appropriations Committees with each other, with FY2015 enacted appropriations, and with FY2016 appropriations requested by the President. Appropriations are complex. For example, budget justifications for requests for some agencies are large, numbering several hundred pages and containing numerous funding, programmatic, and legislative changes for congressional consideration. Further, appropriations laws provide funds for numerous accounts, activities, and subactivities, and the accompanying explanatory statements provide additional directives and other important information. This report does not provide account- and subaccount-level information or detail of budgetary reorganizations or legislative changes enacted in law or proposed by the President, the House Appropriations Committee, or the Senate Appropriations Committee. For information on FY2016 appropriations for a particular agency or for individual accounts, programs, or activities administered by a particular agency, contact the key policy staff listed at the end of this report. The annual Interior, Environment, and Related Agencies appropriations bill includes funding for agencies and programs in three separate federal departments as well as numerous related agencies. The Interior bill typically contains three primary titles. Title I provides funding for most Department of the Interior (DOI) agencies, many of which manage land and other natural resource or regulatory programs. Title II contains appropriations for the Environmental Protection Agency (EPA). Title III funds about 20 agencies in other departments, such as the Forest Service in the Department of Agriculture and the Indian Health Service in the Department of Health and Human Services; arts and cultural agencies, such as the Smithsonian Institution; and various other entities. Title III of the bill is referred to as "Related Agencies." Selected major agencies in the Interior bill are briefly described below. The mission of DOI is to protect and manage the nation's natural resources and cultural heritage; provide scientific and other information about those resources; and exercise trust responsibilities and other commitments to American Indians, Alaska Natives, and affiliated island communities. DOI agencies funded in the Interior bill that carry out this mission include the following: The Bureau of Land Management administers about 245 million acres of public land, mostly in the West, for diverse uses such as energy and mineral development, livestock grazing, recreation, and preservation. The agency is also responsible for about 700 million acres of federal subsurface mineral estate throughout the nation and supervises the mineral operations on about 56 million acres of Indian Trust lands. The Fish and Wildlife Service administers the National Wildlife Refuge System, consisting of 89 million acres of federal land, of which 77 million acres (86%) are in Alaska. It also manages several large marine refuges and marine national monuments, sometimes jointly with other federal agencies. It is the primary agency responsible for implementing the Endangered Species Act (through listing of species; consulting with other federal agencies; collaborating with private entities and state, tribal, and local governments; and through other measures), promoting wildlife habitat, enforcing federal wildlife laws, supporting wildlife and ecosystem science, conserving migratory birds, administering grants to aid state fish and wildlife programs, and coordinating with state, international, and other federal agencies on fish and wildlife issues. The National Park Service administers the National Park System—407 diverse units covering 85 million acres in all 50 states, the District of Columbia, and U.S. territories. Roughly two-thirds of the system's lands are in Alaska. The National Park Service has a dual mission—to preserve unique resources and to provide for their enjoyment by the public. The agency also supports and promotes some resource conservation activities outside the Park System through grant and technical assistance programs and cooperation with partners. The U.S. Geological Survey is a science agency that provides physical and biological information related to geological resources, climate change, and energy, mineral, water, and biological sciences and resources. In addition, it is the federal government's principal civilian mapping agency and a primary source of data on the quality of the nation's water resources. The Bureau of Ocean Energy Management manages development of the nation's offshore conventional and renewable energy resources in the Atlantic, the Pacific, the Gulf of Mexico, and the Arctic. These resources are in areas covering approximately 1.7 billion acres located beyond state waters, mostly in the Alaska region (more than 1 billion acres) but also off all coastal states. The Bureau of Safety and Environmental Enforcement provides regulatory and safety oversight for resource development in the Outer Continental Shelf. Among its responsibilities are oil and gas permitting, facility inspections, environmental compliance, and oil spill response planning. The Office of Surface Mining Reclamation and Enforcement works with states and tribes to reclaim abandoned coal mines. The agency also regulates active coal mines to minimize environmental impacts during mining and to reclaim affected lands and waters after mining. Indian Affairs provides and funds a variety of services to federally recognized American Indian and Alaska Native Tribes and their members and historically has been the lead agency in federal dealings with tribes. The Bureau of Indian Affairs is responsible for programs that include government operations, courts, law enforcement, fire protection, social programs, roads, economic development, employment assistance, housing repair, irrigation, dams, Indian rights protection, implementation of land and water settlements, and management of trust assets (real estate and natural resources). The Bureau of Indian Education funds an elementary and secondary school system, institutions of higher education, and other educational programs. The mission of EPA is to protect human health and the environment. Primary responsibilities include the implementation of federal statutes regulating air quality, water quality, pesticides, toxic substances, management and disposal of solid and hazardous wastes, and cleanup of environmental contamination. EPA also awards grants to assist states and local governments in implementing federal law and in complying with federal requirements to control pollution. Among the Related Agencies funded in the Interior bill, roughly 95% of the funding is typically provided to the following agencies and organizations: The Forest Service in the Department of Agriculture manages 193 million acres of national forests, national grasslands, and a tallgrass prairie in 44 states and the Commonwealth of Puerto Rico; provides technical and financial assistance to states, tribes, and private forest landowners; and conducts research on sustaining forest resources for future generations. The Indian Health Service in the Department of Health and Human Services provides medical and environmental health services for more than 2 million American Indians and Alaska Natives. Health care is provided through a system of facilities and programs operated by the agency, tribes and tribal organizations, and urban Indian organizations. As of January 2015, the agency operated 28 hospitals, 62 health centers, and 25 health stations. Tribes and tribal organizations, through Indian Health Service contracts and compacts, operated another 18 hospitals, 282 health centers, 80 health stations, and 150 Alaska Native village clinics. Urban Indian organizations operated 33 ambulatory or referral programs. The Smithsonian Institution is a museum and research complex consisting of 19 museums and galleries, the National Zoo, and nine research facilities throughout the United States and around the world. Almost 27 million people visited Smithsonian facilities in 2014. Established by federal legislation in 1846 with the acceptance of a trust donation by the institution's namesake benefactor, the Smithsonian is funded by both federal appropriations and a private trust, with nearly $1.36 billion in total revenue from all sources of funding for FY2014. The National Endowment for the Arts and the National Endowment for the Humanities make up the National Foundation on the Arts and the Humanities. The National Endowment for the Arts is a major federal source of support for all arts disciplines. Since 1965 it has awarded more than 145,000 grants that have been distributed to all states. The National Endowment for the Humanities generally supports grants for humanities education, research, preservation, and public humanities programs; creation of regional humanities centers; and development of humanities programs under the jurisdiction of state humanities councils. Since 1965, it has awarded almost 63,000 grants. It also supports a Challenge Grant program to stimulate and match private donations in support of humanities institutions. Prior to enactment of FY2016 appropriations for Interior, Environment, and Related Agencies, the Bipartisan Budget Act of 2015 ( P.L. 114-74 ) raised the caps in the Budget Control Act of 2011 ( P.L. 112-25 ) for each type of discretionary spending—defense and nondefense. Specifically, the 2015 law raised the caps by $25 billion in FY2016 (and $15 billion in FY2017). Thus, consideration of the appropriations legislation enacted for FY2016 was subject to the increased spending limits in the 2015 law. The Consolidated Appropriations Act, 2016, enacted December 18, 2015, provided $32.23 billion for Interior, Environment, and Related Agencies. The total included $452.0 million for the Payments in Lieu of Taxes (PILT) program, which compensates counties and local governments for nontaxable lands within their jurisdictions. Although the enacted appropriation included additional funding for Wildland Fire Management as compared with FY2015, it did not provide for either a new cap adjustment to the discretionary spending limits in law or emergency funding for this purpose, as had been proposed. Agencies received varying amounts of the $32.23 billion total appropriation. For DOI agencies in Title I, appropriations were $12.02 billion. This figure was 37.3% of the total enacted. For EPA, appropriations were $8.14 billion, or 25.3% of the total. For agencies and other entities in Title III, appropriations were $12.07 billion, or 37.5% of the total. Figure 1 identifies the share of the FY2016 enacted appropriations for particular agencies. Moreover, FY2016 appropriations were concentrated on a relatively small subset of agencies. Three agencies—the EPA, Forest Service, and Indian Health Service—received nearly three-fifths (57.8%) of the enacted appropriations. Together with the National Park Service and Indian Affairs, these five agencies received three-quarters (75.3%) of the total FY2016 appropriations. For DOI agencies, appropriations ranged from $74.2 million for the Bureau of Ocean Energy Management to $2.85 billion for the National Park Service. Appropriations for 7 of the 10 DOI agencies were more than $1 billion. The National Park Service and Indian Affairs ($2.80 billion) together accounted for nearly half (47.0%) of the $12.02 billion enacted for DOI agencies. Funding enacted for the 20 Related Agencies in Title III had a wider range, from $1.0 million for the Dwight D. Eisenhower Memorial Commission to $5.66 billion for the Forest Service. The second-largest appropriations figure was for the Indian Health Service, with $4.81 billion, and the next-largest was less than $1 billion—$840.2 million for the Smithsonian Institution. By contrast, six agencies had appropriations of less than $10 million each. The FY2016 total enacted appropriation was a $1.75 billion increase (5.7%) over the FY2015 enacted appropriation of $30.48 billion. Similar to the FY2016 enacted appropriation, the FY2015 enacted appropriation included funding for PILT—$372.0 million for FY2015. FY2016 enacted appropriations for all DOI agencies increased by $925.5 million (8.3%), with all 10 DOI agencies receiving additional funding above the FY2015 levels. The National Park Service and Indian Affairs received the largest dollar increases. An increase of $236.6 million (9.1%) above the FY2015 enacted level for the National Park Service was provided in anticipation of increased visitation for the agency's centennial in 2016 and for grants to states for outdoor recreation (through the Land and Water Conservation Fund), construction and maintenance, and other programs. An increase of $194.6 million (7.5%) for Indian Affairs was included for various activities, among them public safety and justice, contract support costs, education, and construction of educational facilities. FY2016 total enacted appropriations for EPA were the same as the FY2015 enacted appropriations. All EPA accounts were funded at FY2015 levels, with the exception of the account for State and Tribal Assistance Grants (STAG), which was reduced by $27.0 million overall. In addition, FY2016 appropriations included $27.0 million for purposes of EPA meeting federal requirements for cybersecurity implementation. Most EPA programs and activities within accounts also were funded at FY2015 enacted levels, although some received higher or lower amounts relative to FY2015. FY2016 enacted appropriations for Related Agencies increased by $822.3 million (7.3%) from the FY2015 level. The Forest Service received the largest dollar increase—$608.1 million (12.0%). Most of the increase was for Wildland Fire Management, especially fire suppression under the FLAME Wildfire Suppression Reserve Account. For each agency, Table 1 contains the FY2015 enacted appropriations, amount requested by the President for FY2016, level reported by the House Appropriations Committee in H.R. 2822 for FY2016, level reported by the Senate Appropriations Committee in S. 1645 for FY2016, and level enacted for FY2016 in the Consolidated Appropriations Act, 2016 ( P.L. 114-113 ). For FY2016, the President requested $33.32 billion for the approximately 30 agencies and entities typically funded in the annual Interior, Environment, and Related Agencies appropriations law. For the 10 major DOI agencies in Title I of the bill, the request was $12.09 billion, or 36.3% of the total requested. For EPA, funded in Title II of the bill, the request was $8.59 billion, or 25.8% of the total. For about 20 agencies and other entities typically funded in Title III of the bill, the request was $12.65 billion, or 38.0% of the total. The total requested by the Administration included a proposed $1.05 billion cap adjustment to the discretionary spending limits in law. Of the total proposed adjustment, $200.0 million was for DOI Wildland Fire Management, and $854.6 million was for Forest Service Wildland Fire Management. Appropriations for agencies vary widely for a number of reasons relating to the number, breadth, and complexity of agency responsibilities; alternative sources of funding (e.g., mandatory appropriations); and Administration and congressional priorities, among other factors. Thus, although the President's FY2016 request covered approximately 30 agencies, funding for a small subset of these agencies accounted for most of the total. For example, the requested appropriations for three agencies—EPA, Forest Service, and Indian Health Service—were nearly three-fifths (58.4%) of the total request. Further, more than three-quarters (76.4%) of the request was for these three agencies and two others—National Park Service and Indian Affairs. For DOI agencies, the FY2016 requests ranged from $74.2 million for the Bureau of Ocean Energy Management to $3.05 billion for the National Park Service. The requests for 6 of the 10 agencies exceeded $1 billion. Nearly half (49.4%) of the $12.09 billion requested for DOI agencies was for two agencies—the National Park Service and Indian Affairs ($2.92 billion). For Related Agencies in Title III, the requested funding levels exhibited even more variation. The President sought amounts ranging from $2.0 million for grants under National Capital Arts and Cultural Affairs to $5.78 billion for the Forest Service. The Indian Health Service would be the only other agency to receive more than $5 billion. The next-largest request was for the Smithsonian Institution, at $935.8 million. By contrast, 14 agencies would receive less than $80 million each, including 6 with appropriations of less than $10 million each. Figure 2 identifies the share of the President's request for particular agencies in the Interior bill. Table 2 contains the FY2015 enacted appropriations for each agency, amount requested by the President for FY2016 for each agency, and percentage change from FY2015 as compared with the President's request for FY2016. The President's request of $33.32 billion for FY2016 would have been an increase of $2.85 billion (9.3%) over the total FY2015 enacted appropriations of $30.48 billion. The FY2015 appropriation included $372.0 million for PILT, as noted above, whereas the President did not seek discretionary funding for PILT for FY2016. The FY2016 request would have been an increase of $3.22 billion (10.7%) over FY2015 appropriations of $30.11 billion excluding the PILT funding. Unlike the President's request, the FY2015 enacted appropriation did not include a cap adjustment for Wildland Fire Management. Under the President's proposal, the total for each of the three titles of the bill would have increased above FY2015 by varying amounts. DOI agencies would have received an increase of $994.3 million (9.0%), funding for EPA would have increased by $451.8 million (5.6%), and the total for all Related Agencies in Title III would have increased by $1.40 billion (12.4%). With regard to DOI, the President proposed increases above FY2015 for 9 of the 10 agencies. The increases varied in dollar amount and percentage of appropriations, with the lowest dollar increase of $1.4 million (1.7%) for the Bureau of Safety and Environmental Enforcement and the highest of $433.1 million (16.6%) for the National Park Service. Some of the National Park Service increase was intended to enhance park units in light of the agency's 2016 centennial. Activities that would have received additional funds included park facility operations and maintenance, resource stewardship, visitor services, line item construction, historic preservation, and the centennial challenge (a federal matching program to leverage donations for park units). Only one DOI account, Departmental Offices, would have received an overall decrease ($298.6 million, 30.0%) under the President's FY2016 request. This decrease would have occurred because the President did not seek discretionary funding under this account for PILT, as noted. The other four programs included under this heading would have received increases under the President's proposal, as shown in Table 2 . Within the overall increase for EPA, the President sought additional funds for each of the agency's accounts. The $228.0 million (8.7%) increase for the Environmental Programs and Management account was the largest overall dollar increase proposed for EPA accounts. This account funds a broad array of activities supporting EPA's development and enforcement of pollution control regulations and standards, technical assistance, and administrative and operational expenses. The $65.1 million (6.0%) increase for the Hazardous Substance Superfund account was the second-largest overall dollar increase for EPA accounts. This account supports the assessment and cleanup of sites contaminated from the release of hazardous substances. EPA administers these activities under the Superfund program, as authorized in the Comprehensive Environmental Response, Compensation, and Liability Act of 1980 (CERCLA). Despite the increases the President sought for each EPA account, funding for some programs and activities would have remained level or declined. The largest proposed dollar decrease ($332.9 million, 23.0%) was for grants to states for wastewater infrastructure projects through the Clean Water State Revolving Fund. By contrast, the President sought an increase ($279.1 million, 30.8%) for drinking water infrastructure grants to states through the Drinking Water State Revolving Fund. Although most Title III agencies would have received increases under the President's FY2016 proposal, the three largest agencies would have received the biggest dollar increases. Specifically, the President sought an additional $724.2 million (14.3%) for the Forest Service, $460.6 million (9.9%) for the Indian Health Service, and $116.3 million (14.2%) for the Smithsonian Institution. The proposed Forest Service increase was primarily for suppressing wildland fires and for the National Forest System account. The Indian Health Service would have received increases for many programs and activities, including clinical services, contract support costs, and construction of facilities for health care and sanitation. The Smithsonian Institution's additional funds were to be directed to facilities maintenance, operations, security, revitalization, planning, and design, among other purposes. By contrast, three Title III agencies would have received level funding, and two agencies would have received decreases. H.R. 2822 , as reported by the House Appropriations Committee on June 18, 2015, would have provided $30.23 billion for Interior, Environment, and Related Agencies for FY2016. The total included $452.0 million for PILT. During three days of floor debate, the House considered dozens of amendments to H.R. 2822 . Although 57 of the amendments were agreed to, others were rejected, withdrawn, or considered but not voted upon. No vote on final passage of the bill occurred following a difference of opinion on amendments related to display and sale of the Confederate flag on National Park Service lands. S. 1645 , as reported by the Senate Appropriations Committee on June 23, 2015, would have provided $31.13 billion for Interior, Environment, and Related Agencies. The total included $1.05 billion in emergency appropriations for Wildland Fire Management activities of DOI and the Forest Service. Such emergency funding typically does not count toward a subcommittee's allocation for the bill. S. 1645 was not considered by the Senate. See Table 1 for the House and Senate bill totals as well as agency and title totals. The Senate committee-reported bill was $899.6 million (3.0%) more than the House committee-reported bill. The largest dollar difference was for Wildland Fire Management. S. 1645 included $4.66 billion for DOI and Forest Service Wildland Fire Management, which was $1.08 billion (30.1%) more than the $3.58 billion in H.R. 2822 . Unlike H.R. 2822 , the Senate bill did not include discretionary appropriations for PILT. Other selected differences between the bills are highlighted below. With regard to DOI agencies, H.R. 2822 included $11.43 billion for FY2016, which was $204.3 million (1.8%) more than the $11.23 billion in S. 1645 . The higher House bill total was primarily due to the inclusion of $452.0 million for PILT under DOI Departmental Offices. Of the 10 DOI agencies, S. 1645 recommended higher funding for all but three: Office of Surface Mining Reclamation and Enforcement, Indian Affairs, and Departmental Offices. The $7.60 billion reported in S. 1645 for EPA was $175.2 million (2.4%) more than the $7.42 billion reported in H.R. 2822 . The bills proposed different levels of appropriations for all nine EPA accounts. The Senate bill included higher funding for all accounts except for two—Science and Technology and the Leaking Underground Storage Tank Trust Fund (LUST). The Science and Technology account funds the development of the scientific knowledge and tools to inform EPA's formulation of pollution control regulations, standards, and agency guidance. The LUST account is used in part for preventing and responding to releases from underground storage tanks that contain petroleum. The largest dollar difference was for the Environmental Programs and Management account, with the Senate committee reporting $2.56 billion, or $89.2 million (3.6%) more than the $2.47 billion reported in the House bill. Activities in the account that would have received higher funding in the Senate bill included geographic programs, information exchange/outreach, and legal/science/regulatory/economic review. For all 20 Related Agencies in Title III, the Senate committee-reported bill included $12.31 billion, $928.7 million (8.2%) more than the $11.38 billion included in the House committee-reported bill. The funding recommendations in the two bills were equal for 13 agencies, higher for 5 agencies in the Senate bill, and higher for 2 agencies in the House bill. The overall difference between the two bills was primarily related to the Forest Service, for which the Senate committee reported $5.98 billion—$934.2 million (18.5%) more than the $5.04 billion in H.R. 2822 . The higher funding for Wildland Fire Management in the Senate bill ($867.8 million higher, 32.3%) was the single biggest difference. H.R. 2822 as reported by the House Appropriations Committee recommended decreased appropriations from the FY2015 enacted level, while S. 1645 as reported from the Senate Appropriations Committee recommended an increase above FY2015 enacted appropriations. With regard to the House bill, the $30.23 billion for FY2016 was $246.0 million (0.8%) less than the FY2015 appropriation of $30.48 billion (including FY2015 PILT funding). DOI agencies, however, would have received an overall increase of $340.0 million (3.1%) for FY2016, with 6 of the 10 DOI agencies sharing in the increase. The largest recommended dollar increase was $164.9 million (6.3%) for Indian Affairs. Like the FY2015 appropriation, the House committee bill included discretionary funding for PILT. For EPA, H.R. 2822 would have reduced funding by $717.7 million (8.8%)—the largest recommended decrease in the reported bill. The EPA account with the largest dollar decline would be State and Tribal Assistance Grants, with $565.3 million (15.9%) less than FY2015, largely from reduced funding for grants to states through the Clean Water State Revolving Fund (SRF) and the Drinking Water SRF. While Title III agencies would have received an overall increase of $131.7 million (1.2%) for FY2016, the Indian Health Service was the only agency for which additional funds were recommended ($145.5 million, 3.1%). Most Title III agencies would have received level funding, with others proposed at levels lower than FY2015. With regard to the Senate bill, the $31.13 billion for FY2016 was $653.6 million (2.1%) more than FY2015 appropriations ($30.48 billion, including PILT funding). S. 1645 included higher appropriations for every DOI agency except Departmental Offices, largely because it did not propose PILT funding. As with the House bill, EPA would have received the largest decrease—$542.5 million (6.7%)—with State and Tribal Assistance Grants declining more than other accounts ($517.2 million, 14.6%) in large part from reduced grants to states through the SRFs. Most Title III agencies would have received level funding under the Senate bill, and a couple would have received lower appropriations. Nevertheless, the Senate bill recommended overall higher funding for Title III agencies ($1.06 billion, 9.4%). The largest dollar increases were $921.6 million (18.2%) for the Forest Service, primarily attributable to increased funding for Wildland Fire Management, and $136.9 million (2.9%) for the Indian Health Service. Both the House and Senate committee-reported bills had recommended lower funding for FY2016 than sought by the President. The $30.23 billion in H.R. 2822 as reported by the House Appropriations Committee for FY2016 was $3.09 billion (9.3%) less than the President's request of $33.32 billion for FY2016. H.R. 2822 recommended lower funding than sought by the President for many agencies, including the following: $1.17 billion (13.6%) lower for EPA, $736.7 million (12.7%) for the Forest Service, and $380.6 million (12.5%) for the National Park Service. However, for some agencies H.R. 2822 recommended the same or higher funding relative to the President's request. For instance, the House bill recommended $364.8 million (52.4%) more than the President for DOI Departmental Offices, largely due to funding for PILT included within this account (under Office of the Secretary). The $31.13 billion in S. 1645 as reported by the Senate Appropriations Committee for FY2016 was $2.19 billion (6.6%) less than the President's request. Like the House bill, S. 1645 also recommended lower funding than sought by the President for many agencies. Among the lower amounts were the following: $994.4 million (11.6%) less for EPA, $323.7 million (6.3%) less for the Indian Health Service, and $318.7 million (10.5%) less for the National Park Service. For other agencies, S. 1645 contained the same or higher funding relative to the President's request. For instance, the Senate bill proposed $197.5 million (3.4%) more than the President for the Forest Service, largely due to additional funding for the Wildland Fire Management account. Unlike the President's request, the FY2016 House committee-reported bill did not include a cap adjustment for Wildland Fire Management. S. 1645 included bill language to provide for a new cap adjustment and also designated some of the funds in the bill for Wildland Fire Management as emergency funding.
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The Interior, Environment, and Related Agencies appropriations bill includes funding for most of the Department of the Interior (DOI) and for agencies within other departments—including the Forest Service within the Department of Agriculture and the Indian Health Service within the Department of Health and Human Services. It also provides funding for the Environmental Protection Agency (EPA), arts and cultural agencies, and numerous other entities. The Consolidated Appropriations Act, 2016 (P.L. 114-113), provided $32.23 billion for FY2016 for Interior, Environment, and Related Agencies. The total included $452.0 million for the Payments in Lieu of Taxes (PILT) program, which compensates counties and local governments for nontaxable lands within their jurisdictions. It also included additional funding for Wildland Fire Management, but it did not provide for either a new adjustment to the discretionary spending limits in law or emergency funding for this purpose, both of which had been proposed. The FY2016 enacted total was a $1.75 billion increase (5.7%) over the FY2015 total of $30.48 billion. Compared to FY2015, FY2016 funding for all DOI agencies increased by $925.5 million (8.3%), for EPA remained the same, and for Related Agencies increased by $822.3 million (7.3%). Agencies received varying amounts of the $32.23 billion for FY2016. The appropriations were $12.02 billion (37.3% of total) for DOI agencies, $8.14 billion (25.3% of total) for EPA, and $12.07 billion (37.5% of total) for other agencies and entities in Title III of the bill. In earlier action, the President had requested $33.32 billion in FY2016 Interior, Environment, and Related Agencies appropriations. The President had sought an increase of $2.85 billion (9.3%) compared to the FY2015 total appropriation of $30.48 billion. The President's request for FY2016 did not include funding for PILT, whereas the FY2015 appropriation included $372.0 million for the program. For Wildland Fire Management in FY2016, the President proposed a new $1.05 billion discretionary cap adjustment. H.R. 2822, as reported by the House Appropriations Committee on June 18, 2015, contained $30.23 billion for Interior, Environment, and Related Agencies for FY2016. The bill included $452.0 million for PILT but did not include a new cap adjustment for wildfires. The House considered many amendments during three days of floor debate, but no vote on final passage occurred. S. 1645, as reported by the Senate Appropriations Committee on June 23, 2015, contained $31.13 billion for Interior, Environment, and Related Agencies. The total did not include discretionary funding for PILT, but it reflected $1.05 billion in emergency appropriations for Wildland Fire Management. S. 1645 was not considered on the Senate floor. The Senate committee-reported bill included $899.6 million (3.0%) more than the House committee-reported bill. The largest dollar difference was for Wildland Fire Management. The Senate bill also was $653.6 million (2.1%) more than FY2015 appropriations, whereas the House bill was $246.0 million (0.8%) less than FY2015. Both the Senate and House committee-reported bills contained lower funding for FY2016 than sought by the President; S. 1645 was $2.19 billion (6.6%) less than the President's request, while H.R. 2822 was $3.09 billion (9.3%) less.
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R eports of alien minors being separated from their parents at the U.S. border—either when they have presented themselves at a port of entry to claim asylum or when they have been apprehended by authorities after unlawfully entering between ports of entry —have raised questions about the authority of the Department of Homeland Security (DHS) to detain families together pending removal proceedings. The Immigration and Nationality Act (INA) does not provide a specific framework for the detention of alien families during the removal process. Much of the governing law stems from a binding, 20-year-old settlement agreement ( Flores Settlement) between the federal government and parties challenging the detention of alien minors, which the U.S. District Court for the Central District of California entered in a case now called Flores v. Sessions . The Flores Settlement establishes a policy favoring the release of alien minors, including alien minors accompanied by an alien parent, from immigration detention and requires that those alien minors who are not released from government custody be transferred within a brief period to non-secure, state-licensed facilities. According to DHS, few if any such state-licensed facilities capable of holding minors and adults together exist. For that reason, it is DHS's position that, to comply with the Flores Settlement, it must choose between (1) releasing the family together and (2) releasing the alien child while the adult family members remain in detention until removal proceedings have concluded. Recent federal court decisions cast doubt on the legality of the second option, however, leaving the general release of family units together as the only clearly viable option under current law. In an executive order issued on June 20, 2018, President Trump directed DHS "to the extent permitted by law and subject to the availability of appropriations, [to] maintain custody of alien families during the pendency of any criminal improper entry or immigration proceedings involving their members." The executive order also directed Attorney General Sessions to ask the district court overseeing the Flores Settlement to modify the agreement to allow the government to detain alien families together throughout the duration of the family's immigration proceedings as well as the pendency of any criminal proceedings for unlawful entry into the United States. While that motion was pending, in a different lawsuit, Ms. L. v. ICE , challenging the government's policy of separating alien children from their parents when family units entered the United States at or in between ports of entry, a district judge issued a preliminary injunction mandating alien family reunification. In response, the government notified the Flores court that it would begin detaining alien family units together in DHS facilities until a family's immigration proceedings had been completed. The Flores court rejected the government's motion and argument that the preliminary injunction in the Ms. L. lawsuit allowed the government to detain family units together in DHS facilities. In the aftermath of this ruling, DHS appears to have returned to its prior practice of generally releasing family units apprehended at the border that demonstrate a credible fear of persecution pending removal proceedings. However, on September 7, 2018, DHS and the Department of Health and Human Services (HHS), the primary agency responsible for the care and custody of unaccompanied alien minors, published a notice of proposed rulemaking, which, once finalized, w ould allow DHS to detain families together until immigration proceedings were completed. The proposed regulations would create an alternative federal licensing scheme for family residential centers that purports to mimic the standards for the detention of minors set forth in the Flores Settlement, which mandates the use of state-licensed facilities only. This report answers frequently asked legal questions pertaining to the Flores Settlement and the settlement's impact on the detention of alien families apprehended at or near the U.S. border. In particular, the report addresses (1) the background of the Flores litigation, (2) how the Flores Settlement restricts DHS's power to keep families in civil immigration detention, (3) the relationship between the Ms. L. litigation and the Flores Settlement, (4) the executive branch's policy options for detaining or releasing family units apprehended at or near the U.S. border under the Flores Settlement, (5) the September 7, 2018, notice of proposed rulemaking purporting to implement the terms of the Flores Settlement, and (6) the extent to which either the executive branch or Congress can override or modify the terms of the Flores Settlement. Before considering the legal impact of the Flores Settlement on DHS's authority to detain family units arriving at the border without valid entry documents, it is useful to review the relevant statutory framework. The INA contains provisions that govern the detention of aliens in general pending the outcome of removal proceedings. Federal statutes also contain specific provisions concerning the detention of unaccompanied alien children (UACs) who are in removal proceedings. However, neither federal law generally, nor the INA, contains provisions that specifically address the detention of family units or accompanied alien minors for immigration enforcement purposes. Whether they attempt to enter the United States surreptitiously or present themselves at a port of entry, aliens encountered near the border without valid entry documents are generally subject to expedited removal under the INA. Expedited removal is a streamlined process that contemplates removal without a hearing before an immigration judge. Family units, including children arriving with their families, encountered near the border without valid entry documents are subject to expedited removal, but UACs are not subject to this streamlined removal process. If an alien subject to expedited removal "indicates either an intention to apply for asylum . . . or a fear of persecution," then the immigration officer must refer the alien to an asylum officer for a determination of whether the alien has a credible fear of persecution. Aliens who demonstrate such a fear are referred to standard removal proceedings in immigration court for further consideration of their claims for asylum or other relief. The statutory framework that governs the detention of aliens in this situation—that is, where an alien has been referred from expedited to standard removal proceedings after showing a credible fear of persecution—is not straightforward, but its general effect is to permit (without requiring) DHS to detain such aliens pending the outcome of the standard proceedings. First , for aliens referred from expedited to standard removal proceedings following surreptitious entry (i.e., entry or attempted entry into the United States at a place other than a port of entry), the applicable statute is 8 U.S.C. § 1226(a). That statute authorizes DHS to continue detaining the alien, or to release the alien on bond or parole. If DHS decides to keep the alien in detention, the alien is entitled to challenge that decision in a custody redetermination hearing before an immigration judge. Under the standard that governs both the DHS and immigration judge custody determinations, the alien must demonstrate that release on bond or parole "would not pose a danger to property or persons, and that the alien is likely to appear for any future proceeding." Second , for aliens referred from expedited to standard removal proceedings after presenting themselves at a port of entry without valid entry documents, the applicable statute is 8 U.S.C. § 1225(b). That statute provides that such aliens "shall be detained" pending the outcome of the standard removal proceedings in immigration court. But the INA grants DHS authority to release even these aliens on parole. DHS regulations and internal guidance, in turn, instruct DHS officials to make individualized determinations about whether to release such aliens on parole, taking into account factors such as flight risk, danger to the public, and whether the alien has established his identity sufficiently. Recently, in light of evidence that DHS has deviated from this policy in order to detain more aliens for deterrence purposes, two different federal judges in the District of Columbia issued preliminary injunctions ordering DHS to comply with the policy by making individualized parole determinations for aliens detained under § 1225(b). Some federal case law suggests that constitutional principles may limit DHS's ability to detain aliens pending removal proceedings for general deterrence purposes (that is, for the purpose of deterring other aliens from committing civil immigration violations), notwithstanding the statutory authorization in the INA for detention during the removal process. The Supreme Court has yet to resolve this question, however. Federal statutes set forth a separate framework for the treatment of UACs. The Homeland Security Act of 2002 tasks the Office of Refugee Resettlement (ORR), within the Department of Health and Human Services, with "coordinating and implementing the case and placement of unaccompanied alien children who are in Federal custody by reason of their immigration status." Minors remain subject to DHS custody unless and until they are deemed "unaccompanied." Under the Trafficking Victims Protection Reauthorization Act of 2008 (TVPRA), if DHS learns that a person in its custody is an "unaccompanied alien child" (UAC), it must transfer the UAC to ORR custody within 72 hours (unless the child is from a contiguous country, in which case the UAC generally may be given the option to voluntarily return to that country in lieu of being held by ORR and DHS authorities). An alien minor is considered a UAC if (1) the minor has no parent or legal guardian in the United States, or (2) no parent or legal guardian "is available to provide care and physical custody" in the United States. Once a UAC is in ORR custody, ORR must "promptly place[] [the child] in the least restrictive setting that is in the best interest of the child." As noted above, UACs are not subject to expedited removal. The Flores lawsuit began in 1985, reached a settlement in 1997, and remains under the supervision of a U.S. district judge in the Central District of California until the federal government promulgates final regulations implementing the 1997 agreement. Initially, the lawsuit involved a class of unaccompanied alien minors who were apprehended at or near the U.S. border and then detained pending removal proceedings. At that time, before the enactment of the Homeland Security Act or the TVPRA, there was no national policy addressing the care for unaccompanied alien minors. One former Immigration and Naturalization Service (INS) facility in California had adopted a policy of releasing apprehended alien minors only to "a parent or lawful guardian" except in "unusual and extraordinary cases." Several detainees filed a lawsuit on behalf of a class of all aliens under the age of 18 who were detained at that facility because a parent or legal guardian did not personally appear to take custody of the child. The lawsuit challenged the conditions of confinement at the INS facility and also contended that the release policy violated the Due Process Clause of the Fifth Amendment. By 1987, the parties had settled the claims related to the conditions of confinement, but the constitutional challenge to the release policy continued to be litigated. Meanwhile, the INS promulgated a rule governing the detention and release of alien minors (accompanied and unaccompanied) at all INS facilities. That rule authorized additional adult relatives (other than a parent or lawful guardian) to whom alien minors could be released from custody. The Flores plaintiffs maintained the lawsuit by challenging the new INS policy under the Due Process Clause, arguing that the government had violated their fundamental right to be released to unrelated adults. The litigation ultimately made its way to the Supreme Court. In a 1993 ruling—nearly a decade after the litigation's start—the Supreme Court upheld the constitutional validity of the INS policy on its face. In doing so, the Court concluded that the detained alien minors had no constitutional right to be released from government custody into the custody of a "willing-and-able private custodian" when a parent, legal guardian, or close relative is unavailable. After the case was remanded to the district court for further proceedings, the parties continued to litigate whether the INS was complying with the earlier settlement agreement, in which the government had agreed to house alien minors in facilities meeting certain minimum standards. The parties in the Flores litigation eventually reached a settlement agreement in 1997, a modified version of which remains in force today. The Flores Settlement establishes a "nationwide policy for the detention, release, and treatment of minors" in immigration custody. The settlement agreement announces a "general policy favoring release" and requires the government to place apprehended alien minors in "the least restrictive setting appropriate to the minor's age and special needs, provided that such setting is consistent with its interests to ensure the minor's timely appearance before the INS and immigration courts and to protect the minor's well-being and that of others." The settlement agreement further elaborates that when alien minors are first arrested by immigration authorities, those minors may be detained only in "safe and sanitary" facilities. Within a few days, subject to exception, federal authorities must transfer the detained alien minor to the custody of a qualifying adult or a non-secure facility that is licensed by the state to provide residential, group, or foster care services for dependent children. The Flores Settlement binds the parties until the federal government promulgates final regulations implementing the agreement. However, to date, no implementing regulations have been promulgated. Additionally, although the litigation initially stemmed from the detention of unaccompanied alien minors, the Flores Settlement defines a "minor," subject to certain exceptions, as any person under age 18 who is detained by immigration authorities. Accordingly, the U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) later held that the Flores Settlement applies to both accompanied and unaccompanied minors in immigration custody. The Flores Settlement qualifies the authority that DHS possesses under the INA and other statutes to detain alien minors—whether accompanied or unaccompanied—pending the outcome of removal proceedings. With regard to minors meeting the statutory definition for UACs, Congress has enacted statutes regulating their care and custody and providing protections that to some extent displace the Flores Settlement as the operative body of law. But Congress has enacted no such laws with regard to accompanied alien minors or alien family units. Accordingly, much of the current impact of the Flores Settlement comes in the manner that it restricts DHS's authority to detain accompanied alien minors. As mentioned earlier, the Flores Settlement establishes a "nationwide policy for the detention, release, and treatment of minors" in the custody of the former INS. The core of the Flores Settlement favors the release of alien minors and requires that those alien minors who are not released from government custody be housed in non-secure, state-licensed facilities. Subject to exceptions described below, the government must do so within three days if the minor is apprehended in a district where space is available at a licensed facility or, otherwise, within five days. However, as of the date of this report, there presently do not appear to be any qualifying facilities that can house alien minors and their parents. Under the Flores Settlement's terms, alien minors' placement in a non-secure, licensed facility may be delayed when there is an "influx of minors into the United States." An influx of minors exists when more than 130 minors are eligible for placement at a licensed facility. When there is an influx, placements must be made "as expeditiously as possible." The effect of these provisions, as interpreted by the district court overseeing the Flores Settlement, has allowed DHS to detain some family units for longer than five days during "influxes." There is no fixed amount of time for what amounts to "expeditious" placement during an influx, but the district court that has continued to oversee the settlement has provided some guidance. For instance, time extensions must be "de minimis" (i.e., minimal) and made based on individualized circumstances. In other words, during an influx the government likely cannot announce a blanket extension of time for placements of particular groups. In 2015, for example, the government advised the Flores court that, for alien families subject to expedited removal but seeking asylum, the government would need to detain those families for an average of 20 days to complete the credible fear interview and processing. The court opined that "if 20 days is as fast as [the government], in good faith and in the exercise of due diligence, can possibly go in screening family members for reasonable or credible fear," then a 20-day extension "may" be expeditious under the terms of the settlement, "especially if the brief extension of time will permit the DHS to keep the family unit together." But the court did not place its imprimatur on 20 days for all families seeking asylum. Further, when class members attested to being detained for periods ranging from 5 weeks to 13 months, the court concluded that the government was in substantial noncompliance with the Flores Settlement. The requirement for expeditious release remains the law of the land because the district court rejected the government's motion to amend the Flores Settlement. In sum, the reason alien minors and their parents generally cannot remain together for more than brief periods while in immigration detention is because the Flores Settlement requires minors to be placed in non-secure, state-licensed facilities within days or (in individualized circumstances during an influx) weeks of their apprehension, yet there do not appear to be any facilities that both comply with the Flores -required conditions and authorize adults to be housed in the facility. Exactly how long DHS may detain alien minors in a temporary, nonqualifying facility during an influx remains unclear. But the overseeing district court has opined that 20 days may be reasonable under certain individualized circumstances. Having said that, an exception exists if an alien parent affirmatively waives a child's right under the Flores Settlement to be detained in a non-secure, state-licensed facility. The government has unsuccessfully argued in the Flores litigation that it has been absolved of its obligation to house alien minors in non-secure, state-licensed facilities as a consequence of the preliminary injunction entered in the Ms. L. litigation. In Ms. L. , two asylum seekers brought a class action lawsuit claiming that their substantive due process rights had been violated by the government's practice of separating families entering the United States at the border—both when lawfully seeking admission at a port of entry and when illegally crossing into the United States between ports of entry. The district court certified a class generally composed of all alien adult parents who enter the United States at or between designated ports of entry who (1) have been, are, or will be detained in immigration custody by the DHS, and (2) have a minor child who is or will be separated from them by DHS and detained in ORR custody, ORR foster care, or DHS custody. Then the court imposed a preliminary injunction against the government, which, as relevant here, orders it to refrain from detaining in DHS custody class members without their minor children and to reunite all class members with their minor children. The injunction required reunification within 14 days for children under age five, and within 30 days for older children. In Flores , the government alerted the district court to the Ms. L. preliminary injunction and explained that, to comply with the injunction, it intended to detain families together during the entirety of immigration proceedings. The government asserted that the Flores Settlement permits alien children to remain in DHS detention alongside their parents because the agreement requires the release of minors "without unnecessary delay," and the Ms. L. injunction, the government said, makes delay necessary . The Flores court rejected the government's contention that it could indefinitely detain alien minors in secure, unlicensed facilities and still comply with the terms of the Flores Settlement. The court characterized the government's submission as a "strained construction" of the Flores Settlement—one that renders many of its protective requirements meaningless. Nor, the court added, does the injunction make it impossible to comply with both court orders—the Ms. L. injunction and the Flores Settlement—because, the court explained, "[a]bsolutely nothing prevents [the government] from reconsidering their current blanket policy of family detention and reinstating prosecutorial discretion." Consequently, as children of class members were reunited with their detained parents in unlicensed facilities, the Flores clock, so to speak, began running. Once the clock started, the government faced the requirement to "expeditiously"—generally viewed as a 20-day window—place each family in a Flores -qualifying detention facility or release the family. In practice, because of a lack of qualifying bed space, the government has been releasing families. With the Flores Settlement in place, the executive branch maintains that it has two options regarding the detention of arriving family units that demonstrate a credible fear of persecution pending the outcome of their removal proceedings in immigration court: (1) generally release family units; or (2) generally separate family units by keeping the parents in detention and releasing the children only. The executive branch appears to have resumed implementing the first option after the district court in Flores rejected the argument that it could detain family units together in DHS facilities under Ms. L . As for the second option—to separate families by detaining parents only—doubts exist as to whether it is legally viable. The "zero-tolerance policy" for prosecuting illegal entry offenses, announced by Attorney General Sessions in April 2018, was one manner of implementing this option, at least for family units that entered the country surreptitiously: when parents were referred for criminal prosecution for illegal entry or other criminal violations, the children were deemed UACs and transferred to ORR custody. The June 20, 2018, executive order ended this practice, and the district court in Ms. L . concluded that the practice likely violated due process by separating families without a plan for their reunification following the conclusion of criminal proceedings. Thus, to effect the release of children without their parents through a general policy of criminally prosecuting the parents does not appear to be a legally viable policy for the executive branch because due process may require that the families be reunited following the criminal proceedings. The Department of Justice may decide to prosecute parents who enter the country illegally, but the executive branch as a whole likely cannot use prosecution to separate families for prolonged periods. Aside from criminal prosecution, another way for the executive branch to pursue the second option would be to keep parents in DHS civil immigration detention while releasing children to other relatives or guardians. The Ninth Circuit has held that the Flores Settlement does not require DHS to release parents along with their children. The executive branch has argued that this holding "specifically envisioned separating parents from their children under the terms of the [ Flores ] Agreement." Nonetheless, it does not appear that DHS has ever pursued a general policy of releasing children without their parents from civil immigration detention. Such a policy, in any event, would likely face practical and legal barriers. On the practical front, DHS would need to locate other relatives or licensed programs to accept the children while the parents remained in detention. On the legal front, the Ms. L. court has held that a "government practice of family separation without a determination that the parent was unfit or presented a danger to the child" likely violates due process, except to the extent that the family separation occurs during pending criminal proceedings. Under this standard, it is not clear that DHS could constitutionally create family separation by continuing to detain, in civil immigration detention, alien parents whose children were released under the Flores Settlement. A conceivable third option would be for the executive branch to create licensed family detention centers that comply with the Flores Settlement and detain families together in those centers. The executive branch apparently does not count this as a feasible option, however, and has said that "ongoing and unresolved disputes" exist "over the ability of States to license these types of facilities that house both adults and children." Even if such licensed facilities existed, a blanket policy of detaining families together in them arguably might still violate the Flores Settlement, which favors release over detention in qualifying facilities. Also, apart from the Flores Settlement, at least one federal district court has concluded that the detention of arriving family units pending the outcome of their removal proceedings in immigration court would likely violate due process, if undertaken for the purpose of deterring future arrivals. In summary, the only clearly viable option under current law for the treatment of family units that demonstrate a credible fear of persecution is for the executive branch generally to release the families pending their removal proceedings in immigration court. The executive branch may modify or terminate its obligations under the Flores Settlement through three primary avenues: (1) by reaching an agreement with the plaintiffs; (2) by prevailing on a motion to modify the settlement; or (3) by terminating the agreement through promulgation of "final regulations implementing th[e] Agreement," pursuant to the terms of the settlement agreement (as interpreted by the district court). On June 21, 2018, the executive branch began pursuing the second option by asking the Flores district court to approve changes to the settlement agreement that would exempt accompanied minors from the general release policy and make the state-licensure requirement inapplicable to ICE family residential facilities. These modifications would allow DHS to detain accompanied alien minors with their families in ICE family detention centers for more than brief periods without violating the Flores Settlement. However, the district court rejected the government's motion on July 9, 2018. The government has filed an appeal to the Ninth Circuit. On appeal, the government would appear to have limited prospects for success under current circuit case law. A party seeking judicial modification of a settlement agreement must establish that "'a significant change in circumstances warrants revision of the decree.'" The Ninth Circuit has applied this standard to the Flores Settlement on two occasions in recent years. In 2016, the Ninth Circuit held that the "surge in family units crossing the Southwest border" during the migrant crisis that began in 2014 did not constitute a significant change in circumstances and thus did not justify modifying the settlement agreement so that it no longer applied to accompanied alien minors. The Ninth Circuit reasoned that the Flores Settlement anticipated that such an influx could occur and provided the government added flexibility in responding under the "as expeditiously as possible" standard. In 2017, the Ninth Circuit held that developments in the law after the Flores Settlement went into effect in 1997—in particular, the enactment of provisions governing the care and custody of UACs in the Homeland Security Act of 2002 and the Trafficking Victims Protection Reauthorization Act of 2008—did not release the government from its obligations under the decree to provide UACs in removal proceedings with bond hearings. The two statutes, the Ninth Circuit held, did not constitute a "significant change in circumstances" for modification purposes because they did not render compliance with the terms of the consent decree "impermissible." The thrust of the government's argument in its most recent motion is that a "worsening influx of families unlawfully entering the United States at the southwest border" constitutes a significant change in circumstances that justifies modifying the Flores Settlement to allow accompanied minors to remain detained with their families in unlicensed ICE facilities. This is similar to the argument that the Ninth Circuit rejected in the 2016 ruling—that a "surge in family units crossing the Southwest border" justified modification of the consent decree. Indeed, the district court concluded that the most recent government motion is but "a thinly veiled motion for reconsideration" of the argument that the Ninth Circuit rejected in 2016. In the most recent motion, the government argued that "the number of family units crossing the border illegally has increased . . . by 30% since the 2014 influx" and that, notwithstanding the 2016 decision, "nothing suggests that the parties anticipated that this increase would consist largely of children who were accompanied by their parents." Nonetheless, in light of the Ninth Circuit's holding that influxes do not justify modification because they were anticipated by, and addressed in, provisions of the Flores Settlement, the government's best prospects of success on the motion might be on eventual review at the Supreme Court, which would not be bound by the Ninth Circuit's 2016 opinion. On September 7, 2018, the DHS and HHS published a notice of proposed rulemaking for the "Apprehension, Processing, Care, and Custody of Alien Minors and Unaccompanied Alien Children" to replace the Flores Settlement. According to the parties' 2001 stipulation, the Flores Settlement will terminate 45 days after the government publishes final regulations implementing the agreement. Likely, one or both parties to the agreement will seek a court determination as to whether the final rules implement the settlement agreement. It is unclear whether the district court overseeing the settlement would conclude that the rules, at least as proposed, constitute "final regulations implementing th[e] Agreement" within the meaning of the settlement's termination provision. Principally, the proposed regulations provide standards for DHS care and custody of alien minors who were accompanied upon entry and for HHS care and custody of unaccompanied children. In doing so, the regulations would separately define "minor" and "unaccompanied alien child." "Minor" will be defined as any alien who is under 18 years old and has not been emancipated or incarcerated for a criminal offense for which the alien had been tried as an adult. "Unaccompanied Alien Child," like the statutory definition, will be defined as an alien without lawful immigration status, who is under the age of 18 years old and who has no parent or legal guardian in the United States or has no parent or legal guardian in the United States that is available to provide care and physical custody. The proposed regulations diverge from the original agreement in two notable ways. First, the rules are written to conform to two intervening statutes—(1) The Homeland Security Act of 2002, which transferred from the former INS to ORR the function of caring for UACs, and (2) the TVPRA, which provides placement and custody standards for UACs in ORR's custody. Second, and perhaps more likely to generate legal dispute, the proposed rules seek to create a federal alternative to the Flores Settlement's requirement that facilities be state-licensed, which the government views as an impediment to detaining families together. The proposed rules specify that any unreleased alien minor who is not a UAC will remain in DHS custody in a non-secure, licensed facility. If an ICE family detention center is situated in a locality that does not have a licensing scheme that would allow for family detention, a family detention center would still be considered "licensed" under the proposed regulations if DHS hires a third party with "relevant audit experience" to ensure compliance with ICE-established standards for family residential centers. The proposed regulations outline certain minimal provisions that ICE must include when establishing its standards, including arrangements for living accommodations, food, clothing, medical care, counseling, individualized needs assessments, education, recreation, religious services, and information about legal services, among others. These minimal standards are not identical to the minimal standards for licensed programs outlined in the Flores Settlement, and thus an argument could be made that the proposed regulations do not "implement" the settlement. For instance, according to the Flores Settlement—but not the proposed regulations—a licensing program must maintain discipline standards and client records. More generally, it might be argued that the proposed regulations replace Flores 's general policy favoring release of minors with a policy that favors maintaining family unity, even if that requires detaining minors for longer periods in a family residential center. The proposed regulations do afford DHS officials some discretion to parole alien children in custody, and further indicate that a "[m]inor may be released with an accompanying parent or legal guardian who is in detention." But the Federal Register notice for the proposed regulations indicates that "[t]o the extent that [the Flores Settlement] has been interpreted to require . . . [the parole of juveniles] during expedited removal proceedings, this regulation is intended to permit detention . . . in order to avoid the need to separate or release families in these circumstances." If a court accepts the argument that the proposed regulations, once finalized, do not implement the terms of the Flores Settlement, the court would probably hold that the regulations do not satisfy the settlement agreement's termination provision, leaving the agreement in effect. If Congress enacts new statutes that directly conflict with provisions of the Flores Settlement—such that the provisions of the settlement become "impermissible" under the law—then the executive branch could move the district court to modify the decree in conformity with the new statutes. For example, the Flores Settlement establishes a general policy that minors in removal proceedings should be released from custody. In contrast, the Protect Kids and Parents Act ( S. 3091 ), as introduced in the Senate on June 19, 2018, would provide that "[a] child shall remain in the custody of and be detained in the same facility as the Asylum Applicant who is the child's parent or legal guardian during the pendency of the Asylum Applicant's asylum or withholding of removal proceedings." If the bill becomes law, it likely would enable the executive branch to obtain modification of the settlement's general release policy on the ground that the policy is "impermissible" under the new law. Other bills introduced in the 115 th Congress may have similar consequences. Constitutional restrictions would remain a potential obstacle to such a government motion, however. For example, if the district court determines that new statutory provisions are unconstitutional as applied to alien minors accompanied by their parents in immigration detention pending formal removal proceedings, the court likely would not grant a motion to conform the Flores Settlement to the new statute. Any district court holding to this effect—which would implicate unsettled issues noted above about the constitutionality of prolonged immigration detention —would be subject to de novo review on appeal.
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Reports of alien minors being separated from their parents at the U.S. border have raised questions about the Department of Homeland Security's (DHS's) authority to detain alien families together pending the aliens' removal proceedings, which may include consideration of claims for asylum and other forms of relief from removal. The Immigration and Nationality Act (INA) authorizes—and in some case requires—DHS to detain aliens pending removal proceedings. However, neither the INA nor other federal laws specifically address when or whether alien family members must be detained together. DHS's options regarding the detention or release of alien families are significantly restricted by a binding settlement agreement from a case in the U.S. District Court for the Central District of California now called Flores v. Sessions. The "Flores Settlement" establishes a policy favoring the release of alien minors, including accompanied alien minors, and requires that those alien minors who are not released from government custody be transferred within a brief period to non-secure, state-licensed facilities. DHS indicates that few such facilities exist that can house adults and children together. Accordingly, under the Flores Settlement and current circumstances, DHS asserts that it generally cannot detain alien children and their parents together for more than brief periods. Following an executive order President Trump issued that addressed alien family separation, the Department of Justice filed a motion to modify the Flores Settlement to allow for the detention of alien families in unlicensed facilities for longer periods. The district court overseeing the settlement rejected that motion, much as it has rejected similar motions to modify the settlement filed by the government in recent years. (The U.S. Court of Appeals for the Ninth Circuit has affirmed the earlier rulings but has not yet reviewed the most recent ruling.) In its most recent motion, the government has argued, among other things, that a preliminary injunction entered in a separate litigation, Ms. L v. ICE, which generally requires the government to reunite separated alien families and refrain from separating families going forward, supports a modification of the Flores Settlement to allow indefinite detention of alien minors alongside their parents. On a separate track, DHS and the Department of Health and Human Services (HHS) have announced that they intend to seek termination of the Flores Settlement through the promulgation of new regulations that, according to the agencies, would adopt the substantive terms of the agreement with certain modifications. Significantly, the proposed regulations would allow DHS to detain families together until immigration proceedings were completed by creating an alternative federal licensing scheme for family residential centers. That federal scheme would impose facility standards that purport to mimic the standards set forth in the Flores Settlement, which calls for the exclusive use of state-licensed facilities for the detention of minors. A legal dispute seems likely to arise over whether the proposed regulations adequately implement the Flores Settlement, including whether the regulations are consistent with the agreement's general policy favoring the release of minors from immigration custody. Congress, for its part, could largely override the Flores Settlement legislatively, although constitutional considerations relating to the rights of aliens in immigration custody may inform the permissible scope and effect of such legislation.
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Over the past several years, the United States has become increasingly integrated with the world economy. In 2007, the United States was the world's largest exporter (at $1.6 trillion) and largest importer of goods and services (at $2.4 trillion). From 1960 to 2007, U.S. exports of goods and services as a share of gross domestic product (GDP) rose from 4.9% to 12.2%, while imports rose from 4.3% to 17.0%. The Economist Intelligence Unit (EIU) projects that by the year 2037, U.S. exports and imports as a percent of GDP will total 39.5% and 33.8%, respectively (see Figure 1 ). U.S. economic integration with the world has greatly changed the nature and complexity of U.S. trade flows. For example, many U.S. firms have shifted production abroad to take advantage of lower costs with some production sold locally and some exported, including to the United States. In addition, many firms in the United States import inputs (such as auto parts) to produce finished goods (such as cars). Trade in services, while much smaller than merchandise trade, is becoming an increasingly important component of U.S. trade. Many commercial activities in the United States that impact trade are not always reflected in U.S. trade data. For example, many U.S. companies design and develop products that are manufactured overseas, such as in China. Frequently, a significant share of the value added to these products (and profits) accrue to U.S. firms and workers, while only a small part of the value added accrues to where the products are made. Finally, over the past several years, a significant level of U.S. trade (especially imports) has shifted away from developed countries (such as Western Europe and Japan) to developing countries (especially those in Asia, such as China). From 1985 to 2007 the share of U.S. merchandise exports to developing countries rose from 33% to 49%, while the share of U.S. merchandise imports from these countries rose from 35% to 57%. Financial flows play a critical role in the U.S. global economic integration. In 2007, the United States was the largest cumulative source of foreign direct investment (FDI) around the world at $2.6 trillion and was the largest cumulative destination of FDI at $1.8 trillion. FDI plays a critical role for many U.S. firms attempting to sell their goods and services in foreign markets. Many companies set up subsidiaries abroad in order to tailor products and services to suit each country's specific tastes or standards (or because of lower costs). These overseas subsidiaries often import machinery, parts, and other inputs from the parent company in the United States and thus help generate U.S. exports. FDI in the United States helps create employment (about 5.1 million jobs in 2005 by majority-owned nonbank U.S. affiliates of foreign companies). According to the Bureau of Economic Analysis, U.S. affiliates of foreign firms accounted for 20% of U.S. exports and 25% of U.S. imports in 2005. In addition, foreign investment has gone into U.S. securities, such as U.S. Treasury securities, which is used to finance U.S. budget deficits. This investment helps to fund the shortfall in U.S. domestic savings relative to its investment needs and enables the United States to enjoy healthier economic growth and relatively lower interest rates. As of March 2008, foreign investors owned 51.4% of privately-held U.S. debt (at $2.4 trillion). A major concern for many U.S. policymakers and economists is the size and growth of the U.S. trade deficit. The current account balance (the broadest measurement of trade flows because it includes merchandise trade, services trade, investment income and unilateral transfers) went from a $2.9 billion surplus in 1991 to a $738.6 billion deficit in 2007. The deficit reflects the high level of foreign savings the United States must obtain to fund its investment needs. Many mainstream economists contend that free trade is a win-win situation because it enables countries to focus on producing goods they are relatively more efficient at (comparative advantage) and trading for those goods they are less relatively efficient at producing. This enables countries to consume more goods than they could if they were self-sufficient. However, some observers of trade contend that this simple explanation of trade does not always apply in today's global economy where the factors of production (including capital and technology) are internationally mobile. They argue that U.S. trade with some countries, especially those with low wages but high productivity levels (such as India and China), may not always produce net benefits for the United States if such countries are able to gain a comparative advantage in more advanced goods and services over the United States. Another argument is that, in some cases, the benefits of trade in the United States may mainly accrue to upper income groups, while mainly hurting income-competing firms and lower income groups (through job losses and depressed wages). For example, a factory in the United States may be closed and workers laid off because it is no longer competitive. The U.S. company might relocate production to another country, such as or Mexico. Profits from this venture would accrue mainly to company officials and stockholders of the company. The laid off factory workers may find new jobs, but they may not always pay as well as the previous ones. Other economists counter that raising productivity, innovation, and education and training levels are keys to ensuring U.S. global competitiveness and high paying jobs. They further contend that the United States cannot isolate itself from the global economy, and that protectionist measures to try to restrict imports that negatively affect certain domestic industries will adversely affect other industries and have a net negative impact on the U.S. economy. Most trade analysts on both sides of the free trade argument contend that some sort of assistance and/or retraining should be afforded to workers that are displaced by trade (although opinions differ as to what extent that assistance should be given). U.S. post-World War II trade policy under various presidential administrations has had several interrelated objectives. One has been to secure open markets for U.S. exports. A second has been to protect domestic producers from foreign unfair trade practices and from rapid surges in fairly traded imports. A third has been to control trade for foreign policy and national security reasons. A fourth objective has been to help foster global trade to promote world economic growth. In fulfilling these objectives, U.S. policymakers have employed an array of policy tools. One set of tools are multilateral and bilateral/regional negotiations and agreements. The United States has been a major player in establishing a multilateral system of rules on trade. It was a leader in nine rounds of negotiations of the General Agreement on Tariffs and Trade (GATT), including the current Doha Development Agenda (DDA) round, that have expanded the coverage of multilateral trade rules and that led to the establishment in 1995 of the World Trade Organization (WTO). However, progress in the DDA has been slow at best as WTO members have found it difficult to reach consensus on some basic issues, such as reducing tariffs and nontariff barriers on trade in agriculture, manufactured goods, and services. These difficulties have generated debate over the future role of multilateral negotiations and the WTO itself as a tool of trade policy. U.S. trade negotiations have become increasingly dominated by bilateral and regional negotiations to establish free trade agreements (FTAs). To date the United States has FTAs in effect with 14 countries, and FTAs with three other countries pending. Some experts and other observers view the FTAs as a building block to broader, multilateral negotiations. Others consider them an unhelpful roadblock that undermines the multilateral system (because they may lead to trading blocs and trade diversion). In general, support for FTAs in the United States and elsewhere may be waning, in part due to growing uncertainty and skepticism regarding the benefits of trade liberalization among some policymakers and various segments of the population. A second group of trade policy tools are trade remedies– measures applied primarily against imports to alleviate or "remedy" the price impact of unfairly traded imports and of some fairly traded imports. Trade remedies include antidumping (AD) measures and countervailing (CV) measures applied in the form of extra duties on imports that are, respectively, sold at less than fair market value or have benefitted from foreign government subsidies, as determined by the U.S. Department of Commerce (DOC), and that cause or threaten to cause material injury to the U.S. industry, as determined by the U.S. International Trade Commission (USITC). These measures are the most frequently used trade remedies. A more powerful, yet less frequently used, trade remedy is the escape clause or safeguard measure. Safeguards, sometimes called section 201 measures, are applied in the form of higher duties or quotas, on imports that are trade fairly but enter at such rapid rates as to cause or threaten to cause serious injury to the domestic industry. They are applied to the imports of the product from all countries. As a result, safeguards have a potentially powerful impact. The cause and injury thresholds that petitioners must meet before receiving trade remedy relief are much higher than for AD and CV measures. In addition, they require presidential approval. As a result, safeguards are not as frequently applied as other trade remedies and even less so than in the past. Section 301 and its derivatives are another set of trade remedies that are part of trade policy "toolbox" but infrequently used. Section 301 (of the Trade Act of 1974) authorizes the USTR to apply sanctions against a trading partner that uses unfair trade practices against U.S. exports. A related provision, called "Special 301" requires the USTR to identify countries that fail to protect the rights of U.S. owners of intellectual property and to apply sanctions if the trading partner does not improve IPR protection. Some U.S. trading partners have criticized the "aggressive" U.S. use of trade remedies, particularly AD and CV measures (which some claim are protectionist). The European Union and Japan, for example, successfully challenged the U.S. practice of "zeroing" when calculating "fair value" in AD cases. Many WTO members have also argued that trade remedy practices should be reviewed and revised as part of the Doha Development Agenda round. Congress has mandated, as part of the Trade Promotion Authority (TPA), that the President shall not enter into any trade agreement that weakens U.S. trade remedy laws. Besides trade agreements and trade remedies, U.S. policymakers use other tools to achieve various policy objectives. For example, the Department of Commerce, the Department of Agriculture, the U.S. Export-Import Bank and other agencies operate programs to promote U.S. exports of manufactured goods and agricultural products. The Commerce Department and Labor Department administer Trade Adjustment Assistance (TAA) programs for firms (Commerce) and workers (Labor) that are negatively affected by trade in order to help them adjust. In addition, U.S. trade preference programs, including the Generalized System of Preferences (GSP), allow certain products imported from eligible developing countries to enter the United States duty free. These programs are designed to encourage economic development in those countries. Furthermore, sometimes trade is used to achieve overtly foreign policy goals. For example, the U.S. Government controls exports of some high technology to prevent it from getting into the hands of adversaries. It also restricts trade with states deemed to be detrimental to U.S. national interests, such as Burma, Cuba, and North Korea. The direction of U.S. trade policy is likely to be a hotly contested issue among U.S. policymakers over the next several years. Challenges include reaching a consensus on how to lower the U.S. trade deficit (without slowing the economy), the design and funding of programs to assist displaced workers, the extent U.S. trade remedy laws should be used to respond to unfair trade practices (without becoming protectionist), policies the federal government can initiate to help the U.S. economy become more globally competitive, strategies the United States can take to induce other countries to lower their trade barriers (multilaterally in the WTO and/or bilaterally through FTAs), and the extent that trade policy should be used to promote environment (e.g., global climate change) and worker rights. Reaching a consensus on these issues within Congress, as well as between Congress and the Administration, will likely prove difficult since the stakeholders of trade are widespread and diverse (e.g., in terms of whether free trade benefits them or hurts them), and because there are differing opinions over the effects trade has on the U.S. economy, as well as different views over which trade policies are effective in promoting U.S. trade goals. One of the biggest challenges for the next President and Congress will be whether TPA, which expired in July 2007, should be renewed, thus enabling the President to pursue additional bilateral, regional, and multilateral trade agreements. Some policymakers oppose extending TPA, contending that trade liberalization has had little positive impact on the U.S. economy and has hurt some U.S. workers, while others have argued that failure to renew TPA will undermine U.S. leadership on free trade and will enable other countries (such as China) to form trade blocs that exclude the United States, thus putting U.S. exporting firms at a disadvantage.
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The United States has become increasingly integrated with the rest of the world economy. This integration has offered benefits and presented challenges to U.S. business, agriculture, labor, and consumers. Those who can compete in the more integrated economy have enjoyed opportunities to broaden their success, while those who are challenged by increased foreign competition have been forced to adjust and some have exited the market or relocated overseas. Some observers contend that, in order to remain globally competitive, the United States must continue to support trade liberalization policies, while assisting those hurt by trade. Others have raised doubts over whether free trade policies benefit the U.S. economy (e.g., some blame such policies for the large U.S. trade deficit, declining wages, and growing income disparity). Many contend that trade liberalization works only when everyone plays by the rules and have urged the aggressive enforcement of U.S. trade laws to address unfair trade practices. Still others maintain that such issues as labor rights, the environment, and climate change should be linked to trade policies. These competing views are often reflected in the struggle between Congress and the Executive branch in shaping U.S. trade policy. This report provides an overview and background on the debate over the future course of U.S. trade policy and will be updated as events warrant.
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The House of Representatives follows a well-established routine on the opening day of a new Congress. The proceedings include electing and swearing in the Speaker, swearing in Members, electing and swearing in House administrative officers, and adopting rules of procedure and various administrative resolutions. Resolutions assigning some or many Members to committees may also be adopted. The House must take these actions at the beginning of each new Congress because it is not a continuing body. Article 1, Section 2 of the Constitution sets a term of office for Members of the House at two years. Thus, one House ends at the conclusion of each two-year Congress, and the newly elected Representatives must constitute a new House at the beginning of a new Congress. The Twentieth Amendment to the Constitution directs that a new Congress convene at noon on January 3 in each odd-numbered year, unless the preceding Congress has by law designated a different day for the new Congress's convening. On November 20, 2014, the 113 th Congress completed action on H.J.Res. 129 , setting the convening date for the 114 th Congress as January 6, 2015. The joint resolution was signed into law by President Obama on December 4 ( P.L. 113-201 ). Congressional leaders planned that the 115 th Congress would convene January 3, 2017, and that the 116 th Congress would convene January 3, 2019, obviating the need for a law to set the date. In recent years, it has been the exception rather than the rule for a new Congress to begin on January 3. Nine of the past 12 Congresses began on a date other than January 3: 104 th Congress (January 4, 1995), 105 th Congress (January 7, 1997), 106 th Congress (January 6, 1999), 108 th Congress (January 7, 2003), 109 th Congress (January 4, 2005), 110 th Congress (January 4, 2007), 111 th Congress (January 6, 2009), 112 th Congress (January 5, 2011), and 114 th Congress (January 6, 2015). The 107 th , 113 th , and 115 th Congresses were the 3 of these 12 to begin on January 3, convening January 3, 2001; January 3, 2013; and January 3, 2017, respectively. Although no officers of the House will have been elected when the House first convenes, officers from the previous Congress perform certain functions. The previous Clerk of the House calls the House to order and presides over the chamber until the Speaker is elected and sworn in. In the absence of the Clerk, the Sergeant at Arms performs this duty. After the Clerk calls the Representatives-elect to order, the Chaplain offers a prayer. The Clerk leads the Members-elect and their guests in reciting the Pledge of Allegiance. The Clerk then directs a reading clerk to call the roll of all Members-elect to establish that a quorum is present. In current practice, the roll is not actually called by a clerk; rather, the Members-elect record their presence by inserting their official voting cards (obtained prior to or on opening day) in the chamber's electronic voting machines. Once the call of the roll is completed, a majority having registered their names, a quorum (218, if no vacancies) is indicated. This action fulfills the requirements of Article I, Section 5 of the Constitution that a quorum be present to conduct business. The Clerk then announces the election of the Resident Commissioner from Puerto Rico (when applicable since the Resident Commissioner's term is four years) and of the Delegates—one person from the District of Columbia and one person from each of the territories of Guam, the U.S. Virgin Islands, the Northern Mariana Islands, and American Samoa. The Clerk also reports any deaths or resignations since the election. A quorum being present, the first order of official business is the election of the Speaker of the House of Representatives. The candidates for Speaker are nominated from the floor by the leaders of their respective parties. Traditionally, there is one candidate from the majority party and one from the minority party, selected by the Republican Conference and the Democratic Caucus at their early organizational meetings. Individual Members-elect may place other names in nomination. Debate on the nomination of candidates for Speaker is allowed but not customary. Instead, the nominations are followed immediately by a viva voce roll-call vote, that is, a vote in which the Members-elect respond orally to the calling of their names. In this vote, the Members-elect call out the last name of their choice for Speaker when their names are called by a reading clerk. The Clerk appoints Members-elect to serve as majority and minority tellers, usually two each, to ascertain the vote. So long as nearly all of the majority party's members vote for its candidate, the majority party is able to assure its candidate's election because the vote is likely to be almost exclusively along party lines. The candidates themselves, however, often vote "present" or do not vote. The following excerpt is from the proceedings for the election of the Speaker in the 115 th Congress. ELECTION OF SPEAKER The CLERK. Pursuant to law and precedent, the next order of business is the election of the Speaker of the House of Representatives for the 115 th Congress. Nominations are now in order. The Clerk now recognizes the gentlewoman from Washington (Mrs. McMORRIS RODGERS). Mrs. MCMORRIS RODGERS. ... As chair of the Republican Conference, I am directed by the vote of that conference to present for election to the office of Speaker of the House of Representatives for the 115 th Congress the name of the Honorable PAUL D. RYAN.... The Clerk now recognizes the gentleman from New York (Mr. CROWLEY). Mr. CROWLEY. ... Madam Clerk, [as chair of the Democratic Caucus] I am pleased to put forth the name of the Representative-elect from California, NANCY PELOSI, for Speaker of the House of Representatives for the 115 th Congress. The CLERK. The names of the Honorable PAUL D. RYAN, a Representative-elect from the State of Wisconsin, and the Honorable NANCY PELOSI, a Representative-elect from the State of California, have been placed in nomination. Are there further nominations? There being no further nominations, the Clerk appoints the following tellers: The gentleman from Mississippi (Mr. HARPER); the gentleman from Pennsylvania (Mr. BRADY); the gentlewoman from Ohio (Ms. KAPTUR); and the gentlewoman from Florida (Ms. ROS-LEHTINEN). The tellers will come forward and take their seats at the desk in front of the Speaker's rostrum. The roll will now be called, and those responding to their names will indicate by surname the nominee of their choosing. The Reading Clerk will now call the roll. The tellers having taken their places, the House proceeded to vote for the Speaker. ... The CLERK. The tellers agree in their tallies that the total number of votes cast is 433, of which the Honorable PAUL D. RYAN of the State of Wisconsin has received 239, the Honorable NANCY PELOSI of the State of California has received 189, the Honorable TIM RYAN of the State of Ohio has received 2, the Honorable JIM COOPER of the States of Tennessee has received 1, the Honorable JOHN LEWIS of the State of Georgia has received 1, and the Honorable DANIEL WEBSTER of the State of Florida has received 1. Therefore, the Honorable PAUL D. RYAN of the State of Wisconsin, having received a majority of the votes cast, is duly elected Speaker of the House of Representatives for the 115 th Congress. After the Speaker's election, the Clerk appoints a bipartisan committee to escort the Speaker-elect to the Speaker's chair on the dais. The Speaker-elect is escorted by leaders of both parties and, often, by Representatives-elect from his or her home state. He or she is introduced to the chamber by the minority leader, who might deliver a statement from the chair. The Speaker may make a statement of his or her own and then takes the oath of office. By precedent, the dean of the House, the most senior (longest-serving) Member, regardless of party, administers the oath to the Speaker. That oath is identical to that of the other Members. (See " Oath of Office for Members-Elect .") The Speaker during the day's proceedings delivers a letter to the Clerk listing Members in the order in which they may act as the Speaker pro tempore, should a vacancy occur in the office, until a new Speaker is elected. After taking the oath, the Speaker administers the oath to all Members of the House, en masse, including the nonvoting Delegates and Resident Commissioner. The Speaker directs the Representatives-elect to rise and raise their right hands. The oath, which follows, is stated in the form of a question, to which the newly elected Members respond in the affirmative: [Do you] I do solemnly swear (or affirm) that [you] I will support and defend the Constitution of the United States against all enemies, foreign and domestic; that [you] I will bear true faith and allegiance to the same; that [you] I take this obligation freely, without any mental reservation or purpose of evasion; and that [you] I will well and faithfully discharge the duties of the office on which [you] I am about to enter[?]. So help [you] me God. An oath is mandated by Article VI of the Constitution, and its text is set by statute (5 U.S.C. 3331). As the Members-elect raise their right hands, they are not required to hold anything in their left hands. Many have held a family Bible or another sacred text in their left hands, but there is no requirement that anything be held when the oath is taken. The same is true for Representatives who re-enact the event with their families and the Speaker in the Speaker's office after the formal ceremony. Many Members choose to hold something meaningful in their left hands. These objects have often been, but are not limited to, a family heirloom or something else of special significance. Nothing, however, is required. It is up to the Member to determine what, if anything, he or she holds. While photography is not permitted of the swearing-in on the House floor, ceremonial swearing-ins may be photographed or recorded. Members who were not present when all Members were sworn in might take the oath in the House chamber later on opening day. Occasionally, the swearing-in of a Member-elect is delayed because of illness or other circumstances. When that happens, the Member-elect is sworn in at a later date in the House chamber or elsewhere by someone designated by the Speaker. The oath of office may be administered by another Member or by a judge. The location has been at sites in Washington, DC, other than the Capitol and in other parts of the country. If the swearing-in of a Member is challenged, the Speaker, pursuant to House precedents, will ask the Member-elect to remain seated while the others are sworn in. The House then determines the disposition of the challenge. After the Speaker administers the oath of office, he or she receives reports from the chairs of the two party organizations, the Republican Conference and the Democratic Caucus, who announce their parties' choice for majority leader and minority leader. Mrs. MCMORRIS RODGERS. Mr. Speaker, as chair of the Republican Conference, I am directed by that conference to notify the House officially that the Republican Members have selected as majority leader the gentleman from California, the Honorable KEVIN MCCARTHY. Mr. CROWLEY. Mr. Speaker, as chairman of the Democratic Caucus, I have been directed to report to the House that the Democratic Members have selected as minority leader the gentlewoman from California, the Honorable NANCY PELOSI. The party chairs then announce the names of those elected to serve as majority and minority whips. The House next turns to the election of its administrative officers: Clerk, Sergeant at Arms, Chief Administrative Officer, and Chaplain. A simple resolution nominating the slate of candidates is offered by the chair of the caucus or conference of the majority party. The minority party proposes its own roster of candidates as an amendment to the majority party's resolution. By tradition, neither the resolution nor the amendment is debated, although the slate can be divided with a separate vote on any or all officers. Again, because of its numerical advantage, the majority is able to defeat the minority substitute and to adopt the resolution naming its chosen candidates. The Speaker administers the oath to the newly elected officers. Six staff of the minority party leadership are subsequently designated. The House adopts simple resolutions to formally notify the Senate and the President that it has elected its leaders, is assembled, and is ready to receive messages from them. Subsequently, the majority and minority leaders as well as two Senators (usually the majority and minority leaders) telephone the President with the news that Congress has assembled is ready to begin its work. The Clerk of the House is also authorized by resolution to inform the President that the House has selected its Speaker and Clerk. The next order of business is the adoption of the rules of the House. Although the rules of one House do not carry over to the next House, a newly elected House typically approves its rules by adopting the rules of the previous Congress with specific amendments. Traditionally, prior to the first day of a new Congress, majority and minority Rules Committee members and possibly other party groups have worked on any changes the majority or minority wish to implement in the House's standing rules. With the majority party's numerical advantage, its rules package, as presented, prevails. The majority's proposed rules are offered in the form of a House simple resolution, most often numbered H.Res. 5 . Since there are at that time no existing House rules, the resolution is considered under "general parliamentary law," which the House interprets to include the rules in force in the preceding Congress. Debate is normally limited to one hour, although the time might be extended by unanimous consent, and the majority party floor manager of the resolution traditionally yields half the debate time "for purposes of debate only" to the minority floor manager. Participants in the debate discuss the majority's proposal and any minority-party alternate proposal. At the end of debate time, the majority manager moves the previous question. The majority party's numerical advantage assures the adoption of this motion. The effect is to force a nearly immediate vote on the question of final approval of the majority's own rules package. Adoption of the previous question motion ends debate and prevents the minority from actually offering its alternate rules package. Nonetheless, the minority still has the ability to offer a motion to commit with instructions, that is, one more chance to offer an amendment to the majority's rules resolution. Only 10 minutes of debate, equally divided, is allowed but the House often forgoes this debate by unanimous consent. With its numerical majority, the majority party is able to prevail in defeating a motion to commit, if offered, and, then, in adopting its rules resolution. In addition to allowing the adoption of the previous House's rules with specific amendments to those rules, a rules resolution may include other provisions that govern additional House action or activities. Such provisions typically appear as the final sections of the rules resolution, may be extensive, and may be labeled as separate orders, additional orders, or even with a specific name. In the 115 th Congress rules resolution, Section 3 was labeled Separate Orders; Section 4 was labeled Committees, Commissions, and House Offices; and Section 5 was labeled Order of Business. The separate orders in Section 3 pertained to House rules (e.g., access to House exercise facilities by former Members who were registered lobbyists) and rules in rulemaking statutes (e.g., the Congressional Budget Act). These separate orders and other orders departed from or interpreted these rules in a specific manner and were applicable for the first session of the 115 th Congress or for the duration of the 115 th Congress. The provisions related to committees, commissions, and House offices in Section 4 continued the existence for the 115 th Congress of resolutions from prior Congresses that created the House Democracy Partnership, the Tom Lantos Human Rights Commission, and the Office of Congressional Ethics. The House needed to formally indicate that these resolutions were in effect since a simple resolution normally expires at the end of the Congress in which it is adopted. An additional order in Section 5 provided for the reading of the Constitution in the House. The terms special order and special rule are used somewhat interchangeably. In either case, a special rule may make in order House consideration of a measure and establish the terms of the measure's debate and amendment, among other provisions. It might also alter specific rules of the House only for the consideration of one or more measures identified in the special order, perhaps permitting an action that would otherwise be prohibited. When the majority party wishes to begin moving quickly in a new Congress on legislation, it might include in the rules resolution special orders making in order the consideration of specified measures or temporarily altering specific rules to allow the consideration of a specified measure. In the 115 th Congress, Section 5 of H.Res. 5 made in order the consideration of H.R. 21 , which would amend the Congressional Review Act, related to congressional review of certain proposed regulations, to allow a joint resolution to disapprove two or more proposed regulations rather than one regulation. The special order was a closed rule, meaning that no amendments could be offered. In the 113 th Congress, Section 5 of H.Res. 5 allowed a motion to suspend the rules on Friday, January 4, 2013, so that the House could consider a flood insurance measure under that procedure; without this order, the motion could be made only on Mondays, Tuesdays, and Wednesdays. A similar provision in Section 5 of H.Res. 5 in the 112 th Congress applied to a resolution to be considered on Thursday, January 6, 2011, that reduced salaries and expenses authorized for Member, committee, and leadership offices. This provision also expanded the debate time of 40 minutes under the rule on suspension of the rules to 2 hours. In the 111 th Congress, Section 5 of H.Res. 5 made in order the consideration of H.R. 11 , the Lilly Ledbetter Fair Pay Act, and H.R. 12 , the Paycheck Fairness Act, and set the terms for the measures' debate. The House agreed to H.Res. 5 on January 6, 2009. On January 9, it considered H.R. 11 and H.R. 12 under the terms of the special order included in H.Res. 5 , and passed the bills. In the 110 th Congress, special orders were included in H.Res. 6 providing for the consideration of H.R. 1 , pertaining to recommendations of the 9/11 Commission; H.R. 2 , relating to the minimum wage; H.R. 3 , governing stem cell research; and H.R. 4 , authorizing the Secretary of Health and Human Services to negotiate drug prices under Medicare Part D. H.Res. 5 in the 106 th Congress made in order consideration of a resolution to amend the House gift rules ( H.Res. 9 ). H.Res. 6 in the 104 th Congress made in order the consideration of H.R. 1 , the Congressional Accountability Act. On the day of convening or shortly thereafter, the Speaker customarily announces the Speaker's policies with respect to certain floor practices for the duration of the Congress. These policies are grounded in authority or discretion granted the Speaker in the rules. The 10 policies in effect for the 115 th Congress address— privileges of the floor, introduction of bills and resolutions, unanimous consent requests for the consideration of legislation, recognition for one-minute speeches, recognition for special-order speeches, decorum in debate, conduct of votes by electronic device, use of handouts on the House floor, use of electronic equipment on the House floor, and use of the House chamber. In recent Congresses, the majority leader has initiated a set of written protocols to guide the scheduling or consideration of legislation during a two-year Congress. The protocols cover matters involving the content of authorization bills, the availability of measures scheduled for consideration under the suspension of the rules procedure, and other items. Both parties' rules also contain guidance on scheduling or considering legislation. For example, both parties' rules contain guidance on legislation qualifying to be considered under the suspension of the rules procedure. These protocols and party rules are not printed in the Congressional Record . The Speaker, the chair of the Rules Committee, or the chairs of relevant committees might submit memoranda of understanding for printing in the Congressional Record . These memoranda most often provide guidance to the Speaker on the referral of legislation where an ambiguity is present, possibly triggered by a change in rules. In the 114 th Congress, for example, the Speaker inserted three memoranda of understanding between the chair of the Judiciary Committee and, respectively, the chairs of the Agriculture, Energy and Commerce, and Ways and Means Committees. In adopting H.Res. 5 , the House made a change in the Judiciary Committee's jurisdiction by adding the phrase "and criminalization" to the committee's jurisdiction over "criminal law enforcement." The change was intended to "cover measures that alter the elements of a crime so as to criminalize new conduct and, in so doing, trigger an existing criminal penalty." Measures reported from committees other than Judiciary with these kinds of provisions had affected the scope of the Judiciary Committee's jurisdiction over criminal law enforcement. The Speaker might alternately include a policy statement in the Speaker's announcements for a Congress. The Speaker also appoints Members who may sign enrolled bills and joint resolutions. The House establishes its daily hour of meeting for the first session of the new Congress by a simple resolution. It must therefore be renewed for the next session of Congress. The House by unanimous consent allows a period preceding House sessions called Morning Hour. In Morning Hour, Members may speak up to five minutes on topics of their choice. To eliminate a routine daily unanimous consent request, the House agrees by unanimous consent at the beginning of a Congress that Members may publish remarks and include supporting information in the Extension of Remarks section of the Congressional Record . The House adopts a concurrent resolution ( H.Con.Res. 1 , 115 th Congress) by unanimous consent to allow the Speaker and the majority leader of the Senate (or their designated representatives) to notify the Members of the House and Senate to assemble outside of Washington, DC, if circumstances require it. The committee assignment process occurs largely within the party groups—the Republican Conference and the Democratic Caucus. The conference and the caucus have their own rules governing committee assignments. The only action visible on the chamber floor is the adoption of simple resolutions that implement the committee nominations recommended by the conference and the caucus. The adoption of such resolutions is routine and occurs without debate or amendment because of the tacit understanding that each party has a right to establish its own internal distribution of committee assignments. The House may take up one or more assignment resolutions on opening day, but the consideration of additional assignment resolutions extends throughout January and possibly for several additional weeks. The House typically in March adopts a funding resolution for its committees. Interim funding through March would have been provided by the House in the preceding Congress. Other routine organizational business may be taken up on the House floor on the first day. Concurrent resolutions may be adopted providing for a joint session of Congress to receive the President's State of the Union message, or providing for an adjournment of the House and Senate. The Speaker and minority leader might make appointments to commissions or committees or other offices. A resolution of condolence on the death of a Member that occurred subsequent to the adjournment of the last Congress may also be considered. Some resolutions are dependent on specific circumstances that might not occur in every new Congress. For example, following a presidential election, the new House adopts resolutions providing for the counting by the new Congress of electoral votes cast for the President and Vice President of the United States; continuing the Joint Congressional Committee on Inaugural Ceremonies; and authorizing the use of the Capitol and its grounds for inaugural activities. After the House has completed its initial organizational proceedings, it might then turn to legislative or routine business, which normally completes its legislative day. Routine business might include the introduction of bills and resolutions, receipt and referral of messages from the President and executive agencies, receipt of messages from the Senate, one-minute and special-order speeches, and notices and announcements required by House rule or regulation.
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Article 1, Section 2 of the Constitution sets a term of office of two years for all Members of the House. One House ends at the conclusion of each two-year Congress, and the newly elected Representatives must constitute a new House at the beginning of the next Congress. Consequently, the House must choose its Speaker and officers and adopt the chamber's rules of procedure every two years. The Constitution mandates that Congress convene at noon on January 3, unless the preceding Congress by law designated a different day. P.L. 113-201 set January 6, 2015, as the convening date of the 114th Congress. Congressional leaders planned that the 115th Congress would convene January 3, 2017, and that the 116th Congress would convene January 3, 2019, obviating the need for a law to set the date. Although no officers will have been elected when the House first convenes, officers from the previous Congress perform certain functions, such as conducting the election of the Speaker. The House follows a well-established first-day routine. The proceedings include— a call to order by the Clerk of the House; a prayer led by the Chaplain and the Pledge of Allegiance led by the Clerk; a quorum call ordered by the Clerk; the election of the Speaker, ordered by the Clerk and conducted with the assistance of tellers; remarks by the Speaker-elect, followed by his or her swearing-in by the dean of the House; the oath of office for the newly elected and re-elected Members, administered by the Speaker; adoption of the rules of the House for the new Congress; adoption of various administrative resolutions and unanimous consent agreements; and announcement of the Speaker's policies on certain floor practices. On opening day, the House often adopts resolutions assigning some or many of its Members to committees. This process regularly continues over several more weeks. The committee assignment process occurs primarily within the party groups—the Republican Conference and the Democratic Caucus. Other routine organizational business may also be taken up on the House floor on the first day, such as adoption of a resolution to allow a judge or a Member of Congress to administer the oath of office to one or more Members-elect who are absent. Some resolutions on opening day are dependent on specific circumstances and do not occur at the beginning of each new Congress. At the outset of a new Congress following a presidential election, the House and Senate must adopt a resolution agreeing to meet to count the electoral votes cast for President and Vice President. For an explanation of proceedings occurring on the first day in the Senate, see the companion report: CRS Report RS20722, The First Day of a New Congress: A Guide to Proceedings on the Senate Floor.
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The 112 th Congress is currently considering various options for tax reform and deficit reduction. In recent years, deficits have reached historically high levels relative to the size of the economy, leading to concerns over fiscal sustainability in the long run. A balanced approach to deficit reduction could involve changes to both federal spending and revenues. This report addresses revenue options, highlighting proposals made by the President's Fiscal Commission and the Debt Reduction Task Force. Both of these groups offered bipartisan proposals for deficit reduction that provide a potential starting point for what is likely to be a process that involves many difficult policy choices. In addition to changes in revenue policy geared toward deficit reduction, fundamental tax reform has been an issue of interest in the 112 th Congress. It is possible for tax reform to complement deficit reduction goals. This report begins by reviewing the current fiscal situation. As a percentage of gross domestic product (GDP), revenues remain at historically low levels while spending remains elevated, contributing to budget deficits. The budget deficit in FY2011 is projected to be nearly $1.5 trillion, or 9.8% of GDP. Further, in recent years, the share of the federal budget devoted to mandatory spending has increased, making it difficult, if not impossible, for fiscal sustainability to be achieved through cuts in discretionary spending alone. Large budget deficits continue to contribute to a growing national debt, which, if left unchecked, could undermine future economic growth. After examining the current fiscal situation, this report analyzes current federal revenues. The United States currently raises most federal revenues through the individual income tax and payroll taxes. Reforms to both types of taxes could result in additional revenues. Further, the United States could generate additional revenue by reforming the corporate income tax, levying additional consumption taxes, or by increasing excise taxes on certain items (e.g., gasoline, alcohol), among other options. In recent months, a number of groups and individuals have issued proposals for deficit reduction. This report provides a comparison of the tax reforms suggested in two of these proposals, the President's Fiscal Commission and the Debt Reduction Task Force. These two were chosen as each provided comparable specifics with respect to tax reform. In addition to the Fiscal Commission and Debt Reduction Task Force plans, notable deficit reduction plans have been released by congressional leadership and the Administration. In April, 2011, Representative Paul Ryan, chairman of the House Committee on the Budget released The Path to Prosperity: Restoring America's Promise . This document accompanies the House-passed FY2012 budget resolution, H.Con.Res. 34 . Chairman Ryan's Path to Prosperity proposes to reduce budget deficits and stabilize national debt using a combined strategy, including spending cuts, entitlement reforms (specifically, Medicare), and tax reforms. The Path to Prosperity suggests simplifying the tax code by reducing rates and eliminating tax expenditures. Specifics regarding which tax expenditures would be eliminated were not provided. The Administration has also outlined a broad framework for deficit reduction, in a fact sheet titled The President's Framework for Shared Prosperity and Shared Fiscal Responsibility . The President also supports eliminating tax expenditures. Eliminating tax expenditures might allow for reduced rates or deficit reduction. The Administration's proposal does not provide specifics regarding which tax expenditure provisions would be eliminated. The Administration also notes that reforms to Social Security should be considered. This potentially could include changes to the payroll tax base, however, specifics were not provided. The Budget Control Act of 2011 ( P.L. 112-25 ) couples an increase in the debt ceiling with reduced spending, while also establishing a 12-member Joint Select Committee to identify additional policies to reduce the deficit. Under the Budget Control Act of 2011, the debt ceiling is increased through multiple phases by $2.1 trillion to $2.4 trillion. The increase in the debt ceiling is matched with a decrease in projected federal deficits. Under the first phase, the debt ceiling is increased by $900 billion ($400 billion up front, with another $500 billion increase to occur in the absence of a joint resolution of disapproval). Under the second phase, the 12-member Joint Select Committee on Deficit Reduction identifies an additional $1.5 trillion in deficit reduction over the FY2012 - FY2021 budget window. If the Joint Select Committee fails to find at least $1.2 trillion in deficit reduction, $1.2 trillion in across-the-board spending cuts would be enacted. As the Joint Select Committee evaluates policy options for achieving the additional $1.2 trillion to $1.5 trillion in deficit reduction, revenue options may be considered. On September 19, 2011, President Obama submitted recommendations for deficit reduction to the Joint Select Committee on Deficit Reduction. The President's proposal, when combined with the discretionary spending caps enacted as part of the Budget Control Act, would result in nearly $4.9 trillion in deficit reduction through 2021. Several factors contribute to the current fiscal situation. First, there are historically large budget deficits. Bringing down budget deficits could involve reducing spending, increasing revenues, or both. Second, these large budget deficits are contributing to a growing national debt. If these deficits and the debt are not addressed, there may be macroeconomic consequences. The following sections address these factors in turn. The U.S. federal budget deficit has increased relative to historical levels. In recent decades, budget deficits have rarely exceeded 5% of GDP. The FY2010 budget deficit was $1.3 trillion, or 8.9% of GDP. The Congressional Budget Office (CBO) projects a FY2011 budget deficit of nearly $1.5 trillion, or 9.8% of GDP. The Office of Management and Budget (OMB) projects budget deficits rising to $1.6 trillion, or 10.9% of GDP. Over the past three decades (1980 through 2010), the average budget deficit was 3% of GDP. Figure 1 illustrates outlays, receipts, and deficits as a percentage of GDP. In years where outlays exceed revenues, the federal government runs a budget deficit. As can be seen in Figure 1 , outlays have increased while revenues have decreased, relative to GDP, in recent years. The increase in federal outlays coupled with a decrease in federal receipts has led to a rising budget deficit. Federal spending consists of mandatory spending, discretionary spending, and net interest payments. Generally, mandatory spending includes spending on entitlement programs and spending controlled by laws other than annual appropriations acts. Discretionary spending is the portion of spending controlled by annual appropriations legislation. Net interest includes the government's interest payments on debt held by the public, offset by interest income the government receives through loans made and investments. Over the past few decades, mandatory spending has grown to dominate federal outlays. In FY2010, mandatory spending was 55% of total outlays, or $1,913 billion. In FY1980, mandatory spending was 44% of total outlays. Discretionary spending as a percentage of total outlays was 39% in FY2010, or $1,347 billion. Discretionary spending as a percentage of total outlays was 47% in FY1980. Discretionary spending can be further decomposed into defense-related and non-defense-related discretionary spending. In FY2010, non-defense discretionary spending was $658 billion, a sum equal to 49% of discretionary spending or 19% of total federal outlays. Non-defense discretionary spending was 24% of total outlays in 1980. Eliminating the FY2010 budget deficit using only cuts in discretionary spending would have required eliminating all discretionary spending, including defense-related discretionary spending. An evaluation of the federal budget deficit and appropriate policy responses requires examining anticipated longer-term deficits. The FY2010 budget deficit is partially due to fiscal stimulus and other policies enacted in response to the financial crisis and Great Recession which began in late 2007. Automatic increases in spending during the recession also contributed to budget deficits. While the budget deficit was 9% to 10% of GDP in FY2010, the CBO baseline has budget deficits at 3.0% of GDP in 2015. The President's FY2012 Budget projects deficits of 3.2% of GDP by 2015. Various projections predict budget deficits to persist through FY2020 and beyond. Budget deficits add to the national debt. In 2010, the national debt was $9 trillion. By 2016, projections suggest that the national debt will reach $15 trillion. Figure 2 illustrates debt as a percentage of GDP from 1970 through 2016. Between 1970 and the mid-1990s, debt as a percentage of GDP increased from less than 30% to nearly 50% of GDP. In the late 1990s, during a phase of federal budget surpluses and strong economic growth, the debt decreased to less than 33% of GDP in 2001. By 2009, debt relative to GDP had increased to 62%. By 2016, it is expected that debt relative to GDP will reach 76%. Increasing debt can mean increased interest payments to service the debt. Figure 3 illustrates net interest payments as a percentage of GDP from 1970 through 2016. Net interest payments as a percentage of GDP more than doubled between 1970 and the mid-1980s. After reaching 3.3% in the early 1990s, net interest payments as a percentage of GDP fell to 1.3% (1970 levels) by 2009. Net interest payments are predicted to increase to nearly 3% of GDP by 2015. While increasing national debt is generally associated with rising interest payments, interest rates are also a determining factor. Rising net interest payments in the early 1980s were largely driven by increasing interest rates. When interest rates fell towards the end of the 1980s, net interest payments remained around 3% of GDP as the national debt was increasing. In recent years, net interest payments have remained low, relative to historical levels, despite rising debt levels. Low interest rates in recent years have prevented interest payments as a percentage of GDP from increasing to date. If interest rates rise in the future, all else equal, then interest payments relative to GDP are projected to increase as well. If the national debt increases, as projected, and interest rates increase, then interest payments as a percent of GDP will rise at a faster rate. The current fiscal situation is unlikely to be sustainable. Deficit levels are considered unsustainable when deficits cause the national debt to grow faster than GDP (output) over a sustained period of time. As the national debt grows faster than output, an increasing share of national income must be devoted to servicing the debt (making interest payments). With an increasing share of government spending going toward debt service, investors holding the debt may begin to lose faith in the government's ability to continue making interest payments. When investors lose confidence in the government's ability to service debt, and become unwilling to hold the debt at normal interest rates, the government is left with two options. First, the government can default on its debt and fail to pay investors. Second, the government can monetize the debt, or finance debt repayment through money creation. The second option will result in rapid price inflation that will reduce the real value of the debt held by investors. The continued ability of the Treasury to issue debt at historically low interest rates suggests that investors do not view the current U.S. fiscal circumstance as irreversible. Increasing federal deficits in 2009 and 2010 are largely attributable to the economic recession and subsequent policy responses. The policy response includes actions taken in response to the financial crisis, including fiscal stimulus and the Troubled Asset Relief Program (TARP). Fiscal policy responses have included increased spending and tax reductions, enacted to stimulate a weak economy. If, however, the deficit does not return to sustainable levels, and the debt continues to grow after the economy has recovered, the risk that the deficit and accompanying debt will stunt economic growth and potentially decrease standards of living increases. In FY2010, federal revenues were $2.2 trillion. The sources for these revenues are illustrated in Figure 4 . Nearly 41.5% of total receipts ($899 billion) was collected through individual income taxes. Another 40.0% ($865 billion) was collected through social insurance and retirement (i.e., payroll) taxes. The corporate tax accounted for 8.9% ($191 billion) in total tax collections. Excise taxes accounted for 3.1% of total collections ($67 billion). The estate and gift taxes were responsible for 0.8% ($18 billion) in revenue, and the remaining 5.6% ($122 billion) in receipts came from other sources. Figure 5 illustrates the trends in federal receipts as a percentage of GDP, by receipts source, over the past four decades. As can be seen in Figure 5 , both individual and corporate tax receipts relative to GDP reached a 40-year low in 2009. Corporate receipts recovered modestly in 2010. The low levels of individual and corporate income tax collections can be partially explained by the recession. Another factor contributing to reduced income tax collections is the increased availability of income tax credits, exemptions, and deductions. Individual income tax collections have tended to be below historical averages, since the 2001 tax cuts. Social insurance tax collections were slightly above the historical average. As a benchmark, it is helpful to consider the magnitude of the increase in revenues that would be needed, should deficits be eliminated through only tax increases. Table 1 provides some guidance on the percentage increase in revenues that would be necessary to achieve a balanced budget under the CBO current policy baseline and the Administration's FY2012 budget proposal (OMB), based on FY2011 and FY2015 projections. Both CBO and OMB projections suggest that the federal budget deficit will remain around $1.5 trillion in FY2011. Closing this budget deficit using only increased income tax revenue would require income tax receipts to increase by 145%, using CBO's projections, or 141%, using OMB's projections. Increases in income tax receipts could be achieved through higher rates or by reducing various tax expenditures (this issue is discussed further below). Balancing the FY2011 budget through increases in both income and social insurance taxes would require an increase in receipts of 78%, using CBO's projections, or 72%, using OMB's projections. Increasing social insurance receipts could be achieved either through rate increases or by applying the tax to income above the social security cap. Balancing the budget through tax increases in FY2015 would require less in terms of increased revenues. Both CBO and OMB project increasing tax revenues and falling deficits over time as the economy continues to recover from the recent recession. Note that CBO's baseline is current law, meaning that the 2001 and 2003 tax cuts, and the AMT patch, among other policies, are allowed to expire as scheduled in 2012. If tax cuts that are scheduled to expire are extended further, the tax increases required to eliminate the deficit would be even larger. Using these projections, increasing income tax revenues by 30% (using CBO's baseline) or 37% (using OMB's projections) would achieve a balanced budget in FY2015. If both income and social insurance taxes were increased, revenue increases of 18% (using CBO's baseline) or 21% (using OMB's projections) would be necessary to achieve a balanced budget. If all taxes were increased, including corporate taxes, estate and gift taxes, and excise taxes, revenues would have to increase by 15% (using CBO's baseline) or 17% (using the OMB's projections) to achieve a balanced budget. Economists oftentimes evaluate the relative merits of tax policies using the concepts of economic efficiency and equity. Generally, there is a trade-off between economic efficiency and equity. Tax systems that maximize economic efficiency oftentimes do not have desirable distributional consequences. Thus, policymakers may strive to balance these two objectives when implementing changes to the tax code. Another challenge for policymakers is that tax reforms may create winners and losers. Eliminating targeted tax incentives may increase tax liability for some, even as rates across the board are reduced. While eliminating certain tax incentives targeted for low-income individuals may broaden the tax base, eliminating such tax preferences may raise equity concerns. Alternatively, eliminating tax preferences that tend to benefit higher-income taxpayers may enhance tax-code equity at the expense of economic efficiency, if the tax preferences were designed to address a market failure. For example, higher-income households are more able and more likely to benefit from education-related tax incentives. Thus, eliminating various education tax benefits could enhance tax code equity. Eliminating education tax incentives, however, could reduce economic efficiency. Tax subsidies for education can enhance economic efficiency if they are successful in increasing investment in education. Generally, in the absence of market failures, economists believe that market outcomes maximize economic efficiency. Taxes may lead to inefficiencies when they result in changes in behavior. These behavioral responses, generally, occur when taxes change the price of goods or activities. For example, if an individual responds to an increase in income taxes by working less, the tax is said to generate an inefficiency. Not all taxes, however, are associated with market inefficiencies. For example, taxes on the production and consumption of goods associated with negative externalities can enhance economic efficiency. Take, for example, the federal excise tax on gasoline. The consumption of gasoline in motor vehicles may generate negative externalities, in the form of pollution and roadway congestion. Since consumers fail to take these negative external costs into account when making consumption decisions, markets may lead to overconsumption of gasoline relative to economically efficient levels. The federal excise tax on gasoline reduces consumption of gasoline, leading the market to more efficient levels of gasoline consumption. Taxes generally lead to greater inefficiencies when market participants are highly responsive to tax-imposed changes in price. If market participants are responsive to price changes, this means they change their behavior in response to taxes, driving the level of economic activity away from the socially optimal level. In other words, market participants increase participation in low-tax activities while engaging in fewer high-tax activities. This logic is consistent with the economic theory of optimal commodity taxation, which suggests that taxes are more efficient when levied on goods with low demand elasticities (i.e., demand is not responsive to changes in price). While taxing goods with low demand elasticities may be economically efficient tax policy, such a policy may raise equity concerns. Demand elasticities—or the responsiveness of demand for a product to changes in price—for necessities, such as basic food, clothing, healthcare, and shelter, tend to be relatively low. Conversely, luxury goods tend to have relatively elastic demand. Thus, a tax system designed to minimize economic distortions and maximize economic efficiency would tend to tax necessities, even though necessities represent a larger share of household consumption among those with low income. However, placing higher tax rates on necessities relative to luxury goods may violate equity principles, which are discussed below. Economic theory informs that the inefficiency of a tax is an increasing function of the tax rate. In other words, the inefficiency of a tax is not a linear function of tax rates. Instead, the economic inefficiency associated with higher tax rates is disproportionately large. Thus, to minimize distortions and economic inefficiencies from taxation, taxes should be levied at low rates. Broadening the tax base, while lowering tax rates, can yield the same amount of revenue with fewer inefficiencies. Broadening the tax base, to allow for reduced rates, was one of the major policy objectives of the last major overhaul of the U.S. tax code in 1986. Fairness in the tax code can be evaluated using the concept of equity. There are two different measures of equity: horizontal equity and vertical equity. The tax system may be used as a tool for redistribution, which some may view as enhancing equity in society. How much the tax system should be used for redistribution is a policy choice, and beyond the scope of this report. The principle of vertical equity suggests that groups with more resources, or a greater ability to pay, should pay more in taxes. Progressive tax structures, such as the current federal income tax system, are vertically equitable, as those with higher incomes pay higher rates. Consumption taxes, which tend to be regressive, are not vertically equitable. The principle of horizontal equity suggests that individuals who are similar should be treated similarly by the tax code. As an example, consider many homeowners are given tax incentives for housing, while renters are not. Two families, with similar incomes living in similar houses, may have different income tax liabilities if one family owns their house while the other rents. Thus, tax preferences designed to encourage certain behavior may create circumstances where similar individuals have different tax liabilities. This may be viewed as violating the principle of horizontal equity. The following sections provide a broad overview of various tax reform options, categorized according to the various sources of federal revenues discussed above. Providing a detailed analysis of the many reform options available is beyond the scope of this report. Instead, broad options for reform within each revenue source are reviewed. This overview provides a foundation for the discussion of specific deficit reduction proposals that follows. There are two broad options for generating additional revenues using the individual income tax. First, tax revenues can be enhanced by increasing tax rates. Second, additional tax revenues can be generated by eliminating various exemptions, deductions, and credits available under the current tax code (i.e., broaden the tax base). Eliminating enough exemptions, deductions, and credits may allow policymakers to reduce tax rates and increase revenues generated through the income tax system simultaneously. Since marginal tax rates generally influence economic behavior, eliminating targeted preferences, allowing for reduced tax rates, could enhance economic efficiency. Further, if existing tax preferences tend to benefit higher income taxpayers, eliminating such preferences may enhance equity within the tax code. Table 2 lists the largest individual income tax expenditures, ranked according to federal revenue losses. Taken together, these 10 items account for $651 billion in foregone revenue annually, or approximately 70% of total individual tax expenditures. As noted above ( Figure 4 ), FY2010 individual income tax collections were $898.5 billion. Given that tax expenditures have grown to nearly $1 trillion annually, eliminating or scaling back existing tax expenditure provisions could be a part of any deficit reduction proposal. A closer look at the specific provisions listed in Table 2 highlights the various types of tax expenditure provisions as well as possible equity issues associated with using tax expenditures to deliver federal assistance. The first, third, and eighth provisions listed are exclusions from income. Under current law, employer provided healthcare, contributions to retirement accounts, and Medicare benefits are not included in taxable income. Excluding contributions to retirement accounts and employer provided healthcare from income reduces the cost of this form of compensation, encouraging employers to provide these benefits to employees. Delivering such benefits through the tax code, however, may raise equity concerns. Both the retirement contribution and healthcare exclusions are examples of "upside-down" subsidies, where higher income taxpayers receive a greater benefit. Generally, as a consequence of the progressive income tax structure, exclusions and deductions result in an upside-down subsidy. The mortgage interest deduction and reduced rates for dividends and long-term capital gains also raise equity concerns. The mortgage interest deduction is another example of an upside-down subsidy. Eliminating the mortgage interest deduction would reduce after-tax income by an estimated 0.01% for individuals in the lowest income quintile. For individuals in the 90 th to 95 th income percentile, eliminating the deduction would reduce after tax income by an estimated 1.7%. Proponents of the mortgage interest deduction, however, cite benefits associated with homeownership as a possible rationale for retaining this tax preference. The reduced rates for dividends and long-term capital gains tend to disproportionally benefit higher-income households, as such households derive a larger proportion of income from these sources. One possible justification for reduced tax rates on dividends and long-term capital gains may be a reduction in double taxation of corporate income. With respect to capital gains rates, the revenue raising potential of a tax increase is less than the tax expenditure, due to behavioral responses. In contrast, the earned income tax credit (EITC) and the child tax credit both provide greater benefit to lower-income taxpayers. Both credits are at least partially refundable, allowing benefits to flow to those with limited tax liability. Eliminating these tax benefits would raise additional revenue, but decrease the progressivity of the current individual income tax system. A full analysis of tax expenditures in the current tax code is beyond the scope of this report. The examples above serve to highlight the complexities associated with a deficit reduction plan that looks to reduced tax expenditures as a source of additional revenues. Many of the tax code's current tax expenditure provisions were adopted to encourage targeted behavior and enhance economic efficiency by addressing externalities or to promote equity and fairness in the tax code. Eliminating or scaling back various tax expenditure provisions will require analysis of the revenue gains that can be achieved through various reforms, as well as the distributional and economic consequences of various tax expenditure reforms. Mandatory spending associated with entitlement programs such as Social Security, Medicare, and Medicaid has grown in recent decades. In the early 1960s, mandatory spending accounted for approximately 30% of all federal spending. By 2010, mandatory spending had grown to account for approximately 55% of all federal spending. Social Security, Medicare, and Medicaid accounted for nearly 63% of total mandatory spending in 2009. The number of Social Security and Medicare recipients is expected to increase in coming years with the aging of the baby boom generation. As the population ages, and if healthcare costs continue to rise, financial pressures on these entitlement programs will continue to contribute to long-run fiscal challenges. Social Security and some Medicare spending is managed through federal trust funds. Revenues are collected through payroll taxes and deposited into these trust funds. Benefits are also paid out from these trust funds. While both trust funds have historically run surpluses, it is expected that the Social Security and Medicare trust funds will be exhausted within the next 30 years. Restoring these trust funds essentially involves choosing between two alternatives: reduce outlays (benefits) or increase revenues (taxes). As this report focuses on tax policy options for increasing revenues, policy options to reduce outlays through eligibility and benefit modifications are not discussed. One way to potentially increase revenues for entitlement program trust funds is through tax rate increases. Generally, the Social Security payroll tax is 12.4% (6.2% is collected from the employer and employee each). For 2011, the employee's share of the payroll tax has been reduced by two percentage points, to 4.2%. Payroll taxes are also used to fund Medicare's Hospital Insurance (HI) trust fund. The Medicare payroll tax is generally 2.9%, with employers and employee each contributing 1.45%. Under the Patient Protection and Affordable Care Act (PPACA; P.L. 111-148 ), an additional payroll tax of 0.9% on high-income taxpayers (income above $200,000 for single filers and $250,000 for married filers) is scheduled to take effect in 2013. Another option for increasing Social Security trust fund revenues is to increase the cap on taxable earnings. In 2011, only the first $106,800 in income is subject to Social Security payroll taxes (all income is subject to Medicare payroll taxes). One option is to increase the share of earnings subject to the Social Security payroll tax. In 1982, approximately 90% of covered earnings were subject to the payroll tax. By the late 2000s, the proportion of covered earnings subject to the payroll tax was closer to 83%. CBO estimates that increasing the share of covered earnings subject to Social Security payroll taxes to 90% would generate approximately $503 billion over 10 years. Increasing the share of covered earnings to 92% would generate approximately $669 billion over 10 years. Increasing the share of covered earnings to 90% or 92% is unlikely to generate enough additional revenues to achieve Social Security solvency in the long run. Congress has begun evaluating various options for corporate tax reform. As with individual tax reform, much of the discussion has centered on broadening the base by eliminating various deductions, exemptions, and credits, and reducing statutory rates. Deficit reduction may or may not be a policy objective of corporate tax reform. In his 2011 State of the Union address, President Obama called for corporate tax reform that does not add to the deficit. Corporate tax reform proposals may also address U.S. taxation of income earned abroad. The current U.S. tax system is a hybrid of a residence-based and territorial tax system. Reforms that move toward a territorial tax system, where income is taxed where it is earned, may enhance economic efficiency. A switch to a territorial tax system, however, would likely result in federal revenue losses. Overall, corporate tax reform could be structured to be revenue neutral, or structured to raise additional revenues to reduce deficits. As was illustrated in Figure 5 , revenues collected from the corporate tax relative to GDP are currently low relative to historical standards. Table 3 lists the 10 largest corporate tax expenditures for 2010. These 10 corporate tax expenditures together resulted in roughly $96.6 billion in revenue losses during 2010, and account for about 80% of total tax expenditure dollars directed to corporations. For comparison, FY2010 corporate tax collections were $191.4 billion (see Figure 4 ). Scaling back corporate tax expenditures is one option for generating additional revenues through the corporate tax system. The largest corporate tax expenditure is the allowance of accelerated depreciation. Accelerated depreciation allows firms to recover capital costs over a shorter period of time through larger depreciation deductions. By allowing firms to recover costs quickly, the tax code subsidizes capital investment. Depreciation allowances have been enhanced in recent years due to policies enacted during the economic recession designed to stimulate investment. The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) expanded and extended temporary bonus depreciation provisions, with an estimated revenue loss of $55 billion in 2011. The cost of the temporary extension is $20.1 billion over the 2011 to 2020 budget window, as some of the bonus depreciation costs are diminished through reduced depreciation deductions over time in the out years. The second-largest corporate tax expenditure in 2010 was the result of a provision added to the tax code under the Recovery Act (ARRA; P.L. 111-5 ). Generally, discharges of indebtedness are included in taxable income. Under this provision, taxpayers can defer taxable cancellations of indebtedness income that occurred in 2009 or 2010. This temporary provision was enacted to assist financially troubled companies following the financial crises. The third-largest corporate tax expenditure relates to the U.S. treatment of income earned abroad. Deferral of active income of U.S. subsidiaries operating abroad allows firms to delay the payment of U.S. taxes by not repatriating income. In addition to generating revenue losses, deferral provides an incentive for U.S. firms to invest in active business operations in low-tax foreign countries. One possible benefit to deferral is that it may help make U.S. firms more competitive when operating abroad. Allowing state and local governments to issue tax-exempt bonds is the fourth-largest corporate tax expenditure. Corporate purchasers, and other purchasers, of tax-exempt debt are not required to pay taxes on interest earned from holding such bonds, thereby reducing their federal income tax liability. This allows issuers to borrow at reduced interest costs. In recent years, Congress has allowed for various other forms of federally subsidized debt (e.g., tax-credit bonds). Tax-exempt bonds provide a larger subsidy to high-income holders, and thus have been criticized for being inequitable. Tax-credit bonds provide a more equitable benefit to bond holders, as their value is not dependent on a taxpayer's marginal tax rate. The broader question is to what extent tax-subsidized debt is being used to provide public goods or address other potential market failures. The fifth and ninth tax expenditures listed in Table 3 also relate to the tax treatment of inventories. Current tax rules governing the source of inventory sales interact with foreign tax credit provisions in a way that can effectively exempt a portion of a firm's export income from U.S. taxation (the fifth item in Table 3 ). Last-in, first-out (LIFO) inventory accounting methods result in a tax subsidy when prices are rising, by allowing for a higher measure for cost of goods sold, which reduces taxable income (the ninth item in Table 3 ). International Financial Reporting Standards (IFRS) do not permit LIFO inventory accounting methods. As U.S. accounting standards merge with IRFS, LIFO inventory accounting methods will no longer be an option. The production activity deduction, the sixth-largest corporate tax expenditure in 2010 reduces the effective tax rate for domestic manufacturers. The provision was adopted in 2004, and is designed to encourage investment in manufacturing. The domestic production deduction is available for oil and gas extraction, at a reduced rate. President Obama's FY2012 budget proposes to eliminate this deduction for fossil fuels (oil and gas and coal), raising an estimated $18.7 billion over the 2012 through 2021 budget window. The remaining corporate tax expenditures are designed to provide support for low-income housing investments and encourage spending on research and development. The low-income housing tax credit (LIHTC) was introduced in 1986 to encourage development of affordable housing. The tax code also contains provisions designed to reduce the cost associated with research and experimentation expenses, such as the ability to expense certain research-related capital expenditures and tax credits for qualified research-related costs. These activities are viewed by many as generating positive externalities, and thus being underprovided by the market. These tax subsidies aim to correct these perceived market failures by encouraging additional investment in low-income housing and research and development. Switching to a territorial tax system could help address complexities in the corporate tax code associated with foreign-source. One option would be to allow a "dividend exemption," allowing all repatriated dividends to be exempt permanently from U.S. taxation. If deductions allocable to tax-exempt foreign-source income are also disallowed, such a policy could result in additional revenues. Historically, estate and gift taxes have represented a small share of federal revenues (on average, approximately 1.3% of federal revenues were generated through the estate tax over the past 40 years). In 2010, estate and gift taxes generated $18.9 billion in revenues. Taxable estates in 2009 were taxed at a maximum rate of 45%, subject to an exemption of $3.5 million (2009 rates and exemption levels are most relevant for 2010 revenues). Under the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRAA; P.L. 107-16 ), the estate tax was fully phased-out in 2010. The Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-5 ) set the maximum rate for the estate tax at 35% with an exemption of $5 million beginning in 2011. The legislation also included a provision allowing a spouse to inherit any unused exemption. Reducing the exemption amount or increasing the maximum rate is one option for raising revenue. Relative to other revenue options, the potential for revenue generation is small, as the base of the estate tax is small relative to the income and payroll tax bases. Other industrialized nations tend to place a greater reliance than the United States on consumption taxes to finance government spending (see Table 4 ). In the United States, consumption tax collections are equivalent to approximately 4.7% of GDP. Most U.S. consumption taxes are collected at the state and local level through sales taxes. There is no broad-based consumption tax at the federal level. Across all OECD countries, consumption taxes average 10.9% of GDP, including revenues from federal, state, and local governments. Consumption taxes also tend to constitute a larger portion of overall tax revenues in other industrialized countries. In the United States, 7.8% of all tax revenues are generated through consumption taxes. The OECD average is 18.9%. There are various forms of consumption taxes that could be imposed at the federal level. One option is a value-added tax (VAT). A value-added tax is a tax, levied at each stage of production, on each firm's value added. Another option is a national sales tax. This sales tax could be levied only on retail sales. Consumption taxes are oftentimes regressive, and adoption of a broad-based consumption tax may raise equity concerns. A third option is a consumed-income tax. The tax base would be determined by an individual's consumption (effectively, income less savings). This option would more easily allow for a progressive tax system. The potential for revenue from a consumption tax depends on the size of the taxable base. CRS estimates suggest that a broad-based value-added tax (VAT) could be levied on a taxable base of $8.8 trillion. Exempting food, healthcare, housing, higher education, and social services from the taxable base leaves an estimated tax base of $5.1 trillion. For low VAT rates, revenues generated from the VAT can be estimated by multiplying the proposed tax rate by the taxable base. Higher VAT rates may lead to behavioral changes, as individuals reduce consumption or engage in tax evasion, further complicating VAT revenue estimates. Market-based mechanisms to discourage greenhouse gas emissions (GHG) also represent a possible federal revenue source. As an example, the Congressional Budget Office (CBO) provides revenue estimates associated with pricing carbon to reduce emissions by 25% of projected levels in 2022, increasing to a 36% reduction from projected levels by 2026. Such a plan could raise an estimated $100 billion annually, beginning in 2014. The Debt Reduction Task Force proposal, discussed in detail below, considered but ultimately did not recommend a tax on carbon dioxide (CO 2 ) emissions. A tax of $23 per ton of CO 2 emissions starting in 2018, increasing 5.8% annually, would raise approximately $1.1 trillion in cumulative revenues through 2025. The Debt Reduction Task Force noted that such a tax might be attractive as it might enhance economic efficiency and promote investment in clean energy. However, a tax on carbon would also raise energy prices, and would likely be regressive. The revenue raising capacity of a carbon tax would be diminished to the extent tax collections were used to compensate low-income persons affected by the carbon tax. Currently, the United States collects a $0.184 per-gallon federal excise tax on motor fuel. Generally, this revenue is earmarked for the Highway Trust Fund (HTF). The motor fuel excise tax rate has remained the same since the mid-1990s. Thus, the real value of the tax rate has eroded over time. In FY2009, the motor fuel excise tax resulted in revenues of $25 billion. During the 1990s, the motor fuel excise tax was increased for the purposes of deficit reduction. By 1997, however, motor fuel excise tax receipts that were flowing into the general fund were returned to the highway trust fund. In recent years, funds have been transferred from the general fund to the HTF, as spending from the fund has exceeded fund revenues and reserves. Relative to other potential revenue sources discussed above, the revenue potential of the motor fuel excise tax is small. A $0.01 increase in the motor fuel excise tax would generate an estimated $1.6 billion to $1.8 billion in annual revenues. CBO estimates a $0.25 increase would generate $305 billion in revenues over 10 years. Economists' estimates of an optimal gas tax, one that addresses the negative externalities associated with gasoline, suggest that the excise tax on motor fuel should be closer to $1 per gallon. Assuming no additional behavioral responses, increasing the gas tax to $1 per gallon could raise as much as $1 trillion over 10 years. In February 2010, by executive order, President Obama created the National Commission on Fiscal Responsibility and Reform (Fiscal Commission). The 18-member commission was charged with "identifying policies to improve the fiscal situation in the medium term and achieve fiscal sustainability over the long run." The Fiscal Commission released a final report in December 2010. A number of other groups have released alternative plans for achieving deficit reduction and fiscal sustainability. A full comparison of the tax policies of these plans is beyond the scope of this report. Details of the Fiscal Commission's tax proposals are compared to the tax proposals put forth by The Debt Reduction Task Force in Restoring America 's Future: Reviving the Economy, Cutting Spending and Debt, and Creating a Simple, Pro-Growth Tax System . The Debt Reduction Task Force was co-chaired by former Senator Pete Domenici and Alice Rivlin, former director of the Congressional Budget Office (CBO) and Office of Management and Budget (OMB). The details from this report are included for a number of reasons. First, like the Fiscal Commission, the Debt Reduction Task Force is a group comprised of a number of budget experts. Second, the Debt Reduction Task Force's plan contained specifics that could be compared to those put forth by the Fiscal Commission. Third, the Urban-Brookings Tax Policy Center provides distributional analysis of both reports' tax proposals, allowing for additional comparison. Table 5 provides a side-by-side comparison of the Fiscal Commission's tax proposals, the Debt Reduction Task Force's proposals, and tax provisions under current law. There are a number of similarities between the two proposals. For example, each plan seeks to broaden the tax base by eliminating various exemptions, deductions, and credits, allowing for lower tax rates. The following sections highlight similarities, as well as differences, through providing an overview of the two proposals. As noted above, the Budget Control Act of 2011 established a Joint Select Committee for Deficit Reduction. As this bi-partisan committee evaluates various policy options, the findings of the Fiscal Commission and the Debt Reduction Task Force may serve as a useful starting point. The Fiscal Commission's recommendation for deficit reduction and fiscal sustainability included a comprehensive tax reform proposal. The overall goal of the proposed reform is to broaden the base by reducing tax expenditures, allowing for lower tax rates, while still raising revenues for deficit reduction. Another stated goal of the proposal is to maintain or increase the progressivity of the tax code. The Fiscal Commission's plan seeks to reduce the deficit by $3.9 trillion through 2020, which is projected to stabilize the debt at 60% of GDP by 2025. Approximately 27% of this reduction would be realized through additional revenues, as described in the following paragraphs. The remainder would come through reductions in spending. Table 5 provides details on the "Illustrative Plan" proposed by the Fiscal Commission. The Commission's income tax proposals focus on eliminating most tax expenditures, allowing for lower tax rates. The proposal also seeks to reduce the number of income tax brackets from six to three. The Commission's proposal would retain, while also simplifying, certain provisions designed "to promote work, homes, health, charity, and savings." The Fiscal Commission's Illustrative Plan keeps the EITC, the child tax credit, the standard deduction, and personal exemptions. Other existing tax expenditures are also retained, but are modified (e.g., the mortgage interest deduction, incentives for employer provided healthcare, retirement savings incentives, and charitable giving incentives). The Fiscal Commission's proposal would also generate additional revenues through the payroll tax, corporate tax, and excise taxes. Additional revenues would be generated through the payroll tax by increasing the taxable base to include 90% of covered income. A $0.15 increase in the motor fuel excise tax would also generate additional revenues, eliminating the need to transfer general revenues to the Highway Trust Fund (HTF). The Fiscal Commission's corporate tax reforms are similar to those proposed on the individual side. The Commission's Illustrative Plan suggests eliminating most corporate tax expenditures, allowing corporate tax rates to be reduced to 28%. One major difference between the Fiscal Commission's proposal and that of the Deficit Reduction Task Force is the treatment of foreign-source income. The Fiscal Commission's proposal would have the United States tax foreign-source income under a territorial system. With a territorial system, income earned abroad by U.S. multinationals is taxed where it is earned. The current U.S. tax system taxes U.S. based multinationals' worldwide income, allowing foreign tax credits to reduce domestic tax liability for tax payments to foreign governments. Foreign-chartered subsidiaries of U.S. multinationals can also defer U.S. tax payments until income is repatriated. To address concerns that passive foreign-source income could be easily shifted, deferral is restricted for some foreign-source income, which is taxed under Subpart F. The Fiscal Commission's proposal would not change the tax treatment of passive foreign-source income. The Fiscal Commission proposal would also have raised additional revenues by applying a chained-CPI throughout the government. Portions of the tax code that are indexed for inflation would be adjusted using the chained-CPI rather than the currently used standard CPI. The Fiscal Commission notes that a chained-CPI is designed to more closely approximate cost-of-living changes. Applying a chained-CPI to the tax code would slow the increase in bracket thresholds, and overall lead to increased federal revenues. The Fiscal Commission's proposal also suggests reforms that would limit the government's ability to raise revenues, while also ensuring that tax reforms are taken should Congress and the Administration fail to take action. Under the proposal, tax revenues would be limited to 21% of GDP. Historically, federal receipts have never exceeded 21% of GDP (see Figure 5 ). Over the 20-year period 1990 through 2009, total federal receipts as a percentage of GDP averaged 18.1%. The Commission's recommendation also includes what they term a "failsafe," which would trigger automatic reductions in tax expenditures, should Congress and the Administration fail to enact comprehensive tax reform. Table 6 provides information on the estimated revenues if the provisions in the Fiscal Commission's Illustrative Plan were adopted. Over the 2012 through 2020 budget window, it is estimated these reforms would generate over $1.1 trillion in additional revenues. Of this, an estimated $785 billion in revenues would result from comprehensive tax reform. An additional $96 billion would be generated by applying chained-CPI to the tax code. The report does not distinguish between revenues raised through individual reforms as opposed to corporate reforms. Revenues are greater in the later years as many of the tax reforms are phased in over time. Over the 2012 through 2020 time period, the Fiscal Commission's proposal would reduce the budget deficits by an estimated $4.1 trillion. Thus, approximately 27% of the deficit reduction can be attributed to revenues generated by the tax provisions noted in Table 6 . The Joint Select Committee on Deficit Reduction established by the Budget Control Act of 2011 may choose to consider both spending and revenue options. Overall, the Committee has been tasked with finding $1.2 trillion to $1.5 trillion in deficit reduction over the FY2012 – FY2021 budget window. Should the Committee decide to use a ratio of spending cuts to revenues that is similar to that of the Fiscal Commission, roughly $300 billion to $400 billion in deficit reduction would come from additional revenues. If the Committee chooses to use a ratio of spending cuts to revenues similar to that of the Fiscal Commission, and considers the fact that $900 billion in deficit reduction has already been enacted in the form of spending cuts under the Budget Control Act of 2011, revenues may be used to generate roughly $550 billion to $650 billion in deficit reduction. As discussed below, the President's deficit reduction proposal, as submitted to the Joint Select Committee on Deficit Reduction, would generate, on net, $1.3 trillion in additional revenues over the FY2012 – FY2021 budget window. Like the Fiscal Commission's proposal, the Debt Reduction Task Force's Proposal included comprehensive tax reform as part of a broader strategy for deficit reduction. The objectives of the Debt Reduction Task Force's proposal were similar to those of the Fiscal Commission: broaden the tax base and reduce tax rates. Enhancing progressivity in the tax code was another objective. The Debt Reduction Task Force's proposal sought to stabilize the federal debt below 60% of GDP. Of the estimated $5.9 trillion in total debt reduction that would be achieved over the 2012-2020 period should the proposal be fully implemented, approximately 39% would be achieved through tax reforms. Table 5 above summarizes the key provisions of the Debt Reduction Task Force's proposed tax reform. With respect to the individual income tax, the Debt Reduction Task Force's plan would eliminate most tax expenditures, eliminate the standard deduction and personal exemption, eliminate the AMT, and move from six tax brackets to two. Limited tax benefits would be retained for children, mortgage interest, charitable giving, and retirement. Unlike the Fiscal Commission's proposal, the Debt Reduction Task Force's plan would eliminate the exclusion for employer provided health insurance. Like the Fiscal Commission's proposal, the Debt Reduction Task Force's plan would raise additional revenues through the payroll tax, corporate tax, and excise taxes. The estate tax proposal in the Debt Reduction Task Force's proposal would also generate additional revenues relative to current law. Both the Fiscal Commission and Debt Reduction Task Force proposals would increase the payroll tax cap to cover 90% of wages. In addition to increasing the payroll tax cap, the Debt Reduction Task Force proposed a payroll tax holiday as an economic stimulus measure. The proposal called for a one-year suspension of the payroll taxes for both individuals and businesses. This proposal would have resulted in $641 billion in federal revenue losses. The proposal was, in part, effected by the Tax Relief, Unemployment Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). P.L. 111-312 enacted a one-year 2 percentage point reduction (from 6.2% to 4.2%) in the payroll tax rate paid by individuals. The Debt Reduction Task Force's proposed corporate tax reform is similar to that of the Fiscal Commission in that both would reduce corporate tax rates and eliminate most corporate tax expenditures. Unlike the Fiscal Commission, the Debt Reduction Task Force's plan would not move toward a territorial tax system. The Debt Reduction Task Force's plan proposed two excise tax modifications. First, the plan would increase excise taxes on alcoholic beverages by $0.25 per ounce. Second, the plan would impose a new tax on sweetened beverages. The Debt Reduction Task Force's proposal would also introduce a national sales tax. This sales tax would be levied at 6.5%, and would generate the majority of new revenues raised through tax reforms in the proposal. Table 7 presents data on the revenues generated through various tax provisions proposed by the Debt Reduction Task Force. The proposed reforms to the individual and corporate income taxes would lead to estimated revenue losses of $415 billion over the 2012-2020 budget window. While eliminating most tax expenditures results in added revenues ($3.5 trillion over the 2012-2020 window), the increased tax relief for low-income families and families with children, along with the reduced rates, means that these reforms, overall, are not revenue raisers. In other words, the Debt Reduction Task Force's proposed individual and corporate income tax reforms increase the deficit, on net. Nearly all of the revenues raised in the Debt Reduction Task Force's proposal would be through the 6.5% national sales tax. The 6.5% tax would raise an estimated $3 trillion over the 2012-2020 period. As noted in the Debt Reduction Task Force's report, a sales tax may be attractive since it does not tax the return to savings and investment, which may promote long-run economic growth. Sales taxes, broadly, tend to be regressive. Changes in the income tax system noted above were designed to address this concern. Another potential concern regarding a national sales tax may be the interaction with existing state-level sales taxes. Overall, the Debt Reduction Task Force's proposal would generate more in terms of additional tax revenues than would be generated under the Fiscal Commission's proposal. Over the 2012-2020 period, the Fiscal Commission's tax reforms would result in roughly $1 trillion in added revenues. In contrast, the Debt Reduction Task Force's reforms (not including the payroll tax holiday) would generate nearly three times as much additional tax revenue. Since the payroll tax holiday has already been partially enacted, one option would be to take the revenues that would have been used to finance the holiday and allow for a lower sales tax rate. With the payroll tax holiday option included, the Deficit Reduction Task Force's revenue proposals would have generated $2.3 trillion in additional revenues over the 2012-2020 period, or more than twice as much as the revenue proposals put forth by the Fiscal Commission. On September 19, 2011, President Obama submitted to Congress a deficit reduction plan to accompany his proposed American Jobs Act of 2011. The American Jobs Act and the President's deficit reduction plan both contain a number of tax provisions (see Table 8 ). Unlike the Fiscal Commission and the Debt Reduction Task Force plans, the President's proposal does not propose comprehensive tax reform. Instead, the proposal outlines a number of tax policy changes that would have revenue implications. The tax provisions in the President's proposal would raise, on net, $1.3 trillion over the 2012 through 2021 budget window. The majority of the additional revenues would be generated by allowing the 2001 and 2003 tax cuts to expire for high-income earners and from limiting the value of itemized deductions to 28% (see Table 8 ). Additional revenues would be generated by eliminating tax incentives that promote the use of fossil fuels, taxing carried interests as ordinary income, modifying certain inventory accounting rules, changing the tax treatment of insurance companies and products, modifying certain provisions related to the U.S. international tax system (including tax rules for dual capacity taxpayers), and by changing the depreciation rules for corporate jets. Additional revenues would also be raised by reinstating Superfund taxes, making the 0.2% unemployment insurance surtax permanent, and modifying worker classification treatment. While the President's proposal contains $1.6 trillion in new revenues over the 2012 through 2021 budget window, the $0.3 trillion in tax cuts proposed as part of the American Jobs Act reduces total net tax revenues to $1.3 trillion over the 2012 through 2021 budget window. President Obama's American Jobs Act proposal would enact a number of measures providing tax relief in the short run. Specifically, the proposal would reduce employer and employee payroll taxes in 2012. The jobs proposal would also extend the 100% bonus depreciation allowance through 2012, and provide tax credits for hiring veterans and long-term unemployed. Both the Fiscal Commission's proposal and the Debt Reduction Task Force's plan sought to maintain or enhance progressivity in the tax code. The Tax Policy Center has conducted a distributional analysis of the two proposals using their microsimulation model. Table 9 and Table 10 summarize the results of their analysis. The Fiscal Commission's proposal would make moderate changes to the distribution of the federal tax burden (see Table 9 ). Average tax rates are estimated to increase for all income groups. The highest income quintile would see their share of the federal tax burden increase by approximately one percentage point, from 65.7% to 66.9%. The share of federal taxes paid by middle-income groups would decrease under the proposal. Increasing the share of taxes paid by high-income groups, while reducing or maintaining the share paid by lower- and middle-income groups, may appeal to the notions of vertical equity discussed above. The Debt Reduction Task Force's plan appears to increase moderately progressivity in the tax code (see Table 10 ). Under the Debt Reduction Task Force's plan, average federal tax rates increase for all but the lowest income quintile. Under the plan, the highest income is responsible for a larger share of federal taxes (66.4% as opposed to 65.5%). Increasing the share of taxes paid by higher income groups is consistent with vertical equity principles. For all lower-income groups, the share of the federal tax burden is estimated to fall or remain the same. The methodology used to generate the distributional analysis of the Debt Reduction Task Force's plan may understate the plan's regressivity. The Tax Policy Center's analysis allocated the burden of the consumption tax across individuals by treating the consumption tax as a tax on income from labor and a tax on profits plus a reallocation of tax burdens based on consumption patterns. This is the so-called "income sources" method for allocating the distribution of consumption taxes. Another option is to allocate the distribution of the tax burden of a consumption tax using the ratio of current consumption to current income. This is the so-called "consumption ratio" method for allocating a consumption tax. A consumption ratio method of allocation leads to a more regressive distribution of consumption taxes. There is disagreement amongst economists regarding which method best represents the distributional impact of uniform consumption taxes. Thus, it is possible that the income-sources method used in Table 10 might overstate tax-system progressivity under the Debt Reduction Task Force's plan. Persistent budget deficits and the accompanying increase in national debt is at the forefront of congressional debate. Achieving fiscal sustainability, reducing the budget deficit, and bringing the national debt to sustainable levels, will likely involve some combination of spending and revenue measures. This report provided a broad overview of some of the potential revenue options available to Congress. The majority of federal revenues are collected through the individual income tax system and through payroll taxes. Revenues can be enhanced by eliminating various deductions, exemptions, and credits, generally broadening the tax base. A broader tax base could allow for lower tax rates, which may enhance economic efficiency. There are, however, additional revenue options outside of the existing tax code. Both the President's Fiscal Commission and the Debt Reduction Task Force laid out plans for achieving fiscal sustainability. Tax reform was a substantial component of both proposals. Each proposed to modify the existing individual and corporate tax systems by eliminating tax expenditures allowing for lower tax rates. Each plan also suggested increasing the payroll tax base by increasing the share of covered wages. The plans differed, however, with respect to how much revenue would be generated through these tax reforms. Under the Fiscal Commission's proposal, comprehensive tax reform and payroll tax changes would generate the majority of revenues, with additional revenues coming from an additional excise tax on motor fuels. The Debt Reduction Task Force's comprehensive tax reform would not generate added revenues through 2020. Instead, the Debt Reduction Task Force proposed raising revenues through a consumption tax, in the form of a broad-based national sales tax. The President's September 19, 2011, deficit reduction proposal also provides a specific framework for achieving long-run deficit reduction and enhancing fiscal sustainability. Additional revenues in the President's proposal are raised primarily by allowing the reduced tax rates on high-income taxpayers to expire and by limiting the value of itemized deductions for high-income taxpayers, thereby broadening the tax base. The Fiscal Commission, Debt Reduction Task Force, and President's proposal have provided possible roadmaps for achieving fiscal sustainability. In all three plans, tax reform is an important component. Understanding that tax reform could play an important role in any successful deficit reduction and debt control strategy, Congress may want to consider tax policies that will be economically efficient, equitable, and provide a stable foundation for future economic growth. It is also important to note, however, that enhancing equity and efficiency in the tax code may not necessarily lead to deficit reduction.
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Tax reform and deficit reduction are two issues being considered by the 112th Congress. In recent months, a number of groups have published various plans for tackling the nation's growing deficits. On September 19, 2011, President Obama submitted recommendations to the Joint Select Committee for Deficit Reduction. This report analyzes various revenue options for deficit reduction, highlighting proposals made by the President's Fiscal Commission, the Debt Reduction Task Force, and the President's proposal. Others, such as House Budget Committee Chairman Paul Ryan and the Obama Administration, have noted the importance of tax reform as part of deficit reduction plans. These plans, however, do not provide the same level of detail with respect to tax provisions as the Fiscal Commission, Debt Reduction Task Force, and President's proposal, and are therefore not reviewed in detail as part of this report. Large budget deficits, rising national debt, and the growth of entitlement spending have raised questions regarding fiscal sustainability in the United States. The Congressional Budget Office (CBO) predicts a FY2011 budget deficit of nearly $1.5 trillion, or 9.8% of gross domestic product (GDP). Over the past three decades, budget deficits have averaged 3% of GDP. Large budget deficits have contributed to an increased level of federal debt, relative to the size of the economy. Increased debt levels are expected to lead to increased federal interest payments. If not addressed, the current fiscal situation could undermine economic growth. Reducing federal deficits will likely require reductions in spending, increased federal revenues, or some combination of spending cuts and revenue increases. Federal revenues in 2009 and 2010, relative to the size of the economy, were low by historical standards. Reduced federal collections may be partially attributable to the weak economy and the fiscal policy response. Historically low individual income tax collections may also be partially explained by the 2001 and 2003 tax cuts. Spending through the tax code, via tax expenditures, also reduces federal revenues. The use of tax expenditures may undermine economic efficiency and equity in the tax code. The primary sources of federal revenues are individual income taxes, payroll taxes, corporate income taxes, and excise taxes. Additional income tax revenues could be raised with a broader tax base, which could be achieved by eliminating various exemptions, credits, and deductions. A broader tax base could also allow for lower tax rates, without a loss in federal revenues. Broadening the tax base could enhance the economic efficiency of the tax system. The Fiscal Commission, the Debt Reduction Task Force, and the President's proposal took different approaches in the tax reform components of their fiscal sustainability plans. The President's Fiscal Commission raised additional tax revenues primarily through comprehensive income tax reform. The Fiscal Commission chose to broaden the tax base, allowing for both lower tax rates and increased federal revenues. The Debt Reduction Task Force's proposal also recommended individual income tax reform. The individual income tax reforms recommended by the Debt Reduction Task Force were designed to enhance efficiency and increase progressivity in the income tax system. Additional revenues in the Debt Reduction Task Force's plan originate from the proposed 6.5% debt-reduction sales tax. The President's proposal does not propose comprehensive tax reform, but instead highlights various provisions that could be modified or eliminated to generate additional federal revenues.
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The Elementary and Secondary Education Act (ESEA) is the primary source of federal aid to elementary and secondary education. Title I-A is the largest program in the ESEA, funded at $14.9 billion for FY2016. Title I-A is designed to provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of students from low-income families. The U.S. Department of Education (ED) determines Title I-A grants to local educational agencies (LEAs) based on four separate funding formulas: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). The ESEA was comprehensively reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95 ) on December 10, 2015. The ESSA made few changes to the Title I-A formulas. These changes took effect in FY2017. This report provides final FY2016 state grant amounts under each of the four formulas used to determine Title I-A grants. For a general overview of the Title I-A formulas, see CRS Report R44164, ESEA Title I-A Formulas: In Brief , by [author name scrubbed]. For a more detailed discussion of the Title I-A formulas, see CRS Report R44461, Allocation of Funds Under Title I-A of the Elementary and Secondary Education Act , by [author name scrubbed] and [author name scrubbed]. Under Title I-A, funds are allocated to LEAs via state educational agencies (SEAs) using the four Title I-A formulas. Annual appropriations bills specify portions of each year's Title I-A appropriation to be allocated to LEAs and states under each of the formulas. In FY2016, about 43% of Title I-A appropriations were allocated through the Basic Grants formula, 9% through the Concentration Grants formula, and 24% each through the Targeted Grants and EFIG formulas. Once funds reach LEAs, the amounts allocated under the four formulas are combined and used jointly. For each formula, a maximum grant is calculated by multiplying a "formula child count," consisting primarily of estimated numbers of school-age children in poor families, by an "expenditure factor" based on state average per pupil expenditures for public elementary and secondary education. In some formulas, additional factors are multiplied by the formula child count and expenditure factor. These maximum grants are then reduced to equal the level of available appropriations for each formula, taking into account a variety of state and LEA minimum grant provisions. In general, LEAs must have a minimum number of formula children and/or a minimum formula child rate to be eligible to receive a grant under a specific Title I-A formula. Some LEAs may qualify for a grant under only one formula, while other LEAs may be eligible to receive grants under multiple formulas. Under three of the formulas—Basic, Concentration, and Targeted Grants—funds are initially calculated at the LEA level. State grants are the total of allocations for all LEAs in the state, adjusted for state minimum grant provisions. Under EFIG, grants are first calculated for each state overall and then are subsequently suballocated to LEAs within the state using a different formula. Final FY2016 grants included in this report were calculated by ED. The percentage share of funds allocated under each of the Title I-A formulas was calculated by CRS for each state by dividing the total grant received by the total amount allocated under each respective formula. Table 1 provides each state's grant amount and percentage share of funds allocated under each of the Title I-A formulas for FY2016. Total Title I-A grants, calculated by summing the state level grant for each of the four formulas, are also shown in Table 1 . Overall, California received the largest total Title I-A grant amount ($1.8 billion) and, as a result, the largest percentage share (11.98%) of Title I-A grants. Wyoming received the smallest total Title I-A grant amount ($34.8 million) and, as a result, the smallest percentage share (0.24%) of Title I-A grants. In general, grant amounts for states vary among formulas due to the different allocation amounts for the formulas. For example, the Basic Grant formula receives a greater share of overall Title I-A appropriations than the Concentration Grant formula, so states generally receive higher estimated grant amounts under the Basic Grant formula than under the Concentration Grant formula. Among states, Title I-A grant amounts and the percentage shares of funds vary due to the different characteristics of each state. For example, Texas has a much larger population of children included in the formula calculations than North Carolina and, therefore, received a higher estimated grant amount and larger share of Title I-A funds. Within a state, the percentage share of funds allocated may vary by formula as certain formulas are more favorable to certain types of states (e.g., EFIG is generally more favorable to states with comparatively equal levels of spending per pupil among their LEAs). If a state's share of a given Title I-A formula exceeds its share of overall Title I-A funds, this is generally an indication that this particular formula is more favorable to the state than formulas for which the state's share of funds is below its overall share of Title I-A funds. For example, Florida and Nevada received a substantially higher percentage share of Targeted Grants than of overall Title I-A funds, indicating that the Targeted Grants formula is more favorable to them than other Title I-A formulas may be. At the same time, both states received a smaller percentage share of Basic Grants than of overall Title I-A funds, indicating that the Basic Grants formula is less favorable to them than other Title I-A formulas may be. In states that received a minimum grant under all four formulas (Alaska, North Dakota, South Dakota, Vermont, and Wyoming), the shares under the Targeted Grants and EFIG formulas are greater than under the Basic Grants or Concentration Grants formulas, due to higher state minimums under these formulas. If a state received the minimum grant under a given Title I-A formula, the grant amount is denoted with an asterisk (*) in Table 1 .
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The Elementary and Secondary Education Act (ESEA) was comprehensively reauthorized by the Every Student Succeeds Act (ESSA; P.L. 114-95) on December 10, 2015. The Title I-A program is the largest grant program authorized under the ESEA and was funded at $14.9 billion for FY2016. It is designed to provide supplementary educational and related services to low-achieving and other students attending elementary and secondary schools with relatively high concentrations of students from low-income families. Under current law, the U.S. Department of Education (ED) determines Title I-A grants to local educational agencies (LEAs) based on four separate funding formulas: Basic Grants, Concentration Grants, Targeted Grants, and Education Finance Incentive Grants (EFIG). The four Title I-A formulas have somewhat distinct allocation patterns, providing varying shares of allocated funds to different types of states. Thus, for some states, certain formulas are more favorable than others. This report provides final FY2016 state grant amounts under each of the four formulas used to determine Title I-A grants. Overall, California received the largest FY2016 Title I-A grant amount ($1.8 billion or 11.98% of total Title I-A grants). Wyoming received the smallest FY2016 Title I-A grant amount ($34.8 million or 0.24% of total Title I-A grants).
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Untreated HIV infection leads to a gradual deterioration of the immune system and leavesaffected individuals susceptible to the opportunistic infections and cancers that typify AIDS. Since1981, a cumulative total of 1,014,797 AIDS cases in the United States and dependent areas havebeen reported to the Centers for Disease Control and Prevention (CDC). (1) Of this total, 448,871 personswere reported to be living with AIDS as of the end of December 2006. In addition to the totalnumber of people living with AIDS, another 233,079 persons were known to be infected with HIV(does not include data from five states and the District of Columbia; these areas have not beenreporting name-based HIV infection case numbers to CDC since at least 2003). Figure 1. Estimated Total Federal Spending on HIV/AIDS,by Function, FY2008 Source: HHS Budget Office, March 20, 2008. Federal government AIDS spending is estimated at $23.3 billion in FY2008 (see Table 5 ). The Bush Administration request for FY2009 is $24.1 billion. Of the total amount spent by thefederal government on HIV/AIDS in FY2008, the majority (63%) of funding is for treatmentprograms; funding for research receives 13% of the total (see Figure 1 and Table 4 ). The remainingamounts are for prevention programs (14%) and income support for persons with AIDS (10%). AIDS programs within HHS (Health and Human Services) account for 66% of the totalamount spent on AIDS by the federal government (see Figure 2 ). HHS entitlement funding supportsthe treatment of HIV/AIDS patients through Medicaid and Medicare, which are administered by theCenters for Medicare and Medicaid Services (CMS). HHS discretionary funding supports AIDSresearch and prevention programs, as well as treatment programs. Table 2 provides a history ofHHS discretionary funding for HIV/AIDS from the beginning of the epidemic in FY1981 to thepresent. Funding for HIV/AIDS programs within HHS has increased markedly over the past 15 yearsas measured in constant 2000 dollars, shown in Figure 4 near the end of this report. Even thoughHHS has revised its estimates of spending by Medicaid for FY2007 through FY2009, Figure 4 stillshows that most of the overall rise can be attributed to increased spending on Medicaid, Medicare,and treatment programs in the discretionary budget, largely through the Ryan White programadministered by the Health Resources and Services Administration (HRSA). The increase inHIV/AIDS research and prevention programs has been much less pronounced, and their portion ofthe total amount spent by HHS on HIV/AIDS has declined over the past 15 years (see Figure 5 ). For example, in FY1992 HIV/AIDS research and prevention programs at HHS accounted for 51%of the total amount spent by HHS on HIV/AIDS; by FY2008, such programs were about 27% of thetotal amount spent by HHS on HIV/AIDS, reflecting the growing amounts spent on treatmentservices under Medicaid and Medicare. Figure 2. Estimated Total Federal Spending on HIV/AIDS, byAgency, FY2008 Source: HHS Budget Office, March 20, 2008. Note: USAID, U.S. Agency for International Development. See Table 4 . About 90% of FY2008 HHS discretionary funding for HIV/AIDS is allocated to three HHSagencies: the National Institutes of Health (NIH), which supports HIV/AIDS research ; CDC, whichsupports HIV/AIDS prevention programs; and, HRSA, which administers the Ryan White program,an HIV/AIDS treatment program (see Table 3 and Table 4 ). The budgets and activities of thesethree agencies are briefly described below, followed by a discussion of entitlement program spendingon HIV/AIDS. NIH is the principal agency of the federal government charged with the conduct and supportof biomedical and behavioral research. NIH conducts research at its own 27 institutes and centersand supports more than 200,000 scientists and research personnel working at over 3,100 U.S.institutions. NIH funding for FY2008 was provided in P.L. 110-161 ( H.R. 2764 ), andNIH estimates FY2008 funding for AIDS research at $2.913 billion. The Administration's requestfor FY2009 is $2.913 billion. (2) Funding for AIDS research is distributed among the NIH institutesin accordance with the scientific priorities identified in the annual comprehensive plan for AIDSresearch developed by the institutes along with the Office of AIDS Research (OAR). OAR was established in statute by the National Institutes of Health Revitalization Act of1993 ( P.L. 103-43 ) and given substantially enhanced authority and responsibility beyond the officeNIH had established under the same name. Congress appropriated funds to OAR in FY1995. However, since FY1996, Congress has not provided a direct appropriation for the OAR (aside fromamounts identified for the operations of the office itself). For FY2008, the House and Senate do notspecify a funding amount for AIDS research at NIH. Instead, funding for AIDS research is includedwithin the appropriation for each Institute/Center/Division of NIH, with decisions as to specificprojects to fund and levels of funding left to the Director of NIH and the Director of OAR. CDC works with community, state, national, and international public health agencies toprevent HIV infection and reduce AIDS-associated morbidity and mortality through its informationand education programs. CDC also supports research, surveillance, and epidemiology studies onHIV/AIDS. CDC distributes much of its HIV funds to state and local agencies through cooperativeagreements, grants, and contracts. CDC funding for FY2008 was provided in P.L. 110-161 ( H.R. 2764 ). According to the HHS Budget Office, CDC will be spending $872 millionon HIV/AIDS activities in FY2008; the Administration's request for FY2009 is $871 million. (3) The HIV/AIDS Bureau within HRSA administers the Ryan White program, a four-partfederal grant program designed to provide emergency relief and essential health care services topatients infected with HIV. The program funds hundreds of grantees that serve 531,000 people eachyear. The Ryan White HIV/AIDS Treatment Modernization Act of 2006 ( P.L. 109-415 , H.R. 6143 ) reauthorized the Ryan White program through September 30, 2009. HRSA funding for FY2007 was provided in P.L. 110-161 ( H.R. 2764 ). According to the HHS Budget Office, HRSA will be spending $2.170 billion on Ryan Whiteprogram activities in FY2008. The Administration's request for FY2009 is $2.171 billion. (4) (For further information onthe Ryan White program, see CRS Report RL33279 , The Ryan White HIV/AIDS Program , by JudithA. Johnson.) Medicaid is a federal-state matching entitlement program that provides medical assistancefor eligible low-income persons and families and certain aged, disabled, and medically needyindividuals. In order to obtain Medicaid coverage, persons must belong to one of the categories ofpersons who can qualify for coverage (such as families with children and disabled persons) and havelow income or deplete their income on the cost of their care. Medicaid has played an important rolein needed health care for persons with HIV and AIDS because of its coverage of prescription drugs. Within broad federal guidelines, each state designs and administers its own Medicaidprogram, resulting in wide variations among the states in coverage, benefits offered, and paymentfor services. The portion of a state's Medicaid budget provided by the federal government variesfrom 50% in relatively affluent states to 80% in poorer states. Medicaid is one of the largest sourceof federal funding for AIDS treatment and health care services (see Figure 3 ). For FY2008, the federal share of Medicaid spending on AIDS treatment is estimated at $4.1billion, and for FY2009, the federal share estimate is $4.4 billion. Total FY2008 federal and stateMedicaid spending for AIDS treatment will be an estimated $7.2 billion ($4.1 billion federal and$3.1 billion state). (5) CMSanalysts have significantly lowered their estimate of the federal share of Medicaid spending on AIDStreatment due to two factors: (1) the impact of Medicare Part D prescription drug coverage and (2)lowered per capita health care costs based on internal CMS data and external data. (6) However, a study by analystsoutside of CMS found that although "implementation of Medicare drug benefit resulted in a majorshift of prescription drug spending from Medicaid to Medicare ... spending for antiretroviralmedications decreased by a much smaller percentage than did spending for many other classes.People with HIV and AIDS continue to depend heavily on Medicaid to pay for their health care, asmost do not qualify for Medicare." (7) Figure 3. Estimated Federal Government Spending on HIV/AIDSTreatment, FY2008 Source: HHS Budget Office, March 20, 2008. Notes: Other includes the following: Substance Abuse and Mental Health; Public Health EmergencyFund; Department of Defense; Bureau of Prisons; Federal Employee Health Benefits Program;Global AIDS Trust Fund. See Table 3 . Medicare is a federal health care insurance program for the elderly and certain disabledpersons. In general, in order to qualify for coverage under Medicare, a person must be age 65 orolder, disabled, or suffering from kidney failure (end-stage renal disease or ESRD). According toone estimate, about 80% of beneficiaries with HIV/AIDS that qualified for Medicare did so becauseof a disability, (8) theremainder were eligible because they were 65 or older or had ESRD. (9) The elderly qualify the monththey turn 65, and those with ESRD qualify within three months of being diagnosed with irreversiblekidney disease requiring dialysis or a kidney transplant. However, disabled people, including thosewith AIDS, must wait for a total of 29 months after a determination that they are disabled before theybecome eligible for Medicare coverage. (10) Early in the epidemic, few individuals with AIDS survived the long waiting period. Withimproved drug therapies, the life expectancy of individuals with HIV has increased, and it isexpected that the number able to qualify for Medicare coverage will continue to rise. (11) The Medicare PrescriptionDrug, Improvement and Modernization Act of 2003 ( P.L. 108-173 ) provided for the implementationof a prescription drug program, often called Medicare Part D, which became effective January 1,2006. CMS analysts have adjusted their estimate of Medicare spending on AIDS treatment basedon two factors: (1) the impact of Medicare Part D prescription drug coverage and (2) lowered percapita health care costs based on internal CMS data and external data. (12) For FY2008, funding forthe care of persons with HIV/AIDS under Medicare is estimated to be $4.5 billion, and the estimatefor FY2009 is $4.8 billion. In 1998 the White House announced a series of initiatives targeting appropriated funds forHIV/AIDS prevention and treatment programs in minority communities. The Congressional BlackCaucus worked with the Clinton Administration to formulate the approach. For FY2008, a total of $403 million is provided to continue these activities. For FY2009, the Administration has requested$387 million. See Table 1 below for further details. Table 1. HIV/AIDS Minority Initiative ($ in millions) Source: Table prepared by the Congressional Research (CRS) based on analysis from the HHSBudget Office, February 15, 2008. Notes: Totals may not add due to rounding. FY2009 is based on the Administration's budgetrequest. In January 2003, President Bush announced in the State of the Union speech a five-year $15 billionprogram, the President's Emergency Plan for AIDS Relief (PEPFAR). (13) The five-year programtargets countries with a very high prevalence of HIV infection; its goals are to prevent 7 million newinfections, provide treatment to 2 million HIV-infected people, and provide care for 10 millionHIV-infected individuals and AIDS orphans. The Global Fund to Fight AIDS, Tuberculous and Malaria, was first proposed at the July2000 G-8 Summit in Okinawa. (14) Its purpose is to attract, manage and disburse funding througha public-private partnership dedicated to the reduction of infections, illness and death caused bythese three diseases in countries in need. It was established in January 2002 as a charitablefoundation in Geneva, Switzerland; the first round of grants was approved in April 2002. U.S.support of the fund occurs through USAID and HHS. As indicated in Table 6 , federal government spending on international HIV/AIDS programsin FY2008 is $5.8 billion; the Administration's request for FY2009 is $5.9 billion. (15) Table 2. HHS Discretionary Funding forHIV/AIDS ($ in thousands) Source: Table prepared by the Congressional Research Service (CRS) based on analysis from HHSBudget Office, March 20, 2008. Note: FY2009 is based on the Administration's budget request. Table 3. HHS Discretionary Funding for HIV/AIDS, by Agency ($in thousands) Source: Table prepared by the Congressional Research Service (CRS) based on analysis from HHS Budget Office, March 20, 2008. Notes: FY2009 is based on the Administration's budget request. FDA: Food and Drug Administration; HRSA: Health Resources and ServicesAdministration; IHS: Indian Health Service; CDC: Centers for Disease Control and Prevention; NIH: National Institutes of Health; SAMHSA: Substance Abuse and Mental Health Services Administration; AHRQ: Agency for Healthcare Research and Quality; OS: Office of the Secretary(includes the Office of HIV/AIDS Policy, Office for Civil Rights, Office of Minority Health, Office of Women's Health and the Public Health and SocialServices Emergency Fund/Minority Communities Fund); Global Aids Trust Fund: While budgeted in NIH, HHS contributions to the Global Fund toFight HIV/AIDS, Malaria, and Tuberculosis are not reflected in the NIH HIV/AIDS spending figures, but are accounted for separately. a. CDC reported funding for HIV/AIDS expenditures have been comparably adjusted downward to reflect the new budget structure at CDC that excludesadministrative and management costs. The FY2004 adjustment was about $68 million, and the FY2005 adjustment was about $74 million. Table 4. Total Federal Government Spending on HIV/AIDS, by Function ($ in millions) Source: Table prepared by the Congressional Research Service (CRS) based on analysis from HHS Budget Office, March 20, 2008. Notes: HHS : Department of Health and Human Services; CMS : Centers for Medicare and Medicaid Services; DI : Disability Insurance; HUD :Department of Housing and Urban Development; SSI : Supplemental Security Income; OPM-FEHB : Office of Personnel Management-Federal EmployeesHealth Benefits. Table 5. Federal Government Spending on HIV/AIDS: FY1982-FY2009 ($ in millions) Source: Table prepared by the Congressional Research Service (CRS) based on analysis from HHS Budget Office, March 20, 2008. Notes: FY2009 is based on the Administration's budget request. May not add due to rounding. HHS: Department of Health and Human Services;Discretionary AIDS budget; CMS: Centers for Medicare and Medicaid Services; SS: Social Security; DI: Disability Insurance; SSI: SupplementalSecurity Income; VA: Veterans Affairs; AID: U.S. Agency for International Development; DOJ-Prisons: Department of Justice, Bureau of Prisons; HUD: Department of Housing and Urban Development; OPM-FEHB: Office of Personnel Management-Federal Employees Health Benefits. a. FY2000 total includes $75 million for the HRSA Ricky Ray Hemophilia program, and FY2001 total includes $580 million for the HRSA Ricky RayHemophilia program. b. Medicaid and Medicare amounts have been revised due to the impact Medicare Part D prescription drug coverage and lowered per capita health carecosts. Figure 4. HHS Spending on HIV/AIDS Programs Source: HHS Budget Office, March 20, 2008. Note: FY2009 is based on the Administration's budget request. Figure 5. HHS HIV/AIDS Spending, by Program/Function, as aPercentage of Total Source: HHS Budget Office, March 20, 2008. Note: FY2009 is based on the Administration's budget request. Table 6. Federal Government Spending on International HIV/AIDS Programs, by Function ($ in millions) Source: Table prepared by the Congressional Research Service (CRS) based on analysis from HHS Budget Office, March 20, 2008. Notes: May not add due to rounding. HHS: Department of Health and Human Services.
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Federal government spending on HIV (the human immunodeficiency virus) and AIDS(acquired immune deficiency syndrome) is estimated at $23.3 billion in FY2008. Of the total, 63%is for treatment programs; research programs receive 13%; prevention programs receive 14%, andincome support programs receive 10%. The Administration's government-wide request level for allHIV/AIDS programs in FY2009 is $24.1 billion. AIDS programs within the Department of Health and Human Services (HHS) account for66% of the total amount spent on HIV/AIDS by the federal government in FY2008, a total of $15.2billion for both discretionary and entitlement programs. Within the HHS discretionary budget,funding for HIV/AIDS research, prevention, and treatment programs has increased from $200,000in FY1981 to an estimated $6.586 billion in FY2008; the Administration's request for FY2009 is$6.592 billion. This report provides an overview of HHS spending on HIV/AIDS as well as budget numbersfor other federal government programs targeting HIV/AIDS. This report is updated once per yearto reflect the new budget figures.
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O n January 31, 2017, President Donald J. Trump announced the nomination of Judge Neil M. Gorsuch of the U.S. Court of Appeals for the Tenth Circuit (Tenth Circuit) to fill the vacancy on the Supreme Court of the United States created by the 2016 death of Justice Antonin Scalia. Judge Gorsuch was appointed to the Tenth Circuit by President George W. Bush in 2006. Immediately prior to his appointment to the bench, the nominee served as the Principal Deputy to the Associate Attorney General, the third-ranking official at the U.S. Department of Justice, assistin g the Associate Attorney General with oversight of the Department's various civil litigation components. Before serving in the Justice Department, the nominee worked in private practice as a civil litigator at the Washington, D.C. firm of Kellogg, Huber, Hansen, Todd, Evans & Figel. Judge Gorsuch began his legal career clerking for federal judges. He first served as a law clerk to Judge David B. Sentelle of the D.C. Circuit. Later, he served two Supreme Court Justices, newly retired Justice Byron White and Justice Anthony Kennedy, during the October 1993 term. This report provides an overview of Judge Gorsuch's jurisprudence and discusses how the Supreme Court might be affected if he were to succeed Justice Scalia. However, in attempting to ascertain how Judge Gorsuch could influence the High Court, it is important to note that, for various reasons, it is difficult to predict accurately an individual's likely contributions to the Court based on their prior experience. A section of this report titled Predicting Nominees' Future Decisions on the Court provides a broad context and framework for evaluating how determinative a judge's prior record may be in predicting future votes on the Supreme Court. Because Judge Gorsuch would succeed Justice Scalia on the High Court, this report focuses on those areas of law where Justice Scalia can be seen to have influenced the Court's approach to particular issues or provided a fifth and deciding vote, with a view toward how the nominee might approach those same issues. The report begins by discussing the nominee's views on two cross-cutting issues—the role of the judiciary and statutory interpretation. It then addresses fourteen separate areas of law, arranged in alphabetical order, from "administrative law" to "takings." Within each section, the report reviews whether and how Judge Gorsuch has addressed particular issues in opinions he authored or joined. In some instances, the report also identifies other votes in which he participated (e.g., votes as to whether the Tenth Circuit should grant en banc review of decisions of three-judge panels). The report analyzes majority, concurring, and dissenting opinions, including decisions that Judge Gorsuch participated in while serving by designation on another federal court of appeals. Where relevant, the report also notes Judge Gorsuch's nonjudicial writings, many of which address assisted suicide and euthanasia. While the report discusses numerous cases and votes involving Judge Gorsuch, it focuses particularly on cases in which the sitting panel was divided, as these cases arguably best showcase how he might approach a legal controversy whose resolution is a matter of dispute and is not necessarily clearly addressed by prior case law. In addition, the report highlights areas where Judge Gorsuch has expressed views on the law that may contrast with those of some of his colleagues. To the extent that the nominee's votes in particular cases arguably reflect broader trends and tendencies in his decision making that he might bring to the High Court, the report highlights such trends. Nonetheless, this report does not attempt to catalog every matter in which Judge Gorsuch has participated during his decade of service on the Tenth Circuit. A separate report, CRS Report R44772, Majority, Concurring, and Dissenting Opinions by Judge Neil M. Gorsuch , coordinated by [author name scrubbed], lists and briefly describes each opinion authored by Judge Gorsuch during his tenure on the federal bench. Other CRS products discuss various issues related to the vacancy on the Court. For an overview of available products, see CRS Legal Sidebar WSLG1526, Supreme Court Nomination: CRS Products , by [author name scrubbed] and [author name scrubbed]. At least as a historical matter, attempting to predict how Supreme Court nominees may approach their work on the High Court is a task fraught with uncertainty. For example, Justice Felix Frankfurter, who had a reputation as a "progressive" legal scholar prior to his appointment to the Court in 1939, disappointed some early supporters by subsequently becoming a voice for judicial restraint and caution when the Court reviewed laws that restricted civil liberties during World War II and the early Cold War era. Similarly, Justice Harry Blackmun, who had served on the Eighth Circuit for a little over a decade prior to his appointment to the Court in 1970, was originally considered by President Richard Nixon to be a "strict constructionist," in the sense that he viewed the judge's role as interpreting the law, rather than making new law. In the years that followed, however, Justice Blackmun authored the majority opinion in Roe v. Wade recognizing a constitutional right to terminate a pregnancy. He was generally considered one of the more liberal voices on the Court when he retired in 1994. The difficulty in attempting to predict how a nominee will approach the job of being a Justice remains even when the nominee has had a lengthy federal judicial career prior to nomination. Federal appellate judges are bound by Supreme Court and circuit precedent and, therefore, are not normally in a position to espouse freely their views on particular legal issues in the context of their judicial opinions. Moreover, unlike the Supreme Court, which enjoys "almost complete discretion" in selecting its cases, the federal courts of appeals are required to hear many cases as a matter of law. As a result, the appellate courts consider "many routine cases in which the legal rules are uncontroverted." Perhaps indicative of the nature of federal appellate work, the vast majority of cases decided by three-judge panels of federal courts of appeals are decided without dissent. The Tenth Circuit, where Judge Gorsuch serves, is no exception to this general trend, with the overwhelming majority of opinions issued by that court being unanimous. Accordingly, while Judge Gorsuch's work on the Tenth Circuit may provide some insight into his general approach to particular legal issues, the bulk of the opinions that Judge Gorsuch has authored or joined may not be particularly insightful with regard to his views on specific areas of law, or how he would approach these issues if he were a Supreme Court Justice. Even in closely contested cases where concurring or dissenting opinions are filed, it still may be difficult to determine the preferences of the nominated judge if the nominee did not actually write an opinion in the case. The act of joining an opinion authored by another judge does not necessarily reflect full agreement with the underlying opinion. For example, in an effort to promote consensus on a court, some judges will decline to dissent unless the underlying issue is particularly contentious. As one commentator notes, "[T]he fact that a judge joins in a majority opinion may not be taken as indicating complete agreement. Rather, silent acquiescence may be understood to mean something more like 'I accept the outcome in this case, and I accept that the reasoning in the majority opinion reflects what a majority of my colleagues has agreed on.'" Using caution when interpreting a judge's vote isolated from a written opinion may be particularly important with votes on procedural matters. For example, a judge's vote to grant an extension of time for a party to submit a filing generally does not signal agreement with the substantive legal position proffered by that party. And while some observers have highlighted votes by Judge Gorsuch in favor of having certain three-judge panel decisions reconsidered by the en banc Tenth Circuit, these votes should be viewed with a degree of caution. A vote to rehear a case en banc could signal disagreement with the legal reasoning of the panel decision, and may suggest that a judge wants the entire court to have an opportunity to correct a perceived error by the panel. On the other hand, as one federal appellate judge noted in a dissent from a decision denying a petition for a rehearing en banc: Most of us vote against most such petitions and suggestions even when we think the panel decision is mistaken. We do so because federal courts of appeals decide cases in three judge panels. En banc review is extraordinary, and is generally reserved for conflicting precedent within the circuit which makes application of the law by district courts unduly difficult, and egregious errors in important cases. Consequently, a vote for or against rehearing a case en banc or on other procedural matters does not necessarily equate to an endorsement or repudiation of a particular legal position. Finally, it should be noted that, despite having served on the federal appellate bench for a decade, Judge Gorsuch has said little about some areas of law because of the nature of the Tenth Circuit's docket. Accordingly, it may be difficult to predict how he might rule on certain issues if he were elevated to the Supreme Court. Spanning six western states—Colorado, Kansas, New Mexico, Oklahoma, Utah, and Wyoming (along with those segments of Yellowstone National Park extending into Idaho and Montana), the Tenth Circuit has a relatively routine caseload when compared to some of its sister circuits. More than forty percent of the cases that the Tenth Circuit hears are criminal law matters or petitions from federal or state prisoners, a number in line with the national average for the regional federal courts of appeals. The Tenth Circuit also hears a number of private civil litigation disputes, such as cases on labor, insurance, contract, and tort law. On the other hand, some seven percent of the Tenth Circuit's docket is devoted to administrative agency appeals , a percentage far below that of the D.C. Circuit, where over half the docket consists of administrative matters as a result of various jurisdictional statutes and the court's location in the nation's capital. Similarly, the Tenth Circuit rarely has the opportunity to address certain topics, such as international law and foreign affairs, terrorism and national security, and major agency actions in the field of environmental law. In assessing how Judge Gorsuch views the role of the judiciary, many commentators have likened the nominee to Justice Scalia. During the nearly thirty years that Justice Scalia served on the Supreme Court, the late Justice was a well-known proponent of originalism, textualism, and the view that clear rules should guide the work of the lower courts. Accordingly, Justice Scalia vigorously dissented from opinions that, in his view, failed to construe legal texts in accordance with their ordinary meaning at the time of drafting, or resulted in too much ambiguity in the meaning of the law. Following the nomination of Judge Gorsuch, many commentators opined that he would, if confirmed, follow in Justice Scalia's footsteps as an originalist, and largely "preserve the ideological balance that existed on the court when [Justice] Scalia died." These conclusions were echoed by academic studies. For example, following President Trump's election, several studies by political scientists suggested that Judge Gorsuch would replicate Justice Scalia's judging style if he were to be elevated to the Supreme Court. Such an outcome would be in keeping with the reported intentions of President Trump, who repeatedly noted during the 2016 presidential campaign his desire to nominate judges to the Court who are "very much in the mold of Justice Scalia." On the other hand, during Judge Gorsuch's confirmation hearings for his seat on the Tenth Circuit in 2006, the nominee explicitly rejected the view that he had any particular "philosophy" toward judging. He noted that he "resist[ed]" being "pigeon-hole[d]" because "people do unexpected things and pigeon holes ignore gray areas in the law, of which there are many." When Judge Gorsuch has commented on which judges have most influenced his approach to judging, he has noted a wide range of jurists with varying judicial philosophies. For example, during the remarks following his nomination to the Supreme Court, Judge Gorsuch openly praised Justice Scalia's general influence, calling the late Justice a "lion of the law." However, the nominee also noted the influence of "three significant but quite different judges" who "brought him up in the law," Judge David Sentelle and Justices Byron White and Anthony Kennedy. This statement has prompted some commentators to compare the nominee to those jurists, as well. The judicial and nonjudicial writings of Judge Gorsuch may provide another—perhaps richer and more nuanced—basis for evaluating how his approach to judging compares to that of Justice Scalia or any other jurist. While perhaps not espousing a particular judicial philosophy, Judge Gorsuch's judicial opinions and scholarly writings suggest that he could be seen to share many of Justice Scalia's views toward judging. For example, in a lecture delivered in April 2016 at Case Western Reserve University School of Law, Judge Gorsuch commended Justice Scalia's approach toward judging, describing the late Justice's "vision" of what a "good and faithful judge" entails to be a "worthy one." Specifically, in the lecture, Judge Gorsuch praised what he described as Justice Scalia's "traditional view of the judicial function," in which a judge "strive[s] . . . to apply the law as it is," "looking to text, structure, and history to decide what a reasonable reader at the time of the events in question would have understood the law to be." Rejecting the view of the judge as a "pragmatic social-welfare maximizer," Judge Gorsuch, quoting Justice Scalia, argued for a more limited role for judges in the American political system. The themes highlighted in his 2016 lecture on Justice Scalia's legacy previously appeared in several of Judge Gorsuch's opinions on the Tenth Circuit. Notably, in a number of cases, the nominee rejected more flexible approaches to interpreting the Constitution in favor of originalism. One such case is Cordova v. City of Albuquerque , wherein the Tenth Circuit dismissed a lawsuit alleging that attorneys for the city of Albuquerque had maliciously prosecuted the plaintiff in violation of the Fourth Amendment by charging him with assault after an altercation with the police. In this case, Judge Gorsuch concurred in the judgment, grounding his opinion in originalism and writing that the Constitution "isn't some inkblot on which litigants may project their hopes and dreams for a new and perfected tort law, but a carefully drafted text judges are charged with applying according to its original public meaning." The nominee examined the Fourth Amendment's text along with scholarly works on its historical underpinnings to conclude that the Amendment does not include a right against malicious prosecution. Likewise, in several opinions, Judge Gorsuch voiced sentiments similar to those of Justice Scalia about the need for the "rule of law" be "a law of rules" —a view that can be seen to favor a more formalist approach to the law. For example, in Hydro Resources, Inc. v. EPA , Judge Gorsuch, on behalf of a majority of the entire Tenth Circuit, concluded that the Environmental Protection Agency had incorrectly determined that certain property was "Indian land," requiring its owner to obtain a mining permit from the agency. In so holding, the nominee adopted what he characterized as a "simple and predictable" two-part test for determining what constitutes Indian land. Judge Gorsuch's en banc opinion thus rejected the government's invitation to interpret the operative statutory language according to an older, multi-factor test, which the nominee described as consisting of "multifarious and incommensurable competing factors" that yielded "unpredictable results" and "left the law and litigants confused." Beyond voicing a preference for rules based adjudication in his written opinions, Judge Gorsuch has argued more generally for simplification and clarity in the American legal system. In particular, having expressed concerns over the costs of discovery and adequate representation, the nominee has suggested a number of attorney-initiated reforms aimed at making the civil justice system more accessible and affordable for both plaintiffs and defendants. More broadly, the views of Judge Gorsuch and Justice Scalia on the proper role of the judge seem to align in that both have emphatically rejected what may be described as "results-oriented judging" and, instead, emphasized that judges must render decisions that do not necessarily conform to their personal preferences. Justice Scalia, for instance, often pointed to his vote to strike down a law prohibiting flag burning as an example of how his judicial philosophy could yield results that did not align with his own inclinations. Similarly, in a 2016 dissent, Judge Gorsuch emphasized that the role of the judge is to "apply, not rewrite, the law enacted by the people's representatives," noting that a "judge who likes every result he reaches is very likely a bad judge." Instead, Judge Gorsuch has repeatedly declared that the proper role of a court is to interpret the law and not to "substitute" the court's "views of optimal policy" for Congress's judgment. A number of the nominee's opinions have noted his personal sympathies for particular parties in the case, but distinguished these sympathies from what he viewed the law to require. Despite these parallels between the views of Justice Scalia and Judge Gorsuch, there are also discernible differences in their views on the role of the judiciary. First, Judge Gorsuch's approach to judging can be seen to differ in tone and tenor from that of Justice Scalia. Like Justice Scalia, Judge Gorsuch has frequently been described as a talented writer. In particular, the nominee's judicial writings—which frequently employ vivid prose, memorable turns of phrase, and even humor —have been praised widely by legal observers for their clarity and accessibility. But whereas Justice Scalia's writing could be pointed and acerbic in disagreeing with his colleagues on the bench, Judge Gorsuch's judicial writings have been noted for their cordiality. His dissents, in particular, often express his agreement with or admiration for, at least, certain aspects of the majority's opinion. The differences in Justice Scalia's and Judge Gorsuch's writing styles may indicate broader contrasts between the two jurists; the nominee may be more focused on collegiality and consensus-building than the Justice he could replace. During his career on the High Court, Justice Scalia frequently authored fairly broad and uncompromising opinions that did not garner the votes of a majority of the Court. In contrast, Judge Gorsuch's judicial record may reflect comments he made during his confirmation hearing for his Tenth Circuit appointment, wherein he noted the importance of "trying to reach unanimity where possible." As Table 1 indicates, during the decade that Judge Gorsuch served on the Tenth Circuit, his colleagues dissented from majority opinions Judge Gorsuch wrote less frequently than they dissented from the majority opinions of other judges who served on active status on the Tenth Circuit during that entire time period. In addition, while the existence of a concurrence may not necessarily signal disagreement with the majority opinion, some scholars have suggested that separate opinions can be used to gauge the ability of a judge to secure a unified view of the court. To the extent such views are probative, Judge Gorsuch's majority opinions were accompanied by separate opinions roughly 3.3 percent of the time. By comparison, only one of the six active judges serving on the Tenth Circuit at the exact same time as the nominee had a lower rate of drawing a separate opinion when writing for the majority. Although the Tenth Circuit has tended to generate few dissents overall, the relative infrequency with which fellow judges dissented or otherwise wrote separately from Judge Gorsuch's majority opinions may suggest the nominee places a high value on reaching consensus in the opinions he writes or, perhaps, has the ability to persuade others to join his opinions. In this sense, Judge Gorsuch's approach can be seen to stand in contrast to that of Justice Scalia in his own majority opinions when he served on a circuit court . While Judge Gorsuch's majority opinions garnered few dissents, he has displayed relatively more willingness to dissent from others' majority opinions than some colleagues on the Tenth Circuit, as Table 2 below shows. Nonetheless, the rate at which Judge Gorsuch dissented from Tenth Circuit decisions —1.6 percent of all cases in which he participated—places him in the middle of his colleagues and is less frequent than the rate at which Justice Scalia dissented when he served as an appellate judge on the D.C. Circuit. On the other hand, there may be limits to what can be gleaned from this data. The choice to write separately is one that stems from various factors, and may simply depend on the personality and preferences of an individual judge, or the nature of the dispute before the court. Thus, the data may reflect other factors. For instance, the fact that Judge Gorsuch's majority opinions garnered relatively few dissents may be a product of the cases on which he wrote, which, in turn, are assigned by the most senior active judge on each panel. This means that, at least early in Judge Gorsuch's career on the Tenth Circuit, he may not have been assigned to write the most challenging or controversial cases that tend to generate dissent. Perhaps more importantly, because separate opinions are infrequent on the Tenth Circuit, the dataset is relatively small, and only a handful of dissents and concurrences distinguish Judge Gorsuch's numbers from those of his colleagues. Nonetheless, when coupled with broader comments made by Judge Gorsuch's colleagues about his approach to judging, the findings in Table 1 and Table 2 may be noteworthy. For example, Professor Michael McConnell of Stanford University, who served on the Tenth Circuit with Judge Gorsuch from 2006 until 2009, described Judge Gorsuch as "unfailingly cordial and collegial," aiming to "find[] common ground" while being "scrupulously respectful of the other side, in tone and in substance." Likewise, another former colleague, Robert Henry, now the President of Oklahoma City University, described Judge Gorsuch's "judicial temperament" as "superb." Judge Gorsuch's approach to judging may also differ in substance from that of Justice Scalia. In contrast to the oft quoted sentiment that "if it is not necessary to decide more, it is necessary not to decide more," Justice Scalia regularly criticized majority opinions that, in his view, failed to provide broader or clearer guidance to the lower courts because the opinions adopted a more minimalist approach. While the nominee has not been immune from criticism that particular majority opinions he wrote swept too broadly, in contrast to Justice Scalia, Judge Gorsuch's writings have generally espoused a more minimalist role for courts. For example, he noted in a 2012 dissent that "[c]aution is always warranted when venturing down the road of deciding a weighty question of first impression and recognizing a previously unrecognized constitutional right." And in a 2009 concurrence, the nominee wrote that "[j]udicial restraint usually means answering the questions we must, not those we can." Indeed, in a number of opinions the nominee expressly limited the scope of the majority opinions he authored. He has also frequently concurred or dissented to take issue with majority opinions that, in his view, reached issues that were unnecessary to the court's ultimate holding. In a similar vein, while the nominee has occasionally questioned precedent that he viewed as inconsistent with the rule of law, his opinions at times evidence concern about judges "reshap[ing] the law as they wish it to be" by failing to "attach power to precedent." Finally, perhaps the best indication of Judge Gorsuch's approach to judging is provided by looking at how the Supreme Court has evaluated his work, a topic further detailed in Table 3 . Of the approximately 180 published majority opinions authored by the nominee, only one has been reviewed in a formal opinion by the Supreme Court, wherein the Court ultimately affirmed the Tenth Circuit decision by a 5-4 vote. Five additional opinions that Judge Gorsuch joined have been the subject of a formal opinion by the Supreme Court. Of these five opinions, four were affirmed by the High Court. One opinion that Judge Gorsuch joined, Direct Marketing Ass'n v. Brohl , was reversed by the Court in a substantive opinion. As a result, Judge Gorsuch has an arguably high affirmance rate given that the Supreme Court in recent years has reversed the lower courts in roughly seventy percent of all cases it heard. As several commentators have noted, Judge Gorsuch can be seen to employ the same general approach to questions of statutory interpretation that Justice Scalia did. This approach—known as textualism —looks to the statutory text, context, and structure when construing laws, rather than to extrinsic evidence of the intent or purpose of the Congress that enacted the statute. Textualism's focus on the wording of the statute is widely shared among contemporary jurists and commentators, but its rejection of extrinsic sources of meaning has been the subject of debate, as have textualist views about judges' proper role in establishing the meaning of statutory text. With Judge Gorsuch in particular, attention to the statutory text has often centered upon questions of grammar, with the nominee once going so far as to diagram part of a sentence in a written opinion. With specific regard to interpreting criminal statutes, Judge Gorsuch can be seen to resemble Justice Scalia in invoking the "rule of lenity" when construing language that is seen to be ambiguous in favor of criminal defendants. On the other hand, the nominee's recently expressed concerns about " Chevron deference" —judicial deference to the reasonable interpretations by executive branch agencies of ambiguous or silent statutes –distinguish him from Justice Scalia in certain ways. These last two facets of Judge Gorsuch's jurisprudence—that is, his approaches to the rule of lenity and Chevron deference—are discussed in more detail later in this report. Consistent with a textualist approach to statutory interpretation, Judge Gorsuch in a number of his written opinions has identified what he views as the "plain text" or "plain language" of the statute in question (although his colleagues on the bench sometimes took different views as to whether this language was, in fact, so clear ). The exact words of the statute often formed the starting point for Judge Gorsuch's discussion of questions of interpretation, and he has generally accorded such words their customary meaning, as reflected by their dictionary definitions. Perhaps the most notable aspect of the nominee's discussion of statutory text, though, has been his focus on the grammar of legislative language and, in particular, the various parts of speech used in the statutory text. For instance, as noted above, in his 2015 opinion for a majority of the en banc Tenth Circuit in United States v. Rentz , Judge Gorsuch diagrammed a segment of a sentence in a criminal statute to help address the underlying interpretative question, as illustrated in Figure 1 below. The specific interpretative question in Rentz was whether multiple charges may be brought under Section 924(c) of Title 18 of the United States Code —a statute that prescribes penalties for certain crimes involving firearms —against a defendant who fired a single shot that hit two separate victims. According to Judge Gorsuch's opinion for the majority, this diagram helped clarify that the total number of charges lodged against a criminal defendant under the statute should never "exceed the number of uses, carries, or possessions" because: Just as you can't throw more touchdowns during the fourth quarter than the total number of times you have thrown a touchdown, you cannot use a firearm during and in relation to crimes of violence more than the total number of times you have used a firearm. Previously, in dissenting from the denial of en banc review in United States v. Games-Perez , Judge Gorsuch had expressed similar concerns about reading the mens rea element of a criminal statute—or the state of mind required for guilt—as "leapfrogging over the first statutorily specified element and touching down only at the second listed element." According to Judge Gorsuch, such a reading "defies grammatical gravity and linguistic logic." Judge Gorsuch's written opinions have also relied upon other interpretative practices characteristic of textualist approaches to statutory interpretation, including resort to the "larger statutory context," express statements of congressional purpose, and the history of the statute. The nominee has also invoked a number of canons—or general principles—of statutory interpretation when construing text that is seen to be ambiguous. In so doing, Judge Gorsuch has generally cited to and applied specific interpretative canons without expressly involving himself in the broader debates about the merits of canons-based approaches to statutory interpretation, prompted by Justice Scalia's 2012 book, Reading Law: The Interpretation of Legal Texts . However, in his 2016 opinion for a three-judge panel of the Tenth Circuit in Lexington Insurance Co. v. Precision Drilling Co., L.P. , Judge Gorsuch contrasted canons that he viewed as "finely honed and consistent with the judicial function," such as the presumption that statutes do not apply outside the United States unless Congress clearly indicates it intends the statute to apply extraterritorially, with the so called "absurdity canon." This canon is generally said to allow judges to "override even unambiguous statutory texts . . . in order to avoid putatively absurd consequences in their application." However, Judge Gorsuch expressed concern that broad application of this canon could enable judges to disregard clear statutory text in favor of the jurists' perceived view of Congress's purpose in enacting the statute. Judge Gorsuch's Lexington Insurance opinion can be seen to reflect broader concerns about interpretations of statutory text based on extrinsic evidence of congressional purpose common to textualist approaches, as discussed below. However, the nominee's discussion of these concerns in Lexington Insurance is arguably notable for its relative length, particularly given that the sole legal authority cited by Judge Gorsuch as supporting purpose-based applications of the absurdity doctrine is an 1892 Supreme Court decision that has not enjoyed particular favor with the Court in more recent years. The two other judges on the panel would not have reached the questions regarding the absurdity doctrine, concluding instead that the plaintiff had waived the argument. Furthermore, consistent with a textualist approach, Judge Gorsuch has made limited resort to legislative history materials. Unlike Justice Scalia, who generally viewed the use of legislative history materials as illegitimate even in support of text-based arguments, Judge Gorsuch has cited legislative history materials in certain cases. However, such citations may be based, in part, on his view that Supreme Court precedent directed lower court judges to consider legislative history materials in those instances. He has elsewhere expressed concerns about the use of legislative history materials similar to those voiced by Justice Scalia. In particular, Judge Gorsuch has expressed skepticism about a jurist's ability to discern a single legislative "intent" beyond that embodied in the express terms of the statute. Consistent with his concerns about results-oriented judging, the nominee has noted the risks of judges cherry picking among legislative history materials to support their preferred interpretation of the statute being construed. He has also expressed, as Justice Scalia did, constitutional concerns with the use of legislative history materials, in that such materials are not subject to the same bicameralism and presentment requirements as statutes because they are not passed by both chambers of Congress and signed by the President. Judge Gorsuch has similarly expressed concerns, akin to those voiced by Justice Scalia, about invocations of alleged congressional or statutory purposes that are untethered from or contrary to the express statutory text. Some of these concerns are seemingly practical ones, grounded in the difficulty of determining which of various possible purposes that could be attributed to a particular statutory text embody the shared intent of a legislature made up of dozens or even hundreds of members. Other concerns appear to be grounded in the nominee's views about the respective roles of the judicial and legislative branches, as previously noted. Much like Justice Scalia, Judge Gorsuch has opined that courts should interpret the law, not create it, as courts could be said to do if they were to adopt a particular construction of a statute based on the court's abstract view of the statute's purpose in lieu of one based on the statute's express text. As a result, if Judge Gorsuch were to serve on the Supreme Court, his views on statutory interpretation would largely appear to align with those of the Justice he would replace. Administrative law cases at the Supreme Court are often contentious, resulting in divided decisions on legal issues of national import. For example, last term the Supreme Court split 4-4 in United States v. Texas , a case that implicated important administrative law doctrines such as the scope of an agency's discretion to issue guidance documents to set regulatory policy. While the Tenth Circuit's docket does not include as many administrative law cases as other federal courts, in the few cases that have come before him, Judge Gorsuch has articulated distinct views that may signal how he would approach administrative law matters if he were elevated to the Supreme Court. Justiciability Issues. A central threshold issue in administrative law cases is whether a challenged agency action is suitable for judicial review in the first place, including whether a court has jurisdiction over the case. While this inquiry is often dependent on the facts of a given case, a few trends can arguably be discerned from the various cases raising justiciability issues in which Judge Gorsuch presided. In cases both arising in the context of a challenge to a federal agency policy and outside of that context, the nominee sided with the majority of the appellate panel in most cases where access to judicial relief was litigated, and he has not demonstrated a proclivity towards a notably expansive or restrictive view of jurisdictional issues. In the few judicial access cases in which Judge Gorsuch wrote a separate opinion, he has tended to do so on the basis that the court lacked jurisdiction over the suit. For example, in Wilderness Society v. Kane County , a majority of the en banc panel held that the plaintiffs lacked prudential standing in a challenge brought against a local government entity under the Supremacy Clause. Judge Gorsuch, however, wrote a concurring opinion concluding the court lacked subject matter jurisdiction over the case in the first place. Similarly, in Kerr v. Hickenlooper , a suit brought by state legislators claiming that a voter initiative violated the Constitution's Guarantee Clause, the original three-judge panel rejected arguments that the court lacked jurisdiction over the case. Judge Gorsuch dissented from a subsequent denial of rehearing en banc, arguing that the court lacked jurisdiction to hear the suit because it presented a nonjusticiable political question. Statutory Review Cases. As background, under the Administrative Procedure Act (APA), a reviewing court must set aside agency action that is "not in accordance with law" or that is "in excess of statutory jurisdiction, authority, or limitations, or short of statutory right." Pursuant to the framework established by the Supreme Court in Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc. , a court will generally defer to an agency's interpretation of a statute that is seen to be silent or ambiguous on a particular issue. In National Cable & Telecommunications Ass'n v. Brand X Internet Services , the Supreme Court interpreted Chevro n to extend to an agency's interpretation of a silent or ambiguous statute even if a court had previously interpreted the statute in question. As a statistical matter, under the Chevron doctrine, courts have often deferred to an agency's interpretation of its own statutory authority. In engaging in substantive review of agency actions, Judge Gorsuch has questioned the size and power of the modern administrative state, declaring that the number of regulations issued by agencies has "grown so exuberantly it's hard to keep up. . . . And no one seems sure how many more hundreds of thousands (or maybe millions) of pages of less formal [guidance] might be found floating around these days." Given the breadth and scope of federal agency power, the nominee has also raised "questions like whether and how people can be fairly expected to keep pace with and conform their conduct to all this churning and changing 'law.'" Reflecting these concerns, Judge Gorsuch has critiqued Chevron and Brand X and has taken a narrow view of the situations in which Chevron deference is due. In perhaps the most discussed of Judge Gorsuch's opinions, Gutierrez-Brizuela v. Lynch , after writing for a unanimous panel that declined to defer to an agency's determination under Chevron and Brand X , the nominee wrote a separate concurring opinion calling into the question the wisdom and constitutionality of the doctrines created by both cases. Emphasizing the concept of separated powers envisioned by the Founders, Judge Gorsuch's concurring opinion distinguished between the elected legislature's task of setting policy prospectively and the judiciary's duty of neutrally interpreting the law in retroactively adjudicating disputes. For Judge Gorsuch, this assignment of responsibilities ensures liberty by protecting parties who cannot alter their past conduct to the changes in majoritarian politics and bars unelected judges from setting policy for the nation. Judge Gorsuch's concurrence further noted that the Founders provided that "judicial judgments 'may not lawfully be revised, overturned or refused faith and credit by' the elected branches of government," ensuring that neutral decision makers would determine the meaning of the law in disputed cases. In the views of the nominee, however, Brand X runs contrary to this constitutional alignment by permitting executive branch agencies to displace the judiciary's legal determinations. As a consequence, Judge Gorsuch suggested that under Brand X , judicial declarations of what the law means are no longer authoritative, because such decisions are "subject to revision by a politically accountable branch of government." For the nominee, the constitutional remedy when the political branches disagree with the judiciary's interpretation of the law is legislation. But under Brand X , Judge Gorsuch has argued, the executive branch is empowered to render decisions on the meaning of the law, effectively "legislating" without complying with the procedures of bicameralism and presentment required by the Constitution. Following this line of reasoning, Judge Gorsuch's concurrence in Gutierrez-Brizuela also questioned the doctrine of Chevron deference itself. While the APA directs courts to interpret the statutory authority of federal agencies, Chevron deference, in Judge Gorsuch's view, operates as an "abdication" of the courts' duty to say what the law is. His concurrence notes that this practice implicates Due Process and Equal Protection concerns with "the political branches intruding on judicial functions." Specifically, Judge Gorsuch raised concerns that, under Chevron , regulated entities are not given fair notice as to what the law requires; and politicized decision makers are accorded vast discretion to determine the law's meaning according to "the shift of political winds," "risking the possibility that unpopular groups might be singled out for . . . mistreatment." Further, the Gutierrez-Brizuela concurrence also critiqued a prominent justification for the Chevron doctrine—that Chevron merely reflects a congressional delegation of interpretive authority—as a fiction that lacks any express manifestation of clear congressional intent. In addition, Judge Gorsuch asserted that, even if Congress is assumed to have intended to delegate interpretative authority to federal agencies, the application of Chevron deference violates the non-delegation doctrine, which bars Congress from impermissibly delegating its constitutional authority to another branch of government. While acknowledging the prevailing non-delegation principle—that in delegating authority, Congress must provide an "intelligible principle" to guide the agency's decision making —Judge Gorsuch argued that the Chevron doctrine violates this principle by giving an agency authority to interpret the scope of its own jurisdictional power and issue broadly applicable regulations, coupled with the ability to reverse itself on short notice. Finally, Judge Gorsuch's concurrence questioned the propriety of consolidating power in the hands of a single branch of government, arguing that Chevron deference effectively "invests the power to decide the meaning of the law . . . in the very entity charged with enforcing the law." Given the "vast power" of the executive branch and the lack of effective oversight of political appointees, he argued, "[u]nder any conception of our separation of powers, I would have thought powerful and centralized authorities like today's administrative agencies would have warranted less deference from other branches, not more." Instead, Judge Gorsuch contended in Gutierrez-Brizuela that courts should examine the law's meaning de novo, or without deference to the agency's view, allowing regulated parties to rely on consistent agency interpretations while simultaneously allowing courts to operate properly within the Constitution's framework. On the one hand, Judge Gorsuch's views on judicial deference to agency legal interpretations contrast with those of Justice Scalia, who, for much of his time on the bench, was viewed by scholars as a defender of Chevron deference. The doctrine, for Justice Scalia, operated as a clear background rule from which Congress could legislate. Judge Gorsuch's opinions, in contrast, can be read to suggest that he might favor eliminating the doctrine, or at least cabining its application as he did in the majority opinion in Gutierrez-Brizuela and in another case discussed below, De Niz Robles v. Lynch . As a result, if he were to succeed Justice Scalia, the nominee's opinions in De Niz Robles and Gutierrez-Brizuela could suggest that he might favor a narrowing of the scope of Chevron deference in future cases. On the other hand, while Justice Scalia supported Chevron deference in cases of perceived statutory ambiguity, he nevertheless frequently found that statutory text was unambiguous, and, thus, there was no need to consider whether deference to the agency was appropriate. In that vein, insofar as Judge Gorsuch's decisions have found statutes to be unambiguous, his approach to such statutes may be generally consistent with Justice Scalia's views. Judge Gorsuch's opposition to the doctrine of Brand X on separation-of-powers grounds, on the other hand, finds harmony with Justice Scalia's view on the matter. Justice Scalia wrote a dissenting opinion in that case, objecting to the majority's decision on pragmatic and constitutional grounds. In Justice Scalia's view, and in a view similar to the nominee's, Brand X impermissibly permits "[j]udgments within the powers vested in courts by the Judiciary Article of the Constitution" to be overruled by executive branch officers. Nonetheless, Judge Gorsuch, while questioning the Supreme Court's precedents, acknowledged that as a federal appeals court judge, he was not in a position to overrule cases like Chevron and Brand X . At the same time, when the applicability of these cases was unclear, Judge Gorsuch appears to have cabined the circumstance in which these doctrines apply. For example, in De Niz Robles , a precursor to the Tenth Circuit's opinion in Gutierrez-Brizuela , Judge Gorsuch, writing for a unanimous panel, rejected the retroactive application of an agency's adjudication that upset the affected party's reliance interests. While the details of the procedural history of De Niz Robles is quite complex and beyond the scope of this report, the Tenth Circuit had previously deferred to an agency's interpretation of an ambiguous statute under Chevron and Brand X when the agency prospectively applied a statutory interpretation at odds with the court's prior reading. In De Niz Robles , however, the agency retroactively applied an interpretation—at odds with the earlier Tenth Circuit opinion—against a party who had significant reliance interests on the prior contrary Tenth Circuit decision. Judge Gorsuch's opinion in De Niz Robles rejected the application of deference in this situation, effectively narrowing the circumstances in which the doctrines of Chevron and Brand X were appropriate. In other words, at least in the Tenth Circuit, De Niz Robles did not read Brand X to apply when an agency seeks to apply its interpretation retroactively via adjudication. As in his opinion in Gutierrez-Brizuela , the nominee grounded his decision in principles of separation of powers, due process, and equal protection, noting the presumptive prospective effect of legislation compared with the retroactive effect of a judicial decision. Judge Gorsuch reasoned that the more an agency's decision resembles that of a judge—applying a preexisting rule to new facts and circumstances—the stronger the case for retroactive application of the decision; but the more the decision resembles legislation—prescribing new generally applicable rules—the less likely such a decision should be granted retroactive force. Given this guidepost, De Niz Robles concluded that when an agency issues an interpretation of an ambiguous statutory provision under Chevron via an adjudication that displaces a contrary judicial decision, it is operating like legislators setting new policies. Consequently, per the 2015 ruling, such decisions should presumptively apply only prospectively. Beyond Judge Gorsuch's two major rulings in Gutierrez-Brizuela and De Niz Robles , he has tended to be more skeptical of deferring to agencies on legal questions. For example, in TransAm Trucking, Inc. v. Department of Labor , the panel majority upheld a determination by the Department of Labor that a truck driver was terminated in violation of the Surface Transportation Assistance Act. At issue was whether the truck driver engaged in protected activity under the Act by "refus[ing] to operate a vehicle" due to safety concerns. The court deferred under Chevron to the Department's determination that the driver's decision to drive his truck away from his trailer in freezing conditions qualified as protected activity under the statute. Judge Gorsuch wrote a dissenting opinion, arguing that the statute's meaning was plain; for him, "refus[ing] to operate a vehicle" simply did not include actually driving a vehicle. Further, he rejected extending Chevron deference to the agency's interpretation, noting that, in contrast to the majority's reasoning, the absence of a statutory definition did not create ambiguity. Instead, Judge Gorsuch thought the statute was clear and unambiguous, and therefore would have ruled against the agency's interpretation at Chevron 's first step. Discretionary and Factual Review. In contrast to his views on the doctrine of judicial deference to agency statutory interpretations, Judge Gorsuch does not appear to have expressed strong objections to the mechanics of discretionary or factual review, a second major area of substantive administrative law wherein courts will "hold unlawful and set aside agency actions, findings, and conclusions found to be arbitrary, capricious, [or] an abuse of discretion." The nominee has joined or written several unanimous decisions upholding agency actions under the arbitrary and capricious standard. However, the nominee has sometimes departed from his colleagues and written separately to find agency actions arbitrary and capricious or lacking in substantial evidence, particularly where he has doubted that the parties received fair notice of applicable rules and regulations. For example, in National Labor Relations Board v. Community Health Services , the majority panel upheld the Board's decision to "exclude interim earnings from backpay calculations when the employer has wrongfully reduced employee hours, but not terminated employment." The majority noted that while the agency's decision was inconsistent with prior determinations, the agency had considerable discretion under the National Labor Relations Act to determine how back pay should be calculated and, accordingly, ruled that its justifications were reasonable. Judge Gorsuch dissented, claiming that the agency's decision failed to explain why it treated similarly situated entities—that is, terminated employees versus reduced hours employees—differently and departed from its own preexisting rules. His opinion rejected the agency's offered rationales, faulting the agency for essentially announcing a new rule without justification, and arbitrarily distinguishing between situations where employees were terminated or had their hours reduced. Judge Gorsuch's views on capital punishment may be particularly important insofar as he would, if confirmed, be replacing Justice Scalia, who believed the death penalty was fully consistent with the Eighth Amendment. With two Justices currently on the Court who have argued openly that the practice is unconstitutional in all its forms, and with the Court remaining closely divided on many issues relating to capital punishment, Judge Gorsuch could be influential regarding the future of the death penalty. Although the nominee has not written extensively on capital punishment, he has authored or joined opinions reviewing the manner in which states carry out executions, as well as opinions reviewing state court convictions and sentences in capital cases. These votes and opinions suggest that, while the nominee is not wholly opposed to scrutinizing a state's imposition of the death penalty, in line with his general views on judicial restraint, he generally accords a large degree of deference to decisions by state legislators, judges, and executive branch officials on matters relating to the states' imposition and administration of capital punishment. One issue over which the Court has remained divided concerns the manner in which states carry out the death penalty. For example, in December 2016, the Supreme Court split 4-4 over whether to stay (i.e., suspend pending further review) the execution of an Alabama man who had challenged the state's method of administering the death penalty on the grounds that it violates the Eighth Amendment's prohibition against "cruel and unusual punishment." The tie vote resulted in the denial of the inmate's application for a stay and left in place a decision by the Eleventh Circuit that had rejected as untimely and unmeritorious the prisoner's Eighth Amendment challenge to the drug protocol that the State of Alabama used in its lethal injections. Judge Gorsuch's votes in support of two Tenth Circuit opinions rejecting similar challenges to the method in which a state carried out executions suggests that, if confirmed, he might provide a fifth vote against such challenges. In Warner v. Gross , Judge Gorsuch joined the majority opinion holding that the use of the drug midazolam in executions by lethal injection was unlikely to violate the Eighth Amendment's prohibition against cruel and unusual punishment. The Supreme Court later affirmed that decision by a vote of 5-4, with Justice Scalia in the majority. Similarly, in Estate of Lockett v. Fallin , Judge Gorsuch joined the majority opinion affirming the dismissal of an Eighth Amendment claim brought by an executed prisoner's estate. The court, relying on recent guidance from the Supreme Court, held that an accidental and "isolated mishap" that occurs during an execution does not violate the Eighth Amendment even if it causes some pain to the inmate. The nominee's views on the death penalty may also find expression in opinions he has authored or joined reviewing federal district court decisions on habeas corpus petitions. Assuming they have satisfied various procedural hurdles, state prisoners sentenced to death pursuant to a judgment of a state court may challenge their convictions and sentences in federal court on the grounds that they violate the Constitution or other federal law. Such prisoners may file a petition seeking a writ of habeas corpus—that is, generally, a judicial determination as to whether the prisoner should receive a new trial, new sentence, or be released. Notably, the Antiterrorism and Effective Death Penalty Act of 1996 (AEDPA) requires federal courts to accord a large degree of deference to state court decisions when reviewing a prisoner's conviction or sentence. This deferential standard of review, which is designed to avoid friction between the federal government and the states, typically makes it difficult for an inmate to prevail in a federal habeas case. Like Justice Scalia, who rarely voted to grant petitioners' applications for federal habeas relief in death penalty cases, Judge Gorsuch has authored or joined majority opinions denying such relief in a number of cases, emphasizing AEDPA's deferential standard of review. In a few cases, the judge has dissented from majority opinions granting such relief, arguing that the court should have accorded more deference to the state court's decision to reject the inmate's challenges to his sentence or conviction. For example, in Wilson v. Workman , the Oklahoma Court of Criminal Appeals had rejected two death row inmates' claims of ineffective assistance of counsel after declining to consider additional evidence proffered by the inmates on an issue that was not part of the trial court's record in the original proceeding. The Tenth Circuit, sitting en banc, held that the deferential standard of review of state court decisions under AEDPA does not apply when the state court fails to consider material evidence because the state court has not adjudicated the claim "on the merits" under AEDPA. Judge Gorsuch authored a dissent arguing that a state court's decision to exclude evidence in accordance with state evidentiary rules amounted to an adjudication on the merits, thereby requiring federal courts to apply AEDPA's deferential standard in reviewing the state court's decision. A further example of his tendency to defer to the states on capital punishment issues is his opinion in Eizember v. Trammel , in which the court reviewed the convictions and death sentence of a man who had murdered a married couple and committed various other crimes. The prisoner argued that the state trial court should have excluded jurors because of their alleged bias in favor of capital punishment. All three judges on the panel agreed that the prisoner's convictions should be affirmed, and two judges (including Judge Gorsuch) agreed that the prisoner's sentence should be affirmed. However, Judge Gorsuch disagreed with the other two judges on the panel on the question of whether the state court of appeals had neglected to apply controlling Supreme Court precedent properly in assessing the petitioner's claim of juror bias during sentencing. He argued that the court should defer to the state appeals court's statements in its opinion, which indicated that the state trial court had applied the correct standard. Judge Gorsuch asserted that the Tenth Circuit owed "double deference" to the state criminal appeals court's decision that the state trial court did not improperly fail to exclude the jurors from sentencing proceedings. Although Judge Gorsuch's opinions in these cases suggest he will largely defer to the states on matters related to capital punishment, Judge Gorsuch's concurrence in one capital case in which the majority denied the petition for habeas relief indicates that there are some circumstances in which he may question the state's imposition of the death penalty. In Williams v. Trammel , Judge Gorsuch agreed that the court should deny the petitioner's claim for relief but expressed concerns with the state court's apparent willingness to impose capital punishment on an accomplice who had not intended that a criminal activity result in the death of another person or had not otherwise shown a reckless disregard for human life during the commission of the crime. The judge wrote that the Eighth Amendment phrase "cruel and unusual punishment," as originally understood by people at the time of the founding and subsequently interpreted by the Supreme Court, would likely bar such a concept of accessory liability. Thus, although Judge Gorsuch has generally demonstrated a propensity to defer to the decisions of state legislators, judges, and executive branch officials in matters relating to capital punishment, he appears willing to scrutinize state court decisions that appear to contravene existing constitutional protections for capital defendants if those protections are clearly articulated in Supreme Court decisions. Nevertheless, Judge Gorsuch may be reluctant to engage in a broad reading of the Constitution and Supreme Court precedent that would expand the rights of such defendants beyond existing precedent. One area where Judge Gorsuch could be influential, were he to be elevated to the Supreme Court, involves the procedural and substantive limits that federal law imposes on the exposure of defendants to monetary liability in civil cases, particularly in the context of lawsuits resulting from allegedly faulty products, discriminatory practices, or fraudulent activities. This is because Justice Scalia, whom Judge Gorsuch could succeed on the Court, cast critical votes in several closely contested cases that read federal law relatively expansively to restrict the ability of plaintiffs to use (1) procedural vehicles, such as class action litigation, to facilitate civil recoveries, and (2) substantive state law, including common law tort actions, to sue businesses that may have harmed them. In other cases, Justice Scalia cast important votes in cases that more narrowly interpreted the scope of federal law to limit corporate defendants' potential civil liability. Given Justice Scalia's decisions, commentators have considered how Judge Gorsuch might affect the Roberts Court's perceived "warmth" toward businesses on civil liability matters if the nominee were to be confirmed to the Court. Pointing to his writings that are critical of the use of class action lawsuits in securities fraud cases, his apparent preference for arbitration over litigation, and his disfavor of affording deference to government agencies, some commentators suggest that Judge Gorsuch would limit the exposure of civil defendants, a tendency that may be perceived as business friendly. Through his judicial and nonjudicial writings, Judge Gorsuch has expressed an interest in issues related to civil liability, including what has been described by one commentator as a "penchant for . . . high pleading and procedural standards for civil litigants." This interest is evident in several pointed critiques that he has authored on what he perceives as the misuses or excesses of litigation. In addition, when asked to identify "the 10 most significant cases over which you presided" on the Senate Judiciary Committee's "Questionnaire for Nominee to the Supreme Court," two of the ten cases Judge Gorsuch selected were opinions that affirmed the dismissal of civil claims by the district court: a product liability suit involving a medical device and a proposed class action alleging securities fraud. One broad theme that can be gleaned from Judge Gorsuch's judicial opinions related to civil liability is his distaste for the time and costs associated with protracted litigation. In Cook v. Rockwell Int ernationa l Corp. , for example, the nominee lamented: It took a titanic fifteen years for the case to reach a jury. No doubt a testament to contemporary civil litigation practices that ensure before any trial is held every stone will be overturned in discovery—even if it means forcing everyone to endure the sort of staggering delay and (no doubt) equally staggering expense the parties endured here. Somehow, though, this case managed to survive the usually lethal gauntlet of pretrial proceedings and stagger its way to trial. From this sentiment, it might be surmised that Judge Gorsuch may be particularly receptive to curtailing the costly litigation process through strict readings of statutes that create private rights of action and provide for procedural devices, such as class action suits, broad enforcement of arbitration clauses, or other means, to provide swift and definitive ends to protracted civil litigation to the extent the law allows. Nonetheless, these views appear to be more nuanced when applied to the facts of particular cases. In keeping with his approach to statutory interpretation, in civil liability cases, Judge Gorsuch has shown a tendency to examine closely the federal statute or rule in question, especially in cases involving determinations of eligibility for class action status. In Hammond v. Stamps.com, Inc. , for example, the plaintiff filed a putative class action in state court alleging unlawful trade practices involving allegedly misleading website disclosures. When the defendant sought to remove the case to federal court pursuant to the federal Class Action Fairness Act, the district court refused to exercise jurisdiction because it found the defendant failed to meet its burden of showing that over $5 million was "in controversy," as required by the statute. On appeal, Judge Gorsuch authored a unanimous opinion reversing the district court based on a detailed construction of the statutory term "in controversy," which he described as "a term heavily encrusted with meaning." Judge Gorsuch explained: "As historically used, the term 'in controversy' has never required a party seeking to invoke federal jurisdiction to show that damages 'are greater' or will likely prove greater 'than the requisite amount' specified by statute." Based on this construction, he found "federal jurisdiction here beyond doubt," thereby allowing the class action to proceed in federal court. Similarly, in BP Am erica , Inc. v. Oklahoma ex rel. Edmondson , a suit brought in state court alleging manipulations of propane gas prices in violation of state law, BP sought to remove the case to federal court as a "mass action" under the Class Action Fairness Act. The district court denied this request. In a unanimous opinion analyzing whether the Tenth Circuit had jurisdiction to hear an interlocutory appeal under the Class Action Fairness Act, Judge Gorsuch's analysis hinged largely on the plain language of the statute: "When we interpret a statute we begin, of course, with its plain terms. And here, as we've mentioned, the text of [the relevant provision of the Class Action Fairness Act] provides that a court of appeals 'may accept an appeal' from an order of remand 'if application is made to the court of appeals not [more] than 7 days after entry of the order.'" Noting that "[t]he statute doesn't place any other conditions on our discretion," the nominee allowed the interlocutory appeal. Judge Gorsuch's textualist approach to statutes also extends to his interpretations of procedural rules, including those relevant to class action litigation. For example, in Shook v. Board of County Commissioners of the County of El Paso , the district court denied the motion for class certification of county jail inmates with mental health needs based on its conclusion that the proposed class would be unmanageable, chiefly because of the difficulty of fashioning relief that would be applicable to the class as a whole. On appeal, Judge Gorsuch affirmed this conclusion in a unanimous opinion based on a close examination of the "two independent but related requirements" of Federal Rule of Civil Procedure 23, which governs class actions in federal courts. The nominee concluded that the rule "demands a certain cohesiveness among class members with respect to their injuries, the absence of which can preclude certification," as he found the rule did in Shook . Although he has few judicial opinions on the matter, Judge Gorsuch has also expressed clear opinions about a subcategory of class actions—those involving securities fraud—in nonjudicial writings. In 2005, the nominee, then in private practice, coauthored two articles critical of securities fraud class actions. While acknowledging "some of the social benefits" of class action lawsuits, Judge Gorsuch also described the "vast social costs" resulting from these types of suits, arguing that "economic incentives unique to securities litigation encourage class action lawyers to bring meritless claims and prompt corporate defendants to pay dearly to settle such claims. These same incentives operate to encourage significant attorneys' fee awards even in cases where class members receive little meaningful compensation." To counter these purportedly negative consequences, the nominee advocated for stricter enforcement of the causation requirement in securities fraud class action suits. Should he be elevated to the High Court, Judge Gorsuch could also be influential in the area of enforcement of arbitration provisions. As one commentator observed, "[a]ll recent Supreme Court decisions about arbitration were closely split by 5-4 margins," and therefore Judge Gorsuch's views on this area of law could have a significant impact. In an area where the Court has generally viewed federal law as encouraging alternative dispute resolution, the nominee's few judicial opinions on contractual arbitration clauses and the Federal Arbitration Act (FAA) might be read as favoring arbitration over litigation. In Howard v. Ferrellgas , for example, Judge Gorsuch read the FAA to require a remand to the district court to determine whether the parties had opted for arbitration, potentially precluding a class action in federal court. In reaching this outcome, Judge Gorsuch characterized the FAA as having a "heavy hand in favor of arbitration." And in Ragab v. Howard , the nominee disagreed with the panel majority's conclusion that a collection of conflicting arbitration provisions in the parties' contracts was unenforceable because "there was no actual agreement to arbitrate as there was no meeting of the minds as to how claims that implicated the numerous agreements would be arbitrated." Judge Gorsuch dissented, stating "I just don't see any doubt that the parties before us did intend to arbitrate. All six—yes six —of the parties' interrelated commercial agreements contain arbitration clauses." In doing so, Judge Gorsuch noted "the federal policy favoring arbitration embodied in the FAA," and that "[t]he Supreme Court has held that the FAA preempts state laws that single out arbitration clauses for disfavored treatment." Like arbitration, preemption—the circumstance in which federal law displaces state causes of action, such as tort claims—has been an issue of considerable dispute on the High Court in recent years, and one in which Judge Gorsuch could have an impact should he be elevated to the Court. In determining whether federal law preempts common law tort claims, the nominee's approach, as in other areas, is centrally grounded in the words of the federal statute at issue, a method that has resulted in judgments both in favor of and against civil defendants. In Cook v. Rockwell Int ernationa l Corp. , for instance, property owners filed a class action under the federal Price-Anderson Act and state tort law against operators of a nuclear weapons manufacturing plant to recover for damages caused by releases of plutonium and other hazardous substances. After the federal claims failed, the district court disallowed the case to proceed on the state law claims, holding that they were preempted by federal law. Judge Gorsuch disagreed. Examining the statute's text, the nominee wrote: "Where does any of this language—expressly—preempt and preclude all state law tort recoveries for plaintiffs who plead but do not prove nuclear incidents? We just don't see it." While finding the statute itself determinative, Judge Gorsuch also looked to the "larger statutory structure" and the statute's legislative history to buttress his conclusion. By contrast, in Caplinger v. Medtronic, Inc. , a case in which the plaintiff asserted a variety of state tort claims alleging the defendant had promoted an "off label" use of a medical device that resulted in the plaintiff's injuries, Judge Gorsuch authored an opinion for the majority. Caplinger affirmed the district court's dismissal of the complaint as preempted by federal law based on a reading of an express preemption clause within the Medical Device Amendments to the Federal Food, Drug, and Cosmetics Act (FDCA). This provision, however, has a complex history of statutory interpretation by the Supreme Court. Judge Gorsuch noted that one such case articulated the following test for preemption, stating: "[T]ort suits do not impose new 'requirements' on manufacturers and are not preempted so long as the duties they seek to impose 'parallel' duties found in the FDCA." But, Judge Gorsuch stated, "the Court's answer only invited the next question: when exactly does a state law duty 'parallel' a federal law duty enough to evade preemption? That term doesn't appear in the statute, so its meaning was left entirely to judicial exposition." Furthermore, he observed, "the Supreme Court has twice revisited and cut back the scope of its initial decision." Left to reconcile competing statutory interpretations by the High Court, Judge Gorsuch asked: "How are we supposed to apply all these competing instructions? It's no easy task." Nonetheless, the nominee applied these principles while referring back to the statute's plain text throughout his analysis. Ultimately, the court held that the state law claims were preempted because the plaintiff failed to identify a parallel federal requirement based on off-label promotion of a medical device. Civil rights is another area of law in which Judge Gorsuch could be influential if he were to be elevated to the Supreme Court. Justice Scalia's views regarding the scope of constitutional and statutory civil rights protections were established in a number of judicial opinions, and he participated in several closely divided cases, including cases addressing affirmative action and issues related to sexual orientation. However, unlike Justice Scalia, Judge Gorsuch's views on constitutional civil rights questions are less well known because he has had relatively few occasions to address such questions directly in cases before the Tenth Circuit. He has not, for example, had occasion to write on the constitutional limits on affirmative action or the equal protection rights of sexual minorities. Rather, most of the civil rights decisions in which the nominee has participated have centered upon statutory civil rights claims and, in particular, statutory employment discrimination claims. The nominee's opinions in these cases to date have resulted in a variety of outcomes—some favorable to individual plaintiffs, some unfavorable. Based on these decisions, an argument could be made that Judge Gorsuch's views on statutory civil rights reflect his textualist approach to construing statutes, instead of a more results-driven judicial philosophy. Constitutional Civil Rights Claims. Judge Gorsuch has authored or otherwise participated in relatively few opinions addressing claims that a government enactment, policy, or practice has deprived persons of equal protection of the law in violation of the Fifth or Fourteenth Amendments to the U.S. Constitution, provisions that have been interpreted to implicate discrimination based on race, gender, disability, and sexual orientation. There is one opinion, Secsys LLC v. Vigil , authored by Judge Gorsuch for a unanimous panel of the Tenth Circuit, that engages in an extended discussion of equal protection. This opinion characterizes equal protection as "the law's keystone"; explores the differences between intentional discrimination and discriminatory applications or enforcement of "rules of general application"; and explains what types of government action may be subject to heightened scrutiny. However, Secsys is unusual in that the plaintiff corporation alleged that state officials had deprived it of equal protection by requiring it to award a subcontract under a state contract to a specific individual, who sought a higher price than the company was willing to pay. Writing for the panel, Judge Gorsuch rejected this claim, in part, on the grounds that the state officials would have required a similar subcontracting agreement from any other contractor, making their actions distinguishable from "a rule saying that African Americans or women may not bid for a state contract or that only those of a certain religious faith may." The nominee also described the plaintiffs as asking the court to endorse a "novel theory" of equal protection in this case to reach issues that were more commonly covered by criminal or civil laws against extortion. This language, coupled with his characterization of equal protection as "the law's keystone," could suggest that Judge Gorsuch believes that the Constitution's equal protection principles play a crucial role in prohibiting certain government discrimination based on race or sex, but may be more skeptical of interpreting the Equal Protection Clause expansively to shield against previously unrecognized forms of discrimination. Judge Gorsuch also joined the unanimous decision by a panel of the Tenth Circuit in 2015 in Druley v. Patton , which rejected a transgendered prisoner's claim that prison officials violated her right to equal protection by, among other things, giving her inadequately low doses of her hormone medication, denying her request to wear female undergarments, and housing her in an all-male facility. Previously, in 2009, Judge Gorsuch joined a unanimous decision by a panel of the Ninth Circuit—where he was sitting by designation—in Kastl v. Maricopa County Community College District , rejecting claims that a state institution of higher education had violated the equal protection rights, among other things, of a transsexual instructor whose contract was not renewed after she had been banned from using the women's restroom "until she could prove completion of sex reassignment surgery." In both cases, unanimous panels purported to rely on direct precedent in reaching their conclusions. For example, in Druley , the panel noted Tenth Circuit precedent holding that transsexuals are not members of a class for which heightened scrutiny is required under the Equal Protection Clause. Because of this, in the panel's view, the state officials' decisions were subject to the less stringent "rational basis review," which the decisions were able to withstand. Similarly, in Kastl , the panel noted, in a short three-page order, that the plaintiff had failed to "put forward sufficient evidence demonstrating that [the school's actions were] motivated by her gender." This, in the panel's view, caused her claims to fail. Statutory Civil Rights Claims. More commonly, instead of assessing constitutional civil rights claims, Judge Gorsuch's opinions have addressed claims arising under one or more federal civil rights statutes. Such statutes include Title VII of the Civil Rights Act of 1964 (Title VII), as amended; the Family and Medical Leave Act (FMLA); the Age Discrimination in Employment Act (ADEA); the Americans with Disability Act (ADA); and the Individuals with Disabilities Education Act (IDEA). Examining Judge Gorsuch's various rulings interpreting these various statutes, it appears that his jurisprudence is largely a product of his preferences for textualism and rules based adjudication, as opposed to a preference to rule for a particular side. However, it should be noted that some commentators have criticized certain rulings by Judge Gorsuch in this area, taking note of the outcomes in specific cases on the grounds that the discrimination claims of particular victims were "thrown . . . out of court" in favor of a corporate or government entity. While Judge Gorsuch has authored or joined some rulings that were unfavorable to such individuals, this fact may be of limited utility in ascertaining Judge Gorsuch's views about the scope of statutory civil rights protections, as plaintiffs raising federal antidiscrimination claims, especially in the context of employment disputes, rarely prevail before the federal appellate courts as a general matter. Many of the decisions on statutory civil rights in which the nominee participated involved unanimous rulings to dismiss a particular case. In addition, litigation involving statutory civil rights claims often turns on the facts of a particular case, as opposed to differences in opinions about the law, meaning that few universal principles may be gleaned from isolated cases. For example, in 2009 in Strickland v. United Parcel Service, Inc. , Judge Gorsuch agreed with two colleagues that the plaintiff should be able to proceed to trial on a FMLA retaliation claim, but differed from his colleagues as to the plaintiff's Title VII case based on the factual record before the court. While the other two judges voted to reverse the district court's grant of summary judgment to the defendant on the Title VII claim, Judge Gorsuch would have affirmed the lower court's decision because he viewed the plaintiff's case as lacking in evidence. In particular, he construed two key depositions relied on by the plaintiff as simply showing that the plaintiff's supervisor "harassed male employees in very much the same manner he harassed Ms. Strickland." In another fact-intensive civil rights case resulting in a different outcome—a ruling for the plaintiffs— Orr v. City of Albuquerque , Judge Gorsuch wrote the majority opinion. This opinion, much like Strickland , engaged in a "thorough review of the record," which examined official policies and testimony from several officers to conclude that the plaintiffs had provided sufficient evidence to proceed to trial on their claims of illicit discrimination on the basis of pregnancy. And Orr is not the only case in which Judge Gorsuch has ruled in favor of the plaintiffs in a statutory civil rights case, which could suggest that the ultimate outcomes of particular cases are driven by Judge Gorsuch's general judicial philosophy as opposed to a general preference to reach a business or government friendly outcome. Nonetheless, while evaluating Judge Gorsuch's record on statutory civil rights based on the outcomes in individual cases may not be particularly helpful, the substance of several of the nominee's opinions on federal antidiscrimination law is, at times, telling and may suggest that the nominee's general views on adjudication shape his approach to antidiscrimination claims. For instance, in keeping with his preference for clear rules and his general critique of "needless" complexities in the law, Judge Gorsuch has written multiple opinions questioning the efficacy of a central—but complicated—doctrine in federal employment discrimination litigation, the McDonnell Douglas test. Under the McDonnell Douglas test, a plaintiff must first establish a prima facie case of discrimination, and then the burden shifts to the employer to articulate a legitimate, nondiscriminatory reason for its employment action. If the employer meets this burden, the plaintiff can still prevail by offering evidence demonstrating that the employer's explanation is pretextual. In Paup v. Gear Products, Inc. , Judge Gorsuch joined a per curiam opinion that, while acknowledging McDonnell Douglas was "binding on us" in the case at hand, noted criticism that its multipart, burden shifting test "divert[ed] attention away" from the question of whether discrimination "actually took place" and "in its stead" substituted a "proxy that only imperfectly tracks that inquiry." Similarly, in Barrett v. Salt Lake County , the nominee highlighted criticism by two colleagues that the test is not "helpful enough to justify the costs and burdens associated with its administration." Judge Gorsuch's most pointed critique of McDonnell Douglas came in a 2016 First Amendment retaliation case, Walton v. Powell. Rejecting the defendant's argument that the test should be applied in a free association case, the nominee noted that the "special and idiosyncratic" McDonnell Douglas test "has proven of limited value even in its native waters," with the Tenth Circuit finding it inapplicable outside of motions for summary judgment in cases relying on circumstantial evidence "because of the confusion and complexities its application can invite." While it is unclear whether the elimination of the McDonnell Douglas test would necessarily favor a particular side in employment litigation, legal commentators have noted that because the test is "bedrock employment law doctrine" any limits Judge Gorsuch might impose on the use of this test could cause a "significant change in how employment discrimination lawsuits are prosecuted and defended." Other statutory civil rights cases can be seen to have been directly shaped by Judge Gorsuch's general approaches to statutory interpretation. For example, in Almond v. Unified School District #501 , the nominee employed a textualist approach in one of the first opinions interpreting the Lilly Ledbetter Fair Pay Act of 2009, concluding that the Act's expanded accrual period for "discrimination in compensation" claims applied only to "unequal pay for equal work" claims, and not to all claims of discriminatory compensation. Rejecting the view that the phrase "discrimination in compensation" was used in the Act as "some Rorschach inkblot to which we may ascribe whatever meaning springs to mind," Judge Gorsuch looked to the "language of the Act itself," the Act's structure, key canons of statutory construction, and the context in which the statute was enacted in adopting a more narrow reading of the phrase in question. In another decision, A.F. ex rel. Christine B. v. Española Public Schools , Judge Gorsuch wrote for the majority in holding that a student who had previously settled a lawsuit involving alleged violations of the IDEA was barred from "seeking the same relief" under the ADA, the Rehabilitation Act, and 42 U.S.C. § 1983. The nominee relied primarily on the "plain text" of the statute, which the majority construed to mean that plaintiffs attempting to bring civil actions under other federal laws "seeking the same relief IDEA supplies" must exhaust certain procedures set forth in the IDEA "'to the same extent' as you must to bring a civil action under IDEA itself." The dissenting judge, however, argued that the majority had "misread[]" the statute in question by viewing Section 1415( l ) of Title 20 of the United States Code as unambiguously imposing certain requirements on a litigant like A.F. The dissent also objected that the outcome under the majority's reading ran contrary to Congress's intent by "harm[ing] the interests of the children that IDEA was intended to protect." However, in perhaps a reflection on how his broader views on the role of the judge influence his civil rights jurisprudence, Judge Gorsuch's opinion took a different view of this argument based on perceived congressional intent, opining that the court would be substituting its view of desirable social policy for that of Congress if it were to adopt the plaintiff's proposed interpretation. Criminal law is an area where Justice Scalia had a significant influence on the High Court's jurisprudence. Often (although not universally), he helped shape this jurisprudence in ways that could be seen to favor criminal defendants on issues such as the scope of the Fourth Amendment's protections against unreasonable searches and seizures, the Fifth Amendment's prohibition on compelled self-incrimination, and the requirements of the Sixth Amendment's Confrontation Clause. Given that more than forty percent of the cases on the Tenth Circuit's docket involve criminal law matters or petitions from federal or state prisoners, Judge Gorsuch has heard many criminal cases during his tenure on that court. He participated in notable decisions regarding searches and seizures, the exclusionary rule, ineffective assistance of counsel, and various statutory criminal law matters. However, his views on the Confrontation Clause and the scope of self-incrimination rights under the Fifth Amendment are less clear because he has not written on them to a significant extent. On the whole, though, his opinions are seemingly shaped by his views regarding how legal texts, particularly the Constitution and statutes, are to be construed, as well as his conception that the courts' role is to apply the law, rather than create it. Consequently, it would seem that Judge Gorsuch does not view the courts as being exclusively responsible for defining the playing field on which criminal suspects and the government interact in what he has described as the "constant competition between constable and quarry." Constitutional Rules of Criminal Procedure . One aspect of Judge Gorsuch's jurisprudence that could be seen to resemble Justice Scalia's involves the Fourth Amendment. Like Justice Scalia, the nominee has taken an originalist approach to construing the Fourth Amendment's protections against unreasonable searches and seizures, focusing on how the Framers would have construed the term "unreasonable" as it is used in this context. Two notable opinions authored by Judge Gorsuch—both written in 2016—illustrate this. In one of these decisions, United States v. Carloss , Judge Gorsuch dissented from the majority's holding that federal agents did not abridge the defendant's Fourth Amendment rights when they approached the house where he was staying and knocked "for several minutes." The house had several "No Trespassing" signs posted in its yard and on its front door. However, the majority rejected the defendant's argument that these signs "revoked the implied license that the public has to approach the house and knock on the door" on the grounds that the placement of such signs around a home would not have conveyed to an objective officer that he could not knock on its door asking to speak with its residents. Judge Gorsuch disagreed. In so doing, he noted that, at the time when the Fourth Amendment was drafted, "the common law permitted government agents to enter a home or its curtilage only with the owner's permission or to execute legal process." He also observed that at common law, homeowners could generally revoke licenses to enter their property at their pleasure, and "state officials no less than private visitors could be liable for trespass when entering without the homeowner's consent." In the second case involving the scope of the Fourth Amendment's protections against unreasonable searches and seizures, United States v. Ackerman , Judge Gorsuch wrote on behalf of a unanimous three-judge panel in holding that a government entity had conducted an impermissible search. In this case, the government had obtained one of the defendant's messages from an Internet service provider and opened the message and its accompanying attachments, thereby discovering child pornography. The government argued, among other things, that this search was permissible pursuant to the "private search doctrine," which allows a warrantless search of a person's effects that had previously been searched by a private third party. However, in his opinion, the nominee rejected this argument because the third party in Ackerman had not opened the email to view its contents, but instead had ran a search that merely identified the email as possibly containing child pornography, and forwarded the email to the government's agent. In so doing, the court noted that the "Fourth Amendment was no less protective of persons and property against governmental invasions than the common law was at the time of founding." Another area implicating the Fourth Amendment's protections against unreasonable searches and seizures is the prohibition against the use of excessive force in the course of making an arrest, investigatory stop, or other seizure. While Judge Gorsuch frequently relied on originalist principles in other areas of search and seizure law, Supreme Court precedent appears to be the exclusive focus in his excessive force opinions. In such cases, the nominee has relied on what he views as the "relatively exacting 'objective reasonableness standard' articulated in Graham v. Connor ," which involves an examination of "three, non-exclusive factors: '[1] the severity of the crime at issue, [2] whether the suspect poses an immediate threat to the safety of the officers or others, and [3] whether he is actively resisting arrest or attempting to evade arrest by flight.'" Application of this test has led Judge Gorsuch to find both excessive force and no excessive force, depending upon his analysis of the facts of individual cases under the Graham factors. For instance, in Herrera v. Bernalillo County Board of County Commissioners , a case where three sheriff's deputies tackled a plaintiff who was not resisting arrest, resulting in injuries to his knee, Judge Gorsuch authored a unanimous opinion affirming the district court's holding that the deputies were not entitled to qualified immunity because the law at the time of the incident clearly established that the conduct alleged was constitutionally excessive. In reaching this conclusion, the nominee proceeded through an analysis of each of the Graham factors. Similarly, but resulting in a contrary outcome, Judge Gorsuch authored the majority opinion in Wilson v. City of Lafayette , finding qualified immunity protected an officer who used a taser on an individual fleeing arrest, resulting in the suspect's death. In doing so, the nominee again recited and analyzed each of the Graham factors. Perhaps responding to concerns raised by the two other panel members in their concurring and dissenting opinions, Judge Gorsuch noted that "no one questions that the use of a taser, especially if one probe hits the head, amounts to a significant physical intrusion requiring a correspondingly significant justification." Nonetheless, the nominee found the "physical intrusion" in Wilson was not clearly established to be excessive in light of the other Graham factors, including the arrestee actively resisting arrest. And in Fisher v. City of Las Cruces , where the majority found that a material factual dispute existed as to whether the plaintiff's injuries, which he sustained while being handcuffed after he had shot himself, were sufficient for an excessive force claim, Judge Gorsuch concurred with the majority's use of the Graham factors and its conclusion that the factors suggested the officers may not have acted reasonably. In so doing, however, the nominee, noting his strict reliance on Graham in excessive force cases, faulted the majority for "tak[ing] a detour, asking whether, in addition to satisfying all three Graham factors, Mr. Fisher has also shown that he suffered a 'non- de minimis injury.'" Such an inquiry had previously been found to be required only in cases involving allegations of overly tight handcuffing, and the nominee felt that it was an inappropriate departure from Graham in this case. On another matter of constitutional criminal procedure that has, at times, divided the Supreme Court in recent years—the application and scope of the exclusionary rule —Judge Gorsuch wrote a notable dissent in United States v. Nicholson . The issue in Nicholson was whether a police officer, who mistakenly thought the defendant had violated a local traffic ordinance, could seize evidence from the defendant's car during the resulting stop. Noting a New Mexico court ruling that had concluded that the ordinance relied on by the police officer did not provide a legal basis for the stop, the majority decision held that a failure to understand the law by the "very person charged with enforcing it" was objectively unreasonable and warranted suppression of the evidence seized. However, Judge Gorsuch in dissent rejected the view that an officer's mistake of law " always violates the Fourth Amendment." Instead, relying on the text of the Fourth Amendment and precedent emphasizing that suppression inquiries should be guided by a reasonableness inquiry, the nominee argued that, when the law at issue is "deeply ambiguous and the officer's interpretation [is] entirely reasonable," a totality of the circumstances test should counsel for not suppressing evidence seized because of a mistake of law. A year and a half after the Tenth Circuit's opinion in Nicholson , the Supreme Court effectively sided with Judge Gorsuch's more flexible view of the exclusionary rule, holding in a different case that a mistake of law can "give rise to the reasonable suspicion necessary to uphold" a traffic stop under the Fourth Amendment. While the approach taken by Judge Gorsuch in his dissent in Nicholson eventually found favor at the Supreme Court, the nominee's dissent in a case on another often litigated issue in constitutional criminal law— ineffective assistance of counsel claims arising under the Sixth Amendment—did not ultimately become the prevailing view at the High Court. In Williams v. Jones , Judge Gorsuch served on a panel reviewing the ineffective assistance claim of a criminal defendant who, after receiving a full and fair trial, was sentenced to a harsher sentence than he otherwise would have received under an offered plea bargain. The defendant argued that his trial counsel had unduly pressured him into rejecting the plea, and a majority of the court agreed that the defendant had established that the trial counsel rendered deficient performance that prejudiced his client. Judge Gorsuch, however, dissented, arguing that there is no constitutionally protected entitlement to accept and enforce a pretrial plea offer because "due process guarantees a fair trial, not a good bargain." Three years after Williams , the Supreme Court, in a pair of 5-4 decisions for which Justice Scalia wrote dissenting opinions, held that the Sixth Amendment right to adequate assistance of counsel extends to the negotiation and consideration of plea bargains. Statutory Claims . Judge Gorsuch generally brought the same textualist approach to statutory criminal law issues that he brought to other statutory issues, as is illustrated by his opinion on behalf of a unanimous panel of the Tenth Circuit in United States v. Dolan . At issue in this case was language in the Mandatory Victims Restoration Act stating that the "court shall set a date for the final determination of the victim's losses, not to exceed 90 days after sentencing." The defendant argued that the language was jurisdictional, which would have meant that the court lacked the authority to enter any restitution order after the 90 days had passed. However, in writing for the court, Judge Gorsuch took a contrary view, holding that the 90-day rule was a claims processing rule intended to promote speed and unconnected to the court's authority. In so doing, the nominee noted various factors, including the "statute's language and structure," as well as an interpretative canon calling for courts to construe statutes as "directory," rather than jurisdictional, if the statute prescribes a period for the performance of an official duty, but does not include language that bars performance after the specified period of time. Although Dolan was written relatively early in Judge Gorsuch's tenure on the Tenth Circuit, it could suggest certain differences between his textualist approach and that of Justice Scalia, as the Supreme Court subsequently granted certiorari in the case. A majority of the High Court voted to affirm the Tenth Circuit's decision in Dolan . However, Justice Scalia joined a dissenting opinion authored by Chief Justice Roberts that viewed the "clear statutory text" to preclude the court from granting restitution more than 90 days after sentencing. This difference between the Tenth Circuit's textualist interpretation and that of Chief Justice Roberts seems to have been shaped primarily by the different emphases that the Tenth Circuit and the Chief Justice gave to different words in the statute, which stated that "[n]otwithstanding any other provision of law, when sentencing a defendant convicted of [a specified] offense . . ., the court shall order . . . that the defendant make restitution to the victim of the offense." In writing for the Tenth Circuit, Judge Gorsuch focused on the "notwithstanding" clause, viewing it as mandating restitution in every case, even if such restitution is not made at sentencing or within 90 days thereof. The dissenters on the High Court, in contrast, relied, at least in part, on the phrase "when sentencing," which they would have construed to mean that a district court has no power to act after sentencing except as provided in the statute, which prescribes a 90-day window for doing so. On the question of the mens rea—or mental state—requirements of criminal statutes, Judge Gorsuch's textualist approach is sometimes said to have led to "defendant-friendly" results, as illustrated by his opinion dissenting from the denial of rehearing en banc in United States v. Games-Perez . This case centered on the question of whether federal statutes penalizing the possession of firearms by felons require the government to prove that a defendant knew of both his own status as a felon and his possession of a firearm, or whether the government needs to prove only that the defendant knowingly possessed a firearm. The longstanding Tenth Circuit precedent is that the government need only prove knowing possession of a firearm. However, in his dissent in Games-Perez , Judge Gorsuch opined that reading the mens rea element of a criminal statute as "leapfrogging over the first statutorily specified element and touching down only at the second listed element " "defies grammatical gravity and linguistic logic," among other things. Similarly, in United States v. Manatau , Judge Gorsuch, writing on behalf of a unanimous panel, relied on the plain language of sentencing guidelines to reach a more lenient interpretation of the mens rea requirement than the government had urged. The government had argued that the court should construe the term "intended loss," as used in connection with a sentencing enhancement for bank fraud and aggravated identity theft, to include any loss that the defendant " knew would result from his scheme," or that he "might have possibly and potentially contemplated." However, the court disagreed, finding that the "plain language" of the guideline was such that "intended" must be construed to refer to a loss "done on purpose." The court also noted the longstanding tradition in American criminal law of restricting liability to "cases where an intentional choice to do wrong is present." A more stringent approach to mens rea requirements, in which intention or knowledge of wrongdoing is generally construed to be part of the crime, is often associated with concerns about overcriminalization, something that Judge Gorsuch has criticized in much the same way Justice Scalia did. Another aspect of Judge Gorsuch's approach to statutory criminal law issues that could also be seen to be "defendant-friendly"—and to resemble Justice Scalia's approach—is his resort to the rule of lenity in construing criminal statutes that are seen to be ambiguous. In its standard formulation, the rule of lenity "insists that courts side with the defendant 'when the ordinary canons of statutory construction have revealed no satisfactory construction.'" Much as Justice Scalia did, Judge Gorsuch invoked the rule of lenity in several criminal cases, including his 2015 opinion for a majority of the en banc Tenth Circuit in United States v. Rentz . Here, Judge Gorsuch invoked the rule of lenity in support of a primarily text based interpretation, asserting that "[t]o the extent any ambiguity remains at this point about the meaning of § 924(c)(1)(A)—after we have exhausted all the evidence of congressional meaning identified by the parties—we don't default to the most severe possible interpretation of the statute but to the rule of lenity." The nominee opined that invoking the rule when construing ambiguous criminal statutes helps to ensure that individuals have "fair warning" when lawmakers want to impose criminal consequences to certain conduct. He also noted that the rule promotes separation-of-powers principles by ensuring that the legislature, and not the prosecution, "decide[s] the circumstances when people may be sent to prison." Previously, in his 2014 opinion for the panel majority in United States v. Smith , Judge Gorsuch had similarly cited a separation-of-powers rationale for the rule of lenity, opining that "[i]n our legal order it is not the job of independent courts to bend ambiguous statutory subsections in procrustean ways to fit the prosecutor's bill." With the Supreme Court often closely divided on various aspects of environmental law in recent years, Judge Gorsuch could serve as a critical vote on such matters if confirmed to the Court. The nominee has authored few opinions involving environmental law issues and participated in a handful of other environmental law cases while on the Tenth Circuit. The lack of a robust record for Judge Gorsuch on environmental law matters may not be surprising. The Tenth Circuit does not hear many environmental law cases because many major environmental statutes require parties challenging nationally applicable federal laws or administrative agency actions to file a petition in the D.C. Circuit. The territorial jurisdiction of the Tenth Circuit, however, does cover six western states and parts of Yellowstone National Park, which collectively contain millions of acres of land owned by the federal government. Consequently, while the nominee may not have written extensively on environmental law, Judge Gorsuch has authored or joined opinions in several cases challenging federal agency actions related to the management of federal public lands and natural resources. This constitutes the bulk of the nominee's environmental law record. The outcome of an environmental case often depends on the court's resolution of threshold procedural issues, such as whether a plaintiff has the right to bring a lawsuit in the first place or to join an ongoing lawsuit. If such lawsuits are filed, to proceed to the merits, a plaintiff will need to establish standing, a procedural threshold that has, at times, impeded environmental litigation. While Judge Gorsuch has authored or joined opinions in a few cases involving whether an environmental group or regulated business had the right to bring or join a lawsuit challenging federal agency action, there is no discernible trend in his environmental standing jurisprudence. For example, his opinion for the majority in Backcountry Hunters & Anglers v. U.S. Forest Service provides one example of a case that was dismissed because the plaintiffs lacked standing. In this case, the plaintiffs challenged a temporary U.S. Forest Service order that allowed motorcycles—but prohibited all-terrain vehicles (ATVs)—on certain forest trails. Judge Gorsuch, writing for a unanimous court, determined that the appellants lacked a genuine stake in the outcome of the proceedings because vacating the Forest Service plan as the appellants had requested would merely reinstate the previously enacted plan, which allowed both ATVs and motorcycles on forest trails. In dismissing the case, the nominee wrote that a victory for the appellants "would seem to do nothing to help—and perhaps much to hurt—[their] cause," which was to reduce vehicles on forest trails. By contrast, Judge Gorsuch joined a majority opinion determining that an environmental group had standing to challenge the Bureau of Land Management's (BLM) interpretation of its own prior order that allowed a coal mining project to go forward in Utah's Lila Canyon. The majority opinion concluded that the environmental group would suffer injury from the company beginning mining operations by impairing "the ability of its members to continue enjoyment of the aesthetic and scientific benefits provided by the land in question." Judge Gorsuch has also authored or joined other majority opinions in a number of other cases touching upon environmental issues in which the court determined that an environmental group or regulated business had standing to sue. Nonetheless, the limited number of cases on standing in the environmental context makes it difficult to discern any broad tendencies of Judge Gorsuch on the subject. In a related procedural matter—persons' ability to intervene in ongoing litigation—Judge Gorsuch's views are similarly unclear. While the Supreme Court itself would likely not rule on any immediate questions respecting intervention in ongoing litigation, its broader guidance on intervention could be influential to the lower courts. During the Senate's consideration of Judge Gorsuch's nomination to the Tenth Circuit, the judge responded affirmatively to a written question about whether his courtroom "would be open to intervention in litigation by those concerned with the administration of . . . public lands." He wrote that "Judges owe the same obligation of fidelity to the record and the law in all cases and to all persons appearing before them—regardless of who the litigant is or what the nature of the claim may be." Judge Gorsuch has had limited opportunities to evaluate intervention matters in environmental cases. In 2013, he dissented from a majority opinion holding that environmental groups were entitled to intervene as of right in a lawsuit challenging a Forest Service plan that allowed for limited off-highway vehicle use in New Mexico's Santa Fe National Forest. The majority reasoned that the groups had a right to intervene because the Forest Service might not adequately represent their interests if, for example, the agency shifted policy positions in favor of the industry group plaintiff during the litigation. Judge Gorsuch dissented, arguing that the environmental groups lacked a right to intervene in the case because their interests were already adequately represented by the government, and that a shift in the Forest Service's position was "speculative." Although his dissent in Backcountry argued that the environmental groups should not have been allowed to intervene in the case, the opinion also implied that he might have voted in favor of the groups joining the litigation if the government had abandoned its efforts to enforce the law at issue. Once a plaintiff in an environmental case has satisfied any jurisdictional and procedural requirements to bringing a lawsuit, a court might review the substance of the federal agency action at issue. Sometimes, an action by an environmental agency may be based on that agency's interpretation of a statute that it administers, such as in 2015 when EPA and the Army Corps of Engineers promulgated a rule defining the scope of waters protected under the Clean Water Act. As noted elsewhere in this report, Judge Gorsuch has broadly expressed skepticism regarding the extent to which judges should defer to an administrative agency's reasonable interpretation of silent or ambiguous language in a statute it administers. If Judge Gorsuch's views on Chevron deference were to prevail at the Court, there is some debate on what impact this would have for environmental law. On one hand, some commentators have suggested that a judge's refusal to defer to agency interpretations would impede efforts by federal agencies to regulate activities that would negatively impact the environment. However, Judge Gorsuch's reluctance to defer to agency legal interpretations, if applied consistently, could also lead to a lack of deference to agency interpretations of environmental statutes that would lead to a decrease in regulation. Given the range of environmental statutes that require the government to take an active role in environmental protection, one commentator has suggested that judicial scrutiny of agency decisions that, for example, determine whether operation of a certain type of facility is subject to Clean Water Act requirements, would not necessarily result in a legal outcome that was less protective of the environment. Another potentially relevant issue implicated by judicial review of final agency actions regarding environmental regulations is the scrutiny courts should provide in reviewing agencies' interpretations of their own regulations, including interpretations that alter previous interpretations or findings. Applying binding precedent, Judge Gorsuch has shown some deference to agencies' interpretations of their own environmental regulations. For example, in United States v. Magnesium Corporation of America , he wrote a majority opinion upholding EPA's reinterpretation of its Resource Conservation and Recovery Act regulations governing mineral processing waste. The court upheld the reinterpretation, which subjected the wastes to more stringent management requirements, even though the agency's new interpretation conflicted with a previous "tentative" interpretation the agency had made in a report to Congress. Neither the agency's original interpretation of its regulations nor the subsequent reinterpretation was made in accordance with the APA's notice and comment rulemaking procedures. The court held that EPA was not required to provide notice and comment to change a "tentative" interpretation of its own rules. Although the decision upheld EPA's change in its interpretation of its regulations, showing some skepticism toward "agency . . . interpretative reversals," Judge Gorsuch did note potential statutory and constitutional concerns regarding agency action that would uproot nontentative interpretations of law. Another example of Judge Gorsuch's deference to an agency's interpretation of its own environmental regulations occurred in a 2010 decision reviewing the BLM's interpretation of its own prior order that allowed a coal mining project to go forward in Utah's Lila Canyon. Judge Gorsuch joined the court's opinion deferring to BLM's interpretation of its own order. The court, citing Tenth Circuit precedent, determined that it owed deference to the Bureau's interpretation of the order because that interpretation was consistent with the circumstances surrounding the issuance of the order and the agency's subsequent conduct. Environmental cases may also implicate other constitutional issues, including the relationship between federal and state authorities. One question that may arise is whether the Constitution's Commerce Clause should render invalid certain state environmental laws. The Supreme Court, in a series of decisions, has held that the Commerce Clause represents not only a grant of authority to Congress, but also a prohibition on states "imposing excessive burdens on interstate commerce without congressional approval." This implied "negative command" is known as the dormant or negative Commerce Clause. In Energy and Environmental Legal Institute v. Epel , Judge Gorsuch reviewed a dormant Commerce Clause challenge to Colorado's renewable energy standard (RES), which requires many electric utilities in Colorado to ensure that twenty percent of electricity sold to state consumers comes from renewable sources. Writing for the majority, Judge Gorsuch noted that Justices Scalia and Thomas had opposed the dormant Commerce Clause doctrine because they believed that it lacked a firm basis in the text and structure of the Constitution. While noting these views, Judge Gorsuch acknowledged, however, that the Tenth Circuit was bound by Supreme Court precedent on the dormant Commerce Clause doctrine. Applying this precedent, the nominee's opinion read Supreme Court precedent narrowly to uphold the Colorado law, concluding that Colorado's RES was distinguishable from analogous laws that the Supreme Court invalidated on dormant Commerce Clause grounds. Judge Gorsuch's opinion in this case—and, in particular, his discussion of arguments made by Justices who have opposed the doctrine—suggests that, if confirmed to the Court, he might be willing to entertain arguments opposing the Court's use of the dormant Commerce Clause doctrine to strike down state environmental laws. During his tenure on the Court, Justice Scalia viewed federalism—the legal principles governing the division of power between the states and the national government—to be "one of the Constitution's structural protections of liberty," and he authored or joined a host of key opinions delineating the limits of federal power. By contrast, during his tenure on the Tenth Circuit, Judge Gorsuch has addressed issues of federalism and the scope of congressional power vis-à-vis the states only in a limited number of cases. In many key areas of the law related to issues of federalism—such as the scope of Congress's affirmative powers under the Commerce Clause or the limits imposed by the Tenth Amendment—he has written little. Thus, gleaning any general trends respecting the nominee's views in this area of law is difficult, particularly because it is unclear to what degree the nominee's conclusions reflect his own approach to federalism questions, or what he perceives as adherence to Supreme Court precedent. In general, however, in cases implicating federalism concerns, Judge Gorsuch has exhibited respect for state court decisions, interpretations, and rules, and has expressed clear views in support of abstention, the concept of a cooperative federalism, and the practice of federal courts certifying some questions of state laws to state courts. Judge Gorsuch's general respect for the decisions, interpretations, and rules of state courts is evident in the majority and concurring opinions in Browder v. City of Albuquerque , both of which he drafted. This case involved a claim against an off-duty police officer who killed one person and injured another while speeding through a red light. Although Judge Gorsuch affirmed the district court's denial of qualified immunity for the police officer in his majority opinion, he wrote separately to explain his views on when federal courts should abstain, for reasons of federalism, from deciding cases where state courts are able to vindicate rights adequately: To entertain cases like this in federal court as a matter of routine risks inviting precisely the sort of regime the Supreme Court has long warned against—one in which "any party who is involved in nothing more than an automobile accident with a state official could allege a constitutional violation" in federal court and thus "make of the Fourteenth Amendment a font of tort law" needlessly superimposed on perfectly adequate existing state tort law systems. While abstention was not properly raised by the parties in Browder , Judge Gorsuch opined in his concurrence that "when the issue is raised in appropriate future cases, I believe we would do well to consider closely its invitation to restore the balance between state and federal courts. For we should be able to expect both that justice will be done in cases like this one and that it will be done while exhibiting the sort of cooperative federalism that has traditionally defined our law." The nominee's respect for state court decisions and interpretations—which appears to be grounded in his support for the broader concept of a cooperative federalism between state and federal courts—figures prominently elsewhere in his federalism jurisprudence, particularly with regard to habeas petitions lodged by state prisoners. Such themes are evident in his dissent from a denial of a request for a rehearing en banc in Williams v. Jones . In that case, the majority declined to review a panel opinion that required a district court to craft a remedy for what the panel determined to have been ineffective assistance of counsel during plea negotiations in a criminal case. In his dissent, Judge Gorsuch asserted that the panel's "holding represents a significant new federal intrusion into state judicial functions and a revamping of the separation of powers, one that unsurprisingly conflicts with the decisions of a number of other courts, including the Utah Supreme Court." In another habeas case, Wood v. Milyard , while the nominee's unanimous opinion held that a state procedural default did not bar federal habeas review, he noted that federal courts must respect state court rules when appropriate, stating: "As a matter of comity and federalism, . . . we will usually hold our tongues about any potential federal law violation lurking in the background of a state procedural default." While Judge Gorsuch has identified circumstances in which he believes deference to state courts is not only appropriate, but also vital to a system of cooperative federalism, he has also recognized limits to such deference, particularly when the actions of a state or its subdivisions are in clear conflict with federal court judgments. For example, in Ute Indian Tribe of the Uintah & Ouray Reservation v. Utah , the nominee wrote a unanimous opinion that granted an injunction preventing state and county officials from prosecuting Indian tribe members for crimes committed on tribal land. In that case, the tribe had prevailed in federal court four decades earlier on its claims that Utah and several local governments were unlawfully trying to displace tribal authority through such prosecutions. While Judge Gorsuch acknowledged that the federal Anti-Injunction Act "usually precludes federal courts from enjoining ongoing state court proceedings" "out of respect for comity and federalism," he relied upon "an important exception . . . [that] expressly authorizes federal courts to enjoin state proceedings when it's necessary 'to protect or effectuate' a previous federal judgment." Thus, one discernible limit on the nominee's general deference to state courts is the need for finality in federal court judgments. In reaching this conclusion, however, Judge Gorsuch emphasized comity and cooperative federalism, stating: "Though we are mindful of the importance of comity and cooperative federalism and keenly sensitive to our duty to provide appropriate respect for and deference to state proceedings, we are equally aware of our obligation to defend the law's promise of finality." Related to his views on comity and cooperative federalism is Judge Gorsuch's seeming preference to have state courts decide certain novel matters of state law, as evidenced by a number of opinions in which he certified such questions to state courts. In Pino v. United States , Judge Gorsuch laid out certain principles to guide the determination of when certification is appropriate, which he then relied upon in several subsequent cases: "While we apply judgment and restraint before certifying, . . . we will nonetheless employ the device in circumstances where the question before us (1) may be determinative of the case at hand and (2) is sufficiently novel that we feel uncomfortable attempting to decide it without further guidance." In articulating these principles, the nominee emphasized that "[i]n making the assessment whether to certify, we also seek to give meaning and respect to the federal character of our judicial system, recognizing that the judicial policy of a state should be decided when possible by state, not federal, courts." Judge Gorsuch's preference for leaving novel questions of state law to the state courts also informed a dissent he authored in a habeas case. In Wilson v. Workman , the nominee faulted the majority for "ventur[ing] a guess about the meaning of state law" and asserted that "[a]sking the [state court] to interpret its own rule . . . would have had the benefit . . . of 'help[ing] build a cooperative federalism' by 'giv[ing] meaning and respect to the federal character of our judicial system.'" As is evident, at the center of Judge Gorsuch's argument for sending questions of state law to the state is "certification's useful role in promoting a cooperative federalism." A related aspect of federalism is the doctrine of state sovereign immunity, which the Supreme Court has recognized underlies the Eleventh Amendment, and is a fundamental aspect of sovereignty retained by the states under the federal system established by the Constitution. While Judge Gorsuch has had few occasions to address this aspect of federalism, in Hill v. Kemp , he wrote a unanimous opinion reversing a district court's dismissal of certain counts against a state official on Eleventh Amendment grounds. In reaching this outcome, the nominee reviewed extensively the Supreme Court's Eleventh Amendment jurisprudence. Namely, Judge Gorsuch described Hans v. Louisiana , which interpreted the Amendment as precluding suits by citizens in federal court against their own states, and Ex parte Young , which specified circumstances under which the Amendment does not bar suits against a state—namely, when the suit seeks only declaratory and injunctive relief rather than monetary damages and is brought against state officers acting in their official capacities, rather than against the state itself. In reviewing further additions to the "rococo quality" of this Eleventh Amendment jurisprudence, Judge Gorsuch noted that "the Supreme Court has in recent years added a new gloss on Young 's gloss on Hans 's gloss on the Eleventh Amendment," perhaps suggesting frustration over the nature of the Court's jurisprudence in this area. Ultimately, however, he found the case could be decided on the sole question of whether the relief was prospective in nature. Having found that it was, Judge Gorsuch concluded that the case fell "within the scope of Ex parte Young and was not barred by the Eleventh Amendment." Of the various federalism cases interpreting the scope of federal powers granted by the Constitution, perhaps Judge Gorsuch's most telling writings have been with respect to the dormant Commerce Clause. In this area, the nominee's clear views appear to align closely with those of Justice Scalia, who wrote in one case that "[t]he fundamental problem with our negative Commerce Clause cases is that the Constitution does not contain a negative Commerce Clause," characterizing the doctrine as a "judicial fraud" and a "judge-invented rule." Similarly, Judge Gorsuch's misgivings about the dormant Commerce Clause are expressed perhaps most clearly in his unanimous opinion in Energy & Env ironmen t Legal Inst itute v. Epel , where he described the doctrine as "another pocket of federal jurisprudence characterized by a long and evolving history of almost common-law-like judicial decision making." In recounting the development of dormant Commerce Clause jurisprudence, the nominee stated in a seemingly skeptical tone: Most everyone accepts that [the Commerce Clause] grants Congress authority to pass laws concerning interstate commerce and to direct courts to disregard state laws that impede its own. Yet some see even more than that here. For many years . . . the Supreme Court has read the clause as embodying a sort of judicial free trade policy. Employing what's sometimes called "dormant" or "negative" commerce clause jurisprudence, judges have claimed the authority to strike down state laws that, in their judgment, unduly interfere with interstate commerce. Detractors find dormant commerce clause doctrine absent from the Constitution's text and incompatible with its structure. He went on to note, however, that "as an inferior court we take Supreme Court precedent as we find it and dormant commerce clause jurisprudence remains very much alive today." In Epel , Judge Gorsuch ultimately upheld a state law that required electricity generators to ensure that twenty percent of electricity sold to state consumers came from renewable resources. This conclusion was based on a strict reading of one line of dormant Commerce Clause cases—those falling under Baldwin v. G.A.F. Seelig, Inc. —which he described as "the most dormant doctrine in dormant commerce clause jurisprudence." Reading the principles of the Baldwin cases narrowly, Judge Gorsuch concluded that the dormant Commerce Clause was not implicated in this case because the state law at issue "doesn't share any of the three essential characteristics that mark those cases: it isn't a price control statute, it doesn't link prices paid in Colorado with those paid out of state, and it does not discriminate against out-of-staters." Although it is difficult to divine broad conclusions from this one case, Judge Gorsuch's opinion suggests a skeptical reading of the dormant Commerce Clause and an interest in cabining the doctrine to the facts of previous cases. These views were also apparent in the concurring opinion Judge Gorsuch authored in Direct Marketing Association v. Brohl , which held that a state law imposing a notice and reporting obligation on out-of-state retailers that are not required to collect sales tax did not discriminate against or unduly burden interstate commerce, and therefore satisfied dormant Commerce Clause concerns. In concurring, Judge Gorsuch summarized his views on the dormant Commerce Clause in a statement reminiscent of those of Justice Scalia: At the center of this appeal is a claim about the power of precedent. In fact, the whole field in which we are asked to operate today—dormant commerce clause doctrine—might be said to be an artifact of judicial precedent. After all, the Commerce Clause is found in Article I of the Constitution and it grants Congress the authority to adopt laws regulating interstate commerce. Meanwhile, in dormant commerce clause cases Article III courts have claimed the (anything but dormant) power to strike down some state laws even in the absence of congressional direction. While Judge Gorsuch's distinct views on the dormant Commerce Clause seem clear, the limited number of cases in which the nominee has ruled on other aspects of federalism and the scope of federal power vis-à-vis the states makes it difficult to conclude with certainty that he would, if confirmed to the Supreme Court, be as receptive to federalism based arguments as was Justice Scalia. What is apparent, however, is his clear interest in upholding the "essential principles of federal-state comity" in furtherance of a cooperative federalism by deferring to the states when circumstances so warrant. Judge Gorsuch could, if confirmed to the Supreme Court, have a significant influence on the jurisprudence regarding freedom of religion—an area of law that, at its core, encompasses certain constitutional protections, as well as statutory free exercise protections that augment these constitutional standards. In recent years, the Court has taken up a number of religious freedom cases, with Justice Scalia voting as part of five-Justice majorities to interpret more narrowly the Constitution's prohibition on the "establishment of religion," while joining the same voting block to more expansively interpret statutory free exercise protections. In contrast to other areas of law, where Judge Gorsuch's views remain uncertain, freedom of religion is a subject on which the nominee has expressed fairly clear views, writing or joining several notable opinions during his time on the Tenth Circuit. Establishment Clause. A central constitutional issue respecting freedom of religion that Judge Gorsuch has considered concerns the reach of the First Amendment's prohibition on the establishment of a national religion, a restriction the High Court has, at times, read to bar certain government actions that endorse religion. In determining what constitutes an unconstitutional endorsement of religion, the Court has in the recent past adopted Justice Sandra Day O'Connor's "reasonable observer test," which looks to whether an "objective observer," acquainted with the background of the challenged government action, would perceive it as a government endorsement of religion. However, paralleling some of Justice Scalia's views on the Establishment Clause, Judge Gorsuch has, in two dissents, criticized what he viewed as overly expansive interpretations of the reasonable observer test on the grounds that these interpretations needlessly eliminate certain religious symbols and traditions from the public sphere. First, in Green v. Haskell County Board of Commissioners , Judge Gorsuch dissented from the denial of a request for rehearing in a case where the panel had previously enjoined a display of the Ten Commandments—which had been donated to the county—alongside other secular symbols on a courthouse lawn. In his dissent, the nominee criticized the Tenth Circuit's formulation of the reasonable observer test, describing the observer utilized by the panel decision as an " unreasonable one" who "gets things wrong." Judge Gorsuch's dissent noted a number of perceived errors made by the "unreasonable observer," which included confusing the donor's intent with the government's message and equating silence by the government with endorsement. Contending that "like cases should be treated alike," Judge Gorsuch's dissent further argued that the county's "inclusive display" of the Ten Commandments was indistinguishable from the display at issue in Van Orden v. Perry . In that case, the Supreme Court had upheld a display of the decalogue among other monuments and historic markers on the grounds of the Texas state capitol. Given these perceived parallels between Green and Van Orden , the nominee's dissent concluded by noting the "long" custom of displaying the Ten Commandments in public places and arguing that the Tenth Circuit should reevaluate whether the endorsement test even applies to the dispute. Judge Gorsuch's dissent is reminiscent of recent Supreme Court jurisprudence, where a majority of the Justices, including Justice Scalia, appeared to move from the endorsement test to looking to historical practices and understandings to resolve Establishment Clause disputes. Nearly two years after Green , Judge Gorsuch similarly dissented from an order denying en banc rehearing in American Atheists, Inc. v. Davenport . In that case, the panel had relied on the reasonable observer test in holding that the display of twelve-foot high crosses on public lands to memorialize fallen Utah Highway Patrol troopers violated the Establishment Clause. Echoing his dissent in Green , Judge Gorsuch again raised concerns about the Tenth Circuit's interpretation of Justice O'Connor's test, arguing that "our observer continues to be biased, replete with foibles, and prone to mistake." In particular, the dissent criticized what the nominee viewed as the observer's (1) "biased presumption that the Utah roadside crosses are unconstitutional"; (2) "internal bias" that disregarded "secularizing details" about the cross display; and (3) "selective and feeble eyesight," which resulted in misperceptions about the nature of the cross display. In this sense, Judge Gorsuch viewed the panel decision in American Atheists as merely replicating the errors from Green , stating: "[W]e will strike down laws other courts would uphold, and do so whenever a reasonably biased, impaired, and distracted viewer might confuse them for an endorsement of religion." More generally, Judge Gorsuch's dissent pointedly criticized the concept of the reasonable observer on the grounds that this test differs from other formulations the Court has used in the Establishment Clause context in that it could be used "to strike down laws and policies a conjured observer could mistakenly think respect an establishment of religion." Judge Gorsuch's dissent in American Atheists , like his dissent in Green , expressed skepticism regarding interpretations of the First Amendment that discourage accommodation for religious views. Instead, he appears to favor an approach that is more restrained in using the power of judicial review in Establishment Clause cases. Statutory Free Exercise Claims . Judge Gorsuch's most notable writings on freedom of religion may arise in the context of statutory free exercise claims. In two cases subsequently reviewed by the Supreme Court, the nominee authored or joined opinions involving challenges under the Religious Freedom Restoration Act (RFRA) to the contraceptive coverage requirement in the Affordable Care Act (ACA). RFRA provides that federal laws that substantially burden a person's exercise of religion are permissible only if they are the least restrictive means of furthering a compelling governmental interest. In the Tenth Circuit's 2013 en banc decision in Hobby Lobby v. Sebelius , Judge Gorsuch joined the lead opinion of Judge Timothy Tymkovich and wrote a separate concurrence. In Hobby Lobby , two closely held corporations, whose owners chose to "run their business to reflect their religious values," challenged the contraceptive requirement, arguing that it violated their religious beliefs for their businesses to "facilitate any act that causes the death of a human embryo." The opinion for the majority of the Tenth Circuit concluded that the ACA contraceptive coverage requirement likely created a substantial burden on the organization's free exercise rights and was not the "least restrictive means" to justify a "compelling governmental interest." In so holding, the Tenth Circuit deferred to the plaintiff's conception of its religious beliefs, and, viewing the dilemma posed by the contraceptive policy as a "Hobson's choice" in which the corporations and its owners could pay substantial fines for violating the requirement or "compromise their religious beliefs," concluded that the policy amounted to a substantial burden. While acknowledging the "importance" of the government's proffered compelling interests in promoting public health and gender equality, Judge Tymkovich's opinion concluded that the existence of a wide range of exemptions to the requirement undermined the government's justifications for the policy and demonstrated that the policy was not the least restrictive means of achieving these goals. On appeal to the Supreme Court, a five-Justice majority (including Justice Scalia) largely agreed with the Tenth Circuit's assessment and affirmed the lower court. Judge Gorsuch's concurring opinion in Hobby Lobby , while centrally focused on procedural matters tangential to the RFRA claims, did discuss the substantive claims in broader terms than the majority opinion, suggesting that the nominee may have a clear preference for accommodation in free exercise disputes. Noting that RFRA was enacted for the express purpose of "vindicating this nation's long-held aspiration to serve as a refuge of religious tolerance," Judge Gorsuch's concurrence emphasized that courts should largely defer to the assertions about the nature of religious beliefs made by those who sincerely hold these beliefs, both out of respect for religious liberty and because of the judiciary's limited competence to scrutinize the veracity of such beliefs. Judge Gorsuch emphasized that it made little difference that the burden on the plaintiffs in Hobby Lobby did not stem from the government affirmatively requiring their use of a "particular drug or device." This was because the plaintiffs had argued that the government imposed a religious burden by requiring their " personal involvement in facilitating . . . [the destruction of] a fertilized human egg that their religious faith holds impermissible," a "matter of faith" that, in the nominee's view, the court "must respect." As a result, Judge Gorsuch's Hobby Lobby concurrence viewed RFRA as a "tie-breaker" that Congress designed to "override other legal mandates, including its own statutes, if and when they encroach on religious liberty." Two years later, Judge Gorsuch joined an opinion in Little Sisters of the Poor v. Burwell that repeated many of the themes of his Hobby Lobby concurrence. Little Sisters of the Poor involved a corollary issue to the one raised in the earlier litigation. Specifically, the central issue in Little Sisters of the Poor was whether allowing religious entities that objected to the ACA requirement to fill out a form that would functionally require a third-party insurer to provide the coverage violates the free exercise rights of those religious entities. Judge Harris Hartz, joined by four other judges, including Judge Gorsuch, dissented from the decision not to rehear a case dismissing a challenge to this government accommodation policy. In particular, Judge Hartz's opinion criticized the panel's refusal "to acknowledge that [the plaintiff's] religious belief is that execution of the [accommodation] documents is sinful," arguing that the panel decision had "reframe[d]" and minimized the plaintiffs' religious objections. In so doing, the dissent in Little Sisters of the Poor can be seen to have repeated many of the themes from Judge Gorsuch's Hobby Lobby concurrence by describing the majority approach as "dangerous . . . to religious liberty" because it is "not the job of the judiciary to tell people what their religious beliefs are." On appeal, the High Court agreed to hear multiple lower court decisions on this issue, and in the consolidated case, Zubik v. Burwell , ordered the respective circuit courts to reconsider the cases after affording the parties time to reach a compromise that would provide contraceptive coverage without imposing the alleged burden on the challenging entities. The High Court's action was seen as unusual in that the opinion did not formally adjudicate the underlying dispute, perhaps reflecting the close division of the current Court on free exercise matters. Outside of litigation over the ACA's contraceptive requirement, Judge Gorsuch has emphasized the importance of accommodating religious beliefs in other statutory free exercise challenges, especially in the context of prison litigation brought under the Religious Land Use and Institutionalized Persons Act (RLUIPA), a statute that imposes the same burden RFRA imposes for the federal government on certain state entities, like prisons. For instance, in Yellowbear v. Lambert , Judge Gorsuch, writing on behalf of a three-judge panel, held that a Wyoming prison lacked a sufficiently compelling interest in imposing a substantial burden on the religious exercise of an inmate who was an enrolled member of the Northern Arapaho Tribe and sought access to a sweat lodge to practice his religious beliefs. In so doing, the nominee articulated two relatively pro-plaintiff interpretations of free exercise law, (1) noting the "modest" task of the court in determining a claimant's sincerity; and (2) rejecting a conception of the compelling interest inquiry that would allow the government to rely on abstract interests to satisfy its burden under RLUIPA. Similarly, in Abdulhaseeb v. Calbone , Judge Gorsuch joined the majority opinion and authored a concurring opinion reinstating several RLUIPA claims based on an Oklahoma prison's denial of an Islamic prisoner's request for a halal certified diet. In his concurrence, the nominee emphasized that the inmate's charge was that he was denied "all means of accessing food [that] he can eat consistent with his . . . sincerely held religious beliefs," "effectively forcing him to choose between remaining pious or starving," a claim that "lies at [the] heart" of a statutory free exercise claim. Nonetheless, while Judge Gorsuch's opinions on statutory free exercise claims are solicitous of religious accommodation, there appear to be some limits on how far statutory free exercise protections extend in his view. For example, the nominee's concurrence in Abdulhaseeb rejected the prisoner's other claims, including the claim that the prison had violated his rights under RLUIPA merely by placing "jell-o and pudding" on the prisoner's cafeteria tray. More broadly, while acknowledging that laws like RFRA and RLUIPA are "super statute[s]," "capable of mowing down inconsistent" laws, Judge Gorsuch noted that for a plaintiff "to win" under the law "takes no small effort," and such laws do "not offer refuge to canny operators who seek through subterfuge to avoid laws they'd prefer to ignore." Seemingly consistent with this view, in one case, United States v. Quaintance , Judge Gorsuch, writing on behalf of a unanimous panel, rejected the argument that RFRA barred the prosecution of members of a marijuana distribution conspiracy who claimed that the use of the drug was central to the exercise of their newly created religion, which taught that "marijuana was a deity and sacrament." Accordingly, while Judge Gorsuch is apt to interpret statutory free exercise laws, much like the Establishment Clause, to embrace the role of religion in society, there are limits to the degree to which he will defer to the purported interests suggested by claimants seeking to rely upon such laws. The Supreme Court has issued a number of notable opinions over the past decade respecting the First Amendment and freedom of speech, with some legal scholars and practitioners going so far as to describe the Roberts Court as the "strongest First Amendment Supreme Court in our history." Many of the Court's recent First Amendment rulings have been closely divided, and the eight-member Court split evenly during the October 2015 term on a notable case regarding the First Amendment and public employee unions. Given this, Judge Gorsuch could, if confirmed by the Senate, have a significant influence on the future direction of free speech law. The nominee has authored or joined a handful of opinions touching on free speech issues, providing a limited picture of how Judge Gorsuch views the First Amendment. Judge Gorsuch's work on the Tenth Circuit has broached the issue of campaign finance regulation and the First Amendment—an area where a divided Supreme Court has invalidated a number of federal and state election laws —at the margins. For example, in the en banc ruling in Hobby Lobby v. Sebelius , Judge Gorsuch joined the majority opinion that concluded that the "logic" of Citizens United v. FEC —the 2010 Supreme Court ruling that, in relevant part, stated that "First Amendment protection extends to Corporations" —compelled the conclusion that the First Amendment also protects a corporation's religious expressions. While various commentators have suggested the Hobby Lobby decision signals Judge Gorsuch's broader support for decisions like Citizens United , a lower court's reliance on Supreme Court precedent may not necessarily signal agreement with that precedent. More specifically, as noted by one of the concurring opinions in Hobby Lobby , the disagreement between the members of the Court in Citizens United was more complex than whether the First Amendment protects a corporation's speech, and centered on whether the "asserted inclinations and advantages of corporations in corrupting officeholders" justified restricting corporate campaign expenditures. In other words, Judge Gorsuch's vote in the 2013 en banc case may have limited significance with respect to his broader views on the constitutionality of campaign finance laws. Perhaps more insights as to Judge Gorsuch's views on the First Amendment and campaign finance regulation come from Riddle v. Hickenlooper , a 2014 case that invalidated a Colorado law allowing major party candidates to accept twice as much in contributions per individual as independent and minor party candidates. Concurring in Riddle , Judge Gorsuch agreed with the majority that the Colorado law violated the Equal Protection Clause of the Fourteenth Amendment because the law sprang from a "bald desire to help major party candidates at the expense of minor party candidates." Moreover, Judge Gorsuch's opinion attempted to allay fears that the ruling "imperiled" any attempts to regulate campaign contributions, citing federal law as a nondiscriminatory model available to the State of Colorado. In so concluding, however, the concurrence broadly noted that the "act of contributing to political campaigns implicates a 'basic constitutional freedom,' one lying 'at the foundation of a free society' and enjoying a significant relationship to the right to speak and associate—both expressly protected First Amendment activities." The nominee then observed that despite the First Amendment interests in campaign contributions, the Supreme Court "has yet to apply strict scrutiny to contribution limit challenges." While Judge Gorsuch's concurrence in Riddle does not go so far as to argue explicitly for subjecting contribution limits to strict scrutiny, it does cite to Justices who have made such an argument in the past, prompting some commentators to conclude that the nominee may favor subjecting campaign finance restrictions, including contribution restrictions, to the most stringent standard of review. On the other hand, other legal scholars have read Judge Gorsuch's opinion in Riddle to "simply highlight[] the confusion he saw" in the Supreme Court jurisprudence on the proper level of scrutiny to be afforded campaign contributions. At the very least, the Riddle concurrence's language, respecting the First Amendment interests implicated by the act of contributing to a political campaign, may signal that Judge Gorsuch disagrees with retired Justice John Paul Stevens's position that "money . . . is not speech." Beyond the context of campaign finance regulation, Judge Gorsuch has written or joined a number of opinions that view the First Amendment as an important restriction on government activity. For instance, in Van Deelan v. Johnson , a case centering on the First Amendment's Petition Clause, Judge Gorsuch, writing for a three-judge panel, reversed a district court's dismissal of a claim that several county officials had violated the plaintiff's First Amendment rights by "seeking to threaten and intimidate him into dropping various tax assessment challenges." In a particularly pointed passage in Van Deelan , Judge Gorsuch wrote broadly about the underlying dangers of suppression of speech by government officials: When public officials feel free to wield the powers of their office as weapons against those who question their decisions, they do damage not merely to the citizen in their sights but also to the First Amendment liberties and the promise of equal treatment essential to the continuity of our democratic enterprise. With this backdrop, the nominee rejected the county's argument that the plaintiff's tax assessment challenges did not amount to "constitutionally protected activity" because they were not a matter of "public concern," concluding that the First Amendment "extends to matters great and small, public and private." The Van Deelan decision and Judge Gorsuch's reluctance to distinguish between types of speech protected by the Constitution may align him with the majority of the Roberts Court that has, in recent years, rejected the argument that the First Amendment does not protect certain "low value" speech. In addition to Van Deelan , Judge Gorsuch has written or joined a number of opinions that promote the rights of the press at the expense of plaintiffs in certain state tort actions. For example, in Bustos v. A&E Television Network , Judge Gorsuch wrote an opinion holding that a prisoner who "merely conspired with" the Aryan Brotherhood could not sustain a defamation lawsuit resulting from a History Channel television series describing the plaintiff as a member of that gang. Noting that the First Amendment requires a plaintiff pursuing a defamation claim to prove the underlying falsehood of the statement at issue, the Bustos decision held that the plaintiff had failed to show the History Channel's statement had a significant impact on his reputation. Likewise, Judge Gorsuch joined a panel opinion in Cory v. Allstate Insurance , which dismissed a defamation lawsuit on the ground that "minor inaccuracies will not preclude" the defense of substantial truthfulness. Similarly, in two other cases brought against television stations— Anderson v. Suiters and Alvarado v. KOB-TV, L.L.C. —Judge Gorsuch joined opinions that dismissed privacy tort claims on First Amendment grounds, reasoning that the underlying reported events involved protected speech on matters of public concern. Nonetheless, the nominee should not be viewed as a free speech absolutist, as a number of Judge Gorsuch's opinions have recognized limits to the First Amendment's speech protections. For example, in Mink v. Knox— a 2010 case that concluded that the First Amendment precludes defamation actions aimed at parody, even when involving a private figure on a matter of private concern — Judge Gorsuch authored a concurring opinion that raised (without answering) the question of whether constitutionalizing the protections for such parodies was necessary or wise. In the context of public employee speech, the nominee has authored several opinions limiting or dismissing First Amendment lawsuits brought by government employees against their employers on the grounds that the speech occurred pursuant to the employees' official duties and, therefore, could be regulated by the government. With regard to challenges to zoning ordinances targeting adult bookstores, another area of First Amendment law that has divided the Supreme Court, Judge Gorsuch dissented from the denial of a petition for en banc rehearing. In so doing, he contended that the underlying panel decision interpreted the First Amendment too broadly and "set[] a new and much higher burden for municipalities" that made it harder to regulate the secondary effects of adult businesses. And, in a case raising issues similar to those in a case presently before the Court, Judge Gorsuch, in Doe v. Shurtleff , joined an opinion holding that a Utah law requiring registered sex offenders to provide the government with their usernames and online identifiers for certain websites was a permissible content-neutral regulation of speech. Justice Scalia's written work and public speeches reflected distinct attitudes toward the use of contemporary foreign law and practice, ratified treaties, and international custom to inform understanding of the U.S. Constitution and federal statutes. In contrast, due in part to the nature of the Tenth Circuit's docket, Judge Gorsuch's jurisprudence offers comparatively little guidance as to his likely approach on such matters if appointed to the Supreme Court. While the originalist judicial philosophy ascribed to Judge Gorsuch would arguably lead him, like Justice Scalia, to eschew consideration of contemporary foreign practice as an aid to interpreting the Constitution's meaning, the nominee has not addressed such matters in the cases that have come before him. The Tenth Circuit docket involves few cases touching upon international law issues, and the handful of cases considered by Judge Gorsuch in this area has been unremarkable. In short, if Judge Gorsuch has any distinctive leanings with respect to questions regarding the interpretation or enforceability of international law in U.S. courts, or whether foreign law has any bearing on U.S. law, they are not apparent in his judicial writings to date. Judge Gorsuch has touched upon the Second Amendment and the constitutionality of firearms regulations briefly in his written opinions while on the Tenth Circuit. These writings suggest that Judge Gorsuch views the Second Amendment as generally protecting an individual right to bear arms, a position that could be seen as consistent with the originalist approach often ascribed to him. However, none of these cases purported to explore the scope of the Second Amendment's protections or the Supreme Court's decisions in District of Columbia v. Heller and McDonald v. City of Chicago , two challenges to firearms restrictions in which Justice Scalia notably participated during his time on the High Court. Judge Gorsuch's references to the Second Amendment have generally appeared in cases concerned with how to construe federal criminal statutes. The most notable of these was arguably Judge Gorsuch's dissent from the Tenth Circuit's denial of en banc review in United States v. Games-Perez . At issue in that case was whether federal statutes penalizing the possession of firearms by felons require the government to prove that a defendant knew of both his own status as a felon and his possession of a firearm, or whether the government needs to prove only that the defendant knowingly possessed a firearm. The longstanding Tenth Circuit precedent is that the government need only prove knowing possession of a firearm. However, in dissenting from the denial of en banc review in Games-Perez , Judge Gorsuch called for the Tenth Circuit to overrule this precedent because of the specific statutory language in question, as well as the general presumption that the mens rea—or mental state—requirements of criminal statutes apply to all elements of the crime. It was in discussing these mental state requirements that Judge Gorsuch mentioned the Second Amendment, noting that "gun possession is often lawful and sometimes even protected as a matter of constitutional right." In particular, he viewed the fact that gun possession can be lawful and constitutionally protected as weighing in favor of requiring the government to prove that the defendant knew of his status as a felon because the " only statutory element separating innocent (even constitutionally protected) gun possession from criminal conduct in [the statutory provisions in question] is a prior felony conviction." Judge Gorsuch made similar statements about gun possession being "often lawful" and a "matter of constitutional right" in subsequent decisions, including his 2015 opinion for the majority of the en banc Tenth Circuit in United States v. Rentz . Like Games-Perez , the Rentz case was concerned with how to interpret a federal criminal statute related to firearms, Section 924(c) of Title 18 of the U.S. Code which imposes "heightened penalties on those who use[, carry, or possess] guns to commit violent crimes or drug offenses." Judge Gorsuch's opinion, which primarily centered on a text-based interpretation of the statute, also suggested that his interpretation was consistent with constitutional requirements. Specifically, the statutory provision in question could not be reasonably construed to prohibit using, carrying, or possessing a gun per se, "for guns often may be lawfully used, carried, or possessed: the Constitution guarantees as much." Judge Gorsuch's opinions could, in part, be seen to reflect or even expand on the precedent of the Supreme Court's decision in Heller , which his opinions have (although not universally) cited. Other opinions authored by Judge Gorsuch, though, suggest potential openness to at least certain restrictions on firearms possession, consistent with the widely cited dictum in Heller that "nothing in [the Supreme Court's] opinion should be taken to cast doubt on longstanding prohibitions on the possession of firearms by felons and the mentally ill, or laws forbidding the carrying of firearms in sensitive places such as schools and government buildings, or laws imposing conditions and qualifications on the commercial sale of arms." Judge Gorsuch has quoted or otherwise noted Heller 's language about restrictions on the possession of firearms by felons, in particular, in several decisions, including his 2010 opinion for a unanimous three-judge panel in United States v. Pope , which ultimately was resolved on procedural grounds. Other opinions authored by Judge Gorsuch include similar language. In a few cases, such as Pope , the opinions cite to other judges who have taken a different view of Heller 's dictum, at least in particular contexts. However, these citations by Judge Gorsuch may be intended to signal awareness of these judges' arguments, rather than agreement with them. The remaining mentions of firearms in Judge Gorsuch's opinions arise in contexts that do not directly raise Second Amendment claims, and the outcomes in these cases could be seen to reflect other factors beyond the nominee's views about gun possession and the scope of the Second Amendment. For example, in one case, Judge Gorsuch authored a unanimous opinion rejecting a necessity defense to a federal gun charge as a matter of law. In another case, he joined a unanimous opinion authored by another judge concluding that law enforcement did not violate the Fourth Amendment rights of a defendant carrying a concealed handgun when the officers subjected the defendant to an investigative detention and weapons seizure. The law of the state in question exempted persons with valid licenses to carry concealed weapons, among others, from its general prohibition upon carrying loaded firearms in public. However, in the Tenth Circuit's view, the existence of this exemption did not negate law enforcement's reasonable suspicion, at the time when the defendant was detained, that the defendant's possession of the firearm was unlawful. Accordingly, law enforcement had "no affirmative obligation prior to seizing Defendant—at the risk of harm to [themselves] and others—to inquire of [the defendant] whether his possession of the handgun fell within the classes excepted by the statute." With respect to Separation of Powers, the Tenth Circuit docket does not appear to have afforded Judge Gorsuch an opportunity to evaluate any rifts between the President and Congress involving the allocation of war powers or executive claims of exclusivity in the conduct of foreign affairs, for example. But a review of his written opinions suggests misgivings when Congress assigns legislative or judicial responsibilities to be carried out by the executive branch. Specifically, his writings indicate he is a proponent of reinvigorating the non-delegation doctrine to police overly broad statutory delegations of legislative functions to the other branches. Judge Gorsuch has objected to what he views as Congress foisting legislative authority onto the judiciary. For example, he seems to view vagueness problems with criminal statutes at least partially through a separation-of-powers lens. Accordingly, he has noted that vague criminal statutes invite the judiciary to legislate: Not incidentally, vague laws also pose a danger to separation of powers: "if the legislature could set a net large enough to catch all possible offenders, and leave it to the courts to step inside and say who could be rightfully detained, and who should be set at large[, t]his would, to some extent, substitute the judicial for the legislative department of government." His writings from the bench suggest he prefers to apply what scholars frequently term a "formalist" approach to separation of powers—an evaluation of strict delineations of governmental powers set forth in the Constitution—to resolve disputes between and among the branches. Based on these writings, if elevated to the Supreme Court, Judge Gorsuch could be expected to reject "functionalist" approaches that weigh the extent to which a challenged law or action upsets the equilibrium of powers the Framers hoped to achieve. His formalist approach seems to guide his views on both the limited and exclusive nature of judicial power, which are informed by the structure of the Constitution. For example, he wrote the panel opinion in Loveridge v. Hall overturning a district court decision allowing malpractice and breach of fiduciary duty claims to be resolved in a non-Article III bankruptcy court without the consent of the parties. Judge Gorsuch described the purpose of Article III of the Constitution as crafted by the Framers to be "the cure for their complaint [against the crown], promising there that the federal government will never be allowed to take the people's lives, liberties, or property without a decision maker insulated from the pressures other branches may try to bring to bear." Echoing a concurrence from Justice Scalia, the nominee also exhibited some doubt regarding the continued viability of the longstanding distinction between public rights and private rights as a governing principle for determining the types of claims Article I courts (like bankruptcy courts) can hear. Judge Gorsuch has repeatedly stressed that he believes that the division of legislative and judicial powers is not a mere "formality dictated by the Constitution." Nor is it "just about ensuring that two institutions with basically identical functions are balanced one against the other." Rather, he views the separation of powers as essential to the preservation of liberty: To the founders, the legislative and judicial powers were distinct by nature and their separation was among the most important liberty-protecting devices of the constitutional design, an independent right of the people essential to the preservation of all other rights later enumerated in the Constitution and its amendments. Perhaps echoing Justice Scalia's quotation of poet Robert Frost, Judge Gorsuch wrote: [O]ur whole legal system is predicated on the notion that good borders make for good government, that dividing government into separate pieces bounded both in their powers and geographic reach is of irreplaceable value when it comes to securing the liberty of the people. According to Judge Gorsuch, the combination of legislative and judicial functions poses a grave threat to liberty, fair notice, and equal protection. Consequently it appears that a judicial test that would approve Congress's delegation of legislative responsibility to the executive branch so long as such delegation is accompanied by an "intelligible principle," would be insufficient for Judge Gorsuch in the case of criminal proscriptions. This assessment is in keeping with his broader views on the modern administrative state and the proper role of courts in interpreting the law. Judge Gorsuch has emphasized the principle of individual liberty in applying his formalist approach to a number of cases implicating the separation of powers, especially challenges to criminal laws where some aspect is left to the executive branch to define. In United States v. Baldwin , he spent a portion of his majority opinion criticizing the proliferation of criminal prohibitions in the Code of Federal Regulations, even though the appellant did not challenge the regulation as an exercise in excessive delegation. The conviction was nevertheless affirmed. After a panel of judges affirmed a conviction for failure to register as a sex offender, in United States v. Nichols, Judge Gorsuch dissented from the denial of a petition for rehearing en banc based on his view that Congress, in delegating to the Attorney General the authority to determine how to apply the Sex Offender Registration and Notification Act (SORNA) to those whose offenses occurred prior to its enactment, had foisted too much of its authority on the executive branch. He explained his view that: By separating the lawmaking and law enforcement functions, the framers sought to thwart the ability of an individual or group to exercise arbitrary or absolute power. And by restricting lawmaking to one branch and forcing any legislation to endure bicameralism and presentment, the framers sought to make the task of lawmaking more arduous still. These structural impediments to lawmaking were no bugs in the system but the point of the design: a deliberate and jealous effort to preserve room for individual liberty. Judge Gorsuch has also taken exception to the executive branch engaging in activities he regards as judicial functions, even where Congress has delegated the authority. In a pair of cases interpreting two statutory provisions, one permitting the Attorney General to grant relief from removal to aliens and the other prohibiting it, he applied—but objected to—the Supreme Court's precedent in Chevron and Brand X . These two cases, which are discussed in more detail above, generally permit agency decisions to override judicial decisions where statutory ambiguity is identified. In De Niz Robles v. Lynch , Judge Gorsuch established for the majority that there is a presumption of prospectivity to agency exercises of delegated legislative authority unless Congress has clearly authorized retroactivity, especially when agency interpretation effectively overturns a prior judicial decision. In reaching this conclusion, however, Judge Gorsuch let it be known that, if not bound by Supreme Court precedent, the court would have thought it improbable that the Framers had envisioned that an executive branch agency could ever overrule a federal court in the first place. When the agency in question, the Board of Immigration Appeals again applied its own reinterpretation of the immigration statutes retroactively, this time to a petition submitted prior to both the reinterpretation and the subsequent appellate court approval of it, Judge Gorsuch, writing for the majority in Gutierrez-Brizuela v. Lynch , held the retroactive application invalid. He wrote that to do otherwise would raise due process and equal protection concerns. Judge Gorsuch also penned a solo concurrence to take note of the "elephant in the room": [T]he fact is Chevron and Brand X permit executive bureaucracies to swallow huge amounts of core judicial and legislative power and concentrate federal power in a way that seems more than a little difficult to square with the Constitution of the framers' design. Maybe the time has come to face the behemoth. He went on to explicate his views on the separation-of-powers implications of deference of agency interpretations of law, concluding that "powerful and centralized authorities like today's administrative agencies . . . warrant[] less deference from other branches, not more." Citing to Justice Felix Frankfurter's concurrence in Youngstown Sheet & Tube Co. v. Sawyer, Judge Gorsuch's concurrence dismissed more functionalist arguments in favor of a "titanic administrative state," noting the dangers of '"unchecked disregard of the restrictions' imposed by the Constitution." Judge Gorsuch's Gutierrez-Brizuela concurrence may suggest that if he is elevated to the High Court, he may embrace a more formalist approach to separation-of-powers questions that more closely scrutinizes the boundaries the Constitution places on each branch of government. The Supreme Court has been divided in recent years in cases involving the substantive component of the Due Process Clauses of the Fifth and Fourteenth Amendments —the source for various unenumerated rights that have been recognized by the Court as constitutionally protected, including the right to privacy, the right to an abortion, and the right to marry. Justice Scalia was a vocal critic of the substantive due process doctrine. He regularly joined majority opinions that limited the scope of the doctrine, and he dissented in cases where the Court recognized new fundamental liberty interests. Whereas Justice Scalia's views on substantive due process were well known by the time of his death, the nominee's expressed views on the doctrine are arguably less apparent and certainly less voluminous. While serving on the Tenth Circuit, Judge Gorsuch has authored or joined a few opinions that touch on the substantive due process doctrine, and he has never squarely ruled on the right to an abortion or the right to marry. However, two opinions do provide some insights into his views on substantive due process rights. In a 2011 case, Kerns v. Bader , Judge Gorsuch, writing on behalf of a divided panel, dismissed the substantive due process claims brought by a plaintiff who alleged that a county sheriff had violated the plaintiff's rights to informational privacy by asking for and obtaining his psychiatric records from a local hospital. Noting that the government's "mere collection of information" without any further public dissemination of that information does not implicate rights to informational privacy, Judge Gorsuch dismissed the claim on qualified immunity grounds after concluding that the plaintiff had failed to demonstrate that his rights were clearly established at the time of the alleged violation. The dissent, however, called the majority's conclusion on the privacy issue "dismaying" and argued that it was "patently clear" that "individuals have a constitutional right to have their medical records kept private from law enforcement officers pursuing general investigative ends and acting in the absence of any authority to breach that privacy." Nonetheless, while acknowledging the dissent's eloquence, Judge Gorsuch concluded that it was inappropriate to resolve the "complex" Fourteenth Amendment "questions surrounding medical records," especially in the context of a qualified immunity challenge, intimating at least some reluctance to adopting a more expansive reading of substantive due process rights in an unresolved area of law. The second opinion—perhaps the most notable substantive due process opinion authored by Judge Gorsuch—is Browder v. City of Albuquerque . This 2015 opinion held that the plaintiffs' substantive due process rights had been violated in the context of a lawsuit arising from a "terrible crash" that resulted when a police officer raced through the city streets of Albuquerque in his police cruiser after finishing his shift. In Browder , Judge Gorsuch, writing on behalf of a unanimous three-judge panel, upheld a district court order that declined to dismiss the substantive due process claims brought against the officer by the victims of the crash, one of whom died and the other of whom suffered serious injuries. In so holding, Judge Gorsuch broadly discussed the substantive due process doctrine. Describing the doctrine as having a "paradoxical name" and being a "murky area" of law, he noted the view that the doctrine either misplaces the source of fundamental rights in the Due Process Clause or has no basis whatsoever in the Constitution. However, acknowledging that the Supreme Court has established the Due Process Clause as the "home" for certain fundamental unenumerated rights, the Browder majority continued by explaining that the "doctrine should be applied and expanded sparingly" because of the open ended nature of substantive due process. In particular, relying on concurring opinions authored by Justices Kennedy and Scalia in a 1998 Supreme Court opinion, Judge Gorsuch then observed that "history and precedent" and the plaintiff's state of mind are critical guideposts to cabin the inquiry into whether a fundamental right has been infringed under the Due Process Clause. In addition to noting these limits on the doctrine in the majority opinion, Judge Gorsuch authored a separate opinion in Browder to discuss an argument forfeited by the defendant that would further limit substantive due process claims in federal court. Namely, the nominee's concurrence argued that, if state tort law can provide an adequate remedy for an alleged substantive due process violation, federal courts should abstain from ruling on the federal claim on comity and federalism grounds. The extensive discussion of substantive due process and the limits on the doctrine in both the majority and concurring opinions in Browder is notable. After all, the majority decision ultimately concluded that the underlying legal questions raised by the case did not broach "any serious borderline disputes," with the court holding that the plaintiffs had properly alleged a violation of their fundamental rights to life without sufficient justification. As a result, the extensive concerns raised by Judge Gorsuch with respect to the substantive due process doctrine in his Browder opinions may signal the nominee's skepticism toward the application of the doctrine in cases presenting less egregious fact patterns. Judge Gorsuch's most extensive writings on fundamental rights and substantive due process are found not in his court opinions, but in his outside work, most notably a book he wrote in 2006 entitled The Future of Assisted Suicide and Euthanasia . Notably, during the 2006 confirmation hearing for his seat on the Tenth Circuit, Judge Gorsuch stated that, while his "writings" on euthanasia and assisted suicide were, in his view, "consistent with the Supreme Court's decisions . . . and existing law," his "personal views" as expressed in his writings "have nothing to do with the case before me," as the "litigants deserve better than that" and "the law demands more than that." In fact, much of the book has little to do with the law. At its heart, the book explores the various ethical arguments regarding assisted suicide and euthanasia, ultimately lodging an argument against their legalization "based on secular moral theory." Specifically, Judge Gorsuch argues in the work that "human life is fundamentally and inherently valuable . . . the intentional taking of a human life by private persons is always wrong." Importantly, his book does not address "publicly authorized forms of killing like capital punishment and war," nor does it seek to define what is encompassed by the term "human life." Nonetheless, in assessing the philosophical arguments related to assisted suicide and euthanasia, the nominee addressed key legal doctrines implicating the right to die, including the substantive due process doctrine. The legal discussion in Judge Gorsuch's book raises broader questions about the substantive due process doctrine and how to assess when a fundamental right is protected by the clause, providing some insight into the nominee's views on such issues. In addressing the constitutional debate regarding assisted suicide and euthanasia, the book centers on two Supreme Court cases from 1997, Washington v. Glucksberg and Vacco v. Quill , that collectively upheld state laws that outlawed assisted suicide against substantive due process and equal protection challenges. In recounting the litigation in the two cases, Judge Gorsuch devotes a chapter to questions related to determining whether a right to assisted suicide can be justified by looking at past historical practices. In evaluating the historical test for substantive due process, he notes that the test is the subject of "considerable methodological disputes," including "what 'level' of historical abstraction" is needed, "whose history" should be evaluated, and "how far back" in history the test should look. The book itself does not expressly reject the historical test for substantive due process, nor does it attempt to resolve the debate over the test's "methodological warts." Instead, Judge Gorsuch, "seeking to apply the history test faithfully," examines the "historical record broadly in terms of time and at different levels of abstraction," concluding that there is limited support for a historical right to assisted suicide. In the discussion of the historical test, however, Judge Gorsuch challenges the views of Justices O'Connor and Kennedy respecting the historical test and the level of abstraction needed to recognize a historically based fundamental right. In Michael H. v. Gerald D. , Justice O'Connor's concurring opinion, joined by Justice Kennedy, had rejected the conclusion in Justice Scalia's plurality opinion that courts should look to the "most specific level at which a relevant tradition protecting, or denying protection to, the asserted right can be identified" when identifying what "liberty" interests are protected under the Fourteenth Amendment. Noting the distinction between the history of the law on assisted suicide and the law on suicide more generally, Judge Gorsuch questioned "whether Justices O'Connor and Kennedy meant to suggest in Michael H. that a court actually may disregard an on-point specific tradition . . . in favor of a more generally analogous, but less directly applicable one . . . ." Viewing the central case cited by Justice O'Connor's Michael H. concurrence, Eisenstadt v. Baird , as "an equal protection decision," rather than a due process one, Judge Gorsuch appears to be somewhat skeptical of more expansive views of the historical test to determine what constitutes a fundamental right. In addition to examining the historical test for determining which liberty interests are protected by the Due Process Clause, Judge Gorsuch's book also examines what he calls the "reasoned judgment" approach whereby "moral reasoning" and "critical discourse"—as opposed to historical norms—dictate what constitutes a fundamental right. In recent years, a divided Court appears to have moved toward such an approach. Judge Gorsuch neither endorses nor rejects the reasoned judgment approach, opting instead to ask open questions that "one might" ask about the efficacy of such a method of interpretation. Nonetheless, the book does question the reach of Planned Parenthood of Southeastern Pennsylvania v. Casey , which could be seen to be based on the "reasoned judgment" approach. In particular, the controlling plurality opinion in Casey , reaffirming Roe v. Wade 's central holding respecting the right to an abortion, grounded the decision partly on the moral argument that "choices central to personal dignity and autonomy" "are central to the liberty protected by the Fourteenth Amendment." The Casey plurality also concluded that the doctrine of stare decisis—or respect for long settled law—required upholding Roe . Relying on this second holding to respond to autonomy based arguments for a right to assisted suicide, Judge Gorsuch contended that Casey should be viewed as based on its "narrowest rationale," the stare decisis rationale. Moreover, he took the view that the alternative of recognizing new rights based on broad libertarian concepts like individual autonomy could "prove too much," justifying the striking down of laws that prohibit "polygamy, consensual duels, prostitution, and . . . the use of drugs" on similar grounds. In this sense, paralleling Chief Justice Roberts's reasoning with regard to the scope of substantive due process protections, the views in Judge Gorsuch's 2006 book may question broader conceptions of the Due Process Clause that are based on abstract notions of morality. There are, however, limits on what can be gleaned from Judge Gorsuch's book with respect to his broader views on unenumerated, fundamental rights. While the book "introduce[s] and critically examine[s] the primary legal . . . arguments" respecting legalization of assisted suicide and euthanasia, including fundamental rights and substantive due process, it does not purport to provide a conclusive view of the author's understandings of the underlying constitutional issues. At times, the book raises more questions about the underlying legal issues than it attempts to resolve definitively. And, as noted earlier, during his 2006 confirmation hearing, Judge Gorsuch has largely dismissed the argument that his writings on euthanasia and assisted suicide would in any way influence his work as a judge. More broadly, the writings of a nominee to the Supreme Court—especially those authored before the nominee became a judge—may not fully represent the nominee's current views. At the same time, Judge Gorsuch's nonjudicial writings on substantive due process, coupled with the few opinions he has written on the subject and his general views on the role of the courts, suggest that the nominee, if elevated to the Supreme Court, is unlikely to interpret the substantive component of the Due Process Clause expansively. Relative to Justice Scalia, who authored and joined several opinions that can be interpreted as strengthening the protection of private property rights afforded by the Takings Clause of the Fifth Amendment during his tenure on the Supreme Court, Judge Gorsuch has said little on the subject and does not appear to have significantly addressed the merits of a takings claim in a judicial opinion. This is unsurprising, as the Tenth Circuit does not hear many takings claims because the Tucker Act vests the U.S. Court of Federal Claims (CFC) with jurisdiction over such claims when the plaintiff seeks more than $10,000 in compensation from the federal government. With limited exceptions, the CFC's jurisdiction over such claims is exclusive, and appeals from the CFC are heard by the Federal Circuit, not the Tenth Circuit. If Judge Gorsuch is elevated, he could very well hear takings issues on the Court's docket. However, there is currently an insufficient basis to evaluate his views regarding the scope of the Takings Clause.
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On January 31, 2017, President Donald J. Trump announced the nomination of Judge Neil M. Gorsuch of the U.S. Court of Appeals for the Tenth Circuit (Tenth Circuit) to fill the vacancy on the Supreme Court of the United States created by the death of Justice Antonin Scalia in 2016. Judge Gorsuch was appointed to the Tenth Circuit by President George W. Bush in 2006. The Tenth Circuit's territorial jurisdiction covers Colorado, Kansas, New Mexico, Oklahoma, Utah, Wyoming, and parts of Yellowstone National Park that extend into Idaho and Montana. Immediately prior to his appointment to the bench, the nominee served as the Principal Deputy to the Associate Attorney General, the third-ranking official at the U.S. Department of Justice, assisting the Associate Attorney General with oversight of the Department's various civil litigation components. Before serving in the Justice Department, the nominee worked in private practice as a civil litigator at the Washington, D.C. firm of Kellogg, Huber, Hansen, Todd, Evans & Figel. Judge Gorsuch began his legal career clerking for federal judges. He first served as a law clerk to Judge David B. Sentelle of the D.C. Circuit. Later, he served two Supreme Court Justices, newly retired Justice Byron White and Justice Anthony Kennedy, during the October 1993 term. This report provides an overview of Judge Gorsuch's jurisprudence and discusses how the Supreme Court might be affected if he were to succeed Justice Scalia. In particular, the report focuses on those areas of law where Justice Scalia can be seen to have influenced the High Court's approach to particular issues or provided a fifth and deciding vote on the Court, with a view toward how the nominee might approach those same issues. The report begins by discussing the nominee's views on two cross-cutting issues—the role of the judiciary and statutory interpretation. It then addresses fourteen separate areas of law, arranged in alphabetical order, from "administrative law" to "takings." The report includes a table that notes the cases where the Supreme Court has reviewed majority opinions written or joined by Judge Gorsuch. Another set of tables in this report analyzes the nominee's concurrences and dissents and those of his colleagues on the Tenth Circuit. A separate report, CRS Report R44772, Majority, Concurring, and Dissenting Opinions by Judge Neil M. Gorsuch, coordinated by [author name scrubbed], briefly summarizes all opinions authored by Judge Gorsuch during his tenure on the federal bench. Other CRS products discuss various issues related to the vacancy on the Court. For an overview of available products, see CRS Legal Sidebar WSLG1526, Supreme Court Nomination: CRS Products, by [author name scrubbed] and [author name scrubbed].
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T he manner in which staff are deployed within an organization may reflect the missions and priorities of that organization. In Congress, employing authorities hire staff to carry out duties in Member-office, committee, leadership, and other settings. The extent to which staff in those settings change may lend insight into the Senate's work over time. Some of the insights that might be taken from staff levels include an understanding of the division of congressional work between Senators working individually through their personal offices, or collectively, through committee activities; the relationship between committee leaders and chamber leaders, which could have implications for the development and consideration of legislation, the use of congressional oversight, or deployment of staff; and the extent to which specialized chamber administrative operations have grown over time. This report provides staffing levels in Senators', committee, leadership, and other offices since 1977. No Senate publication appears to officially and authoritatively track the actual number of staff working in the chambers by office or entity. Data presented here are based on staff listed by chamber entity (offices of Senators, committees, leaders, officers, officials, and other entities) in Senate telephone directories. Figure 1 displays overall staffing levels in the Senate. Table 1 in the " Data Tables " section below provides data for all staff listed in chamber directories in the Senate through 2016. Joint committee staff data from the Senate for panels that met in the 114 th Congress (2015-2016) are provided in Table 7 . This report provides data based on a count of staff listed in the Senate telephone directories published since 1977. Like most sources of data, telephone directory listings have potential benefits and potential drawbacks. Telephone directories were chosen for a number of reasons, including the following: telephone directories published by the Senate are an official source of information about the institution that are widely available; presumably, the number of directory listings closely approximates the number of staff working for the Senate; while arguably not their intended purpose, the directories provide a consistent breakdown of Senate staff by internal organization at a particular moment in time; and the directories afford the opportunity to compare staff levels at similar moments across a period of decades. At the same time, however, data presented below should be interpreted with care for a number of reasons, including the following: There is no way to determine whether all staff working for the Senate are listed in the chambers' telephone directories. If some staff are not listed, relying on telephone directories is likely to lead to an undercount of staff. In particular, staff working in Senators' state offices were not listed until 1987. This likely led to an undercount of staff, and makes comparisons pre-1987 and post-1987 difficult. It is not possible to determine if staff who are listed were actually employed by the Senate at the time the directories were published. If the directories list individuals who are no longer employed by the Senate, then relying on them is likely to lead to an overcount of staff. The extent to which the criterion for inclusion in the directories for the Senate has changed over time cannot be fully determined. Some editions of the directory do not always list staff in various entities the same way. This may raise questions regarding the reliability of telephone directory data as a means for identifying congressional staff levels within the Senate over time. Some Senate staff may have more than one telephone number, or be listed in the directory under more than one entity. As a consequence, they might be counted more than once. This could lead to a more accurate count of staff in specific entities within the Senate, but multiple listings may also lead to an overcount of staff working in the chamber. Chamber directories may reflect different organizational arrangements over time for some entities. This could lead to counting staff doing similar work in both years in different categories, or in different offices. It appears that the Senate telephone directories started listing Senate staff working in Senators' state offices in 1987. Given the lack of consistent staff data from Senators' offices prior to 1987, comparisons between data from those offices from 1977-1986 and 1987-2016, as well as any analysis of total staffing levels in the Senate before 1987, would be incomplete. Staff levels from committees, leadership, and officers and officials, however can be evaluated across the entire 1977-2016 time period. Additionally, analysis of total staffing levels, as well as staff distribution, since 1987 is discussed below. In the Senate, the number of staff has grown steadily, from 4,916 in 1987 to 5,749 in 2016, or 16.94%. Each year since 1987, the number of Senate staff has grown by an average of 29 individuals, or 0.58%. From 1977 to 1986, excluding congressional staff from state offices, the number of staff in the Senate has grown steadily from 3,397 in 1977 to 4,180 in 1986, or 23.05%. Figure 1 displays staff levels in six categories (Senators' DC offices, Senators' state offices, total staff in Senators' offices, committees, leadership, and officers and officials) since 1977. Figure 2 provides the distributions among categories of offices from 1987 to 2016. Table 1 in the " Data Tables " section, below, provides detailed staff levels in those categories. Staff in Senators' offices grew from 2,068 in 1977 to 2,474 in 1986, or 19.63%. Due to the addition of staff in Senators' state offices, comparisons of total staff before 1986 to after are not possible. But staff in Senators' Washington, DC, offices continued to grow. In 2016, there were 2,342 staff in Senators' DC offices, an increase of 13.25% from the 1977 level, 2,068. Staff in Senators' offices, including state-based staff, have grown from 3,286 in 1987 to 4,120 in 2016, or 25.38%. Senators' office staffs have grown as a proportion of overall Senate staff over time. In 1987, Member-office staff comprised 66.84% of Senate staff. The proportion grew to 67.51% in 1990, and 72.96% in 2000, before dropping slightly to 71.66% in 2016. Most of the growth in Senators' staffs since 1987 appears to have been among state-based staff, which nearly doubled in size from 935 in 1987 to 1,778 in 2016. More staff work in Washington, DC, offices than in state offices, but the percentage of Senators' staff based in states has grown steadily since 1987, while the number of staff in Senators' Washington, DC, offices has remained relatively flat. In 2016, 56.84% of staff listed in the Senate telephone directory as working in Senators' offices did so in Washington, DC, down from a high of 72.18% in 1988. Table 2 in the " Data Tables " section below provides the number of staff working in Senators' offices in Washington, DC, and state offices. Senate committee staff levels have shown the smallest change among Senate staff categories, increasing from 1,084 in 1977 to 1,153 in 2016, or 6.37%. Change among Senate committee staff may be characterized in three stages: an increase during 1977-1980 (20.57%); a period of decline in 1980-1999 (-27.93%); and a period of growth from 1999 to 2016 (22.40%). Between 1987 and 2016, committee staff comprised a decreasing proportion of Senate staff, falling from a peak of 23.39% of Senate staff in 1987 to a low of 17.49% of staff in 1995. The proportion of Senate committee staff grew to 20.06% in 2016, still below its 1987 peak. In the " Data Tables " section below, three tables provide staff levels in various Senate committees. Table 3 provides data for 2007-2016; data for 1997-2006 are available in Table 4 , Table 5 provides data for 1987-1996, and data for 1977-1986 are in Table 6 . Totals for each year, which include Senate joint committee staff found in Table 7 , are provided in Table 1 . The number of staff in Senate leadership offices grew from 44 in 1977 to 160 in 2016. The majority of the growth in leadership staff occurred between 1977 and 1981, from 44 to 119, or 170.45%. The number of leadership staff peaked in 2012 at 234. As a proportion of Senate staff, leadership employees were 2.69% in 1987 and 2.78% in 2016. Staff working in the offices of Senate officers and officials has grown 57.21% since 1977. Staff levels have grown from 201 in 1977 to 316 in 2016, but were characterized by sharp decreases in 1988, from 1998-2001, in 2012, and in 2016. Despite the growth, Senate officers and officials' staff decreased as a proportion of Senate staff, falling from 7.08% in 1987 to a low of 5.21% in 2012. In 2016, the proportion of officers and officials' staff was 5.50%. Since 1987, the number of staff working for the Senate has grown. There have been increases in the number of staff working in Senate leadership offices, and larger increases in the staffing of officers and officials through 2015, though 2016 saw a dip in those numbers. Staff working for Senators have shifted from committee settings to leadership settings or the personal offices. Some of these changes may be indicative of the growth of the Senate as an institution, or the value the chamber places on its various activities. One example that may be an indication of institutional development arguably is found in the growth of the number of staff working in leadership and officers and officials' offices. A potential explanation for these changes may be found in what some might characterize as an ongoing professionalization and institutionalization of congressional management and administration. Some note that as organizations such as governing institutions develop, they identify needs for expertise and develop specialized practices and processes. In Congress, some of those areas of specialization arguably include supporting the legislative process through the drafting of measures, oversight and support of floor activities, and the management of legislation in a bicameral, partisan environment. Another potential explanation related to a more institutionalized, professionalized Congress could be the demands for professional management and support. This could arise as a result of congressional use of communications technologies, and the deployment of systematic, professionalized human resources processes, business operations, and financial management. Consequently, increased specialized support of congressional legislative and administrative activities may explain increases among staff working for chamber leaders, and officers and officials. In another example, the distribution of staff working directly for Senators has shifted from committee settings to personal office settings. Staff in Member offices has grown while staff in Senate committees has decreased, both in real numbers and in percentage of total staff. This may represent a shift from collective congressional activities typically carried out in committees (including legislative, oversight, and investigative work) to individualized activities typically carried out in Senators' personal offices (including direct representational activities, constituent service and education, and political activity).
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The manner in which staff are deployed within an organization may reflect the missions and priorities of that organization. This report provides staffing levels in Senators' Senate committee, leadership, and other offices since 1977. From 1977 to 1986, Senate staff, excluding state-based staff, increased from 3,397 to 4,180, or 23.05%. From 1987 to 2016, all Senate staff grew from 4,916 to 5,749, or 16.94%. The changes in both time periods were characterized in part by increases in the number of staff working in chamber leadership offices, and, prior to 2016, increases in the staffing of chamber officers and officials. Additionally, staff working for Members have shifted from committees to the personal offices of Members. Since 2010, however, staff working for the Senate has decreased 6.79%. Some of these changes may be indicative of the growth of the Senate as an institution, or the value the chamber places on its various activities. This report is one of several CRS products focusing on congressional staff. Others include CRS Report RL34545, Congressional Staff: Duties and Functions of Selected Positions, by R. Eric Petersen; CRS Report R43947, House of Representatives Staff Levels in Member, Committee, Leadership, and Other Offices, 1977-2016, by R. Eric Petersen and Amber Hope Wilhelm; CRS Report R44324, Staff Pay Levels for Selected Positions in Senators' Offices, FY2001-FY2015, coordinated by R. Eric Petersen; CRS Report R44323, Staff Pay Levels for Selected Positions in House Member Offices, 2001-2015, coordinated by R. Eric Petersen; CRS Report R44322, Staff Pay Levels for Selected Positions in House Committees, 2001-2015, coordinated by R. Eric Petersen; and CRS Report R44325, Staff Pay Levels for Selected Positions in Senate Committees, FY2001-FY2015, coordinated by R. Eric Petersen.
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Congress maintains an active interest in the effective implementation of regulatory systems adopted by federal agencies. A common concern is the pace at which agencies establish rules and complete adjudications. Commentators and courts have noted that agency delay can impact the effectiveness of a regulatory system. Delays can also negatively affect regulated entities that must wait for final agency action. As one court noted: "Quite simply, excessive delay saps the public confidence in an agency's ability to discharge its responsibilities and creates uncertainty for the parties, who must incorporate the potential effect of possible agency decisionmaking into future plans." Substantial case law has emerged on how courts will treat agency delay in a variety of circumstances. The Administrative Procedure Act (APA) imposes a general time restraint on administrative agencies—they must act within a "reasonable time." If a person meets the necessary standing requirements, he can sue the agency for failing to act within a reasonable time. However, when there is no hard deadline imposed on the agency, courts are often reluctant to compel an agency to act and often allow an agency to set its own priorities. In addition to the general timing requirements imposed by the APA, Congress also has the power to require agencies to act on issues within a specific time frame by establishing a statutory deadline in the agency's enabling statute. When an agency fails to meet a statutory deadline, courts are more willing to compel the agency to take prompt action. Judicial remedies available for delayed agency actions are somewhat limited. Generally, a court is restricted to ordering an agency to act by a specific deadline. The following sections outline the timing requirements imposed by the APA, discuss the available judicial remedies when actions are found to be unreasonably delayed, and provide an examination of cases where courts have been asked to compel agency action. Finally, the report concludes with a discussion of legislative tools that Congress can use to try to set agency priorities. The APA does not provide any concrete time limits for agency actions. Instead, the APA leaves most deadlines to be established in the particular agency's enabling statute, if at all. However, the APA states that "within a reasonable time, each agency shall proceed to conclude a matter presented to it." Further, the APA states that courts shall "compel agency action unlawfully withheld or unreasonably delayed." As such, the APA provides individuals with a cause of action when agency action has been unreasonably delayed. A court may hear a claim for unreasonable delay despite the fact that the agency has yet to take a final action on the subject. Generally, under Section 704 of the APA, a court does not have jurisdiction over an agency matter until the agency action is final. However, a court can have jurisdiction over a matter pending before an agency when a party claims that there has been an unlawful or unreasonable delay. In Norton v. SUWA , the Supreme Court stated that "when an agency is compelled by law to act within a certain time period ... a court can compel the agency to act." The United States Court of Appeals for the District of Columbia Circuit (D.C. Circuit) has also noted that the language of the APA indicates that Congress intended the courts to play a role in ensuring that agencies fulfill their obligation to act within a reasonable time, and other circuits have noted that a claim of unreasonable delay qualifies for judicial review despite a lack of "final agency action." Claims for unreasonable delay can be brought under the APA against an agency in court. However, a claim of unreasonable delay can only be brought against an agency for actions that the agency is legally obligated to take. The Supreme Court has stated that "a claim under § 706(1) [of the APA] can proceed only when a plaintiff asserts that an agency failed to take a discrete agency action that it is required to take." If taking a certain action is "committed to agency discretion by law," then no claim can be made against the agency for failing to take such an action. In other words, an agency must be required to act by law in order to establish a claim that the agency has unreasonably delayed in acting. Before discussing how a court determines whether an unreasonable delay has occurred, it is important to understand the limitations on available judicial remedies. When a court determines that an action has been unreasonably delayed, it must then decide what remedy to provide the plaintiff. First, although a court can order an agency to take prompt action on an issue, the Supreme Court has declared that a court cannot dictate what conclusion the agency should reach. The Court stated that when an agency misses a deadline, a court can issue "a judicial decree under the APA requiring the prompt issuance of regulations, but not a judicial decree setting forth the content of those regulations." For example, if an agency must determine critical habitat for an endangered species, the court can direct the agency to act immediately, but the court cannot determine which habitat is critical. Furthermore, the Supreme Court has stated that regulations issued after a deadline has passed still maintain the force of law, despite the tardiness of their promulgation. Therefore, a plaintiff cannot challenge the validity of regulations merely based on their promulgation after a deadline. Thus, judicial remedies are generally limited to imposing deadlines on the agency. Courts take varying approaches when fashioning a remedy for an agency action that has been unduly delayed. In some cases a court will order an agency to act promptly. In other situations, a court might impose a deadline on the agency. Sometimes courts merely direct the agency to impose a deadline on itself, which the court will accept unless the agency's proposed deadline is unreasonable. Additionally, courts will often maintain jurisdiction over the case until the agency action has been completed. In these situations, the court will require the agency to file regular reports with the court detailing the progress the agency has made on the action to ensure the agency is actively working to comply. Examples of how courts fashion remedies are provided in the cases discussed in this report. Generally, courts tend to avoid compelling agency action because they do not want to impose agendas on the more politically accountable regulatory agencies. Courts will look to enabling statutes to see if there are statutory time requirements imposed on the agency. When there is no statutory deadline for the agency action, courts tend to be more deferential to the agency's priorities. According to the Blackletter Statement of Federal Administrative Law from the American Bar Association: An agency's delay in completing a pending action as to which there is no statutory deadline may not be held unlawful unless the delay is unreasonable in light of such considerations as the agency's need to set priorities among lawful objectives, the challenger's interest in prompt action, and any relevant indications of legislative intent. In considering such challenges courts are deferential to agencies' allocation of their own limited resources. The D.C. Circuit, in Telecommunications Research & Action Center v. FCC (" TRAC "), established guidelines to consider when determining whether an agency delay warrants mandamus compelling the agency to act. The court stated that "[i]n the context of a claim of unreasonable delay, the first stage of judicial inquiry is to consider whether the agency's delay is so egregious as to warrant mandamus." The court then enumerated several factors, known as the TRAC factors, to consider when answering this question: (1) the time agencies take to make decisions must be governed by a "rule of reason;" (2) where Congress has provided a timetable or other indication of the speed with which it expects the agency to proceed in the enabling statute, that statutory scheme may supply content for this rule of reason; (3) delays that might be reasonable in the sphere of economic regulation are less tolerable when human health and welfare are at stake; (4) the court should consider the effect of expediting delayed action on agency activities of a higher or competing priority; (5) the court should also take into account the nature and extent of the interests prejudiced by delay; and (6) the court need not find any impropriety lurking behind agency lassitude in order to hold that agency action is unreasonably delayed. Although the TRAC factors are widely cited with regard to whether a court should issue mandamus to compel agency action, courts have also been quick to point out that "mandamus is a drastic remedy, suitable only in extraordinary situations." In cases where there are no statutory deadlines imposed, agency delay of several years on an adjudication may pass before a court issues a writ of mandamus. Decisions seem to vary, and it can be difficult to predict how a court will rule on a question of unreasonable delay. The D.C. Circuit has noted that "[t]here is no per se rule as to how long is too long to wait for agency action," and it can be hard to determine which TRAC factor a court will decide to rely on most heavily. As a result, it appears that each claim of agency delay is determined on a case-by-case basis. This section explores some court decisions to illustrate the difficulty in determining which way a court will rule on a claim of unreasonable delay. For example, in one circumstance, a court determined a delay of 10 years on reaching a decision to be reasonable, while in another situation, a court determined an eight-year delay to be unreasonable. In TRAC , the petitioners claimed that the Federal Communications Commission (FCC) had unreasonably delayed in determining whether AT&T should reimburse ratepayers for certain alleged overcharges. Despite the fact that the proceeding had taken five years and had not yet been resolved, the court decided that the delay did not warrant mandamus in light of the fact that mere economic interests were involved and that the agency had assured the court that it was working expeditiously to resolve the proceeding. Instead of compelling the agency to act, the court required the FCC to provide the anticipated date of resolution and maintained jurisdiction in order to ensure that the agency proceeded accordingly. In Potomac Elec. Power Co. v. ICC , a court found an eight-year adjudication to determine the justness and reasonableness of a railroad's rates to be unreasonable. In this case, the court issued a writ of mandamus and required a final agency order to be issued within sixty days. In justifying the writ of mandamus, despite the fact that the matter merely involved economic interests, the court pointed to legislative history that indicated that Congress wanted the Interstate Commerce Commission (ICC) to act quickly in these rate proceedings. However, in Kokajko v. FERC , despite the presence of similar legislative history—"FERC is statutorily required to give preference and speedy consideration to questions concerning increased rates or charges for the transmission or sale of electric energy"—the court determined that five years was not an unreasonable amount of time to wait for a final agency determination and dismissed the petitioner's claim. In Kokajko , the court focused on the fact that the case merely involved an economic interest and that there was no "significant length of unexplained agency inaction." The court stated, however, that "a five year delay is approaching the threshold of unreasonableness." The United States Court of Appeals for the Fourth Circuit, in In re City of Virginia Beach , determined that mandamus was not warranted for a four and one-half year wait for approval of a water pipeline construction project. Although the court noted that the water pipeline affected "human health and welfare," the court declined to compel immediate agency action in light of the Federal Energy Regulatory Commission's (FERC) assurances that the project was a high priority and would be expedited. Because the delay was not entirely caused by FERC, the court determined that mandamus was not warranted despite the fact that the court was "[not] happy about the overall time elapsed." The United States Court of Appeals for the Eighth Circuit upheld a ten-year delay by the Citizenship and Immigration Services (CIS) on an application for permanent residence. The court noted that the application was given considerable attention by the agency and that the delays were partially caused by changes in legislation regarding required investigations of applicants. The court held that the agency had thus not unreasonably delayed in reaching a final determination on the proceeding within 10 years. Courts have treated an agency's delay in promulgating rules similarly to agency delay in adjudication procedures. Courts still apply the TRAC factors when determining whether a delay is unreasonable in the rulemaking setting. Again, it can be difficult to predict whether a court will compel an agency to act on a claim for unreasonable delay when there is no statutory deadline. In one case involving rulemaking proceedings, the court found that a three-year delay by the Environmental Protection Agency (EPA) was reasonable. The EPA had undertaken a rulemaking to determine if it should regulate strip mines under the Clean Air Act. The court noted that "absent a precise statutory timetable or other factors counseling expeditious action, an agency's control over the timetable of a rulemaking procedure is entitled to considerable deference." The court again applied the TRAC factors and considered the fact that human health and welfare was at stake. It also noted that the agency had been progressing on the rule by holding public meetings, accepting comments, and issuing reports on the issue. After weighing all the considerations, the court stated "given the complexity of the issues facing EPA and the highly controversial nature of the proposal, agency deliberation for less than three years ... can hardly be considered unreasonable." However, in a different case, Public Citizen Health Research Group v. Auchter , the same court held that the Occupational Safety and Health Administration's (OSHA) three-year delay in promulgating a final rule for ethylene oxide (EtO) safety standards was unreasonably delayed. Although this case was decided prior to TRAC , the court still made reference to the same factors. It stated that "[d]elays that might be altogether reasonable in the sphere of economic regulation are less tolerable when human lives are at stake." Emphasizing the delay's potential impact to human health, the court ordered that a notice of proposed rulemaking be issued within thirty days and stated that it expected a final rule within a year. In In re International Chemical Workers Union , the court determined that a six-year delay in promulgating a rule regarding cadmium exposure safety standards was unreasonable. In this case the agency acknowledged that a new standard for cadmium exposure limits was necessary, but repeatedly pushed back the expected release date for the final rule. The court used the TRAC standards and noted that the purpose of the OSHA statute was to protect the health of American workers. It balanced this against the agency's limited resources and other competing activities. In the end, the court accepted the agency's "estimate of the additional time it needs to complete the final stages of the rulemaking," but warned that any additional postponement "would violate [the] court's order." The agency was forced to promulgate a final standard within seven months of the court order. These few examples show that it can be challenging to pinpoint when a court will compel agency action in both rulemaking and adjudication proceedings when there are no statutory deadlines in place. Courts more readily compel agencies to act in cases where there is a statutory deadline imposed on an agency. The Supreme Court declared, in Norton v. SUWA , that "when an agency is compelled by law to act within a certain time period ... a court can compel the agency to act." Some lower courts have made a distinction between actions "unlawfully withheld" (actions that are delayed beyond a statutory deadline) and actions "unreasonably delayed" (actions that are only governed by the APA's "reasonable time" provision) and have determined that a missed statutory deadline compels the court to mandate prompt agency action. Although it is commonplace for courts to compel agencies to act if a deadline has been missed, some courts, as illustrated below, may decline to compel an agency to act in such circumstances. For example, despite the existence of a statutory deadline, the D.C. Circuit still applies the TRAC test to determine whether it is appropriate to issue an order compelling the agency to act. In Forrest Guardians v. Babbitt , the United States Court of Appeals for the Tenth Circuit (Tenth Circuit) stated that when an agency fails to act by a "statutorily imposed absolute deadline," the action has been "unlawfully withheld" and the court has no choice but to compel the agency to act. The Tenth Circuit noted that Section 706(1) of the APA states that courts "shall compel agency action unlawfully withheld," and declared that the court, because of Congress's use of the word "shall," had no discretion on the issue. The court stated that although the TRAC factors might be helpful when considering action guided by a mere general timing provision, the court could not apply the TRAC test to situations where an agency has failed to meet a specific statutory deadline. The court remanded the case and directed the district court to order the Secretary to "issue a final critical habitat designation ... as soon as possible, without regard to the Secretary's other priorities under the [Endangered Species Act]." Similarly, the United States Court of Appeals for the Ninth Circuit (Ninth Circuit) has held that a court must compel agency action when the agency fails to comply with a statutory deadline. In Biodiversity Legal Foundation v. Badgley , the Ninth Circuit found that it was required to issue an injunction to require the Fish and Wildlife Service (FWS) to comply with a twelve-month deadline imposed by the Endangered Species Act. Although the Ninth Circuit acknowledged that it follows the TRAC standard in cases involving general timing provisions, the court stated that "Congress has specifically provided a deadline for performance by the Service, so no balancing of factors is required or permitted." The court stated that the missed deadline "compelled the court to grant injunctive relief" and that the "court had no discretion to consider the Service's stated priorities." Other courts, however, do not follow this distinction. For these courts, a statutory deadline acts only as one of the factors to consider when applying the TRAC test for unreasonable delay and is not, by itself, determinative. Although a deadline will weigh heavily in favor of compelling an agency to act, some courts have declined to order an agency to take action even in the face of deadlines that have long passed. The United States District Court for the District of Columbia, in Ctr. for Biological Diversity v. Pirie , criticized the reasoning followed by the Tenth Circuit in the Forrest Guardians decision. Although the court acknowledged that Section 706 of the APA states that the courts " shall compel agency action unlawfully withheld or unreasonably delayed," the court determined that courts still have discretion when determining whether to issue a writ of mandamus or injunction against an agency. The court pointed to Section 702 of the APA, and declared that the language of this section preserved the courts' equitable discretion in these cases: "Because 702 of the APA explicitly states that a court retains equitable discretion, this Court cannot hold that Congress has clearly and unequivocally limited that discretion under the APA." Therefore, the court determined that it is not forced to compel agency action, even if the agency has missed a statutory deadline. In its opinion from In Re Barr Laboratories, Inc. , the D.C. Circuit noted that "a finding that delay is unreasonable does not, alone, justify judicial intervention." In this case, the Food and Drug Administration (FDA) had missed a statutory deadline for reviewing "generic drug" applications. By statute, the FDA was supposed to review these applications within 180 days. However, the FDA estimated that its response time could range from 389 to 669 days. Barr Laboratories sought mandamus compelling the agency to review its application and claimed that, by missing the statutory deadline, the FDA had unreasonably delayed. The court responded: "Though we agree with Barr that FDA's sluggish pace violates a statutory deadline, we conclude that this is not an appropriate case for equitable relief." The court looked at all of the TRAC factors and determined that mandamus was not appropriate despite the fact that the FDA failed to meet their statutory deadline by a significant margin. The court noted that simply putting one drug manufacturer's case to the front of the line would necessarily push other similar cases further back and would not ultimately promote Congress's objective of having all applications dealt with swiftly. The court did not want to determine the agency's priorities; however, the court did note that if Barr Laboratories had been singled out for mistreatment, an order of mandamus might have been appropriate. Finally, the D.C. Circuit held that a nine-year delay by the United States Coast Guard, in the face of a one-year deadline for promulgating regulations regarding oil tanker standards, was unreasonable. The court ordered the agency to take "prompt" action. However, it applied the TRAC factors, indicating that merely missing the deadline was not, by itself, enough for the court to issue mandamus to compel the agency to act. The TRAC factors remain the most common approach to determining whether agency actions have been unreasonably delayed in both rulemaking proceedings and adjudicatory proceedings. One potential problem with the TRAC test is that it fails to provide any clear answer to whether an agency has delayed unreasonably. Even the D.C. Circuit acknowledges "[t]here is no per se rule as to how long is too long to wait for agency action" and that the TRAC balancing test "sometimes suffers from vagueness." With no clear standard, it can be difficult for regulated entities to estimate when they could expect agency action finally to occur or when it would be appropriate to sue an agency for their delays. However, it seems that two factors always tend to receive ample discussion from the courts. First, statutory deadlines appear to be a significant factor in determining a case of unreasonable delay. When Congress signifies that it wants an agency to prioritize an action, the courts are more willing to enforce that priority. Second, courts appear to be more willing to compel an agency to act when the action involves public health or safety, compared to mere economic interests. Ultimately, however, the determination is made on a fact specific, case-by-case basis. Congress often attempts to press agencies to resolve issues and promulgate rules in swift fashion. Perhaps Congress's most effective tool, discussed above, is the statutory deadline. Although in some circumstances courts will decline to enforce the deadline on the agency, claims for unreasonable delay are vastly more successful when there is a statutory deadline imposed by Congress. Recent scholarship also notes that rulemakings that are undertaken with an imposed statutory deadline are, on average, completed sooner than similar rules with no deadline imposed. It is important to note, however, that when overly imposing deadlines are placed on agency action, agencies often have to act hastily and may reduce the time available for public participation in a rulemaking. In some circumstances, a tight deadline can lead an agency to avoid normal notice and comment procedures by invoking the "good cause" provision under the APA. Another tool available to Congress is the imposition of "hammer" provisions. These provisions, which may be written in tandem with a statutory deadline, dictate what is to happen if a regulatory deadline is missed. These provisions, therefore, impose a consequence if the agency fails to meet the statutory deadline. The consequences for missing a deadline vary. Some laws establish a regulatory scheme that will be put in place if a deadline is missed; others mandate that the agency's proposed rule would go into effect if a final rule is not promulgated by the deadline. At least one law has withheld funding from an agency until certain rules are promulgated. Although these provisions can force an agency to act quickly, they can also be difficult for Congress to establish. For example, for laws that require a congressionally mandated regulatory scheme to go into effect if the agency misses a deadline, subject matter expertise may be helpful or necessary to establish a statutorily imposed regulatory scheme. Congress also maintains the "power of the purse" and can place restrictions on appropriations or threaten to do so if Congress determines that an agency is failing to act in a timely manner. Finally, in the event that an agency is taking too long to take an action, Congress also has the ability to exert political pressure on the agency. Congressional committees can call oversight hearings to question an agency leader regarding delays. Individual members are also permitted to express their concerns to agencies and often send letters to pressure agencies to act promptly on certain issues. Although courts will ultimately determine whether an action has been delayed unreasonably, Congress is able to use these tools to try to establish priorities for the federal agencies' agendas.
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One common concern about federal agencies is the speed with which they are able to issue and implement regulations. Federal regulatory schemes can be quite complex, and establishing rules and completing adjudications can sometimes require substantial agency resources and significant amounts of time. However, critics point out that sometimes an agency can simply take too long to a complete task. Commentators and courts have noted that such agency delay can impact the effectiveness of a regulatory scheme. It can also impact regulated entities that must wait for final agency action. In some circumstances, a court may have to determine whether an agency has violated the law by unreasonable delay in taking action. Substantial case law has emerged for how courts will treat agency delay in a variety of circumstances. Under the Administrative Procedure Act (APA), agency actions must be completed "within a reasonable time." Courts have jurisdiction under the APA to hear claims brought against an agency for unreasonable delay, and the APA provides that courts shall compel any action unreasonably delayed or unlawfully withheld. When an agency has delayed, but does not have to act by any statutorily imposed deadline, courts are more deferential to the agency's priorities and are less willing to compel an agency to take action. However, if a delay becomes egregious, courts will compel an agency to take prompt action. Generally, courts follow the TRAC factors, from Telecommunications Research & Action Center v. FCC, to determine whether a delay is unreasonable. The court will see if Congress has established any indication for how quickly the agency should proceed; determine whether a danger to human health is implicated by the delay; consider the agency's competing priorities; evaluate the interests prejudiced by the delay; and determine whether the agency has treated the complaining party disparately from others. A court balances these TRAC factors to reach a conclusion on a case-by-case basis. It can be difficult to predict which way a court will decide any particular case. There is no strict rule on how long is too long to wait for an agency action. Therefore, it is important to look at previous cases to see what kinds of delays are determined to be unreasonable. In addition to the APA's general requirement to act within a reasonable time, Congress may also establish specific deadlines for agency actions by statute. When an agency fails to meet a statutory deadline, courts generally compel the agency to take prompt action. Some courts have determined that a court has no choice but to compel agency action in the face of a missed statutory deadline. For these courts, no balancing is permitted when a deadline has been violated. However, other courts note that a statutory deadline is merely one of the factors to consider when determining whether the delay is unreasonable. For these courts, the TRAC factors are still evaluated to determine whether the court should compel the agency to act after a deadline has been missed. Judicial remedies for delayed agency actions are somewhat limited. The Supreme Court has ruled that a court is permitted to compel an agency to take action, but cannot determine what conclusion the agency shall ultimately reach on the issue. Furthermore, the Supreme Court has also established that agency rules still maintain the force of law, even when they are promulgated after a statutory deadline. Therefore, a court's only remedy for unreasonable agency delay is essentially to impose a deadline on the agency.
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During the Cold War, the United States maintained nuclear forces that were sized and structured to deter any attack by the Soviet Union and its Warsaw Pact allies, and if deterrence failed, to defeat the Soviet Union. In the years since the 1989 collapse of the Berlin wall and 1991 demise of the Soviet Union, officials in the U.S. government and analysts outside government have conducted numerous reviews and studies of U.S. nuclear weapons policy and force structure. Although these studies have varied in scope, intent, and outcome, most have sought to describe a new role for U.S. nuclear weapons and to identify the appropriate size and structure of the U.S. nuclear arsenal in the post-Cold War era. In offering their recommendations, these analyses addressed not only the end of the hostile U.S.-Soviet global rivalry, but also the emergence of new threats and regional challenges to U.S. security. The U.S. Department of Defense conducted several far-reaching reviews, including the 1993 Bottom-up Review, the 1994 Nuclear Posture Review, and the 1997 Quadrennial Defense Review, that contributed to the Clinton Administration's response to changes in the international security environment. These formal reviews, when combined with less prominent internal studies, resulted in numerous changes to the structure of U.S. nuclear forces and policy guiding their potential use. However, many critics of the Clinton Administration argued that, at the end of the 1990s, the U.S. nuclear posture looked much as it had at the beginning of the decade. The number of deployed nuclear weapons had declined as the United States implemented the first Strategic Arms Reduction Treaty (START I) and completed the withdrawal of most of its non-strategic nuclear weapons. But, even though the Soviet Union no longer existed and the threat of global nuclear war had sharply diminished, the United States continued to focus its nuclear planning and size and structure its nuclear forces to deter the potential threat of a Russian attack. In a speech at the National Press Club in May 2000, then-Governor George W. Bush both echoed the criticism of the Clinton Administration's nuclear policy and outlined an alternative approach that he pledged to adopt if elected. He stated that the "Clinton-Gore Administration" remained "locked in a Cold War mentality" and that the United States needed to "fend against the new threats of the 21 st century." He argued that "America should rethink the requirements for nuclear deterrence..." and stated that "the premises of Cold War nuclear targeting should no longer dictate the size of our arsenal." He stated that, if elected, he would ask the Secretary of Defense "to conduct an assessment of our nuclear force posture." After DOD completed that assessment, he would reduce U.S. nuclear forces to the "lowest possible number consistent with our national security." In several speeches and statements during his first year in office, President Bush and his advisers stated that "Russia is no longer our enemy" and they pledged to alter U.S. nuclear weapons policy to reflect this view. In its debate over the FY2001 Defense Authorization Bill, the Senate passed a provision that called on the next President to conduct a new nuclear posture review during his first year in office. During the last few years of the Clinton Administration, Congress had prevented the President from reducing U.S. strategic nuclear forces below the levels specified in START I until the 1993 START II Treaty entered into force. The Clinton Administration had sought relief from this language because the costs to the services of retaining weapons slated for elimination were growing. But some Members questioned whether the Clinton Administration might reduce U.S. forces too far if Congress lifted the prohibition. Hence, the Senate retained the prohibition in the FY2001 Bill and stated that the next President could only reduce U.S. forces after conducting a new nuclear posture review. Although the House had not included similar language in its bill, the Conference Committee supported the call for a new nuclear posture review. These two factors—the Congressional mandate and the Presidential commitment—established the framework for the Bush Administration's review of U.S. nuclear posture. The Administration completed its review and sent a classified report to Congress at the end of December 2001; it provided the public with a summary of its results in early January 2002. The results of the Administration's review generated a significant amount of debate in January, and then again in March, when a copy of the classified report leaked to the press. Most analysts focused on areas where the Bush Administration had proposed to change U.S. nuclear posture; some focused on areas where U.S. nuclear policy would remain the same as it had been for years, or even decades. This report provides a general overview of the past, present, and possible future of U.S. nuclear policy. It begins with a review of the international security environment, highlighting the threats that the United States has sought to deter or respond to with its nuclear forces. It then reviews the strategy and doctrine guiding the U.S. nuclear force posture, targeting and employment policy, the numbers and types of weapons in the nuclear force structure, and the infrastructure that has supported design, development, and testing of U.S. nuclear weapons. In each of these areas, the report summarizes U.S. nuclear policy during the Cold War, identifies changes implemented in the decade after the collapse of the Soviet Union, and details how the Bush Administration proposes to bring continuity and change to U.S. nuclear weapons, policy, and infrastructure. The report concludes with a discussion of several issues and questions that analysts have raised after reviewing the Bush Administration's Nuclear Posture Review. These include the role of nuclear weapons in U.S. national security policy, how to make the U.S. nuclear deterrent "credible," the relationship between U.S. nuclear posture and the goal of discouraging nuclear proliferation, plans for strategic nuclear weapons, and the future of non-strategic nuclear weapons. During the Cold War, the United States sought to maintain "nuclear and conventional capabilities sufficient to convince any potential aggressor that the costs of aggression would exceed any potential gains that he might achieve." In spite of these general statements, however, one nation stood at the top of the list of potential aggressors. The Soviet Union was the only nation with a nuclear arsenal that could threaten the political existence of the United States and the only nation that could pose a global challenge to U.S. allies and interests. Therefore, when detailing threats to U.S. national security, officials concluded that "the most significant threat to U.S. security interests [remained] the global challenge posed by the Soviet Union." Other nations, such as those in Soviet-dominated Eastern Europe, were included in the U.S. nuclear war plans, but their presence reflected their relationship with the Soviet Union more than any independent threat they might pose to the United States or allies. China could also threaten U.S. interests, and the United States maintained the capability to respond to possible contingencies in Asia. But, because the Soviet threat dominated U.S. defense planning, officials believed that nuclear forces sized and structured to deter the Soviet threat would be sufficient to deter or respond to these "lesser included cases." Most experts agree that the collapse of the Soviet Union at the end of 1991 essentially eliminated the threat of global nuclear war between the superpowers. The Clinton Administration argued that "the dissolution of the Soviet empire had radically transformed the security environment facing the United States and our allies. The primary security imperative of the past half century—containing communist expansion while preventing nuclear war—is gone." But the Clinton Administration argued that Russia could potentially pose a threat to the United States again in the future. This potential existed "not because its intentions are hostile, but because it controls the only nuclear arsenal that can physically threaten the survivability of U.S. nuclear forces." Furthermore, officials in the Administration argued that "a stable transition in Russia is by no means assured" so the United States "must hedge against the possibility that Russia, which continues to maintain a formidable nuclear arsenal consisting of thousands of deliverable strategic and tactical warheads, could reemerge at some time in the future as a threat to the West." At the same time, the Clinton Administration recognized growing threats to the United States from a number of emerging adversaries, particularly if they were armed with weapons of mass destruction. In its National Security Strategy Report for 1998, the Administration noted that "a number of states still have the capabilities and the desire to threaten our vital interests ..." and that, "in many cases, these states are also actively improving their offensive capabilities, including efforts to obtain or retain nuclear, biological, or chemical weapons, and, in some cases, long-range delivery systems." The Clinton Administration also declared that "weapons of mass destruction pose the greatest potential threat to global stability and security. Proliferation of advanced weapons and technologies threatens to provide rogue states, terrorists, and international crime organizations the means to inflict terrible damage on the United States, its allies, and U.S. citizens and troops abroad." The Clinton Administration did not consider China to pose a direct threat to the United States. Nevertheless, Administration officials did note that China maintained a formidable nuclear force, even though it was much smaller than Russia's nuclear force. The Administration also stated that "China continues to make steady efforts to modernize those forces, and that the United States cannot be sure that it will not need nuclear weapons to deter China in the future." The Bush Administration has stated that "nuclear forces continue to play a critical role in the defense of the United States, its allies, and friends. They provide credible capabilities to deter a wide range of threats, including weapons of mass destruction and large-scale conventional military force." However, in contrast with the Clinton Administration's view about a potential Russian threat, the Bush Administration has stated, on several occasions, that Russia and the United States are no longer enemies. Even though Russia retains thousands of nuclear warheads, which could reach targets in the United States, the Administration hoped that the growing cooperation between the two nations would allow a "new strategic framework" to replace the Cold War's adversarial relationship and its reliance on "mutual assured destruction." Consequently, according to the Administration's public comments on the Nuclear Posture Review, the United States "will no longer plan, size or sustain its nuclear forces as though Russia presented merely a smaller version of the threat posed by the former Soviet Union." The Administration does acknowledge, however, that a "hostile peer competitor" could re-emerge in the future, and this potential contingency did play a role in decisions on the future size and structure of U.S. nuclear forces. At the same time, the Bush Administration has argued that, in the future, "the United States is likely to be challenged by adversaries who possess a wide range of capabilities, including asymmetric approaches to warfare, particularly weapons of mass destruction." According to some in the Administration, these adversaries might threaten U.S. allies and interests, U.S. forces protecting U.S. interests, and U.S. territory in an effort to blackmail the United States to retreat from its commitments around the world. These adversaries could include non-state actors and terrorists as well as nations such as China, Iran, North Korea, and others. Therefore, when planning its nuclear policy and force structure, the United States now faces threats from "multiple potential opponents, sources of conflict, and unprecedented challenges." The United States has maintained its nuclear arsenal to deter attacks or threats of attack from its adversaries. As was noted above, the Soviet Union and Russia have been the primary, but not only, targets of this strategy. The United States has sought to deter attack by maintaining a nuclear force structure and operational plans for those forces that would convince any attacking nation that the costs of its aggression would far outweigh the benefits. The challenge for U.S. nuclear policy has been to make this threat credible. Many analysts have argued that the overwhelming destructive power of nuclear weapons could have undermined the threat to use them—because the Soviet Union and Russia could have responded to a U.S. retaliatory attack with equally destructive attacks against the United States, the United States might not have launched its nuclear forces. Other nations might not be able to threaten the United States with massive destruction, but they also might not believe that the United States would cross the nuclear threshold unless its own survival were at risk. Hence, the United States has sought, on many occasions in the past 50 years, to modify and adjust its forces and targeting strategy so that potential adversaries would believe and heed the U.S. threat to retaliate with nuclear weapons, adding more limited attack options and seeking greater flexibility in the timing and size of potential nuclear attacks. During the 1950s and 1960s, the United States sought to deter Soviet aggression by threatening "massive retaliation" and "assured destruction." These strategies envisioned a large-scale U.S. nuclear strike against a wide variety of targets in the Soviet Union, Eastern Europe, and China if the Soviet Union or its allies initiated a nuclear or large-scale conventional attack against the United States or its allies. In threatening such an overwhelming response, the United States sought to convince Soviet leaders that the Soviet Union would cease to exist as a functioning society if it initiated a conflict against the United States and its allies. In the 1970s, the United States adopted a strategy of "flexible response" and, subsequently, a "countervailing strategy." These policies emphasized retaliatory strikes on Soviet military forces and war-making capabilities, as opposed to attacks on civilian and industrial targets. They also allowed for the possibility of limited, focused attacks on a smaller number of targets. These strategies sought to provide the President with more flexibility, with respect to the timing, scale, and the targets of the attack, than he would have had in earlier years. The United States sought to deter not only a nuclear attack on U.S. territory, but also nuclear, chemical or conventional attacks and coercion aimed at U.S. allies in Europe and Asia. This "extended deterrent" sought to convince the Soviet Union that any level of aggression against U.S. allies could escalate into a nuclear conflict that might involve attacks on the Soviet Union. The United States and its allies did not insist that they would respond to any level of aggression with nuclear weapons, but they sought to maintain the capability to do so. This posture reflected, in part, the fact that the Soviet Union and Warsaw Pact maintained a clear numerical superiority in conventional forces, and, without the possibility of resort to nuclear weapons, the United States and NATO might face defeat. Consequently, the United States would not rule out the possible first use of nuclear weapons in a conflict. However, in the late 1970s, the United States issued a "negative security assurance," in conjunction with the Nuclear Non-proliferation Treaty (NPT), in which it stated that it would not threaten or attack with nuclear weapons any non-nuclear weapons states that were parties to the NPT, unless these states were allied with a nuclear nation in a conflict with the United States. This last exclusion meant that the statement did not alter U.S. nuclear planning for potential conflicts with the Soviet Union and Warsaw Pact. However, some analysts believed that this commitment would encourage other nations to forswear their own nuclear weapons because they knew they would not need such weapons to deter or respond to nuclear attack from the United States. Throughout the 1990s, the Clinton Administration and others argued that nuclear weapons remained important to deter the range of threats faced by the United States. Secretary of Defense Perry outlined this view in his Annual Report for 1995, noting that "recent international upheavals have not changed the calculation that nuclear weapons remain an essential part of American military power. Concepts of deterrence ... continue to be central to the U.S. nuclear posture. Thus, the United States will continue to threaten retaliation, including nuclear retaliation, to deter aggression against the United States, U.S. forces, and allies." In theory, this deterrent strategy extended beyond Russia—"the United States must continue to maintain a robust triad of strategic forces sufficient to deter any hostile foreign leadership with access to nuclear forces and to convince it that seeking a nuclear advantage would be futile." Furthermore, according to the Clinton Administration, "nuclear weapons serve as a hedge against an uncertain future, a guarantee of our security commitments to allies and a disincentive to those who would contemplate developing or otherwise acquiring their own nuclear weapons." The Clinton Administration retained the existing U.S. policy on "first use"—specifically, it did not forswear the first use of nuclear weapons. The Clinton Administration indicated that nations other than Russia might face nuclear retaliation if they attacked the United States with nuclear, chemical or biological weapons. Although it re-affirmed the U.S. negative security assurance in 1995, Administration officials indicated that the United States would reserve the right to use nuclear weapons first "if a state is not a state in good standing under the Nuclear-Nonproliferation Treaty (NPT) or an equivalent international convention." Furthermore, a nation might forfeit its protections under the negative security assurance if it attacked the United States or U.S. forces with weapons of mass destruction (WMD). The United States did not, however, directly threaten to use nuclear weapons in retaliation for non-nuclear attacks. Its policy was one of "studied ambiguity." For example, when discussing how the United States might react if Libya were to develop and use chemical weapons, former Secretary of Defense William Perry stated "if some nation were to attack the United States with chemical weapons, then they would have to fear the consequences of a response from any weapon in our inventory... We could make a devastating response without the use of nuclear weapons, but we would not forswear the possibility." Secretary Perry also noted that, although the United States would not specify how it would respond to WMD use, an aggressor could be certain that the U.S. response would be "both overwhelming and devastating." Assistant Secretary of Defense Edward Warner testified that "the very existence of U.S. strategic and theater nuclear forces, backed by highly capable conventional forces, should certainly give pause to any rogue leader contemplating the use of WMD against the United States, its overseas deployed forces, or its allies." These statements generally referred to the potential U.S. response to an attack from another nation. Most experts agreed that nuclear weapons could do little to deter an attack from a non-state actor—it might be difficult to identify such an attacker and it could be difficult to identify appropriate targets for a U.S. response. Nonetheless, many experts agreed that U.S. nuclear weapons might play a role in deterring the state sponsors of non-state actors. During the 1990s, the NATO alliance altered its nuclear strategy to reflect the demise of the Soviet Union and Warsaw Pact, but also did not adopt a "no-first use" policy. Although nuclear weapons play a far smaller role in Alliance strategy than they did during the Cold War, the NATO allies reaffirmed the importance of nuclear weapons for deterrence. The "New Strategic Concept" signed in April 1999 stated that "to protect peace and to prevent war or any kind of coercion, the Alliance will maintain for the foreseeable future an appropriate mix of nuclear and conventional forces. Nuclear weapons make a unique contribution in rendering the risks of aggression against the Alliance incalculable and unacceptable." Furthermore, nuclear weapons ensure "uncertainty in the mind of any aggressor about the nature of the Allies' response to military aggression." The Bush Administration has emphasized that nuclear weapons "continue to be essential to our security, and that of our friends and allies." Nuclear weapons remain the only weapons in the U.S. arsenal that can hold at risk the full range of targets valued by an adversary. As a result, they continue to play a key role in U.S. deterrent strategy. During the Cold War, and in the past decade, U.S. policy often viewed nuclear weapons apart from the rest of the U.S. military establishment, with nuclear weapons serving to deter a global nuclear conflict with the Soviet Union or Russia. In contrast with this traditional perspective, the Bush Administration has described a more comprehensive and integrated role for nuclear weapons. In its presentation outlining the results of the Nuclear Posture Review, the Administration argued that nuclear weapons, along with missile defenses and other elements of the U.S. military establishment, not only deter adversaries by promising an unacceptable amount of damage in response to an adversary's attack, they can also assure allies and friends of the U.S. commitment to their security by providing an extended deterrent, dissuade potential adversaries from challenging the United States with nuclear weapons or other "asymmetrical threats" by convincing them that they can never negate the U.S. nuclear deterrent; and defeat enemies by holding at risk those targets that could not be destroyed with other types of weapons. According to former Undersecretary of Defense Douglas Feith, "linking nuclear forces to multiple defense policy goals, and not simply to deterrence, recognizes that these forces ... perform key missions in peacetime as well as in crisis or conflict." In addition to expanding the role of nuclear weapons beyond deterrence, the Bush Administration has altered the role of deterrence in U.S. national security strategy. It has stated, in several speeches and documents, that the United States may not be able to contain or deter the types of threats that are emerging today, such as those created by rogue nations or terrorists armed with weapons of mass destruction. Consequently, the United States must also be prepared to preempt these threats by launching strikes against adversaries before the adversary attacks the United States, its allies or its interests. Some analysts have concluded that, with this change in perspective, the Administration foresees the possible preemptive use of nuclear weapons against nations or groups that are not necessarily armed with their own nuclear weapons. This would be a striking change in U.S. national security policy, with the United States possibly contemplating nuclear use early or at the start of a conflict, rather than in response to actions taken by the adversary. On the other hand, some have argued that, with its overwhelming conventional superiority, it would be difficult to imagine a scenario where the United States would have a military need to launch a preemptive strike with nuclear weapons in the opening phases of a conflict. Nevertheless, the United States has not ruled out this possibility. The idea that nuclear weapons can play a role that goes beyond threatening nuclear retaliation is not new to the Bush Administration. The Clinton Administration also stated that nuclear weapons can serve as "a guarantee of our security commitments to allies and a disincentive to those who would contemplate developing or otherwise acquiring their own nuclear weapons." The key difference between the past and the future may be rhetorical—during the Cold War, the United States emphasized the role that nuclear weapons could play in deterring the Soviet Union before mentioning other possible objectives for U.S. nuclear policy; in the future, with the greatly reduced risk of global nuclear war, the other objectives may become more prominent in discussions of U.S. national security strategy. Furthermore, in its presentation on the Nuclear Posture Review, the Bush Administration asserted that, in spite of contributing to four distinct policy objectives, nuclear weapons would play a smaller role in U.S. national security strategy in the future than they had during the Cold War. According to the Administration, U.S. deterrent policy has been highly dependent on the threat of offensive nuclear retaliation, with the President having few other options for response if the United States or its allies were attacked. Now, according to the Administration, the United States will also seek to deter and defeat adversaries with precision conventional weapons, which may soon be able to destroy some targets that were assigned to nuclear weapons in the past, and ballistic missile defenses, which can deter attack by denying an adversary the ability to threaten U.S. targets with ballistic missiles. According to Administration officials, this new combination of weapons will provide the President with a greater number of options and greater flexibility when responding to threats or aggression from U.S. adversaries. Some in the Administration have referred to this change as "tailored deterrence," with the United States developing more specific responses that would rely on a broader range of military capabilities, to respond to the threats posed by emerging adversaries. Some have argued that a national security concept that combines nuclear and conventional capabilities will blur the distinction between the two types of weapons and, therefore, increase the likelihood of a nuclear response. The Administration, however, has argued that the presence of nuclear and conventional options would "reduce pressures to resort to nuclear weapons by giving the President non-nuclear options to ensure U.S. security." Furthermore, according to those who support the Administration's approach, where adversaries might doubt the U.S. willingness to resort to nuclear weapons, these expanded options could enhance the credibility of the U.S. deterrent. Others note, however, that, over the years, the threat of conventional response has not succeeded in deterring potential adversaries, requiring the United States to respond with conventional attack and war. Further, in spite of the Administration's presentation of a "new triad," U.S. military planning has always presented the President with a range of options. Nuclear options may have dominated possible U.S. responses to Soviet aggression, but the President could always choose conventional options when faced with a crisis or conflict. In fact, throughout the Cold War and the decade since, the United States has always chosen conventional, rather than nuclear, options when responding to aggression. The United States has never ruled out the possible first use of nuclear weapons. Although it has pledged that it would not attack non-nuclear weapons states with nuclear weapons under most circumstances, it has maintained a policy of "studied ambiguity" about the circumstances under which it would consider nuclear retaliation and the type of response it might use if a nation attacked the United States with WMD. In its nuclear posture review (NPR), the Bush Administration did not alter the U.S. policy on the first use of nuclear weapons. However, with its emphasis on the emerging threats posed by nations armed with weapons of mass destruction, the Administration did appear to shift towards a somewhat more explicit approach when acknowledging that the United States might use nuclear weapons in response to attacks by nations armed with chemical, biological, and conventional weapons. The Bush Administration has stated that the United States would develop and deploy those nuclear capabilities that it would need to defeat the capabilities of any potential adversary whether or not it possessed nuclear weapons. Specifically, in its briefing on the Nuclear Posture Review, the Administration stated that the capabilities needed in the U.S. nuclear force structure "are not country-specific" and that the United States "must maintain capabilities for unexpected and potential risks." The focus will be "on how we will fight, not who we will fight." This does not, by itself, indicate that the United States would plan to use nuclear weapons first in conflicts with non-nuclear nations. However, General Richard B. Myers, then chairman of the Joint Chiefs of Staff stated in an interview that the scope of the destruction, not the weapon used in an attack, would affect a U.S. decision on whether to respond with nuclear weapons. He included high explosives (i.e., conventional weapons) in the list of "weapons of mass destruction" that might bring a nuclear response from the United States. Furthermore, press articles that reported on the nuclear posture review stated that the Administration had considered using nuclear weapons in contingencies with nations such as Iran, Iraq, Syria, and Libya. These nations do not, at this time, possess nuclear weapons. When responding to these press reports, the Bush Administration stated that the NPR had not produced war plans for attacks on non-nuclear nations. Instead, the U.S. nuclear force posture was designed to deter these nations from acquiring or using weapons of mass destruction. According to the President's national security adviser, Condoleezza Rice, it was supposed "to send a very strong signal to anyone who might try to use weapons of mass destruction against the United States." President Bush also appeared to endorse a policy of more explicit nuclear threats during a news conference on March 14, 2002. He stated that "we want to make it very clear to nations that you will not threaten the United States or use weapons of mass destruction against us or our allies... I view our nuclear arsenal as a deterrent, as a way to say to people that would harm America that ... there is a consequence. And the President must have all the options available to make that deterrent have meaning." Documents and press reports published in the years since the release of the NPR have reinforced the perception that the United States is planning for the possible, or even likely, first use of nuclear weapons in conflicts with nations that do not possess their own nuclear weapons. In 2004 and 2005, the Joint Staff prepared a new draft of its Joint Doctrine for Nuclear Operations, a document that had last been updated in 1995. The last available draft of this document, dated March 15, 2005, includes a list of several circumstances under which the United States might consider the first use of nuclear weapons. These would not only allow for the use of nuclear weapons in response to the use of nuclear, chemical, or biological weapons by other nations, but also in anticipation of that use, both to destroy installations that may house those weapons and to "demonstrate the U.S. intent and capability to use nuclear weapons to deter adversary use of WMD (weapons of mass destruction.)" Some analysts have argued that these statements and possible plans for using nuclear weapons against non-nuclear weapons states are inconsistent with the U.S. negative security assurance offered to the non-nuclear nations under the NPT. Neither the President nor Secretary of State Powell have addressed this issue or announced a withdrawal of the negative security assurance. However, in February, 2002, John Bolton, then the Undersecretary of State for Arms Control and International Security, stated that he did not think the rhetorical approach used in the negative security assurance "is necessarily the most productive" and "doesn't seem to me to be terribly helpful in analyzing what our security needs may be in the real world." He argued that the assurances had been offered in "a very different geostrategic context" and stated that the Bush Administration would be reviewing U.S. security assurances to non-nuclear nations "in the context of our preparation for the 2005 review conference" of the Nuclear Nonproliferation Treaty. During the Cold War, the United States sought to deter the Soviet Union, and defeat it if deterrence failed, by threatening to destroy a wide range of military and industrial targets. The U.S. plan for how to achieve this objective was contained in a document known as the SIOP—the Single Integrated Operational Plan—which is highly classified. According to scholarly reports and articles, the SIOP evolved over the years, in response to changes in the number and capabilities of U.S. nuclear forces and changes in theories of how to deter the Soviet Union. Throughout this time, though, the SIOP reportedly contained a number of attack options for the President to choose from. These options varied in terms of the numbers and types of targets to be attacked and varied according to the number and types of U.S. warheads available when the conflict began. In 1990, General John Chain, Commander in Chief of the Strategic Command, outlined U.S. targeting strategy in testimony before Congress. He stated that "the task is to be able to deter any possessor of nuclear weapons from attacking the United States by having a postured retaliatory force significant enough to destroy what the attacker holds most dear... Against this macro mission, target categories are designated. Within these target categories, a finite list of targets are designated; and against those targets, weapons are allocated." These target categories reportedly included Soviet strategic nuclear forces, other military forces, military and political leadership, and industrial facilities. These represented mostly "counterforce" and industrial targets. The United States did not seek to destroy Soviet cities, although many likely would have faced attack due to their proximity to military or industrial targets. The United States sought the capability to destroy thousands of sites in these target categories, even if the Soviet Union destroyed many U.S. weapons in a first strike. The need for weapons that could survive a Soviet strike and retaliate against a wide range of Soviet targets created the requirement for large numbers of U.S. strategic nuclear weapons. After the disintegration of the Warsaw Pact and collapse of the Soviet Union, the Department of Defense conducted several studies to review U.S. nuclear targeting strategy and weapons employment policy. According to published reports, these reviews revised and greatly reduced the length of the target list, but left the basic tenets of the strategy untouched. According to a 1995 article in the Washington Post, "the United States primary nuclear war plan still targets Russia and provides the President an option for counterattack within 30 minutes of confirmed enemy launch." In 1997, the Clinton Administration altered the U.S. strategy from seeking to win a protracted nuclear war, a strategy identified during the Reagan Administration, to seeking to deter nuclear war. In practice, this probably meant the United States would not seek to cause as much damage against as wide a range of targets as it had planned on attacking in previous war plans. Consequently, the United States would not need to maintain as large an arsenal of nuclear weapons as it had needed during the Cold War. But, these changes did not alter the core objectives of U.S. nuclear policy. The United States would continue "to emphasize the survivability of the nuclear systems and infrastructure necessary to endure a preemptive attack and still respond at overwhelming levels." Furthermore, the United States reportedly continued to prepare a range of attack options, from limited attacks involving small numbers of weapons to major attacks involving thousands of warheads, and to plan attacks against military targets, nuclear forces, and civilian leadership sites in Russia. The Clinton Administration argued that the flexibility offered by this range of options would enhance deterrence by providing the United States with more credible responses to a range of crises and attack scenarios. The Clinton Administration retained the U.S. policy of maintaining the capability to launch nuclear weapons after receiving indications that an attack on the United States was underway, but before incoming warheads could detonate. Analysts have criticized this policy, arguing that it leads Russia to maintain its forces at a high state of alert, which could lead to an inadvertent launch of Russia's nuclear weapons if Russia received false or ambiguous warnings of nuclear attack. Nevertheless, Clinton Administration officials stated that the United States would not rely solely on the ability to launch promptly; it could wait until detonations had occurred, then launch its retaliatory strike at a later time. Consequently, some of the options available in U.S. war plans included weapons that would be available if the United States launched its forces before any were destroyed, and some included only those weapons that would survive if the United States absorbed a first strike before initiating its response. The decision on whether to launch U.S. weapons promptly or to wait for detonations on U.S. soil would be left to the national command authority at the time of the crisis. During testimony before Congress, Douglas Feith, then the Undersecretary of Defense for Policy, stated that the "mutual assured destruction" relationship between the United States and Soviet Union was no longer an appropriate basis for calculating our nuclear requirements. Therefore, when determining the size and structure of the U.S. nuclear arsenal, DOD "excluded from our calculation ... the previous, long-standing requirements centered on the Soviet Union, and, more recently, Russia." The Bush Administration has referred to this new targeting strategy as a "capabilities-based" strategy, rather than a "threat-based" strategy. During the Cold War, U.S. targeting strategy focused on deterring and, if necessary, defeating the Soviet threat . According to the Administration, this gave rise to war plans that allowed for few contingencies and required only a minimum of flexibility and adaptability. In the future, when planning for the possible use of nuclear weapons, the United States would "look more at a broad range of capabilities and contingencies that the United States may confront" and tailor U.S. military capabilities to address this wide spectrum of possible contingencies. Specifically, the United States would identify potential future conflicts, review the capabilities of its possible adversaries, identify those capabilities that the United States might need to attack or threaten with nuclear weapons, and develop a force posture and nuclear weapons employment strategy that would allow it to attack those capabilities. The most specific and visible change to emerge from this new targeting strategy has been the replacement of the Cold War SIOP (single integrated operational plan) with a new war plan known as OPLAN (operations plan) 8044. This document now contains the major strike options and major contingency plans that had been included in the SIOP. Some press reports indicate that the Administration also developed, then a companion contingency plan, CONPLAN 8022-22, which planned for the prompt U.S. response to a number of contingencies with nations other than Russia. Reports indicate that while most of the options in this new plan called for the use of conventional weapons, some also allow for the use of nuclear weapons early or at the start of a conflict. The Pentagon reportedly eliminated this plan after a few years, absorbing its targeting and attack options into OPLAN 8044. The Bush Administration has not discussed, publicly, how it will identify specific targets or allocate weapons in its "capabilities-based" targeting strategy. It has, however, identified three types of contingencies that it believes the United States must prepare to address with its nuclear employment plans. Immediate contingencies include "well-recognized, current dangers." The Soviet threat was an immediate contingency in the past, current examples include a WMD attack on U.S. forces or allies in the Middle East or Asia. Potential contingencies are "plausible, but not immediate dangers." This might include the emergence of new, adversarial, military coalitions, or the re-emergence of a "hostile peer competitor." According to the Administration, the United States would probably have sufficient warning of the emergence of these threats to modify or adjust its nuclear posture. Unexpected contingencies are "sudden and unpredicted security challenges." This might include a "sudden regime change" when an existing nuclear arsenal transferred to the control of a hostile leadership or an adversary's sudden acquisition of WMD. These three types of contingencies would place different demands on U.S. nuclear war planners. Because the United States can understand and anticipate immediate contingencies, it can size, structure, and plan in advance for the use of its nuclear arsenal to address these contingencies, just as it did when addressing the Soviet threat during the Cold War. The United States can also plan in advance for the possible use of nuclear weapons in potential contingencies, even if it does not maintain the needed force structure on a day-to-day basis. Hence, the war-planning and targeting process for these contingencies are likely to be similar to the process used during the Cold War, albeit with a wider range of possible plans to address targets among a greater number of countries. And, although the Administration has not addressed this issue, the United States will likely prepare a number of alternative employment plans so that the President will have options to choose from if a conflict occurs. These are likely to include many of the same types of targets as the United States planned to attack during the Cold War because the ability to destroy these types of facilities is likely to remain important to the U.S. ability to defeat an enemy and limit damage to itself during a conflict. These targets could include deployed and non-deployed stocks of weapons of mass destruction (during the Cold War, Soviet nuclear weapons made up the majority of the targets in this category), other military facilities, leadership facilities, and, possibly other economic targets. The United States cannot, however, prepare pre-planned options for attacks for unexpected contingencies because it does not know when or where these threats may emerge. The focus on the "unexpected" has underlined the Administration's insistence that the United States develop and expand its capabilities for "adaptive planning." The United States Strategic Command (STRATCOM), which develops the operational plans for U.S. strategic nuclear weapons, already has the ability to do some adaptive planning. It began this effort in 1992, when it sought to develop "a flexible, globally focused, war planning process" along with living SIOP, a nuclear war plan "able to respond almost instantaneously to new requirements." Now, "STRATCOM is in the process of developing a more flexible and adaptive planning system ... that employs modern computing techniques and streamlined processes to significantly improve our planning capability for rapid, flexible crisis response." A responsive adaptive planning process must also rely on timely and accurate intelligence, so that the planners will be able to identify targets and attack them at their vulnerable points. Therefore, the Administration has called for improvements in U.S. "sensors and technologies so that they can provide more detailed information about an adversary's plans, force developments, and vulnerabilities." It has requested additional funding "for the development of advanced sensors and imagery, for improved intelligence and assessment, and for modernization of communications and targeting capabilities in support of evolving strike concepts." The Bush Administration has emphasized the increasing importance of adaptive planning, and waning relevance of pre-planned attack options, to highlight the fact that its nuclear doctrine and targeting strategy focus on emerging threats, rather than on a smaller version of the Cold War threat from the Soviet Union. Yet the Administration's plans probably do not represent a complete break from past practices. First, because the Administration has identified the "re-emergence of a peer competitor" as one of the potential contingencies the United States might need to address, the United States is likely to retain some form of predetermined war plan with options for possible attacks against Russian targets. Second, although the Administration has indicated that it will reduce the number of operationally deployed strategic nuclear warheads (this is discussed in the next section), it will retain enough warheads to threaten many, if not most, of the targets included in options in the current OPLAN. It may eliminate some of the existing options, and possibly add options for attacks against other possible adversaries, but it probably will not completely replace pre-planned options with adaptive planning. Instead, U.S. nuclear weapons employment policy is likely to include options for attacks against Russia, contingency plans for attacks against other countries, and adaptive planning capabilities to address unexpected, emerging threats. This would be similar to the employment policy that had emerged by the end of the Clinton Administration. Although the Clinton Administration continued to prepare a SIOP that focused on Russia, press reports indicate it also maintained current intelligence on WMD facilities in countries, such as Iran, Iraq, and North Korea, and that it passed this information to target planners at STRATCOM so that they could prepare contingency plans for attacks with U.S. nuclear weapons. According to one report, STRATCOM could produce target packages for these plans "within hours." During the 2000 presidential campaign, Governor George W. Bush indicated that, as a part of his nuclear posture review, he would consider reducing the alert rates of U.S. nuclear weapons. However, when the Administration completed its review, it did not propose any changes to U.S. alert rates. To the contrary, DOD concluded that, even as the Air Force prepared to retire the Peacekeeper ICBMs, it would keep the force on alert to maintain the morale and operational readiness of the units. Further, the 2005 draft of the Doctrine for Joint Nuclear Operations specifically states that "increased readiness levels may be necessary to deter aggression" and that the "alert posturing of nuclear weapons" can "send a forceful message that demonstrates the national will to use nuclear weapons if necessary." In addition, with the growing emphasis on the possible use of nuclear weapons in anticipation of, as well as in response to, an adversary's use of chemical or biological weapons, the Bush Administration seems unlikely to ever consider the U.S. adoption of a "no first use" policy. During the Cold War, the U.S. nuclear arsenal contained many types of delivery vehicles for nuclear weapons, including short-range missiles and artillery for use on the battlefield, medium-range missiles and aircraft that could strike targets beyond the theater of battle, short- and medium-range systems based on surface ships, long-range missiles based on U.S. territory and submarines, and heavy bombers that could threaten Soviet targets from their bases in the United States. The long-range missiles and heavy bombers are known as strategic nuclear weapons; the short- and medium-range systems are considered non-strategic nuclear weapons and have been referred to as battlefield, tactical, and theater nuclear weapons. Throughout the Cold War, the United States deployed thousands of shorter-range nuclear weapons on land in Europe, Japan, and South Korea and on ships around the world. These weapons were deemed essential to the U.S. strategy of extending nuclear deterrence to its allies. The United States began to reduce these forces in the late 1970s, in part because NATO officials believed they could maintain deterrence with fewer, but more modern, weapons. These modernization programs continued through the 1980s, particularly through the deployment of ground-launched cruise missiles and intermediate-range ballistic missiles in Europe. However, by the end of that decade, as the Warsaw Pact dissolved, the United States had canceled or scaled back all planned modernization programs. In 1987, it also signed the Intermediate-Range Nuclear Forces (INF) Treaty, which eliminated all U.S. and Soviet ground-launched shorter and intermediate-range ballistic and cruise missiles. Since the early 1960s the United States has maintained a "triad" of strategic nuclear delivery vehicles. These include land-based intercontinental ballistic missiles (ICBMs), submarine-launched ballistic missiles (SLBMs) and long-range heavy bombers. The United States developed these three different types of nuclear delivery vehicles, in large part, because each of the military services wanted to play a role in the U.S. nuclear arsenal. However, during the 1960s and 1970s, analysts developed a more reasoned rationale for the nuclear "triad." They argued that these different basing modes would enhance deterrence and discourage a Soviet first strike because they complicated Soviet attack planning and ensured the survivability of a significant portion of the U.S. force in the event of a Soviet first strike. The different characteristics of each weapon system might also strengthen the credibility of U.S. targeting strategy. For example, ICBMs eventually had the accuracy and prompt responsiveness needed to attack hardened targets such as Soviet command posts and ICBM silos, SLBMs had the survivability needed to complicate Soviet efforts to launch a disarming first strike and to retaliate if such an attack were attempted, and heavy bombers could be dispersed quickly and launched to enhance their survivability, and they could be recalled to their bases if a crisis did not escalate into conflict. Modernization programs continued to enhance the capabilities of U.S. strategic nuclear weapons throughout the Cold War era. These programs culminated with the deployment of Peacekeeper (MX) ICBMs and Trident submarines and Trident II (D-5) SLBMs in the mid-1980s and 1990s and with the deployment of the B-2 (Stealth) bomber in the 1990s. The United States also continued to add to the numbers of its deployed strategic nuclear weapons through the end of the 1980s. However, by the mid-1990s, the numbers of warheads deployed on U.S. strategic nuclear forces began to decline as the United States and Russia implemented the first Strategic Arms Reduction Treaty (START). The United States has pursued research and development on anti-ballistic missile (ABM) systems since the early 1950s. In the mid-1960s it developed the Sentinel system, which would have used ground-based, nuclear-armed interceptor missiles to protect a number of major U.S. urban centers against Soviet attack. In 1969, the Nixon Administration renamed the system "Safeguard," and changed its focus to deployment around ICBM fields to ensure that these missiles could survive a first strike and retaliate against the Soviet Union. Congress almost stopped the program in 1969, when the Senate voted 50-50 to approve an amendment halting construction. Safeguard continued, however, when Vice President Spiro Agnew broke the tie with a vote for the program. In 1972, the United States and Soviet Union signed the Anti-Ballistic Missile (ABM) Treaty, which limited each nation to the deployment of two ABM sites, one around its capital and one around an ICBM field. The United States completed its ABM site around ICBM fields near Grand Forks, North Dakota. It operated for a short time in 1974 and 1975, then was shut down by Congress, largely because the costs of operating the system, even in peacetime, were thought to be high relative to the limited protection it offered. U.S. research and development into ABM systems, especially for ICBM protection, continued, albeit at lower budget levels through the late 1970s, before rising again during the Carter Administration. The Reagan Administration further increased this funding after President Reagan announced an expansive effort, known as the Strategic Defense Initiative (SDI), to develop non-nuclear ballistic missile defenses, based on land, at sea, and in space, that would protect the United States against a full-scale attack from the Soviet Union. As cost estimates and technical challenges increased, the Reagan Administration stated that it would begin with a more limited deployment of land-based and space-based sensors and interceptors that would seek to disrupt and deter an incoming attack, instead of providing complete protection. The first Bush Administration further scaled back the goals for SDI, stating that the United States would seek to deploy a defensive system that could protect against small-scale missile attacks from the Soviet Union or other U.S. adversaries. During the 1990s, the United States reduced both the numbers and types of weapons in its nuclear arsenal. Some of these changes reflect the imposition of negotiated arms control limits; others, such as the changes in U.S. non-strategic forces, reflect adjustments in U.S. objectives and nuclear force posture. In September 1991, President George Bush announced that the United States would withdraw all land-based tactical nuclear weapons (those that could travel no more than 300 miles) from overseas bases and all sea-based tactical nuclear weapons from U.S. surface ships, submarines, and naval aircraft. These initiatives affected more than 2,500 nuclear warheads that had been deployed on shorter range delivery systems. Furthermore, in late 1991, NATO decided to reduce by about half the number of weapons for nuclear-capable aircraft based in Europe, which led to the withdrawal of an additional 700 U.S. air-delivered nuclear weapons. At the end of the 1990s, the United States maintained an estimated 1,000 warheads for its active stockpile of nonstrategic nuclear weapons. This number included around 500 air-delivered weapons that may still be stored at bases in Europe. The remainder are air-delivered weapons and around 350 nuclear-armed sea-launched cruise missiles that are stored at facilities in the United States. Throughout the 1990s, the United States continued to maintain a triad of strategic nuclear forces, with warheads deployed on land-based ICBMs, submarine-launched SLBMs, and heavy bombers. According to the Department of Defense, this mix of forces offered the United States a range of capabilities and flexibility in nuclear planning, complicated an adversary's attack planning, and hedged against unexpected problems in any single delivery system. During the past 10 years, while implementing the START Treaty, the number of warheads deployed on these strategic nuclear forces declined from a Cold War high of around 12,000 warheads to fewer than 7,500 warheads. The remaining warheads are deployed on 18 Trident submarines with 24 missiles on each submarine and either 6 or 8 warheads on each missile; 500 Minuteman III ICBMs, some with one and others with 3 warheads on each missile; 50 Peacekeeper (MX) missiles, with 10 warheads on each missile; 76 B-52H bombers, with up to 20 cruise missiles on each bomber; and 21 B-2 bombers with up to 16 bombs on each aircraft. This force structure is displayed on Table 1 , below. In early 1993, the United States and Russia signed a second Strategic Arms Reduction Treaty. Under this Treaty, the United States and Russia would have each reduced their strategic offensive nuclear weapons to between 3,000 and 3,500 accountable warheads. In 1994, the Department of Defense decided that, to meet this limit, it would deploy a force of 500 Minuteman III ICBMs with one warhead on each missile, 14 Trident submarines with 24 missiles on each submarine and 5 warheads on each missile, 76 B-52 bombers, and 21 B-2 bombers. The Air Force would eliminate 50 Peacekeeper ICBMs and reorient the B-1 bombers to non-nuclear missions. However, this Treaty never entered into force and, as is noted above, Congress prevented the Clinton Administration from reducing U.S. forces unilaterally. Table 1 outlines the forces that the United States had deployed after completing the reductions mandated by START I, and compares them with the forces the Clinton Administration had planned to deploy under START II. In the wake of the 1991 Persian Gulf War, Congress and the Clinton Administration restructured the BMD programs to emphasize theater missile defense development and deployment efforts, and to focus national missile defense (NMD) efforts on technology development. In 1996, the Administration adopted a new policy that called for the continued development of NMD technologies during the first three years (1997-2000), followed by a deployment decision (in 2000) if the system were technologically feasible and warranted by prospective threats. Using this approach, the United States would seek to develop an NMD system to defend the United States against attacks from small numbers of long-range ballistic missiles launched by hostile nations, or, perhaps, from an accidental or unauthorized launch of Russian or Chinese missiles. Development and deployment would be conducted within the limits of the ABM Treaty. In January 1999, the Clinton Administration added funding to the future-years defense budget for NMD so that it would be able to pursue the deployment option in the event a deployment decision was made. The Administration emphasized, however, that an NMD deployment decision still would not be made until June 2000. In addition, the Administration announced that it had restructured the NMD program for a possible deployment date of 2005, rather than 2003. This change was made, according to the Pentagon, to reduce the amount of risk in the program and to maximize its success. The Administration also acknowledged that it would have to approach the Russians with proposals for amendments to the ABM Treaty that would permit the deployment of an effective, although limited, NMD system. However, after a test failure in July 2000, President Clinton announced, on September 1, 2000, that he would not authorize the deployment of an NMD system and would, instead, leave the decision to his successor. The Bush Administration has described a "new triad" of weapons systems and capabilities that will contribute to nuclear deterrence and U.S. national security in the coming years. In this "new triad," nuclear weapons and precision-guided conventional weapons combine as "offensive strike" forces. According to the Administration, this combined strike force will reduce the U.S. reliance on nuclear weapons and provide the President with a greater number of options when responding to an attack. Missile defenses make up the second leg of the triad. The Bush Administration has stated that defenses will contribute to deterrence by complicating attack planning and undermining confidence for an adversary planning an attack with ballistic missiles and by giving the United States an option, besides "shooting back" if attacked with ballistic missiles. The third leg of the new triad is a "responsive infrastructure" that would allow the United States to maintain and, if necessary, expand its nuclear arsenal in response to emerging threats. This capability would allow the United States to reduce its forces, knowing it could restore them at a later date if new threats emerged. These three legs are joined together by "command and control, intelligence, and planning capabilities." The Administration has stated that these will provide the United States the ability to identify targets and plan nuclear or conventional attacks on short notice, in response to unexpected threats. The Administration argues that "the new triad will provide ... the flexibility in planning necessary to address the new range of contingencies, including the unexpected and undeterrable." The following sections summarize the Bush Administration's plans for non-strategic and strategic nuclear weapons, missile defenses, and infrastructure. The report does not address the plans for precision-guided conventional weapons, as these are beyond the scope of the paper. It also does not provide any details on the Administration's plans for intelligence and command and control systems, as this information remains classified. When announcing the results of the nuclear posture review, the Bush Administration did not outline any changes to the current deployments of non-strategic nuclear weapons. Administration officials indicated that further adjustments in NATO's nuclear posture were an issue to be addressed by the alliance. However, press reports indicate that the Bush Administration does plan to retain the capability to launch non-strategic air-delivered nuclear weapons on U.S. fighter aircraft. It also plans to retain the nuclear-armed Tomahawk sea-launched cruise missiles and the capability to deploy those missiles on attack submarines. Reports indicate that the Navy had sought to retire that capability, but was overruled by the Pentagon's civilian leadership. Reports also indicate, however, that the Administration has relocated and consolidated some of the nonstrategic weapons deployed in Europe, reducing the number of bases equipped to house those weapons from 10 bases in seven countries in 2000 to 8 bases in six countries by the end of its first term. Although the reports on the NPR did not discuss many details for U.S. non-strategic nuclear weapons, the Bush Administration could support the continued deployment of these systems. The Administration's strategy outlines the need to react quickly to new intelligence and promptly target and deliver nuclear weapons to emerging targets. Non-strategic nuclear weapons deployed at bases overseas may be closer to the battlefield than strategic weapons based in the continental United States, and, therefore, may be able to respond more quickly. They also may carry fewer and smaller warheads than U.S. strategic nuclear weapons, which would make them better suited to discrete, precise attacks. At the conclusion of the Nuclear Posture Review, the Bush Administration announced that the United States would reduce its strategic nuclear forces to 1,700-2,200 "operationally deployed warheads" over the next decade. It codified these reductions in the Strategic Offensive Reductions Treaty (known as the Moscow Treaty), which the United States and Russia signed in May 2002. According to the Administration, operationally deployed warheads are those deployed on missiles and stored near bombers on a day-to-day basis. They are the warheads that would be available immediately, or in a matter of days, to meet "immediate and unexpected contingencies." The Administration claims that the size of this force is not determined by a need to counter a "Russian threat." However, the Administration did consider Russia's remaining nuclear capabilities when developing the U.S. nuclear force posture; a conflict with Russia is considered to be a "potential contingency" that could arise if the U.S. relationship with Russia were to deteriorate significantly. The forces needed to address potential contingencies are included in the "responsive force" not in the "operationally deployed force" of 2,200 warheads. The Bush Administration indicated that the United States would retain a triad of ICBMs, SLBMs, and heavy bombers for the foreseeable future. It did not offer a rationale for the retention of this traditional "triad," although the points raised in the past about the differing and complementary capabilities of the systems probably still pertain. Moreover, the Administration also, initially at least, plans to retain most of the delivery vehicles in the current strategic force structure as it reduces from the current level of around 7,000 warheads to a force of around 2,200 operationally deployed warheads. It has eliminated 50 Peacekeeper ICBMs, which carried 500 warheads, and is in the process of converting four Trident submarines, which count as carrying 576 warheads, to non-nuclear missions. The Pentagon also recommended, in the 2006 Quadrennial Defense Review Report that the United States eliminate 50 of its 500 Minuteman III ICBMs and that the Air Force reduce the size of the B-52 fleet to 56 aircraft. Further, the Administration has indicated that it plans to retire the entire fleet of 460 Advanced Cruise Missiles (ACM) and reduce the Air-Launched Cruise Missile (ALCM) from over 1,100 missiles to 528 missiles. Table 2 , below outlines a force structure that is consistent with the plans announced by the Administration. The United States will also exclude from its accounting those warheads that could be deployed on weapons systems in overhaul—this would generally apply to two Trident submarines at any given time. These two submarines could have counted as up to 384 warheads under the START Treaties, but will not count against the new total of 2,200 warheads. Further, to reach the level of 2,200, the Administration will have to remove more warheads from deployed missiles and count only those bomber weapons deployed at bomber bases, not the total number of weapons that could be carried on all U.S. bombers. The Administration has indicated that approximately 3,800 warheads would be deactivated in the near-term, and many of these warheads would be placed in an active reserve. According to the Administration, these stored warheads constitute a "responsive force" because the warheads could be restored to deployment in weeks or months, in response to potential contingencies, which are "more severe dangers that could emerge over a longer period of time." Secretary of Defense Rumsfeld has also noted that the United States must retain many retired warheads because it currently has no warhead production capacity; if problems came up that disabled a type of warhead, the United States could only maintain its forces by deploying the stored warheads. On the other hand, in June 2004 Ambassador Linton Brooks, Director of the National Nuclear Security Administration (NNSA), announced that the Bush Administration had decided to reduce sharply the size of the U.S. nuclear stockpile. Although he did not offer any precise numbers, he stated that the number of warheads would decline by over half in the next eight years. Groups outside the government have estimated that this decision could lead to the retirement and disassembly of around 4,300 warheads in the coming years, leaving around 6,000 warheads in the U.S. stockpile by 2012. Further, in mid-December 2007, the White House announced that President Bush had approved a significant reduction in the U.S. nuclear weapons stockpile. The release did not provide any concrete numbers, but officials indicated the reduction could be between 10% and 15%. Critics argue that this reconstitution force makes a mockery of the U.S. plans to reduce its offensive nuclear forces. The Administration, however, has claimed that the ability to reconstitute forces, if necessary, allows for deep reductions in operationally deployed forces. The Administration has also stated that the responsive force represents the force that the United States will need to meet the "four goals of dissuading potential adversaries, assuring allies, deterring aggression, and defeating enemies." The following provides a more detailed summary of the Bush Administration's plans for each leg of triad of strategic offensive forces. At the start of the Bush Administration in 2001, the U.S. ICBM force contained 500 Peacekeeper missiles, each deployed with 10 warheads, and 500 Minuteman III missiles. Each Minuteman III missile could carry 3 warheads, but, as it reduced to the START force levels, the United States "downloaded" 150 Minuteman III missiles so that each now carries only one warhead. The other 350 missiles still carry 3 warheads each. This ICBM force carried a total of 1,700 warheads before the Peacekeeper deactivation program began.. The Bush Administration deactivated and retired all 50 Peacekeeper ICBMs. DOD first announced this decision, and the Air Force began to budget for the process, in 1994. The 1993 START II Treaty would have banned multiple warhead ICBMs, so the United States would have had to eliminate these missiles while implementing the Treaty. However, beginning in FY1998, Congress prohibited the Clinton Administration from spending any money on the deactivation or retirement of these missiles until START II entered into force, an event that never occurred. The Bush Administration requested $14 million in FY2002 to begin the missiles' retirement; Congress lifted the restriction and authorized the funding. The Bush Administration began deactivating the Peacekeeper missiles in October 2002 and completed the retirement on September 19, 2005. Under START II, the United States would have had to destroy the silos that house the Peacekeeper missiles to ensure that the missiles could not be deployed again in the future. Now, however, the Air Force plans to retain the empty silos, and save the expense of excavating or exploding them. It also plans to retain the missile stages for possible use as space launch vehicles or target vehicles for missile defense tests. Finally, it plans to retain the warheads removed from the missiles and deploy some of them on Minuteman III missiles. The Bush Administration is also in the process of reducing the Minuteman III force from 500 to 450 missiles, although the 109 th Congress prohibited the Administration from proceeding with this plan until it submitted a report justifying the plan and analyzing its implications. It still plans to download most of them to carry only 1 warhead, but some could remain deployed with 2 or 3 warheads, for a total force of 500-600 warheads. The Air Force plans to modernize these missiles, to improve their accuracy and reliability and to extend their service lives beyond 2020. This modernization program is expected to cost around $5.5 billion. Of this amount, $55 million will be used to upgrade the command consoles in missile alert facilities to allow for more rapid retargeting—a capability identified in the NPR as essential to the future nuclear force. The Air Force is also conducting an ongoing $1.9 billion program to replace the guidance system on the Minuteman missile to increase its accuracy and extend its service life. The Air Force had hoped that the new guidance system would make the Minuteman missile as accurate as the Peacekeeper missiles, but press reports indicate that the system has shown some problems during its testing program. The Air Force has also been repouring the fuel in the first and second stages of the Minuteman missiles remanufacturing the third stage. The Air Force will also eventually extend the life of the missiles' fourth stage, the one that carries the reentry vehicle. Finally, under the Safety Enhanced Reentry Vehicle program, the Air Force will replace the existing warheads on some of the Minuteman missiles with the W87 warheads removed from Peacekeeper missiles. The Air Force has also begun to study its options for extending or replacing the Minuteman III missiles. It reportedly produced a "mission needs statement" and conducted an Analysis of Alternatives (AOA) during FY2004 and FY2005, with a plan to bring the new missile into service by 2018. In June 2006, General Frank Klotz, of Air Force Space Command, noted that his organization would recommend to the Pentagon that the Air Force take an evolutionary approach with the Minuteman and continue to modernize and upgrade existing missiles, rather than start from scratch designing and producing a new missile. Under this plan, the existing fleet of Minuteman III missiles could remain in the force through 2025 or 2030. Some in the Air Force and defense community have also begun to consider the possibility of deploying ICBMs with conventional, rather than nuclear warheads. They argue that this type weapon system would "improve the U.S. ability to swiftly react to targets around the globe," contributing to the mission of "prompt global strike." Critics, however, contend that such a deployment and use of ICBMs could prove very destabilizing. They note that, if the United States ever launched these missiles, both Russia and China could mis-interpret the launch and react as if the United States had launched a nuclear attack against them. At the start of the Bush Administration, the U.S. SLBM force consisted of 18 Trident submarines. Eight of these submarines, which were based at Bangor, Washington, carried the older Trident I (C-4) missile; four of these are being converted to carry conventional weapons. The other four are being converted to carry the Trident II (D-5) missile. The remaining 10 submarines, which were based at Kings Bay, Georgia, all carried the Trident II missile. Each of these missiles can be equipped to carry up to 8 warheads. However, when reducing its forces to comply with the START I Treaty, the Navy removed warheads from the missiles on the 8 Tridents in the Pacific fleet, and each now carries no more than 6 warheads. It may have also begun to "download" the warheads on the remaining submarines, so that all the missiles will eventually carry no more than 6 warheads. The Bush Administration plans to retain 14 Trident submarines, all equipped with D-5 missiles, in the U.S. strategic nuclear force. This is the same plan that the Clinton Administration announced in 1994 for the U.S. force under START II. However, the Clinton Administration had planned to retire the four oldest Trident submarines so that the missiles that could be deployed on them would not count under the limits in the START II Treaty. The Navy has, instead, begun to convert these vessels to carry conventional cruise missiles or other non-nuclear weapons, or to perform special missions. All four have now been removed from the strategic force. Reports estimate that it will take two years, and up to $1 billion, to convert each submarine. Because these submarines will still have launch tubes for ballistic missiles, they will still count under the START Treaty, but they will not count under the Administration's calculation of "operationally deployed warheads." The retirement of four Trident submarines will eliminate 576 operationally deployed warheads (4 submarines, with 24 missiles and 6 warheads on each missile.) To further reduce the number of "operationally deployed" warheads, the Navy may remove additional warheads from Trident missiles. Each missile probably would have carried 5 warheads under START II; they are likely to carry as few as 3 warheads in the future. In addition, the Navy will have two Trident submarines in overhaul at any given time. The warheads that could be carried on missiles on these submarines will count under START and would have counted under START II. However, the Bush Administration will not count these warheads in its total of 2,200 "operationally deployed warheads." Furthermore, as the Navy retired four submarines based at Bangor, Washington, it moved 5 submarines from Kings Bay, Georgia to Bangor, for a total of 9 submarines at Bangor and 5 submarines at Kings Bay. This move occurred between FY2003 and FY2006. Initially, the Navy had planned to move 3 submarines to Bangor, leaving 7 at each base, to "balance the force" and to maintain an equivalent workload at each base. However, some reports indicate that the Navy decided to move an additional two submarines to Bangor so that the United States could increase its ability to cover potential targets in China and East Asia. The Navy also plans to continue producing D-5 missiles, with the force expected to grow to a total of 561 missiles, with 58 of the missiles designated for the British Trident program. The Navy has indicated that the Trident submarines can remain in service for 44 years, which means that the first retirements will begin in 2029. The Navy has initiated studies into options for a replacement for the Trident—one would be a new, dedicated ballistic missile submarine and another would be a variant of the Virginia class attack submarine. It would have to begin work on a new submarine by 2016 so that it could begin to enter the fleet as the Tridents begin to retire. The Trident II missiles will reach the end of their service lives sooner than the submarines, and they will begin to retire in 2019. The Navy plans to conduct a modification program to extend the missiles' life; funding will begin in FY2005 and missile production is scheduled to begin in FY2015. The Navy plans to purchase 300 missiles, enough to equip 10 Trident submarines. The Navy is also planning to refurbish the W76 warheads on the Trident missiles, starting in 2007, so they can remain in service until 2040. The Navy has also devloped a plan to deploy some Trident missiles with conventional warheads, as a part of the prompt global strike mission. This responds to a recommendation in the NPR that DOD study the feasibility of modifying a ballistic missile system to carry a non-nuclear payload. To perform this type of mission, the missile's accuracy would have to be improved. Consequently, DOD requested $30 million to begin a "three year effective enhancement" effort to "demonstrate the near-term capability to steer a sea-launched ballistic missile warhead to GPS-like accuracy." Congress rejected this request in FY2003 and FY2004. However, the Navy requested $127 million in funding again in FY2007, and a reprogramming of $100 million in FY2006, so that it could pursue the deployment of conventional warheads on Trident submarines in the near term. The President also requested $175 million for this effort in FY2008. This effort is designed to provide STRATCOM with the ability to use conventionally-armed ballistic missiles in support of the new Global Strike mission. The 109 th Congress rejected the request for funding to alter the missiles and submarines, although it did permit some funding for continued research on the reentry vehicle. Members expressed particular concern about the possibility that adversaries might mistake the launch of a conventionally-armed Trident missile for a nuclear-armed missile, and react accordingly. In its first session, the 110 th Congress also rejected the Administration's request for funding for this program, creating, instead, a new $100 million fund that could conduct research into a wider range of options for the prompt global strike mission. At the present time, the U.S. Air Force has 94 B-52 bombers and 21 B-2 bombers that are equipped to carry nuclear weapons. The Air Force also has 92 B-1 bombers that were deployed as nuclear-armed aircraft in the 1980s and 1990s. The United States reoriented the B-1 bombers to conventional missions, and removed them from the nuclear war plans in the late 1990s. Under the START II Treaty, the United States could have restored them to a nuclear role, even though it had no plans to do so. The Bush Administration has indicated that it will no longer maintain the capability to exercise this option. The Bush Administration has also indicated that it would like to reduce the size of the B-1 force. It initially planned to retire 33 bombers assigned to the Air National Guard and provide upgrades to the conventional weapons systems on the remaining 60 aircraft. However, in the FY2004 Defense Authorization and Appropriations Bills, Congress had mandated that the Air Force restore 23 of these aircraft to service. The Air Force has argued that this mandate would be too costly and complex to implement. It indicated, however, in early February 2004, that it might request that seven or eight of these aircraft return to active service. The Bush Administration did not outline any changes to the size of the B-52 or B-2 fleets when it announced the results of the NPR. The FY2007 budget, however, it requested the elimination of 38 B-52 bombers, leaving a fleet of 56 aircraft. The 109 th Congress rejected this request, allowing the Air Force to retire only 18 B-52 bombers, and mandating that it maintain at least 44 "combat-coded" aircraft. Congress also required that the Administration submit a report on the future requirements for the U.S. bomber fleet. In the FY2008 Defense Authorization Bill ( H.R. 1585 , Sec. 137), Congress mandated that the Air Force maintain a fleet of 74 B-52 bombers, with no less than 63 in the Primary Aircraft inventory and 11 backup aircraft. Two additional aircraft would be designated as "attrition reserve." The Conference Committee indicated that the Members agreed that a fleet of fewer than 76 aircraft would be insufficient to meet long-range strike requirements. The B-52 bomber, which first entered service in 1961, is equipped to carry nuclear or conventional air-launched cruise missiles and nuclear-armed advanced cruise missiles. The B-52 bombers can also deliver a wide-range of conventional arms. With upgrades, the Administration expects the older version of these cruise missiles, the ALCMs, to the fleet until 2030 and the aircraft to remain in service until around 2044. The B-2 "Stealth" bomber first entered service in late 1993. It is equipped to carry nuclear gravity bombs, such as the B-61 and the B-83, and conventional bombs. The Bush Administration believes this aircraft will remain in the force until 2040. Under the START II Treaty, the United States would have had to count the total number of nuclear weapons these aircraft were equipped to carry under its allocation of permitted warheads. These warheads would have counted even if the bombers were equipped to perform conventional missions, unless the bombers were altered so that they could no longer carry nuclear weapons. The Bush Administration has stated, however, that it will not count the weapons that could be carried on bombers under its total of 2,200 "operationally deployed" warheads. It will only count as "operationally deployed" those nuclear weapons stored at bomber bases, excluding a small number of spare warheads. It does not intend to alter any bombers so that they cannot carry nuclear weapons. It plans to maintain nuclear capability, without distinction, on all B-52 and B-2 bombers. But it does plan, however, to eliminate the nuclear mission from the B-52 bombers housed at Barksdale Air Force Base. Consequently, the number of bomber weapons could decrease in the future, even without changes to the numbers of deployed bombers. In several speeches given during the campaign and his early months in office, President Bush indicated that he would pursue a more robust missile defense program than the one he inherited from the Clinton Administration. The President stated that the world had changed, that the United States faced new threats, and that it could no longer rely on the Cold War-era doctrine of nuclear deterrence to safeguard its national security. He stated that he would pursue the development of missile defense technologies that could be deployed on land, at sea, and in space, and that would protect the United States, its allies, and its forces overseas from ballistic missile attacks from rogue nations. The President recognized that his planned missile defense system would not be consistent with the limits in the ABM Treaty. He sought to convince Russia to withdraw from the Treaty together with the United States. When that approach failed he announced, on December 13, 2001, that the United States had given its six months' notice; the United States withdrew from the Treaty on June 13, 2002. The Administration began to outline its plans for missile defense in July 2001. Initially, the Administration planned to continue all the ongoing theater missile defense (those that would attempt to shoot down shorter-range missiles) and national missile defense (those that would attempt to shoot down longer-range missiles) programs pursued by the Clinton Administration. However, it did propose sharp increases in funding, adding $3.1 billion to the Clinton Administration's planned budget of $5.2 billion for missile defense in FY2002. The Bush Administration also eliminated the distinction between theater and national missile defense, dividing the programs, instead, into boost-phase, mid-course, and terminal phase. The Bush Administration has not identified an eventual architecture for its ballistic missile system. It has stated that it does not know what types of technologies or how many sensors and interceptors it will eventually deploy, or when these systems will be available. Instead, it has pursued a "robust research and development program" to identify promising technologies and systems. It has indicated that it may begin deploying technologies in the next few years, as they begin to show promise, then upgrade them over time as the technologies mature. This process, often referred to as spiral development, differs significantly from most other military acquisition programs because military officials have not established performance criteria or milestones that the systems must achieve before they can proceed to production and deployment. In addition, because the Administration has not identified the eventual size or structure of its completed program, it cannot identify either the annual or total costs for the program. The Administration and others who support this acquisition approach argue that it will allow the United States to field missile defense technologies quickly, even if they are not perfect and require later modifications. They argue that this is necessary because the United States faces a growing threat from nations armed with ballistic missiles and weapons of mass destruction. Furthermore, as was noted above, missile defenses form one of the legs in the Administration's new "triad" of capabilities identified in the nuclear posture review. The Administration argues that missile defenses can enhance deterrence by complicating an adversary's attack planning, dissuade an adversary from acquiring ballistic missiles by undermining the value of those weapons, assure allies of the U.S. ability to contribute to their defense, and limit damage to the United States, its friends, and forces if deterrence fails. During 2004, DOD began to deploy interceptor missiles for its missile defense system in silos in Alaska; six of these were in place by the end of 2004, two more were deployed in 2005 and three more in 2006, for a total of 11. The Administration also deployed two of these interceptor missiles at Vandenberg Air Force Base in California. The Administration had hoped to declare these interceptors, and therefore its missile defense system "operational" before the election in 2004. However, delays in the program, continuing problems with scheduled tests, and continuing questions about the system's effectiveness have delayed this announcement. Reports indicate however, that the system was placed on alert in July 2006, when North Korea conducted a test launch of its longer-range missile. The Missile Defense Agency has also begun to plan for the eventual deployment of a missile defense site in Eastern Europe by reviewing possible deployment areas in Poland and the Czech Republic. The 110 th Congress may address the plans and funding for this site in its review of the FY2008 Defense Authorization Bill. The U.S. Department of Energy's (DOE) nuclear weapons complex provides warheads required by the Department of Defense for its strategic and non-strategic nuclear weapons. The complex is an integrated network of facilities that conduct research and development; produce nuclear and other materials; produce, maintain and test nuclear weapons; and dismantle retired warheads. During the Cold War, the facilities in the complex expanded their capacity and capability to meet the needs of a large nuclear arsenal of increasing technical sophistication. In the last decade, as is described in more detail below, the number of facilities in the complex declined and the focus of its efforts shifted. The Bush Administration plans to adjust the complex further, restoring some of the capabilities lost in the last decade and enhancing the U.S. capability to produce and maintain nuclear weapons. By the middle of the 1980s, the U.S. nuclear weapons complex consisted of 14 major facilities, and a number of smaller facilities, located in 12 states. Three laboratories—Lawrence Livermore National Laboratory in Livermore, CA; Los Alamos National Laboratory in Los Alamos, NM; and the Sandia National Laboratories in Albuquerque, NM—conducted research and development and designed new nuclear weapons. The complex also included four facilities that could produce nuclear or other materials used in nuclear weapons and naval nuclear reactors. These facilities, which were operated by a number of industrial contractors, included the Hanford site near Richland, WA; the Savannah River Site, near Aiken, SC; the Idaho National Engineering Laboratory, near Idaho Falls, ID; and the Feed Material Production Center at Fernald, OH. The nuclear weapons complex also included six major nuclear weapons production facilities. These included the Rocky Flats Plant, outside Denver, CO; the Kansas City Plant, near Kansas City, MO; the Mound Plant, near Dayton OH; the Pinellas Plant, in Clearwater, FL; and the Pantex Plant near Amarillo, TX. These facilities were also operated by industrial contractors. Finally, the complex included the Nevada Test Site, about 65 miles from Las Vegas, which conducted explosive tests of U.S. and British nuclear warheads. These tests were used to confirm the reliability of existing weapons, test the effects of nuclear weapons, and help in the development of new nuclear warheads. Many of the facilities in the nuclear weapons complex were constructed in the 1940s and 1950s, so they were deteriorating significantly during the 1980s. In 1988, DOE closed the nuclear reactors at Hanford and Savannah River, in response to safety concerns. The Rocky Flats Plant, which produced the nuclear triggers, or "pits," for nuclear weapons closed in 1989, in response to safety and environmental concerns. At the time, DOE expected to reopen at least some of these facilities. In the late 1980s, it also developed a plan to modernize and replace many of its facilities, on the assumption that the United States would need to continue to design, produce, test, maintain, and dismantle large numbers of nuclear weapons for the foreseeable future. However, the demise of the Soviet Union and the end of the Cold War led many to question and reconsider assumptions about the future of the U.S. nuclear weapons complex. During the 1990s, the focus of efforts in the U.S. nuclear weapons complex changed. Instead of concentrating on developing, testing, and producing new nuclear weapons, the United States turned its efforts to maintaining the existing stockpile and ensuring its safety and reliability in the absence of underground nuclear testing. DOE also reduced the size of the existing infrastructure, from 14 to 8 facilities, and began to modernize the remaining facilities. The facilities at Hanford, Pinellas, Mound, and Rocky Flats all ceased work on nuclear weapons. The remaining facilities included the 3 nuclear weapons laboratories—Livermore, Los Alamos, and Sandia; four production facilities—the Kansas City Plant, the Y-12 Plant in Tennessee, the Savannah River Site, and the Pantex Plant; and the Nevada Test Site. The number of people employed by the nuclear weapons complex, which had reached a peak of nearly 58,000 people in 1990, had fallen below 24,000 people by the end of the decade. Operations at all eight of the remaining facilities changed in response to changing demands for nuclear weapons work and changes in the U.S. nuclear force posture. For example, the Savannah River site, which had produced plutonium and tritium in its now-closed reactors, focused, instead, on efforts to purify existing tritium. In addition, the Pantex Plant, which had focused mostly on the final assembly of nuclear weapons, began to shift its workload towards the dismantlement of retired weapons. DOE is also establishing a facility at Los Alamos Laboratory that can make pits for nuclear weapons, which had been produced at the Rocky Flats Plant during the Cold War. The Los Alamos facility will not have nearly the capacity of Rocky Flats, but its supporters argue that it will help fill a gap in the U.S. ability to maintain its nuclear weapons and certify the reliability of its pits. Perhaps the most significant change in the U.S. nuclear weapons complex was the cessation of nuclear testing. The United States adopted a moratorium on nuclear testing in 1992 and signed the Comprehensive Test Ban Treaty in 1996. Although the Senate refused to consent to the ratification of the Treaty in October 1999, the United States has continued to observe a moratorium. In the absence of nuclear testing, DOE developed the Stockpile Stewardship Program to maintain U.S. nuclear weapons. This program, which will use existing computing and analysis capabilities along with several new, large experimental facilities at the nuclear weapons laboratories, includes surveillance efforts that are designed to predict and detect problems in nuclear warheads; assessment and certification efforts that analyze and evaluate the effects of changes on warheads safety and performance; and design and manufacturing efforts which are intended to refurbish stockpile warheads and certify new parts, materials, and processes. Congress first authorized this program in 1993 and elements of it have been underway since that time. The Bush Administration has called the nuclear weapons infrastructure one of the three legs of its "new triad." According to Administration officials, the U.S. ability to maintain its existing nuclear weapons "lends credibility to the arsenal and assurance to allies." An infrastructure "focused on sustainment and sized to meet the needs of a smaller nuclear deterrent" would provide the United States with the capabilities to "respond to future strategic challenges." In addition, the "ability to innovate and produce small builds of special purpose weapons would convince an adversary that it could not expect to negate U.S. nuclear weapons capabilities." Hence, according to the Administration, an infrastructure that allows the United States to sustain its forces and adapt them to meet emerging needs would "provide the United States with the means to respond to new, unexpected, or emerging threats in a timely manner." Further, by maintaining the infrastructure needed to adapt old warheads and produce new ones, the United States can reduce its stockpile of nondeployed warheads. This characterization of the nuclear weapons infrastructure, and its integration into the new model of deterrence, does not alter its central functions, but it does raise the profile of the facilities and underline the Administration's commitment to modernize and expand the complex. When announcing the results of the Nuclear Posture Review, the Bush Administration indicated that the United States would continue to observe a moratorium on nuclear testing, in spite of the President's opposition to the Comprehensive Test Ban Treaty. The Administration has stated that the United States will continue to pursue the stockpile stewardship programs to assure the safety, reliability and performance of the nuclear weapons stockpile. According to Administration officials, DOE will strengthen the weapons assessment process and seek improvements in understanding the of physics of nuclear explosions through new and expanded simulation capabilities. The ongoing program will include aggressive surveillance and the planned refurbishment of existing warheads, to "anticipate stockpile problems and fix them before they arise." The Bush Administration confirmed that the Stockpile Stewardship Program has permitted DOE to certify the safety and reliability of the U.S. nuclear arsenal up till now, but it contends the United States may not be able to continue to do so in the future, as the nuclear stockpile ages. Furthermore, DOE has only a limited capacity to fabricate and certify pits and other components for nuclear weapons. Many existing facilities, and the workforce, are aging. Therefore, the Administration has outlined a more comprehensive program to rebuild the nuclear weapons complex and its workforce to ensure that the United States can respond to emerging problems in the nuclear weapons arsenal or emerging threats in the international environment. The Administration has argued that a "responsive" nuclear weapons infrastructure must incorporate several capabilities that include and go beyond the 1990s focus on stockpile surveillance and management. For example, the infrastructure must be able to respond to surprises in the status of the stockpile, such as age-related defects that appear suddenly, or changes in international security environments. The Administration has also argued that the United States should be able to anticipate innovations in weapons design and countermeasures pursued by an adversary and counter them before they arise. The infrastructure must also have a sufficient reserve or surge capacity for research, development, and production; a sufficient stock of assets, such as tritium, to support the deployed and responsive force of nuclear warheads; and the capacity to maintain the readiness of sufficient numbers and types of weapons. Specifically, the NPR recommends that the infrastructure have the capacity to identify and repair emerging problems in existing warheads in three to four years and to allow for the design, development, and production of new types of warheads within five years of a decision to enter full scale development. The Administration has identified a number of specific tasks that the infrastructure must accomplish over the next decade. At the top of the list is the refurbishment of several existing warheads so that it can retain them for the foreseeable future. This refurbishment effort will take place at the Pantex Plant, and will use most of the existing capacity at that facility. In addition, the NPR has indicated that the United States should be able to produce new warheads if the international security environment dictates. Therefore, the NPR reportedly indicates that Pantex will need to expand its capacity, from the current level of around 350 warheads per year to 600 warheads per year, so that it could assemble sufficient quantities of new warheads without interfering with the planned refurbishment program. In the past decade Pantex has concentrated on dismantling warheads removed from service; in the future, DOE will schedule warhead dismantlement at Pantex when there is time between refurbishment and other production efforts. DOE also plans to expand the capacity at the Y-12 Plant in Oak Ridge, Tennessee, so that it can meet the expected workload for replacing uranium components in the existing U.S. nuclear arsenal. The Administration also sought funding, in the years after the completion of the NPR, for a study on one specific modified nuclear warhead—the "robust earth penetrator." This type of warhead would be designed to penetrate below the ground before exploding, so that it could increase the probability of destroying hardened and deeply buried targets. These types of targets might include command and control facilities, storage depots for weapons of mass destruction, or other military assets. The United States currently has one type of nuclear weapon—the B-61 mod 11 bomb—that is designed to penetrate before detonating. But this weapon can only penetrate about 10 meters and may not survive penetration in many types of terrain. Consequently, DOE initiated a research project on a new earth penetrating weapon. According to Ambassador Linton Brooks, the Administrator of the National Nuclear Security Administration, this research would focus on modifications to the B-61 and B-83 bombs. This study could have cost $10 million in FY2003 and $40-$50 million over three years. Congress authorized the Administration's request for $15 million for the second year of this study in FY2004, but it only appropriated 7.5 million. The Administration requested $27.5 million in its FY2005 budget to begin "developmental ground tests" on the "candidate weapons designs. It also planned to request sharply higher levels of funding in the next few years, including $95 million in FY2006, $145.3 million in FY2007, and $128.4 million in FY2008. Congress denied the Administration's request for funding for this program in the Consolidated Appropriations Act, 2005 ( P.L. 108-447 ). It also denied the Administration's request for funding in FY2006, and DOE has since abandoned its efforts, with DOD taking on some aspects of the study to determine whether the casing for a new weapon, either nuclear or conventional, could penetrate hardened and buried targets before exploding. In the FY2005 budget, Congress provided DOE with funding for a new program, the Reliable Replacement Warhead (RRW). Many in Congress and at DOE expected this program to provide the United States with a new way to maintain and modify its warheads. Ambassador Brooks indicated that this program could be a part of the "transformation" of the U.S. weapons complex, allowing the United States to maintain and modify its warheads without explosive nuclear testing, and allowing the United States to reduce the size of its stored stockpile of warheads. DOE has pursued this program by establishing design teams at both U.S. nuclear weapons labs. By February 2006, both teams had developed designs that they believed would meet military requirements, would not require nuclear testing to certify, and would meet other criteria established for the program. In early March 2007, the National Nuclear Security Administration (NNSA) announced that the Nuclear Weapons Council had selected the design from Lawrence Livermore Lab in California. In recent years, questions have come up about the need for this new warhead design, particularly in light of the fact that many have begun to question the role and requirements for nuclear weapons in the future. In the FY2008 Omnibus Appropriations Bill, Congress eliminated all funding for this program. The NPR also recommended that the United States reduce the amount of time that it would take to resume nuclear explosive testing at the Nevada Test Site. The Administration claims that this "enhanced test readiness" is "prudent as a hedge for the possibility that a future safety or reliability problem could not be fixed without testing." If a problem came up in these processes, it would take 24-36 months for DOE to prepare for and conduct an underground nuclear test. Furthermore, the Administration has noted that this time might lengthen in the future, as remaining personnel with nuclear testing skills and expertise retire. Consequently, the Administration included $15 million in the FY2003 DOE budget and $25 billion in the FY2004 DOE budget to begin to reduce the time needed to prepare for nuclear testing. These funds would be used to augment key personnel and increase their proficiency, begin training the next generation of personnel, conduct additional subcritical tests, replace key components, modernize certain test diagnostic capabilities, and decrease time to show regulatory compliance. The Administration also hoped to construct on a new facility that would be able to produce the "pits" for nuclear weapons. DOE will continue to use the interim pit facility at Los Alamos National Laboratory, but this facility would only be able to produce 20-50 pits per year and would not be able to manufacture all the types of pits currently in the U.S. stockpile. According to the Administration, this facility may not be sufficient if the United States must replace large numbers of aging pits in the future. Therefore, it plans to bring a new facility on line by 2020. It will size this facility with the capacity to support the planned workload for maintaining and replacing existing pits and to address "surprise" requirements and the need for potential new warhead production. Congress has raised questions about this program. In the Consolidated Appropriations Act, 2005 Congress provided $7 million for the modern pit facility, but specified that these funds could not be used to select a construction site for the facility. In 2006, DOE announced a plan to consolidate and reduce the size of its nuclear weapons complex. This plan, which is still in the early stages, would eliminate some of the DOE facilities and combine others at a smaller number of locations. This plan is, at this time, known as "Complex 2030." The National Nuclear Security Administration formally announced plans to transform the nuclear weapons complex in mid-December 2007. This plan would reduce the size and the cost of the complex, with a reduction of about 30% in square footage and a decline of about 20%-30% of the workforce over a decade. As was noted above, the Clinton Administration retained much of the existing U.S. nuclear weapons policy and force posture in the decade after the demise of the Soviet Union. Nevertheless, in official documents, the Administration stated that nuclear weapons were playing a smaller role in U.S. defense strategy than they had during the Cold War, and it stated that these weapons existed primarily to serve as a deterrent for adversaries who were armed with their own nuclear weapons. The Clinton Administration, and the Bush Administration before it, also eliminated many specific targets from the U.S. war plan, and began to reduce the size of the U.S. nuclear arsenal, in response to the demise of the Warsaw Pact and Soviet Union. But the central tenets of the U.S. deterrence strategy and nuclear employment plans remained essentially unchanged. Furthermore, during the 1990s, the Clinton Administration began to develop targeting options for the use of nuclear weapons in response to chemical or biological attack from nations other than Russia, and, in its declaratory policy, the Administration would not rule out the possible first use of nuclear weapons in these circumstances. At the same time, many participants in the public debate over nuclear weapons policy argued that the United States should alter sharply its nuclear weapons strategy and force posture. They claimed that, in the absence of the global threat from the Soviet Union, the United States could maintain its deterrent posture with a far smaller number of nuclear weapons; many proposed reductions to levels of around 1,000 warheads. Some also argued that, with its overwhelming superiority in conventional weapons, the United States could defeat almost any potential adversary without threatening to resort to nuclear weapons. Several studies concluded that a policy of "nuclear abolition" could be a practical, albeit long term, goal for the United States and other nations with nuclear weapons. In the meantime, they argued that the United States should use its nuclear weapons only to deter the potential use of nuclear weapons by other nations. In this framework, the United States could consider its nuclear weapons to be "weapons of last resort." The Bush Administration's description of the role of nuclear weapons differs sharply from the views advocated by many analysts over the last decade, but it is more consistent with official policies and posture adopted by the Clinton Administration. The Bush Administration assumes that nuclear weapons will be a part of U.S. security strategy for at least the next 50 years. Given this time frame, the NPR recommends that the United States begin now to develop weapons systems that will enter the force in the years between 2020 and 2040. Therefore the Administration clearly does not assume that the current systems in the U.S. nuclear arsenal will be the last. The Administration also has a role for nuclear weapons that goes well beyond a "weapon of last resort" designed to deter only nuclear attack. The Administration not only argues that nuclear weapons can deter chemical, biological, and conventional attack, it believes they can do more than just deter attack. It has argued that they can also be used to assure allies of U.S. commitments, dissuade adversaries from acquiring weapons of mass destruction or threatening the United States, and defeat adversaries by destroying critical targets if deterrence fails. This last objective has contributed to the Administration's interest in developing new types of nuclear weapons that can threaten hardened and deeply buried targets. The Administration has argued, however, that this expanded role for nuclear weapons does not mean that the United States is increasing its reliance on nuclear weapons. It has noted that the addition of missile defenses and precision-guided conventional weapons to U.S. deterrent forces will give the President a greater number of options in a crisis and actually reduce the likelihood of nuclear use. Critics, however, question this logic, arguing that the Administration's approach will blur the distinction between nuclear and conventional weapons and increase the likelihood of nuclear use. According to one analyst, the Administration has outlined a role for nuclear weapons that emphasizes war-fighting over deterrence. He has argued that "if military planners are now to consider the nuclear option any time they confront a surprising military development, the distinction between nuclear and nonnuclear options fades away." Others have also concluded that the Administration's plan will increase U.S. reliance on nuclear weapons. Former Senator Sam Nunn, former Secretary of Defense William Perry, and retired General Eugene Habiger wrote that the Administration's policy is "expanding options for nuclear attacks, widening the number of targeted nations and developing new nuclear weapons variants." They note that "each of these ideas may have a plausible military rationale," but "their collective effect is to suggest that the nation with the world's most powerful conventional forces is actually increasing its reliance on nuclear forces." Some critics of the Administration's policy continue to argue for a far more limited role for nuclear weapons in U.S. defense and security policy. They question whether threats to use nuclear weapons in response to anything other than a nuclear attack would be either necessary or credible. Therefore, according to one analyst, "the U.S. would be far better served by adopting a genuinely new nuclear posture, one that maintains nuclear weapons only to deter nuclear attack. Given the awesome power of U.S. conventional forces, we do not need nuclear weapons for any other purpose, even to deter a chemical or biological attack." Furthermore, given the long-standing "taboo" against the use of nuclear weapons, some argue that the United States would enhance its standing in the international community if it sought to reduce, rather than expand, the role of nuclear weapons in international affairs. In many ways, the debate over the role of nuclear weapons in U.S. defense policy follows from a more fundamental debate over how to make deterrence credible. This debate surfaced frequently during the Cold War, when the United States sought to develop a mixture of strategy, doctrine, and force posture that would deter not only a Soviet nuclear attack on the United States but also a conventional attack by the Soviet Union or its allies against U.S. allies. For example, some analysts questioned whether the Soviet Union would believe U.S. threats to launch a massive retaliatory strike in response to an attack in Europe, when the Soviet Union could respond by devastating U.S. cities. Concerns about the credibility of the U.S. deterrent underlined many of the U.S. efforts to develop smaller, more accurate nuclear weapons and war plans that contained options allowing attacks against a range of targets. Analysts hypothesized that, if the Soviet Union knew that the United States could launch an attack more tailored to the provocation, and more directed against Soviet nuclear forces, then U.S. threats might seem more credible to the Soviet leadership. In other words, the more prepared the United States appeared to fight and win a nuclear war, the more likely it would be for the Soviet Union to refrain from aggression and for deterrence to succeed. Others argued, however, that such large force structures and elaborate plans were simply overkill, that the threat of nuclear destruction with as few as 100 warheads, known as a minimum deterrent, could be enough to deter any rational leader from challenging the United States. In the years after the end of the Cold War, debates over the credibility of nuclear deterrence often focused on whether nations armed with chemical or biological weapons might believe U.S. threats to retaliate with nuclear weapons if attacked with chemicals or biological agents. Some argued that the potential loss of life from a biological attack would be so severe that nuclear deterrent threats would be both appropriate and credible. Others argued that nations simply would not believe that the United States would cross the nuclear threshold in response to anything less than a nuclear attack, so nuclear threats would not be a credible deterrent for chemical or biological weapons. Furthermore, some argued that if a nation did use chemical or biological weapons, and the United States did not retaliate with nuclear weapons, the United States would be caught in a bluff and the credibility of its nuclear deterrent would be further damaged. These views contributed to the theory that the United States should threaten to use nuclear weapons only as a "last resort." The Bush Administration has outlined plans to develop a more focused nuclear war-fighting capability for the United States. The emphasis on the development of penetrating nuclear weapons that can destroy hardened and deeply buried targets, along with the "capabilities" based approach that states the United States will seek the ability to destroy threatening capabilities possessed by any potential adversary, are a part of this new strategy. As was noted above, critics have argued that these changes in the U.S. nuclear posture make it more likely that the United States will use nuclear weapons in a future crisis. The Bush Administration has argued, however that U.S. plans and capabilities to use nuclear weapons against smaller countries would make nuclear use less likely because it would make the U.S. deterrent more credible and robust. Analysts who support the Bush Administration's approach have noted that "leaders of rogue states may not take seriously a U.S. threat to launch massive nuclear strikes on leadership and weapons sites.... Thus, having the capability to destroy such targets with smaller and less destructive weapons would strengthen, rather than erode deterrence." In addition to altering the U.S. force posture and war plans, the Bush Administration has been somewhat more explicit in threatening the use of nuclear weapons in retaliation for chemical or biological attacks. As was noted above, U.S. policy, both during the Cold War and in the decade since its end, has been one of "studied ambiguity" about the circumstances under which it would retaliate with nuclear weapons for a chemical, biological, or even conventional attack. It never openly declared that it would use nuclear weapons (and therefore, never would have been caught in a "bluff" if it did not retaliate with nuclear weapons), but it also would not foreswear the first use of nuclear weapons. President Bush has not altered this policy, but he has stated that "we want to make it very clear to nations that you will not threaten the United States or use weapons of mass destruction against us or our allies." He said that "I view our nuclear arsenal as a deterrent, as a way to say to people that would harm America that ... there is a consequence." In its report on the National Security Strategy of the United States, released in September 2002, the Bush Administration stated that the United States would "deter and defend against the threat [of nuclear, biological, and chemical weapons] before it is unleashed." But the report also stated that the United States would seek to "strengthen nonproliferation efforts to prevent rogue states and terrorists from acquiring the materials, technologies, and expertise necessary for weapons of mass destruction." The report says that the United States will "enhance diplomacy, arms control, multilateral export controls, and threat reduction assistance that impede states and terrorists seeking WMD..." According to the Administration, the development of new types of nuclear weapons that can defeat hardened and deeply buried targets, along with the potential use of nuclear weapons in retaliation for non-nuclear attacks, are a part of the U.S. effort to dissuade other nations from acquiring and threatening to use chemical, biological, or nuclear weapons. But many critics of the Administration' approach argue that this policy is likely to undermine U.S. diplomatic efforts to discourage nuclear proliferation. According to one analyst, "by emphasizing the important role of nuclear weapons, the Pentagon is encouraging other nations to think it is important to have them as well." Senator John Kerry expressed a similar view when he stated that the NPR would undermine U.S. credibility when it sought to convince other nations to forego nuclear weapons, noting that "it reduces all our bona fides on the proliferation issue. Critics of the Administration's policy point specifically to the implications its views on the U.S. negative security assurance might have for U.S. nonproliferation efforts. Many note that, through the negative security assurance, the United States sought to convince other nations that they would not need their own nuclear weapons to deter a nuclear threat from the United States. But, there would be "no reason for other countries to refrain from acquiring nuclear weapons" if the United States abandoned that policy. Not only would these nations receive no security benefit from the absence of nuclear weapons in their arsenals, they might also conclude that they could only deter a U.S. attack if they were to acquire their own nuclear weapons. Others, however, have argued that the negative security assurance has done little to stem proliferation or enhance U.S. security because other nations do not consider the U.S. nuclear posture or declaratory policy when making their decisions about the acquisition of nuclear weapons. Even if the United States did not have any nuclear weapons, some nations would seek them for themselves to counter their neighbors or offset the U.S. advantage in conventional weapons. Furthermore, some analysts consider the negative security assurance, and its specific focus on nuclear weapons, as an "outdated policy that effectively gives non-nuclear countries a safe haven for developing chemical and biological weapons." Nevertheless, many critics of the Administration's policy have questioned the wisdom of an approach that might undermine U.S. nuclear nonproliferation objectives, even in the interest of providing new tools to address chemical and biological weapons. They note that the United States currently possesses conventional forces that are far superior to those of any other country. If, however, potential adversaries were to acquire nuclear weapons, they might present the United States with an "asymmetrical threat" that could offset U.S. conventional superiority. Therefore, these critics argue, the United States should seek to "marginalize as much as possible the role that nuclear weapons play in U.S. defense and foreign policy." Nations can only negate the overwhelming U.S. conventional superiority with nuclear weapons, so "it is in U.S. interest to keep the firewall between nuclear and conventional high and strong." As was noted above, the Bush Administration's plans for the U.S. arsenal of strategic nuclear weapons contain a number of key components: Reductions in the number of "operationally deployed" strategic nuclear warheads to between 2,200 and 1,700 warheads; Retention of most deployed delivery vehicles (ICBMs, SLBMs, and bombers), with reductions in the number of warheads carried by and counted on these vehicles; Storage of many warheads removed from deployment; The ability to restore stored warheads to deployed delivery vehicles in days, weeks, or months—a capability known as the "responsive force." The Administration argues that this combination of features will allow the United States to reduce its deployed forces while retaining the flexibility it needs to respond to unexpected or potential contingencies that might come up in the future. When combined with the plans to rebuild a robust infrastructure, these plans indicate that the United States will maintain the ability to enhance both the size and the capabilities of its strategic nuclear forces. Analysts have raised numerous questions about the Administration's plans. First, they question why, if Russia and the United States are no longer enemies, does the United States need to maintain 2,200 warheads in its deployed forces. They argue that Russia is the only potential adversary that has enough nuclear, leadership, and military targets to justify such a large U.S. force, and, by insisting on retaining this many weapons, the United States must still be developing war plans that contemplate wide-spread attacks on Russian targets. The Administration disputes this claim, noting that the United States has other potential adversaries, and, even if these nations do not possess thousands of nuclear warheads, some may expand their nuclear forces or chemical and biological capabilities in the future. Analysts have also noted that the Administration's claims of deep reductions in offensive nuclear weapons are undermined by its plans to retain thousands of warheads in storage for a "responsive force." They note that, if these warheads were deployed on existing delivery vehicles, the United States could have a deployed force of nearly 4,000 warheads in a relatively short amount of time. They also argue that, if Russia adopts a similar posture, the threat of nuclear terrorism could increase because Russia's stored warheads might be vulnerable to theft or sale to nations seeking their own nuclear weapons. The Administration has countered by noting that the United States has never destroyed warheads removed from delivery vehicles under past arms control agreements; it has always retained an active stockpile of warheads for spares and testing purposes. On the other hand, under arms control agreements, the United States did have to destroy delivery vehicles so that their warheads would no longer count in the total of deployed warheads. The Bush Administration does not plan to destroy either the silos for the Peacekeeper missiles or the Trident submarines that will be removed from the strategic force. It also plans to retain the same number of delivery vehicles that the United States would have retained, and counted as 3,500 warheads, under the START II Treaty. Hence, even if the United States deploys only 2,200 warheads on a day-to-day basis, it could expand its forces relatively rapidly. Many of the questions raised by the Administration's critics reflect their views on the role of nuclear weapons in U.S. national security and their views on what is needed to maintain a credible deterrent. Generally, they believe that the United States should adopt a posture where nuclear weapons are weapons of "last resort," used only to deter or respond to nuclear attack on the United States. They conclude that the United States could maintain a credible deterrent with a far smaller number of nuclear weapons, perhaps 1,000 or fewer, and without significant investments in new infrastructure or new nuclear weapons capabilities. The Administration, however, has outlined a posture that reflects the view that nuclear weapons should play a broader role in U.S. national security strategy than just the deterrence of nuclear attack, that a credible deterrent requires the capability to effectively threaten and destroy a range of critical targets, and that the United States may need different numbers of nuclear weapons and different types of nuclear weapons to address threats that emerge in the future. Under this formula, the flexibility to restore nuclear warheads quickly, expand the number of deployed warheads over time, and develop new weapons with new capabilities makes it possible for the United States to reduce its deployed weapons in the near term without creating potential risks to its security in the future. As was noted above, the United States withdrew from deployment most its nonstrategic nuclear weapons during the early 1990s, leaving a few hundred air-delivered bombs deployed at bases in Europe. Although some analysts question the need for these weapons, and their relevance to NATO's strategy in the absence of the Soviet Union and Warsaw Pact, most concerns about nonstrategic nuclear weapons focus on the potential for the loss or theft of Russia's weapons. Unclassified reports estimate that Russia may still have up to 8,000 nonstrategic nuclear weapons at storage areas around the country, and that these storage areas might be poorly guarded and the weapons may be vulnerable to theft. One former Member of Congress, Curt Weldon, referred to the issue of Russia's tactical nuclear weapons as "severe" and "critical." Many analysts believe that, to address concerns about Russia's nonstrategic nuclear weapons, the United States must propose unilateral or negotiated reductions in these forces. Others argue that negotiations are not an option because, with just a few hundred weapons deployed, the United States would have little leverage to convince Russia to reduce its stocks of nonstrategic nuclear weapons. Many contend that the United States should focus, instead, on measures to improve security at Russia's nuclear weapons storage facilities and to enhance transparency and openness so that both sides can remain confident in the safety and security of Russia's stockpile. Efforts in these areas are funded by DOD's Cooperative Threat Reduction Program and DOE's nonproliferation programs in Russia. The Bush Administration did not address questions about U.S. or Russian nonstrategic nuclear weapons in the NPR or in the testimony and briefings that accompanied its release. However, in the months following the release of the NPR, and particularly after the United States and Russia signed the Strategic Offensive Reductions Treaty in May 2002, the Administration began to recognize that nonstrategic nuclear weapons should be on the agenda for discussions between the United States and Russia. Press reports indicated that this issue would be on the agenda during the May summit when Presidents Bush and Putin signed the Treaty. This did not occur, and Secretary of Defense Rumsfeld noted, at the time, that the issue on nonstrategic nuclear weapons was one that "keeps getting set aside." However, during hearings on the Treaty before the Senate Foreign Relations Committee in July 2002, Secretary of Defense Rumsfeld and Secretary of State Powell both acknowledged that the two sides did need to address the issue. Both indicated that nonstrategic nuclear weapons would be on the agenda for the new Consultative Group for Strategic Stability, which was announced in the Joint Declaration released after the May 2002 summit in Moscow. This group, which is chaired by the U.S. Secretaries of Defense and State and Russia's Ministers of Defense and Foreign Affairs, held its first meeting in September 2002. Many analysts believe that this group should place its highest priority on addressing the risks posed by Russia's arsenal of nonstrategic nuclear weapons, but this has not happened to date.
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The Bush Administration conducted a review of U.S. nuclear weapons force posture during its first year in office. The review sought to adjust U.S. nuclear posture to address changes in the international security environment at the start of the new century. Although it continued many long-standing policies and programs, it also introduced new elements into both U.S. policy and U.S. nuclear weapons programs. This report, which will be updated as needed, provides an overview of the U.S. nuclear posture to highlight areas of change and areas of continuity. During the Cold War, the United States sought to deter the Soviet Union and its allies from attacking the United States and its allies by convincing the Soviet Union that any level of conflict could escalate into a nuclear exchange and, in that exchange, the United States would plan to destroy the full range of valued targets in the Soviet Union. Other nations were included in U.S. nuclear war plans due to their alliances with the Soviet Union. After the Cold War, the United States maintained a substantial nuclear arsenal to deter potential threats from Russia. It would not forswear the first use of nuclear weapons in conflicts with other nations, such as those armed with chemical or biological weapons, and formed contingency plans for such conflicts. The Bush Administration has emphasized that the United States and Russia are no longer enemies and that the United States will no longer plan or size its nuclear force to deter a "Russian threat." Instead, the United States will maintain a nuclear arsenal with the capabilities needed to counter capabilities of any potential adversary, focusing on "how we will fight" rather than "who we will fight." Furthermore, U.S. nuclear weapons will combine with missile defenses, conventional weapons, and a responsive infrastructure in seeking to assure U.S. allies, dissuade U.S. adversaries, deter conflict, and defeat adversaries if conflict should occur. During the Cold War the United States maintained a "triad" of ICBMs, SLBMs, and heavy bombers in a strategic nuclear arsenal of more than 10,000 warheads. During the 1990s, the United States reduced the size of this arsenal to around 7,000 warheads , but maintained all three legs of the triad. The Bush Administration has announced that the United States will further reduce its arsenal to between 1,700 and 2,200 "operationally deployed" warheads, but that it will not eliminate many delivery vehicles while reducing its force and it will retain many nondeployed warheads in storage as a "responsive force" that could be added to the deployed forces if conditions warranted. The Bush Administration has also announced that it will resize and modernize the infrastructure that supports U.S. nuclear weapons, so that the United States could respond to unexpected changes in the status of its arsenal or the international security environment. Analysts and observers have identified several issues raised by the Administration's Nuclear Posture Review. These include the role of nuclear weapons in U.S. national security policy, how to make the U.S. nuclear deterrent "credible," the relationship between the U.S. nuclear posture and the goal of discouraging nuclear proliferation, plans for strategic nuclear weapons, and the future of non-strategic nuclear weapons.
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Native Hawaiian recognition bills have been considered in the 106th-108th Congresses,and at least one of the bills has been reported in each Congress (see Table 1 below). (128) All the billsprovided for a recognition process very similar to that in S. 147 and H.R. 309 , but differed in various other provisions, including the determinationof land transfers to, and the jurisdictional powers of, a Native Hawaiian political entity. Thenature of the federal government's relationship to Native Hawaiians was an issue long beforethe 106th Congress, however, in both the Department of the Interior (129) and the halls ofCongress. Congress came closest to enacting a Native Hawaiian recognition bill in the 106thCongress, when the House passed H.R. 4904 . While the Senate did not passH.R. 4904, the bill would have been enacted through a provision in theConsolidated Appropriations Act, 2001 ( H.R. 4577 , P.L. 106-554 ), until a Senateconcurrent resolution removed the provision by correcting the enrollment of H.R.4577 ( S.Con.Res. 162 ). Table 1. Native Hawaiian Recognition Bills inCongress Congress has enacted a number of programs for Native Hawaiians, in addition to theHawaiian Home Lands program. (130) One concern among proponents of Native Hawaiianrecognition is that many or all of these federal programs for Native Hawaiians may beendangered if a Native Hawaiian political entity is not created. (131) Federal NativeHawaiian programs either are solely for Native Hawaiian communities or organizations orexplicitly include Native Hawaiian communities or organizations among the eligibleapplicants. Some of these programs benefit Indians as well. The programs provide a notinsignificant amount of federal dollars for Native Hawaiians. A 2003 report of the Councilfor Native Hawaiian Advancement estimated that in FY2002 over $70 million flowed intoHawaii because of such Native Hawaiian programs. (132) Among themajor federal Native Hawaiian programs listed in the Catalog of Federal Domestic Assistance (CFDA) (133) are the following. Native Hawaiian Education Act ( P.L. 107-110 , Title VII, Part B); F2004obligations were $33.3 million, according to the CFDA. Higher Education Act, Title III, Institutional Aid for Alaska Native andNative Hawaiian serving institutions. Native Hawaiian Health Care Improvement Act ( P.L. 102-396 ); F2004obligations were $10.5 million, according to the CFDA. Native Hawaiian Housing Block Grants ( P.L. 106-569 , HawaiianHomelands Homeownership Act, §513); F2004 obligations were $9.6 million, according tothe CFDA. Loan Guarantees for Native Hawaiian Housing ( P.L. 106-569 , HawaiianHomelands Homeownership Act, §514); F2004 loan guarantees were $39.7 million, accordingto the CFDA. Native American Programs Act of 1974 ( P.L. 93-644 , as amended);shared program with Indians and Native American Pacific Islanders; total program FY2004obligations were $35 million, according to the CFDA. Native American Employment and Training ( P.L. 105-220 , §166);shared program with Indians; total program FY2004 obligations were $55 million, accordingto the CFDA.
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S. 147 / H.R. 309 , companion bills introduced in the 109th Congress,represent an effort to accord to Native Hawaiians a means of forming a governmental entity thatcould enter into government-to-government relations with the United States. This entity would beempowered to negotiate with the State of Hawaii and with the federal government regarding thetransfer of land and the exercise of governmental power and jurisdiction. There was similarlegislation in the 106th, 107th, and 108th Congresses; the House passed a Native Hawaiian recognitionbill, H.R. 4904 , in the 106th Congress. While the Senate did not pass H.R.4904, the bill would have been enacted through a provision in the Consolidated Appropriations Act,2001 ( H.R. 4577 , P.L. 106-554 ), until a Senate concurrent resolution removed theprovision by correcting the enrollment of H.R. 4577 ( S.Con.Res. 162 ). This report describes the provisions of the reported version of S. 147 ; outlinessome federal statutes and recent cases which might be relevant to the issue of federal recognition ofa Native Hawaiian entity; and recounts some legal arguments that have been presented in the debateon this legislation. It includes a brief outline of the provisions of a substitute amendment expectedto be offered in lieu of the reported version of S. 147, when Senate debate, which wasinterrupted by the filing of a cloture motion on July 29, resumes. The substitute amendment is theproduct of discussions that have included congressional, executive, and State of Hawaii officials. S. 147 has again been placed on the Senate Calendar. This report will be updated aswarranted by legislative activity.
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Under a growing number of consumer and employment agreements, companies are requiring disputes to be resolved through arbitration, a method of dispute resolution involving a neutral, private third party, rather than a judicial proceeding. In 2015, for example, the Consumer Financial Protection Bureau found that tens of millions of consumers use consumer financial products that are subject to arbitration clauses. In nonunion workplaces, it is estimated that at least a quarter of all employees are now subject to mandatory arbitration agreements. While arbitration is often viewed as a faster and less expensive alternative to litigation, consumer advocates and others maintain that mandatory arbitration agreements create one-sided arrangements that deny consumers and employees advantages afforded by a judicial proceeding, such as the availability of a jury trial. The Federal Arbitration Act (FAA or the Act) was enacted in 1925 to ensure the validity and enforcement of arbitration agreements in any "maritime transaction or ... contract evidencing a transaction involving commerce[.]" The U.S. Supreme Court (Court) has recognized the FAA as evidencing "a national policy favoring arbitration." The application of the FAA, however, particularly in light of various state law requirements and the use of different types of arbitration agreements, has raised numerous legal questions and been the subject of several cases before the Court. Concern over a perceived lack of "meaningful choice" to decide whether to submit a claim to arbitration has also spurred recent federal regulatory action, as well as legislation that would amend the FAA to render pre-dispute arbitration agreements unenforceable. This report examines the FAA and reviews the Court's decisions involving the statute's preemption of state law requirements. The report also explores the Court's decisions involving mandatory arbitration agreements that prohibit a consumer or employee from maintaining a class or collective action. In its October 2017 term, the Court will consider three consolidated cases that challenge such agreements on the grounds that they violate the right to engage in "other concerted activities" under the National Labor Relations Act (NLRA). Section 2 of the FAA provides: [a] written provision in any maritime transaction or a contract evidencing a transaction involving commerce to settle by arbitration a controversy thereafter arising out of such contract or transaction, or the refusal to perform the whole or any part thereof, or an agreement in writing to submit to arbitration an existing controversy arising out of such a contract, transaction, or refusal, shall be valid, irrevocable, and enforceable, save upon such grounds as exist at law or in equity for the revocation of any contract. By enacting Section 2, Congress sought generally to promote the enforcement of arbitration agreements. Historically, American courts viewed arbitration with judicial hostility. It is believed that this hostility flowed from a similar enmity displayed by English courts. Arbitration infringed on the livelihood of English judges who were paid fees based on the number of cases they decided. English courts were also generally unwilling to surrender their jurisdiction over various disputes. The hostility toward arbitration subsided as industrialization led to an increased number of business disputes. In 1924, the Court upheld a New York law that compelled arbitration in a dispute involving a maritime contract. The Court's decision in Red Cross Line v. Atlantic Fruit Company is believed to have opened the door for federal legislation that recognized the validity of arbitration agreements. President Calvin Coolidge signed the United States Arbitration Act (commonly referred to as the Federal Arbitration Act) on February 12, 1925. The enactment of the new law "declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims which the contracting parties agreed to resolve by arbitration." While Congress's primary motivation for drafting the FAA reflected its interest in protecting the enforcement of arbitration agreements as agreed to by the contracting parties, it also understood the potential benefits that would be provided by the law's enactment: It is practically appropriate that the action should be taken at this time when there is so much agitation against the costliness and delays of litigation. These matters can be largely eliminated by agreements for arbitration, if arbitration agreements are made valid and enforceable. Although Section 2 of the FAA requires the enforcement of arbitration agreements in maritime transactions and contracts "evidencing a transaction involving commerce," the precise scope of this latter group of contracts has not always been certain. Congress provided a definition for the term "commerce" in Section 1 of the FAA, but it did not identify the extent to which a contract must "evidenc[e] a transaction involving commerce" before the FAA would apply. Prior to 1995, there was a split among courts interpreting Section 2. Some courts concluded that the FAA applied only to those contracts where the parties "contemplated" an interstate commerce connection. In Burke County Public Schools Board of Education v. Shaver Partnership , for example, a North Carolina court stated that where performance of the contract "necessarily involves, so that the parties to the agreement must have contemplated, substantial interstate activity the contract evidences a transaction involving commerce within the meaning of the Federal Arbitration Act." Other courts held that the Section 2 phrase "involving commerce" reached to the limits of Congress's power under the Commerce Clause. In Snyder v. Smith , for example, the U.S. Court of Appeals for the Seventh Circuit (Seventh Circuit) maintained that the courts should take into account Congress's broad power to regulate under the Commerce Clause when deciding which contracts involve commerce. Because Congress may reach activities "affecting" interstate commerce under its Commerce Clause authority, the Seventh Circuit reasoned that it was logical to conclude that any contract affecting interstate commerce falls under Section 2 of the FAA. In 1995, the Supreme Court determined that a broad interpretation of "involving commerce" is appropriate. In Allied-Bruce Terminix Companies, Inc. v. Dobson , the Court held in a 7-2 opinion authored by Justice Breyer that the phrase "involving commerce" signaled the full exercise of Congress's power under the Commerce Clause. The Court concluded that the FAA's legislative history "indicates an expansive congressional intent." For example, the House Report that accompanied the FAA stated that the Act's "'control over interstate commerce reaches not only the actual physical interstate shipment of goods but also contracts relating to interstate commerce.'" In addition, remarks in the Congressional Record indicated that the FAA "'affects contracts relating to interstate subjects and contracts in admiralty.'" The Court maintained that the word "involve" should be read as the functional equivalent of the word "affect." Because the phrase "affecting commerce" normally signals Congress's intent to exercise its Commerce Clause powers to the fullest extent, the Court reasoned that the use of the phrase "involving commerce" should be given a similar reading. After concluding that the phrase "involving commerce" should be interpreted broadly, the Dobson Court further determined that the FAA applies to all contracts that involve commerce and does not require the contemplation of an interstate commerce connection by the parties. The Court found that a "contemplation of the parties" requirement was inconsistent with the FAA's basic purpose of helping parties avoid litigation. Such a requirement invited litigation about what was or was not contemplated by the parties. Any congressional recognition of an expedited dispute resolution system at the time the FAA was drafted would be undermined by this additional litigation. In 2001, the Court confirmed that the FAA also covers employment agreements that require arbitration to resolve work-related disputes. In Circuit City Stores, Inc. v. Adams , the Court held in a 5-4 opinion authored by Justice Kennedy that an employment application that included a mandatory arbitration provision was not excluded from the FAA's coverage pursuant to the statute's exemption clause. Section 1 of the FAA provides that it will not apply to "contracts of employment of seamen, railroad employees, or any other class of workers engaged in foreign or interstate commerce." The Court concluded that the Section 1 exemption clause should be given a narrow construction, and interpreted it to apply only to contracts with seamen, railroad employees, and other transportation employees. According to the Court, a reading of the phrase "any other class of workers engaged in foreign or interstate commerce" to exclude all employment contracts from the FAA's coverage would undermine the statute's specific enumeration of the "seamen" and "railroad employees" categories. The Court observed: Construing the residual phrase to exclude all employment contracts fails to give independent effect to the statute's enumeration of the specific categories of workers which precedes it; there would be no need for Congress to use the phrases "seamen" and "railroad employees" if those same classes of workers were subsumed within the meaning of the "engaged in ... commerce" residual clause. The Court also noted that the FAA's exclusion of contracts involving seamen and rail employees was reasonable given the adoption of federal legislation, such as the Shipping Commissioners Act of 1872 and the Transportation Act of 1920, that provided for the arbitration of their disputes. In light of these laws, the Court opined that the exclusion would allow "established or developing statutory dispute resolution schemes" to remain undisturbed. Historically, states have played an active role in the regulation of arbitration agreements, and all fifty states currently maintain statutes that operate alongside the FAA and govern the validity of arbitration agreements and awards. However, state legislatures and state courts have also sought to place various restrictions on the enforcement of mandatory arbitration clauses and proceedings, particularly in situations where there may be unequal bargaining power between the contracting parties. These restrictions have included state requirements that mandate a judicial forum for certain kinds of legal disputes, as well as those that impose special conditions or procedural safeguards on the arbitration process. As the Supreme Court has noted, Section 2 of the FAA "limits the grounds for denying enforcement of 'written provision[s] in ... contract[s]' providing for arbitration," and because of these limits, courts commonly find that the FAA preempts state laws or judicial rules that interfere with these contracts. Nevertheless, some state legislatures and state courts have attempted to invalidate certain mandatory arbitration agreements, commonly in instances where there is a perception that requiring the parties to settle their disputes through arbitration would be unfair, contrary to public policy, or would somehow not protect the interests of vulnerable individuals. The question of whether the FAA preempts a state law or judicial rule is a subject of recurring litigation that has come before the Court more than a dozen times. In these cases, the Court has routinely held that the FAA supersedes state requirements that restrain the enforceability of mandatory arbitration agreements. The preemption doctrine originates from the Supremacy Clause of the Constitution, which establishes that the laws of the United States "shall be the supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding." In general terms, federal preemption occurs when a validly enacted federal law supersedes an inconsistent state law. As a result, where federal and state laws are in conflict, the state law is generally supplanted, leaving it void and without effect. Courts frequently recognize that in analyzing the preemptive effect of federal law, the "purpose of Congress is the ultimate touch-stone." There are two general categories of preemption: express preemption and implied preemption. With respect to the first category, a federal statute may be deemed to displace existing state law through express language in a congressional enactment, often called an express preemption clause. Additionally, the Court has recognized certain implied forms of preemption, under which state law must give way to federal law if, for example, implementation of state law "stands as an obstacle to the accomplishment and execution of the full purposes and objectives of Congress." The FAA does not contain an express preemption clause. However, the Court has held, pursuant to implied preemption principles, that the FAA supersedes state laws that "undermine the goals and policies of [the Act]." As the Court has noted, the FAA "was designed 'to overrule the judiciary's longstanding refusal to enforce agreements to arbitrate,'" and "[t]he overarching purpose of [the FAA] ... is to ensure the enforcement of arbitration agreements according to their terms so as to facilitate streamlined proceedings." Additionally, a key factor in the Court's FAA preemption analysis has been a state's treatment of arbitration clauses compared to other contractual provisions. The Court has repeatedly indicated that Section 2 of the FAA compels courts to place arbitration agreements "on equal footing with all other contracts." Accordingly, state requirements that "single out" arbitration clauses for hostile treatment or do not apply to contracts generally have been held to be preempted by the FAA. The Supreme Court has addressed the relationship between the FAA and state law in a variety of different contexts. However, certain common principles articulated in these cases may arguably demonstrate the broad parameters of when the FAA preempts a particular state requirement. Among these principles, the Court has repeatedly held that the FAA will displace state laws or judicial rules that prohibit the arbitration of a particular kind of claim. In one of the first of its FAA preemption cases, Southland Corporation v. Keating , the Court held that the Act superseded a state provision that effectively compelled resolution of a dispute exclusively through the courts. In Keating , several franchisees of 7-Eleven convenience stores filed a class action lawsuit in California state court against the corporate owner and franchisor, alleging, among other things, violations of a state statute governing franchise investment. The corporation sought to compel arbitration of these claims pursuant to an arbitration clause in the franchise agreement. On appeal, the California Supreme Court held that (1) the state statute compelled judicial review of the claims because the statute voided provisions "purporting to bind a [franchisee] ... to waive compliance with any provision of [state] law"; and (2) the FAA did not supplant this state provision. In a 7-2 opinion written by Chief Justice Burger, the Court reversed the lower court, concluding in relevant part that the FAA applied in state courts and preempted the state statute's prohibition on the arbitration of claims. The Court stated that "in enacting §2 of the [FAA], Congress declared a national policy favoring arbitration and withdrew the power of the states to require a judicial forum for the resolution of claims" that parties choose to resolve through arbitration. Prior to Keating , it was unclear whether the FAA applied in state courts, where a large proportion of contractual disputes between private parties are heard. In clarifying the reach of the FAA, the Court focused on the language in Section 2 and its application to contracts "involving commerce" as evidence that Congress did not intend to limit the Act's reach to enforcement of arbitration clauses solely to federal courts. The Court further reasoned that adopting the state court's decision would promote forum shopping, and that Congress did not intend for enforcement of an arbitration clause to vary depending on whether the case arose in federal or state court. Finally, the Court explained that in passing the FAA, "Congress intended to foreclose state legislative attempts to undercut the enforceability of arbitration agreements." In subsequent decisions, the Court has reaffirmed the idea that when a state law or judicial interpretation bars mandatory arbitration of a specific type of dispute, the FAA preempts the state requirement. Following Keating , the Court has determined that Section 2 of the FAA also preempts state requirements that prescribe special conditions on the enforcement of mandatory arbitration agreements or the arbitration process. Under the Court's current construction of the FAA, these types of state requirements conflict with Section 2, which prevents states from singling out arbitration provisions for "suspect status." In Doctor ' s Associate s, Inc. v. Cas arotto , the Court evaluated a Montana state law that rendered arbitration clauses unenforceable if the agreement failed to state on the first page, in underlined and capital letters, that the agreement was subject to arbitration. At issue in Casarotto was an agreement between a franchisor of Subway sandwich shops and a franchisee. The agreement called for mandatory arbitration of disputes arising from the agreement, but lacked this state-required notice concerning arbitration. In an 8-1 opinion authored by Justice Ginsburg, the Court held Montana's law preempted, as it placed arbitration agreements in "a class apart" from other contracts and "singularly limit[ed] their validity." Because the state law conditioned enforcement of an arbitration agreement on compliance with a notice requirement that was inapplicable to contracts generally, the Court concluded that the FAA overrode the state requirement. In a more recent case, Preston v. Ferrer , the Court held that the FAA preempted a state law that initially referred certain state law claims to a state administrative agency before parties could arbitrate questions arising out of a contract. This case involved a dispute between Alex Ferrer, a television personality, and Arnold Preston, an entertainment industry attorney, and an agreement that contained a mandatory arbitration clause. Preston sought to recover fees allegedly due under the contract and moved to compel arbitration. In response, Ferrer petitioned the California Labor Commissioner to determine whether the contract was invalid and unenforceable under California law, claiming that Preston acted without the proper license required for talent agents. The state law at issue conferred "exclusive original jurisdiction" in the state's Labor Commissioner. The Court ruled, in an 8-1 decision written by Justice Ginsburg, that the FAA preempted the state law. In its opinion, the Court relied on an earlier FAA case, Buckeye Check Cashing, Inc. v. Cardegna , in which the Court determined "challenges to the validity of a contract providing for arbitration ordinarily 'should ... be considered by an arbitrator, not a court.'" The Court stated that " Buckeye largely, if not entirely resolves the dispute" in the case, and that granting primary jurisdiction over the dispute to an administrative agency conflicted with the FAA. The Court also found the state law preempted because it "impose[d] prerequisites to enforcement of an arbitration agreement that are not applicable to contracts generally." Ferrer had argued that the California law can be reconciled with the FAA because it "merely postpones arbitration until the Labor Commissioner has exercised her primary jurisdiction." However, the Court rejected this argument, concluding that requiring the Labor Commissioner to first hear the dispute would "hinder the speedy resolution of the controversy" and frustrate a primary objective of arbitration. The Supreme Court has also addressed the preemption of state law in relation to the FAA's "saving clause." Under the saving clause in Section 2 of the FAA, an arbitration agreement may be invalidated "upon such grounds as exist at law or in equity for the revocation of any contract." In other words, pursuant to the FAA's saving clause, arbitration agreements may be rendered unenforceable based on factors that would invalidate the contract as a whole. Courts have relied on the FAA's saving clause to deny the enforcement of an arbitration agreement, sometimes in cases where it is found that enforcement would be unconscionable pursuant to state law (i.e., fundamentally unfair or oppressive to one of the bargaining parties). However, the Supreme Court has recently held that the saving clause does not "preserve state-law rules that stand as an obstacle to the accomplishment of FAA's objectives." In AT&T Mobility LLC v. Concepcion , the Court examined an agreement between two consumers and a telephone company for the sale and servicing of cellular phones. After the consumers were charged sales tax for the phones that had been advertised as free, the consumers filed a class action lawsuit against the company. In response, the company sought to compel individual arbitration pursuant to the agreement. The consumers maintained that the arbitration agreement was unconscionable and therefore invalid because it did not allow for classwide arbitration. The U.S. Court of Appeals for the Ninth Circuit (Ninth Circuit) agreed with the consumers, based on a rule established by an earlier state court decision that found class arbitration waivers to be unconscionable when they involve certain types of contractual disputes. The appeals court maintained that the state court's rule did not conflict with the FAA because it reflected an unconscionability analysis that is generally applicable to contracts in California, and not just contracts containing an arbitration clause. In a 5-4 decision penned by Justice Scalia, the Supreme Court reversed the decision of the Ninth Circuit. While the Court noted that the FAA's saving clause allows arbitration agreements to be invalidated by "generally applicable contract defenses" such as unconscionability, the Court generally reasoned that the clause could not be used as a mechanism for imposing restrictions on arbitration that interfere with the goals of the FAA. In this case, the Court found that the saving clause did not immunize a state rule that required the availability of classwide arbitration, a process that interferes with the "fundamental attributes of arbitration" and creates a scheme that is inconsistent with the FAA. In comparing class arbitration with individual arbitration, the Court observed that the former makes the process slower and more costly, requires procedural formality, and increases risks to the company. The Court further concluded that California's state rule was preempted because it hindered the FAA's objectives of promoting an informal and streamlined dispute resolution process. In its most recent FAA preemption ruling, the Supreme Court not only reaffirmed its prior stance on FAA preemption, but also found that state law governing contract formation may also be subject to preemption under the FAA. On May 15, 2017, the Court handed down its ruling in Kindred Nursing Centers Limited Partnership v. Clark , upholding the validity of arbitration agreements entered into by the legal representatives of former nursing home residents. In a 7-1 decision authored by Justice Kagan, the Court concluded that application of a Kentucky state rule that compelled an individual to explicitly waive a right to trial when executing a power of attorney agreement violated the FAA, as such a requirement "singles out arbitration agreements for disfavored treatment." In Kindred , the estates of former nursing home residents sued the company that operated the nursing facility, alleging that the residents received improper care that led to their deaths. The company moved to dismiss the litigation, claiming that the arbitration agreements signed by the representatives of the residents, pursuant to power-of-attorney documents, prevented the cases from being heard in court. The Kentucky Supreme Court held that the arbitration agreements were invalid based on provisions of the Kentucky Constitution, which generally proclaim the right to trial by jury as "sacred" and "inviolate." Pursuant to these rights, the state court determined that an individual's representative can enter into a valid binding arbitration agreement and deprive the individual of access to the courts, but only when the individual expressly consents to the arbitration agreement being entered into on his or her behalf. Because the powers of attorney at issue in the case lacked this requisite authorization, the Kentucky Supreme Court concluded that these representatives were not permitted to waive the residents' state constitutional rights. The U.S. Supreme Court reversed and vacated the judgment of the state court. In its opinion, the Court held that by requiring an individual to make an express statement to surrender the individual's right to a trial, Kentucky's clear-statement rule "fails to put arbitration agreements on an equal plane with other contracts," in violation of the FAA. The estates of the residents argued that the FAA was inapplicable in this case, as the Kentucky state rule did not concern enforcement of existing arbitration agreements, but rather the initial formation of these agreements, something that is not covered by the federal act. However, the Court disagreed, noting that the language of the FAA addresses not only "enforce[ment]" of arbitration agreements, but also their "valid[ity]"—that is, what is needed to enter into them. Thus, the Court contended, "[a] rule selectively finding arbitration contracts invalid because improperly formed fares no better under the Act than a rule selectively refusing to enforce those agreements once properly made." Based on the Supreme Court's FAA jurisprudence, states appear restricted in their ability to constrain the use of arbitration agreements. While the Court has found that states may regulate arbitration agreements under laws governing the validity, revocability, and enforceability of contracts generally, state requirements that expressly target these agreements and that disfavor or interfere with arbitration are generally preempted by the federal act. Additionally, although the FAA's preemptive scope is broad, the Court has recognized that courts have the power to invalidate certain arbitration agreements under the Act's saving clause. However, after Concepcion , a topic of continuing debate is when the invalidation of an arbitration agreement is allowable, and when this invalidation will be found to impermissibly impede the objectives of the FAA, particularly in situations outside of the class action context. During the late 1990s, major companies began to restrict the availability of classwide arbitration in their consumer and employment-related mandatory arbitration agreements. In 1999, for example, ten major banks that issue credit cards reportedly formed a group to promote the use of class arbitration waivers. The increased use of such waivers has been criticized by some who contend that they have undermined challenges to practices such as predatory lending and wage theft. Others emphasize, however, that class arbitration waivers do not prohibit individual actions, and that employment disputes, in particular, are generally individualized and otherwise not appropriate for class or collective action. The Court has considered the enforcement of arbitration agreements that include class or collective action waivers in some of its most recent cases. As noted, in Concepcion , the Court concluded that an arbitration agreement that allowed only individual arbitration to resolve disputes was enforceable and not covered by the FAA's saving clause. According to the Court, the FAA's objectives of promoting an informal and expeditious dispute resolution system would be undermined if a California state court's rule were applied. Application of the rule would have permitted classwide arbitration, a process believed to be slower and more expensive. Following its decision in Concepcion , the Court considered another case involving a class arbitration waiver in a consumer agreement. In American Express Co mpany v. Italian Colors Restaurant , a group of merchants that accepted the American Express card challenged a class arbitration waiver on the ground that it contravened the policies of federal antitrust laws. The merchants argued that the credit card company used its monopoly power to force them to accept its cards at rates 30 percent higher than the fees charged for competing credit cards. The U.S. Court of Appeals for the Second Circuit (Second Circuit) declined to enforce the class arbitration waiver, citing the prohibitive costs that would be incurred by the merchants if they were compelled to pursue individual actions. On appeal, the Supreme Court noted that the enforcement of an arbitration agreement pursuant to the FAA may be overridden by a "contrary congressional command" against arbitration. Here, however, because the antitrust laws do not express an intention to preclude a waiver of class action procedures, the Court concluded in a 5-3 opinion authored by Justice Scalia that the class arbitration waiver was enforceable. The Court also maintained that the cost of pursuing individual arbitration should not be viewed as preventing the effective vindication of the merchants' rights under the antitrust laws. The Court explained: "[T]he fact that it is not worth the expense involved in proving a statutory remedy does not constitute the elimination of the right to pursue that remedy." In January 2017, the Court agreed to review three employment-related cases that involve class or collective action waivers. Unlike the class arbitration waivers at issue in Concepcion and Italian Colors , the waivers in these three cases prohibit a class or collective action in both arbitral and judicial forums. The cases— National Labor Relations Board v. Murphy Oil USA, Inc. ; Epic Systems Corporation v. Lewis ; and E rnst & Young LLP v. Morris —involve employees who contend that the waivers violate their right under the NLRA to engage in "other concerted activities for the purpose of collective bargaining or other mutual aid or protection[.]" This right, established in Section 7 of the NLRA, is enforced by Section 8 of the statute, which states that it is an unfair labor practice to "interfere with, restrain, or coerce employees in the exercise of the rights guaranteed in [section 7.]" In Murphy Oil , the U.S. Court of Appeals for the Fifth Circuit (Fifth Circuit) upheld a gas station operator's use of a class or collective action waiver. The court concluded that the NLRA does not express a contrary congressional command against arbitration that should preclude the enforcement of the waiver. In Epic Systems and Ernst & Young , however, the Seventh Circuit and the Ninth Circuit respectively held that the waivers contravene the NLRA, and may not be enforced pursuant to the FAA. In Epic Systems , the Seventh Circuit determined that the waiver was unlawful under the NLRA after first recognizing that the concerted activities contemplated by section 7 include the ability to maintain a class or collective action. Citing the NLRA's history and purpose, the court observed: "Section 7 should be read broadly to include resort to representative, joint, collective, or class legal remedies." Because the waiver restricts these Section 7 rights and thus would be considered an unfair labor practice under Section 8, the court determined that it was unlawful. Finding the waiver to be unlawful, the Seventh Circuit further maintained that the FAA's saving clause should render it unenforceable. The court explained: Illegality is a standard contract defense contemplated by the FAA's saving clause ... If the NLRA does not render an arbitration provision sufficiently illegal to trigger the saving clause, the saving clause does not mean what it says. Unlike the Fifth Circuit, the Seventh Circuit declined to find the waiver enforceable because the NLRA does not include a contrary congressional command against arbitration. Rather, the Seventh Circuit contended that the NLRA and the FAA should be construed to give effect to both statutes. Here, the court maintained that the statutes "work hand in glove" given the waiver's illegality and the operation of the FAA's saving clause. Like the Seventh Circuit, the Ninth Circuit also concluded that a concerted action waiver included in an accounting firm's arbitration agreement violated the NLRA and was unenforceable. In Ernst & Young , however, the Ninth Circuit emphasized that Section 7 provides a non-waivable substantive right to collectively pursue legal claims. The court noted that "when an arbitration contract professes the waiver of a substantive federal right, the FAA's saving clause prevents a conflict between the statutes by causing the FAA's enforcement mandate to yield." While the Ninth Circuit did recognize the waiver as a violation of Sections 7 and 8, it seems that the court might have found the waiver to be unenforceable simply because "substantive rights cannot be waived in arbitration agreements." The consolidated cases provide the Court with an opportunity to not only resolve the split among the appellate courts, but also address how the FAA should be construed when an arbitration agreement attempts to eliminate a right provided by another federal statute. In past cases, the Court has concluded that an arbitration agreement can restrict how a right will be enforced. In Gilmer v. Interstate/Johnson Lane Cor poration , for example, the Court maintained that a claim alleging a violation of the Age Discrimination in Employment Act could be subject to arbitration in lieu of litigation. Unlike the agreement at issue in Gilmer , however, the agreements in the consolidated cases would eliminate both a judicial and arbitral forum for concerted activity, a right provided by the NLRA. Moreover, how the Court interprets the application of the saving clause could be particularly notable. Epic Systems and Murphy Oil argue that the saving clause does not apply for various reasons, including the contention that it "has no application to other federal statutes like the NLRA." As discussed, however, this position is at odds with the decisions of the Seventh and Ninth Circuits. Given the Court's FAA jurisprudence and the seemingly limited ability of states to curb the use of mandatory arbitration agreements, some federal agencies have taken recent action to regulate the use of arbitration agreements under certain circumstances. For example, on July 19, 2017, the Consumer Financial Protection Bureau (CFPB) issued a final rule that will restrict the use of mandatory pre-dispute arbitration clauses in agreements for certain consumer financial products and services. This rule was issued pursuant to Section 1028 of the Dodd-Frank Wall Street Reform and Consumer Protection Act, which authorized the CFPB to conduct a study of the use of arbitration agreements between consumers and financial institutions and subsequently issue regulations restricting or prohibiting the use of arbitration agreements upon a finding that such a prohibition or restriction "is in the public interest and for the protection of consumers." The CFPB final rule circumscribes the use of mandatory arbitration agreements in two main ways. First, the final rule restricts covered financial service providers from using a pre-dispute arbitration agreement to block consumers from initiating or joining class action lawsuits. Second, the rule requires providers that use these arbitration agreements to include language reflecting the limitation on class action waivers and to submit specified information on their use of arbitration to the CFPB. The CFPB final rule takes effect on September 18, 2017, and applies only to mandatory arbitration agreements entered into on or after March 19, 2018. Some Members of Congress have expressed opposition to the rule, claiming that it could detrimentally impact consumers and hamper their ability to seek expedited resolution of their legal disputes. Legislation has been introduced that would overturn the final rule under the Congressional Review Act, including H.J.Res 111 , a joint resolution passed by the House on July 25, 2017. Additionally, in 2016, the Centers for Medicare and Medicaid Services (CMS), a part of the Department of Health and Human Services, issued a comprehensive final rule governing the participation of nursing homes and other long-term care facilities in Medicare and Medicaid. One requirement of the new rule that received considerable attention was a prohibition on a covered facility entering into a binding arbitration agreement with a resident (or the resident's representative) prior to a dispute arising between the parties. While some praised this ban as a way to better protect the health and safety of long-term care residents, others criticized this restriction and asserted that CMS lacks the authority to hinder the use of arbitration in this manner. Shortly after the final rule was issued, a number of plaintiffs filed a lawsuit against CMS, claiming that the agency lacked the authority to limit arbitration in light of the FAA. The U.S. District Court for the Northern District of Mississippi issued a preliminary injunction in American Health Care Association v. Burwell to temporarily prevent the agency from implementing the arbitration requirements while the case was pending. However, in June 2017, CMS withdrew its appeal of the district court decision, and the agency subsequently issued a proposed rule that would revise these arbitration restrictions. The proposed rule would remove the prohibition on pre-dispute binding arbitration agreements, but also includes certain measures to promote transparency in the arbitration process. Among the new provisions, the proposed rule would require a facility to ensure that the binding arbitration agreement is in "plain language" and in "plain writing" if it is part of the facility admission contract. As noted in the preamble to the final rule, CMS believes that the revised approach "is consistent with the elimination of unnecessary and excessive costs to providers while enabling residents to make informed choices about important aspects of his or her healthcare." In light of the Supreme Court's FAA decisions, the use of mandatory arbitration agreements by private-sector companies is believed to have grown enormously. While the efforts of federal agencies like the CFPB will likely deter the use of such agreements, the CFPB's rule, in particular, would apply only to a specific category of agreements—that is, those involving certain consumer financial products and services. Some maintain that the only way to reverse the growing use of mandatory arbitration agreements generally is to amend the FAA. During the 115 th Congress, several bills have been introduced that would amend the FAA and generally limit the use of mandatory arbitration agreements under specified circumstances. Examples include the following: Arbitration Fairness Act of 2017 ( H.R. 1374 / S. 537 ). This legislation would add a new chapter to the FAA and generally forbid mandatory arbitration agreements for the resolution of antitrust, civil rights, employment, or consumer disputes if an agreement was entered into before such a dispute arises. Under the bills, courts would be responsible for determining whether a particular arbitration agreement is subject to the ban. Restoring Statutory Rights and Interests of the States Act of 2017 ( H.R. 1396 / S. 550 ). In an effort to curb the use of pre-dispute arbitration agreements, these bills would amend Section 2 of the FAA to provide that the Act's requirements on the enforceability of arbitration agreements would not apply to specific claims brought by individuals or certain small businesses that arise from a violation of federal or state statutes, the U.S. Constitution, or a state constitution, unless a written arbitration agreement is entered into by both parties after the claim has arisen and applies only to the existing claim. The legislation would also amend the saving clause of the FAA to specify that it pertains to federal and state statutes and findings of a court that an agreement is unconscionable, invalid based on a lack of "meeting of the minds," or otherwise unenforceable based on contract law or public policy. Such changes would appear to limit the preemptive scope of the FAA under the Court's current construction of the Act, and potentially make it easier for state courts to invalidate mandatory arbitration agreements. A determination as to whether these provisions apply to a particular arbitration agreement would be required to be made by a court instead of an arbitrator. Safety Over Arbitration Act of 2017 ( S. 542 ). This bill would allow arbitration to resolve a dispute "alleging facts relevant to a hazard to public health or safety" only if all parties consent to arbitration in writing after the dispute arises. In instances when arbitration is elected, the arbitrator must provide a written explanation of the basis for any award or other outcome. Court Legal Access and Student Sup port (CLASS) Act of 2017 ( H.R. 2301 / S. 553 ). Legislation has also been introduced that would address the availability of arbitration in college enrollment disputes. Pursuant to the proposed CLASS Act, provisions of the FAA promoting the enforcement of arbitration agreements would not apply to enrollment agreements between students and institutions of higher education.
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Arbitration is a method of legal dispute resolution in which a neutral, private third party, rather than a judge or jury, renders a decision on a particular matter. Under a growing number of consumer and employment agreements, companies have come to require arbitration to resolve disputes. While arbitration is often viewed as an expeditious and economical alternative to litigation, consumer advocates and others contend that mandatory arbitration agreements create one-sided arrangements that deny consumers and employees advantages afforded by a judicial proceeding. The Federal Arbitration Act (FAA) was enacted in 1925 to ensure the validity and enforcement of arbitration agreements in any "maritime transaction or ... contract evidencing a transaction involving commerce[.]" The U.S. Supreme Court (Court) has recognized the FAA as evidencing "a national policy favoring arbitration." The application of the FAA, however, particularly in light of various state law requirements and the use of different types of arbitration agreements, has raised numerous legal questions and been the subject of several cases before the Court. The question of whether the FAA preempts a state law or judicial rule is a subject of frequent litigation. In these cases, the Court has routinely held that the FAA supersedes state requirements that restrain the enforceability of mandatory arbitration agreements. This report examines the FAA and reviews the Court's decisions involving the statute's preemption of state law requirements. The report also explores the Court's decisions involving mandatory arbitration agreements that prohibit a consumer or employee from maintaining a class or collective action. In its October 2017 term, the Court will consider three consolidated cases that challenge such agreements on the grounds that they violate the right to engage in "other concerted activities" under the National Labor Relations Act (NLRA). Finally, concern over a perceived lack of "meaningful choice" to decide whether to submit a claim to arbitration has prompted regulatory activity, as well as legislation that would amend the FAA to render certain types of pre-dispute arbitration agreements unenforceable. The report discusses some recent examples of federal regulatory action that aim to restrict the use of mandatory arbitration in the consumer arena, and reviews bills like the Arbitration Fairness Act of 2017 (H.R. 1374/S. 537), which would prohibit the enforcement of an arbitration agreement that requires arbitration for an employment, consumer, antitrust, or civil rights dispute if the agreement was executed prior to the dispute's occurrence.
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On May 23, 2005, during the first year of President George W. Bush's second term, OMB issued a memorandum to the heads of departments and agencies. (See Appendix A for a facsimile of the memorandum.) Joshua B. Bolten, Director of OMB at that time, wrote that "effective immediately," OMB would involve itself systematically in some aspects of how agencies execute laws related to mandatory spending. For the most part, mandatory spending programs are provided for in substantive laws under the jurisdiction of House and Senate authorizing committees. Congress typically vests authority to implement these laws in agencies. Mandatory spending accounts for more than half of the federal government's annual outlays. (See Appendix B for tabular displays of FY2009 mandatory outlays broken out by authorizing committee and programmatic area.) Discretionary spending, by contrast, is provided in annual appropriations acts under the jurisdiction of the House and Senate Appropriations Committees. In issuing the OMB memorandum, the Bush Administration's stated goal was to restrain federal spending growth for mandatory spending programs. If an agency wished to use discretion under current law in a way that would "increase mandatory spending," the memorandum required the agency to propose the action to OMB. For purposes of OMB's process, an increase was defined as spending more than the amount that the Administration assumed in its most recent projection of what is required under current law to fund the mandatory spending program. To offset such a difference in spending, the memorandum also required the agency to propose actions that would "comparably reduce" mandatory spending. The memorandum did not address, however, whether agencies' administrative actions and corresponding spending changes would be consistent with congressional intent or expectations, or whether agencies' proposals and OMB's decisions would be transparent to Congress and the public. The Administration elsewhere characterized the process as "augmenting its ... controls" on agency decisions, and, in addition, referred to the process as "administrative PAYGO." In using the term "PAYGO," the Administration juxtaposed this OMB involvement in agency decision making with a different, statutory mechanism that Congress has used when carrying out its power of the purse and legislative function (see Box 1 ). In 2009, the Barack Obama Administration said it would continue the OMB memorandum's process. After several years of implementation, however, very little is publicly known about the scope and effect of OMB's process or the rationales for OMB determinations. In one case, some details about OMB's process were disclosed publicly in June 2010, which prompted congressional concerns about agency policy implementation and the role of OMB. Using available information, this CRS report focuses first on the OMB May 2005 memorandum and the process it outlines. The report then discusses one case where the process appears to have been implemented. It then discusses other potential implications, if the OMB process were widely utilized in practice. Next, the report discusses potential options for Congress. Finally, Appendix C of the report discusses how Congress in other contexts has responded legislatively to the prospect of (1) agencies operating under broad grants of discretion to implement laws, and (2) the President's involvement in agency decision making through OMB. This report's analysis draws on these precedents, which may inform congressional consideration of options related to the OMB memorandum and its use on behalf of the President. The Bush Administration first announced plans to implement this "administrative PAYGO" process in February 2005, shortly after President Bush was inaugurated for his second term. Specifically, the Administration said OMB planned to establish an "internal review process that requires agencies, when proposing substantial administrative decisions that increase mandatory spending, to also propose other offsetting administrative decisions that reduce mandatory spending." This approach, the Bush Administration said, would accompany an Administration legislative proposal to restore some aspects of a statutory budget enforcement process often referred to as "pay-as-you-go" (PAYGO). Box 1 discusses "statutory PAYGO," which is different from the OMB process in several significant respects, including stages of the budget process in which activities occur, the actors who are involved, and transparency to Congress and the public. Due to the differences, a lack of information about how the OMB process has been used in practice, and absence of the term "administrative PAYGO" in the underlying OMB memorandum, this CRS report generally refers to "the OMB May 2005 memorandum" or "the OMB process" instead of "administrative PAYGO." On May 23, 2005, then-OMB Director Bolten followed up on OMB's announcement by issuing a two-page memorandum to heads of departments and agencies with directions for agencies (see Appendix A ). As of this CRS report's writing, the memorandum remains virtually the only published source of transparency into OMB's process. With a stated goal of "restraining Federal spending growth," Director Bolten wrote that effective immediately, agencies were required to follow certain steps regarding "administrative actions" that would "increase mandatory spending." The memorandum further explained and defined the latter two quoted terms. With regard to the term "administrative actions," the memorandum identified two types of administrative actions that could have the impact of increasing mandatory spending: those actions that are "required by law" and those that are "discretionary." The memorandum defined the second type, "discretionary administrative actions," as including "regulations, demonstrations, program notices, guidance to states or contractors, or other similar actions not required by law that would increase mandatory spending." Notably, the memorandum also stated that "the term 'administrative action' includes actions not normally subject to OMB review," suggesting that this process would systematically involve OMB in agencies' decision making in new ways. The memorandum also defined "increase in mandatory spending," as "an increase relative to the projection in the most recent [President's annual budget request] or Mid-Session Review of what is required, under current law, to fund the mandatory-spending program." In OMB documents, these projections are called "current services estimates" or "baseline projections of current policy," and are based on the Administration's economic and programmatic assumptions. Procedurally, the memorandum required agencies to include in their annual budget requests to OMB a list of "all administrative actions planned or anticipated for the fiscal year covered by the submission that would increase mandatory spending in that or any subsequent fiscal year." OMB did not address whether these "planned or anticipated" actions similarly would appear in the President's budget submission to Congress or in agencies' more detailed budget submissions. At any point in time between one year's annual budget submission to OMB and the next, the memorandum furthermore required agencies to "advise OMB of any anticipated administrative action that would increase mandatory spending as soon as possible after the agency becomes aware that the action is likely to occur." Each of these notification requirements appeared to hold regardless of whether the "planned" or "anticipated" administrative actions were considered to be required by law or subject to an agency's discretion. Other language in the memorandum suggested that OMB would treat all such "planned" and "anticipated" administrative actions as having been "proposed" by the agency to OMB. OMB provided further direction on how agencies should make these "proposals." If an agency submitted to OMB a discretionary administrative action that would increase mandatory spending, OMB said the agency also would be required to "include one or more proposals for other administrative actions ... that would comparably reduce mandatory spending." Requests for exceptions to the requirement for offsets would need to come from the agency head, and such requests would be "granted" by the OMB Director only "in light of extraordinary need or other compelling circumstances." An agency head would be allowed to "appeal" to the "Budget Review Board." Alternatively, if an agency determined that an action would increase mandatory spending but is "required by law and therefore does not permit the exercise of discretion," OMB directed that "the agency's general counsel must provide an opinion explaining that conclusion." In either case, OMB directed that "[a]ll materials submitted to OMB in this context should include a first-year cost estimate and, whenever possible, five- and ten-year cost estimates provided by the agency's chief actuary or, in the absence of an actuary, the chief budget or policy officer." The memorandum also discussed what might happen after an agency submits these planned and anticipated actions to OMB. In some cases, if OMB were to determine that an offset is "inappropriate," the memorandum said OMB may "request" that the agency submit "alternative offsets." Alternatively, if an agency were to submit a discretionary administrative action without an offset, it would be "returned to the agency for reconsideration." The latter language is identical to what OMB's Office of Information and Regulatory Affairs (OIRA) uses in the context of reviewing agencies' draft proposed and final rules. When OMB reviews rules, OMB says a return for reconsideration may occur for a variety of reasons, including, among others, "if the quality of the agency's analyses is inadequate ... [and] if the rule is not consistent with ... the President's policies and priorities." During the Bush Administration, an OIRA Administrator referred to return letters as being OMB's "ultimate weapon" in influencing agencies' actions. (See Box 2 for discussion of OMB returns of draft rules for agency reconsideration, which may inform assessments of the potential effect of returns under OMB's May 2005 memorandum. ) After issuing the memorandum, OMB briefly cited it and some of its requirements in Circular No. A-11 , an annual document that directs agencies in how to prepare budget requests. The Bush Administration also included short descriptions of the memorandum's controls in subsequent presidential budget requests, which said the OMB memorandum continued to be in effect. During the remainder of the Bush Administration, it seems that no further information about the OMB memorandum and its utilization was publicly released. Shortly after President Obama took office in January 2009, the Obama Administration indicated it would continue to implement the OMB memorandum's procedures in some form. After a March 2009 hearing, Ranking Member Paul Ryan of the House Budget Committee posed several questions for the record to OMB Director Peter R. Orszag about the OMB May 2005 memorandum. Specifically, he asked if the Obama Administration was continuing to use the memorandum's process; if the Administration had made any related changes to its baseline; what any such baseline changes and their budgetary impacts were; and for an "account of all administrative actions affecting levels of mandatory spending that have been implemented since January 20, 2009, or which are assumed in your budget." Director Orszag responded that the Obama Administration supported continuation of the OMB process and furthermore that it planned to implement it relative to the current services baseline in the President's FY2010 budget proposal, "except where it is appropriate to waive Administrative PAYGO in accordance with established procedures." In addition, Director Orszag said the upcoming FY2010 Analytical Perspectives volume of the President's budget proposal would "provide information on the budgetary impact of regulations and other important baseline assumptions." In this response, Director Orszag referred to a section of the Analytical Perspectives volume that identifies "some," but not all, of the "major programmatic assumptions" that may affect the Administration's baseline estimates. Conceivably, such a list might include some, but not necessarily all, of any planned changes in mandatory spending that result from the OMB May 2005 memorandum's process. However, without greater transparency into OMB's and agencies' activities, it is not clear these instances could be identified. After the March 2009 hearing, little information about the OMB memorandum and its utilization was forthcoming. Following the Bush Administration's practice, the Obama Administration referred to the OMB memorandum in the annual Analytical Perspectives volume, indicating the Administration would continue to implement its process. An OMB representative provided some information about the May 2005 memorandum and its process in response to inquiries from CRS. According to the representative, similar activities had occurred before, but the May 2005 memorandum formalized them. Within OMB, the process is implemented in a decentralized way by the organization's Resource Management Offices (RMOs). The representative also said information about the process's scope and effect has not been made publicly available. Such proceedings and communications are considered by OMB to be pre-decisional and subject to restrictions outlined in Section 22 of Circular A-11 . This section of the circular says, among other things, that "[p]olicy consistency between the President's Budget and the budget-related materials prepared for the Congress and the media is essential," and it points to a statutory provision that restricts agency officers and employees from submitting "to Congress or a committee of Congress an appropriations estimate or request, a request for an increase in that estimate or request, or a recommendation on meeting the financial needs of the Government" unless "requested by either House of Congress." As noted later in this report, Congress has legislated multiple exceptions to the statutory restriction. As of the time of this report's writing, little more is publicly known about how widely the OMB memorandum has been used, whether it has been used consistently across agencies and policy areas, and what its effects have been. In addition, the Bush and Obama Administrations generally have not addressed whether agencies' and OMB's actions would be consonant with congressional intent or expectations. Even with a lack of transparency, it is nevertheless possible to analyze some of the memorandum's potential effects and implications, if the memorandum's process were used. Such analyses, may, in turn, highlight potential issues for Congress. In one case, an agency official broached the subject in a congressional hearing, as discussed below. OMB's controls on mandatory spending programs appear to have been used during implementation of the Conservation Reserve Program (CRP) in the U.S. Department of Agriculture (USDA). The CRP provides payments to farmers to take highly erodible or environmentally sensitive cropland out of production for ten or more years. CRP is the federal government's largest private land retirement program and was enacted in 1985. The 2008 farm bill allows USDA to enroll up to 32 million acres at any one time, with mandatory funding coming from USDA's Commodity Credit Corporation (CCC). Jurisdiction in Congress for CRP (for both authorization and funding since CRP is a mandatory program) resides in the House Committee on Agriculture and the Senate Committee on Agriculture, Nutrition and Forestry. Congress may have the understanding that it has given USDA statutory authority and access to mandatory funding to enroll 32 million acres, as well as the expectation the authority would be used. However, the process outlined in OMB's May 2005 memorandum appears to have prevented USDA from reaching that goal, at least for a time. In testimony to Congress in June 2010, a USDA official acknowledged several obstacles that were imposed on agency action by OMB's process. Specifically, the testimony tied the Bush Administration's application of the OMB process to agency actions concerning the CRP. The testimony also cited a more recent application of OMB's process, in which spending reductions from changes to the federal crop insurance program apparently were used as offsets to enable CRP funding. But [the current treatment of offsets to expand the Conservation Reserve Program] isn't the sole source of the problem that we confront both in dealing with the Administration PAYGO problems that we face day or day [sic] or the ones that Congress faces. Basically we have ended up in a situation where even going back to the previous Administration there were efforts to make modifications to the CRP program that required offsets, and there were a number of tradeoffs that were made in terms of efforts to pay for programs. The previous Administration wanted an open access initiative applied to CRP... They were required to pay for that and so in order to pay for it, they modified their assumptions concerning CRP participation... They didn't implement the program, and during the transition [to the Obama Administration] OMB applied those PAYGO savings to deficit reduction and so we lost it. When we then decided to try to find a way to allow for an extension of expiring CRP contracts last year, we had to pay for it, and so we went back and made an assumption about future CRP signup in order to get the money to pay for the extensions last year. So that meant as we start looking at an open signup this year with the goal to maximizing CRP participation at [32 million acres], we are basically stuck with an offset... About $300 million of administratively required PAYGO offsets. To put the testimony in context, fewer than 32 million acres are enrolled in CRP, and the USDA baseline reflected only the enrolled acres. Thus, apparently the USDA baseline did not contain sufficient funding to enroll the additional acres to reach 32 million acres, even though USDA has the legislative authority up to 32 million acres. CRP program activity essentially appears to have been limited by the Administration's baseline under OMB's controls. Table 1 shows that USDA's baseline in February 2010 assumes that 30 million acres will be enrolled in CRP from 2011 to 2014. Conversely, CBO's concurrent baseline in March 2010 assumes nearly full enrollment during those same years, at 31.8 to 31.9 million acres. During the 2011-2014 period, the difference between CBO's and USDA's baseline assumptions ranges from 1.5 million acres to 1.9 million acres, with USDA assuming lower enrollment (and thus lower outlays). This difference gives rise to tension between Congress and USDA/OMB over whether additional CRP enrollment to reach the 32 million acre cap should be required to be offset. The process outlined by OMB's May 2005 memorandum appears to have required USDA to find offsets in other mandatory programs when it wanted to increase CRP acres—an activity that would cost more but which Congress already had authorized USDA to do, both in statute and for which CBO has projected outlays in its baseline. Likewise, if USDA wished to use its authority to implement administrative initiatives that are within the scope of the CRP authorizing language provided by Congress (such as the Open Access program or programs to help certain species such as the sage grouse), OMB's process would appear to require USDA to find offsets before funding became available to implement those actions. The effect of OMB's process on CRP appears to have become an issue during the Bush Administration, as implied in the testimony excerpted above. According to the USDA testimony, the Bush Administration wished to fund an Open Access initiative. In order to fund the initiative under OMB's process, the Administration modified its assumptions concerning CRP participation in a way that reduced costs and freed up funds. However, the Open Access initiative ended up not being implemented, leaving the freed-up funds still to be utilized. During the presidential transition, however, OMB allocated the freed-up funds to deficit reduction rather than other purposes, such as CRP. During the Obama Administration, according to the testimony, offsets were needed again when USDA wanted to increase CRP enrollment. This came to light in a more transparent way during the recent renegotiation of the Standard Reinsurance Agreement (SRA) for the federal crop insurance program. A USDA press release that announced the final SRA agreement states that [T]he Administration is also ensuring that $2 billion in savings from the new Standard Reinsurance Agreement will be used to strengthen successful, targeted risk management and conservation programs and that $4 billion will be used to reduce the national deficit. The $2 billion that will be invested in Farm Bill programs include releasing approved risk management products, such as the expansion of the Pasture, Rangeland, and Forage program [a crop insurance program]; providing a performance discount or refund, which will reduce the cost of crop insurance for certain producers; increasing Conservation Reserve Program (CRP) acreage to the maximum authorized level; investing in new and amended Conservation Reserve Enhancement Program initiatives; and investing in CRP monitoring. These are activities for which Congress appears to have had the understanding it had already provided funding to USDA (indicated by CBO's baseline assumptions shown in Table 1 , through the statutory instructions to use the Commodity Credit Corporation to pay for CRP, and the authorities for the Federal Crop Insurance Corporation). The perceived need for offsets appeared to come from within the Bush and Obama Administrations, and particularly from OMB, as indicated in the testimony above. As a result, an agricultural newsletter reported that the House Agriculture Committee was interested in OMB's process and might call a hearing. The newsletter also quoted the committee's Chairman Collin C. Peterson as saying, [W]ait a minute. We have already authorized the CRP at 32 million acres. But it turns out that OMB had already capped CRP at a lower level and used part of the money for the Open Access program. OMB is not supposed to do that. They are undermining the authority of the authorizing committees. USDA reportedly said that it would cooperate by providing information to Congress. As for whether there could be a pattern of OMB redirecting funds in past years, [USDA Secretary Tom] Vilsack said that "Honestly, I don't know enough about the details of OMB's machinations. I just know that I am focused on trying to get those 32 million acres in CRP, which I think we are going to get done. We will cooperate with the committee and we will provide them with all the information that they are seeking." The effect of budgetary offsets created by the Administration and used in the OMB process may also affect the official CBO baseline used by Congress. For example, the offset used to increase CRP that was cited in the USDA press release above was savings from the renegotiation of the Standard Reinsurance Agreement for crop insurance. In the spring of 2010, on the expectation that USDA would adopt some savings administratively through the SRA, the March 2010 CBO baseline—released before the final SRA agreement was reached in June 2010—reflected a reduction by incorporating a placeholder of $3.9 billion of savings from the SRA. A future CBO baseline is expected to fully incorporate the final SRA under CBO assumptions, which might result in a different amount than USDA's estimate of $6 billion of savings. Moreover, the Administration's assertion that it is "reinvesting" $2 billion from the SRA savings into the farm bill baseline for CRP and other crop insurance programs may or may not be fully reflected in CBO's baseline, again depending on the potential for different budgetary assumptions used for OMB's process and CBO's official baseline. Thus, some Members of Congress, especially those on the Agriculture committees, have expressed concern that USDA has taken action that will reduce the funds available to Congress to write the next farm bill in 2012. Less may be available either because OMB applies administrative savings to deficit reduction, or CBO's assumptions do not reflect the same increase in the baseline as the Administration asserts was added to the programs through OMB's process. These Members expressed concerns about preserving the CBO baseline, so that Congress can make decisions of how to reallocate funds within the agricultural budget, or comply with possible congressional directives to reduce the deficit via budget reconciliation. In both of these cases, the Agriculture committees could make similar reductions to crop insurance, but the difference is that the savings could be available for legislative offsets through statutory PAYGO, rather than be used as offsets for an OMB process that some in Congress might question. The CRP example illustrates one instance in which OMB appeared to exercise influence over an agency's mandatory spending program. However, without more information about when and how this process has been implemented, it is not possible to say whether the example is typical. Furthermore, as noted earlier, OMB told CRS that the process outlined in OMB's May 2005 memorandum has not been implemented in a centralized manner. Therefore, it is possible the process may have been implemented inconsistently across OMB's Resource Management Offices and, as a result, in different ways across agencies and programs. Given the lack of transparency surrounding this process, it is not possible to determine the extent to which the process has been used or enforced, nor is it possible to determine whether or not the process has achieved its stated purpose of containing increases in mandatory spending from discretionary administrative actions. Nevertheless, the CRP example does highlight some potential broader implications of this OMB process. For one thing, it suggests that the OMB process may have measurable effects on program outputs and outcomes. In the case of CRP, this process appears to have affected the number of acres that were enrolled in the program. By extension, such a process also could affect the number of individuals enrolled in benefits programs, like Medicaid or Supplemental Security Income (SSI), and the services they receive. In addition, there may be instances in which this process may impose administrative burdens on federal agencies. When agencies "propose" an administrative action for OMB's review, staff in program offices, budget or actuarial offices, and general counsel offices must develop five- and ten-year cost (or savings) estimates, as appropriate, and determine whether or not the action is required by law (or discretionary). If agencies are engaging in such activities for every discretionary action that technically is covered under the OMB memorandum's definitions—that is, every program notice, every piece of guidance to states or contractors, etc.—this could result in an increase in the workload of relevant staff and result in less effort focused on other tasks. Moreover, if agencies experience difficulty in identifying plausible offsets, it is conceivable that their behavior may be altered. For example, agencies may choose to not consider, pursue, or submit to OMB an administrative action that would cost money, regardless of the agency's perception of a policy's merits or whether it would be consistent with congressional intent. Because OMB's process is not transparent outside the executive branch, agencies might furthermore be hesitant to discuss such policy options and trade-offs with congressional authorizing committees. OMB's effort to exercise more systematic control over agency mandatory spending is fairly recent, but many related issues have arisen in the past. The Framers of the Constitution intended for Congress, the President, and the courts to share power over the national government, subject to checks and balances from each other. Consequently, as Congress and the President pursue their policy preferences, they may cooperate or compete for control of agencies and the policies they implement. In addition, with the advent of the "administrative state"—that is, expansion in the size and scope of federal government at the turn of the 20 th century—Congress granted increasing discretion in many policy areas to administrative agencies. In response, Congress has shown ongoing interest in monitoring, regulating, and publicizing how agencies use discretion. The institutional presidency also expanded in the 20 th century in several respects, especially with the establishment of OMB and its growing role in helping the President to pursue his or her policy preferences. Consequently, Congress also has shown considerable interest in the possibility of presidential influence on, and interventions in, agency decision making through OMB. In Appendix C , this report reviews selected instances when these issues arose and ways in which Congress responded. These include the Administrative Procedure Act (APA), which Congress passed in 1946 in order to bring transparency and public participation to agencies' use of discretion through rulemaking. The APA facilitated congressional oversight by defining certain kinds of discretionary actions as "rules," requiring agencies to formally articulate proposed rulemakings in advance of implementation, and allowing interested stakeholders to act as extensions of Congress for purposes of "fire-alarm" oversight. This transparency also facilitated Congress's ability to influence rulemaking through the use of appropriations restrictions. It should be noted, however, that rules may encompass only a small portion of the discretion that agencies exercise. A prominent administrative law scholar argued that most agency decision making is informal activity—that is, use of discretion not covered by the APA and largely unregulated. Furthermore, OMB sometimes has been involved in agency decision making, as discussed in Appendix C . In some instances, Congress gave OMB a role in agency decision making through statutory requirements, when doing so served Congress's legislative purposes. At other times, various Presidents initiated OMB's involvement in order to pursue their policy preferences. In both cases, Congress responded to the prospect or reality of OMB's involvement with statutory directions, constraints, and transparency requirements. In other cases, OMB itself has provided for some level of transparency. If Congress wishes to consider options related to the OMB May 2005 memorandum, the following four examples of OMB involvement in agency decision making, along with related congressional responses, may suggest approaches. Agency submissions of budget information and requests. The Budget and Accounting Act of 1921 required agencies to submit budget requests to the President for potential modification, before the requests are submitted to Congress. OMB administers this process on the President's behalf. In multiple cases, Congress has legislated statutory exceptions to this law and thereby allowed direct submissions of budget information to Congress, in order to provide agencies with some independence from the policy preferences of the President or to improve congressional access to agency information. OMB clearance of agency testimony and draft legislation. Executive Order (E.O.) 8248 established a process for OMB to "clear" and "coordinate" numerous types of agency communications with Congress, including testimony and correspondence, before agencies submit them to Congress. In this area, as well, Congress has acted to provide some agencies with statutory authority to directly submit such materials to Congress, in order to provide them with some independence from the policy preferences of the President or to improve congressional access to agency information. OMB and the Paperwork Reduction Act. Congress passed the Paperwork Reduction Act to provide central leadership and oversight of government-wide efforts to reduce paperwork burden on non-federal persons. The law established the Office of Information and Regulatory Affairs (OIRA) within OMB. OIRA is authorized by law to approve or disapprove agency information collection requests, but this approval process is subject to certain requirements for transparency and public participation. OMB review of agency rules and guidance documents. The rulemaking process that the APA established also facilitated the eventual start of "presidential review" of agency rulemaking, which has been undertaken in one form or another since 1971. The current process was established through E.O. 12866. The E.O. requires departments and agencies (but not independent regulatory agencies) to submit all "significant" proposed and final regulatory actions to OIRA for review before they are published in the Federal Register and take effect. OIRA may return some draft proposed and final rules to agencies for "reconsideration," as discussed in Box 2 . The E.O. requires some transparency for "formal" OIRA reviews of draft proposed and final rules, but not for "informal" reviews. Congress has used statutory provisions added to OMB's appropriation to limit the scope of certain OMB reviews. Discussion in Appendix C of the APA and four examples of OMB involvement in agency decision making (and associated congressional responses) may inform congressional consideration of potential options that relate to the process outlined in OMB's May 2005 memorandum. The process outlined by OMB's May 2005 memorandum may raise issues for Congress relating to congressional intent for mandatory spending, agency use of discretion, and the possibility of OMB involvement in agency decision making on behalf of the President. In approaching the subject of OMB controls on agency mandatory spending, Congress might consider at least five general options. First, if Congress sees no current need to engage in lawmaking or oversight of the process, it might continue with the status quo. Second, if Congress wished to learn more about the process, as practiced currently or in the past, Congress could conduct related oversight through hearings and inquiry. In posing certain questions, scrutiny associated with this kind of oversight may indirectly affect how OMB implements its process. In addition, Congress might wish to have more information before considering legislative options, if it were concerned about potential unintended consequences from legislating. If Congress wished to address the topic prospectively through lawmaking, Congress might consider three additional options: increasing transparency of OMB's process, legislating in greater detail, or modifying how OMB's process operates. The latter three options also might be considered in combination. Each of the five general options is discussed below along with potential implications. Congress might consider proceeding with the status quo. Under this option, the process outlined in the OMB May 2005 memorandum presumably would continue in some form with very limited transparency outside the executive branch. To the extent agency administrative actions already were subject to requirements for transparency and public participation (e.g., "rules" under the APA), these practices would continue. If the OMB process were utilized, the Administration would twice per year establish a baseline spending projection to which agency mandatory spending levels would be held, unless the Administration made exceptions or agencies could persuade OMB that cost-increasing administrative actions were required by law. Advocates of this option might argue that the President and OMB would use this process to prevent increases in mandatory spending that are not required by law, and that directing agencies in this way should be considered pre-decisional and therefore viewable only within parts of the executive branch until agencies act or otherwise are required to disclose actions. The Bush Administration justified use of the process by saying "[a] significant amount of Federal policy is made via administrative action, which can increase Federal spending, often on the order of tens of billions of dollars in entitlement programs such as Medicare or Medicaid," and that agencies "frequently initiate unplanned for and costly proposals." Critics of the status quo option might argue that the process outlined in OMB's May 2005 memorandum could be used by the President in an effort to displace statutory authority vested in agencies, and that agencies have a higher likelihood of following congressional expectations and intent than OMB, which acts on behalf of the President's policy preferences. Critics also might enlist arguments like those below, in support of alternative options to conduct investigatory oversight, increase transparency, legislate in detail, or modify OMB's process. A separate group of critics might view the status quo as providing inadequate leverage for the President, because OMB does not have explicit statutory authority to disapprove agency administrative actions. As a second general option, Congress might conduct oversight through the use of hearings or other forms of investigative inquiry of how agencies and OMB have operated in the past, or currently operate, under OMB's process. In addition, if Congress wished to consider options that involve lawmaking, the use of oversight tools to gain more information about OMB's process might help prevent unintended consequences from legislating. If Congress wished to learn more about the process, how it has been used, and what its effects have been, a number of topics might be investigated or studied. For example, little is publicly known about the scope and effect of OMB's controls on mandatory spending programs. Potential avenues of inquiry related to this topic might include the following: establishing which agencies and programs have been subject to OMB's process; determining what its effects on program outputs, outcomes, and spending have been; discovering what the process's impact has been on the activities, capacity, and workload of agency budget, legal, policy analysis, and program offices; and ascertaining how the process has worked in practice (e.g., the extent to which OMB has judged agency-submitted offsets to be "inappropriate," returned submissions for reconsideration, or granted exceptions to the process's offset requirement "in light of extraordinary need or other compelling circumstances"). In addition, it is not clear whether agencies' administrative actions and corresponding mandatory spending changes have been consistent with congressional intent or expectations. Related questions might include whether agencies have consulted with congressional authorizing committees before submitting administrative actions to OMB or taking action. Another potential line of inquiry might involve how the Administration's baseline has been used. Because the OMB memorandum's definition of an "increase in mandatory spending" is relative to a baseline that is easily revised by OMB, it is conceivable that a President or OMB could use the baseline proactively as a policy lever in an attempt to direct agency uses of discretion in mandatory spending programs. For example, it is conceivable that an Administration might assume that a longstanding agency practice, which nevertheless is not required by law, does not continue. If discontinuance of the practice would save funds, an agency's plan to continue with the practice technically might be interpreted by OMB as an "increase in mandatory spending," which under the OMB memorandum would require the agency to propose offsets. Hence it is conceivable that OMB could proactively cause certain agency practices to become "proposals" for purposes of the OMB memorandum. Congress also might consider legislating on this subject to increase transparency prospectively. Especially in this area, prior congressional approaches to agency use of discretion and OMB involvement in agency decision making may inform congressional options (see Appendix C ). As a threshold matter, additional transparency could be pursued on an agency-specific or government-wide basis. In either case, Congress might seek increased transparency at one or more stages of agency and OMB activity, including (1) at the time of initial agency submission of a "proposal" to OMB; (2) after an OMB determination, but in advance of agency implementation; (3) at the beginning of agency implementation; and (4) after implementation has begun. At stage (1), for example, Congress might consider as a model the exceptions it has legislated for submission of budget information or agency testimony directly to Congress before modification by OMB. Alternatively, Congress might consider establishing an APA-like or PRA-like process for agency submissions to OMB, the President, or an entity in the Executive Office of the President, albeit without allowing OMB to conduct "informal" reviews of the submissions before they are published for public comment. Analogous to the APA or PRA, such a process might provide for advance publication, public participation, and congressional insight into the trade-offs that OMB and agencies consider. Because this option would provide some advance notice to Congress, Congress might have an opportunity to conduct oversight or legislate on the topic. At stage (2), Congress might consider establishing an APA-like or PRA-like process for agency administrative actions reviewed and approved by OMB but not yet implemented. Such a process might provide for advance publication and public participation, while still allowing OMB to conduct a prior review. At stages (3) or (4), Congress might consider reporting requirements for agency administrative actions pursued after OMB review, including cost-increasing and cost-reducing actions. This option would not provide advance notice to Congress. Advocates of increased transparency might argue that OMB's current process makes it difficult or impossible to know whether OMB and agencies were acting consistently with congressional expectations or intent. In addition, advocates might argue that administrative actions with substantial implications for spending are legislative in nature, even if they do not fall under the APA's definition of "rule," and therefore should be subject to transparency and public participation. Critics of increased transparency might argue that the transparency would weaken the President's influence over agencies, or that the President should have substantial leverage over agency mandatory spending activities. In addition, critics might argue that transparency would impede open communications within the executive branch on how to best implement current law. If Congress were dissatisfied with the OMB process, Congress might consider legislating in greater detail to reduce the discretion that agencies might exercise when implementing mandatory programs. By reducing agency discretion, Congress might lessen the ability of OMB to involve itself in agency decision making and thereby potentially prevent deviations from congressional intent. Legislating in greater detail would be done at the agency or program-specific level by individual authorizing committees, if the committee process were used to move legislation. Legislating in greater detail may put more responsibility on Congress to anticipate a range of implementation issues that otherwise could be left to agencies. If agencies are prevented from exercising authority to adjust the implementation of mandatory programs or pursue emerging policy priorities, the outcome of a program may rest more squarely with Congress. In addition, if detailed program parameters or requirements that are set in statute are not optimized initially and need to be adjusted (e.g., to fix a faulty assumption), legislative action may take relatively longer than administrative action. This could put program costs or participation in jeopardy compared to congressional intent. Depending on the direction of the change, revising legislative details could have adverse statutory PAYGO implications for authorizing committees that otherwise might not occur had implementation been left to an agency. Thus, there could be some substitution of budget challenges between OMB's process and legislating in detail. In some circumstances, Congress may be reluctant to "reopen" authorizing language before it expires because of unrelated program requests that could complicate the legislative process. Congress might consider statutorily modifying the process outlined in OMB's May 2005 memorandum, either on an agency-specific or government-wide basis. For example, Congress might enact into law OMB's process while giving OMB explicit authority to approve agency actions, perhaps modeled on the PRA (see Appendix C ). Alternatively, Congress might prohibit OMB from implementing the memorandum, perhaps modeled on how Congress has restricted OMB reviews of agricultural marketing regulations (see Appendix C 's discussion under " OMB Review of Agency Rules and Guidance Documents "). Congress also could consider requiring reviews to be conducted by congressional authorizing committees or the Senate and House Budget Committees instead of OMB, perhaps by using CBO's baseline spending projection instead of the Administration's baseline, provided that the authorizing committees did not engage in executive functions. Because many variations on this option could be considered, advocates and critics of these variations might bring to bear a variety of arguments in support or opposition. In many cases, procedural arrangements may have significant implications for power relationships among Congress, the President, and agencies. For example, it could be argued that giving statutory authority to OMB to approve or disapprove agency use of discretion for mandatory spending would give the President considerable legal leverage over the activities of agencies and enhanced bargaining power with Congress. Conversely, it could be argued that prohibiting OMB from conducting such reviews would strengthen Congress's influence over agencies' mandatory spending programs by limiting presidential influence. In any case, due to the lack of transparency of OMB's process outside the executive branch, Congress might wish to gain more information about past and current OMB and agency practices to inform future decision making and avoid unintended consequences. Appendix A. Facsimile of OMB Memorandum M-05-13 Appendix B. Tabular Displays of FY2009 Mandatory Outlays The tables below provide several perspectives on how mandatory spending may be categorized, including by House authorizing committee ( Table B -1 ), Senate authorizing committee ( Table B -2 ), and programmatic area ( Figure B -1 and Figure B -2 ). Appendix C. Prior Congressional Approaches to Agency Discretion and OMB Involvement Grants of Administrative Discretion and the Administrative Procedure Act Congress historically has expressed strong interest that agencies execute laws in a manner that is consistent with congressional intent and expectations. As a result, Congress often legislates in detail when it directs agencies, or sometimes the President, to undertake certain tasks. At other times, however, when laws are formulated in ways that allow a measure of discretion in their implementation, Congress may use a variety of constitutional, statutory, and political tools to direct and constrain agencies (or the President) and hold them to account. When granting discretion to agencies, Congress's approach arguably reached a turning point with enactment in 1946 of the Administrative Procedure Act (APA). By that time, a variety of factors—including industrialization, urbanization, the Progressive Movement, efforts to combat the Great Depression, and two world wars—had led to an expansion in the scope of the federal government's activities. To deal with the complexity, "Congress had become a delegator, vesting much of its legislative authority in administrative agencies, and a great deal of the initiative for policy making and budgeting had passed to the executive branch." In response, Congress passed measures to enhance its lawmaking and oversight capacities. These laws included the APA, which among other things was enacted to subject agency use of discretion through rulemaking to transparency and public participation. As codified in Title 5 of the United States Code , the APA defines the term "rule," in part, as "the whole or part of an agency statement of general or particular applicability and future effect designed to implement, interpret, or prescribe law or policy." The law also establishes procedural requirements for how agencies may make, amend, and repeal rules, which together generally are called "rulemaking." The law requires, among other things, that an agency publish a notice of proposed rulemaking in the Federal Register , afford interested persons an opportunity to participate in the proceeding through the submission of written comments, and when consideration of the matter is completed, incorporate in any adopted rules "a concise general statement of their basis and purpose." According to one scholar, because agencies were exercising delegated legislative authority, Congress's intention was that agencies' "processes should embrace the legislative values of representation, participation, and open information." Congressional Authorizations of, and Responses to, OMB Involvement in Agency Decision Making Congress was not alone in noticing how agencies may exercise discretion. Presidents oftentimes pursue their policy preferences by attempting to influence or control agency decision making through organizational and procedural means. Consequently, various Presidents have initiated OMB's involvement in some agency decision making processes. In other instances, however, OMB's role began at the requirement of Congress through statute, when Congress wished for agencies to be subject to additional oversight or direction. As noted earlier, in many cases, Congress responded to the prospect or reality of OMB's involvement with legislation. Agency Submissions of Budget Information and Requests The Budget and Accounting Act of 1921 established in law the duty of the President to submit each year a single, consolidated budget proposal for congressional consideration. It meant that the President was responsible for making budget requests, so that each executive department and agency would no longer act independently of presidential direction. Support for the law grew out of Progressive Era views that placed little trust in legislative institutions and sought to shift more authority to executive institutions, and also emerged out of budgetary stresses from World War I. As amended and recodified, one of the act's key provisions restricts agency officers and employees from submitting "to Congress or a committee of Congress an appropriations estimate or request, a request for an increase in that estimate or request, or a recommendation on meeting the financial needs of the Government" unless "requested by either House of Congress" (31 U.S.C. § 1108(e)). Currently, OMB issues annual directions to agencies on how to put together budget requests for potential modification by the President, before the requests are submitted to Congress. OMB then manages the process of assembling the President's budget proposal. Over time, however, Congress has established multiple statutory exceptions to the law. These provisions allow or require certain agencies to provide budgetary information or annual budget requests directly to Congress without first submitting them to OMB or the President, or to provide them concurrently to Congress and the President, before potential modification by the President. OMB appears to acknowledge and abide by statutory authorities for agencies to directly submit budget and other information to Congress. OMB Clearance of Agency Testimony and Draft Legislation Reorganization Plan No. 1 of 1939 transferred the predecessor of OMB to its location in the newly created Executive Office of the President. Executive Order (E.O.) 8248 followed soon thereafter to "effectuate the purposes" of the reorganization and provide "adequate machinery for the administrative management of the Executive branch of the Government" to the President. As amended, the E.O.'s Section II.2.(e) assigns to OMB the duty to "assist the President by clearing and coordinating departmental advice on proposed legislation." The E.O. effectively directs OMB to review and modify many documents that agencies produce for congressional recipients (e.g., testimony and correspondence), in order to ensure compliance with the President's policy agenda and coordination across agencies. Congress sometimes has responded by providing agencies with statutory authority to submit such materials directly to Congress, bypassing OMB. OMB has said it recognizes such exceptions. OMB and the Paperwork Reduction Act The Paperwork Reduction Act (PRA) of 1980 established OIRA within OMB to provide central leadership and oversight of government-wide efforts to reduce unnecessary paperwork burden and improve management of information resources. The law was amended in 1995 (PRA of 1995). If a covered agency (departments, independent agencies, and independent regulatory agencies) wants to collect information from 10 or more non-federal persons, or to require 10 or more persons to provide information to a third party or to the public, that information collection or disclosure requirement probably is covered by the PRA. The law provides for transparency and public participation in several ways. After an agency submits its proposed information collection request to OIRA, the PRA requires OIRA to provide at least 30 days for public comment prior to deciding whether to approve the request. This comment period is in addition to the 60 days of public comment that are required prior to submission of the proposed collection to OIRA. OIRA maintains a daily-updated database showing each approved collection by agency, collection requests that are under review, collections that have been reviewed in the previous 30 days, and collections that have recently expired. The PRA also requires OIRA to keep Congress and congressional committees "fully and currently informed of the major activities" under the act. Specifically, the act requires OIRA to submit an annual report to the President of the Senate and the Speaker of the House of Representatives describing, among other things, the extent to which agencies have reduced information collection burdens on the public. To satisfy the requirement, OIRA develops an annual Information Collection Budget (ICB) by gathering data from agencies. OMB Review of Agency Rules and Guidance Documents The current process of presidential review of rulemaking was established by President William Clinton in October 1993 through E.O. 12866, which revoked previous orders. The E.O. requires departments and agencies (but not independent regulatory agencies) to submit all "significant" proposed and final regulatory actions to OIRA for review before they are published in the Federal Register . The order defines a "significant" regulatory action as one that may, among other things, have a $100 million impact on the economy, create a serious inconsistency with actions by another agency, or raise "novel legal or policy issues arising out of ... the President's priorities." OIRA conducts formal reviews under the E.O. that are subject to some transparency, but it also conducts informal reviews that are substantially not transparent. With regard to formal reviews, E.O. 12866 generally requires that OIRA complete them within 90 calendar days, and requires both the agencies and OIRA to disclose certain information about how the reviews were conducted. Specifically, the order says that agencies should identify for the public (1) the substantive changes made to rules between the draft submitted to OIRA for review and the action subsequently announced, and (2) changes made at the suggestion or recommendation of OIRA. OIRA also is required to provide agencies with a copy of all written communications with parties outside of the executive branch, and to maintain a public log of all regulatory actions under review. For some rules, there is an additional phase of "informal review" before a rule is officially submitted to OIRA. OIRA has indicated that it can have its greatest impact on agencies' rules during these informal reviews. Former OIRA Administrator John Graham indicated that agencies' "receptivity" to informal reviews may be enhanced by the possibility of a returned rule. In January 2007, President Bush issued E.O. 13422, which changed the regulatory review process in several ways. Among other things, the order required that every agency head designate a presidential appointee within the agency as a "regulatory policy officer" who could control upcoming rulemaking in the agency, and expanded OIRA review to include significant guidance documents. OMB characterized the executive order as a "good government" measure, but the changes were highly controversial and were viewed by some as a "power grab" by the Bush Administration. Many observers have viewed E.O. 13422 as part of a broader statement of presidential authority presented throughout the Bush Administration—from declining to provide access to certain information to presidential signing statements that indicated certain statutory provisions would be interpreted consistent with the President's view of the "unitary executive." On January 30, 2009, President Obama issued E.O. 13497, which revoked E.O.13422 and returned E.O. 12866 to its original form. Notably, however, on March 4, 2009, OMB Director Orszag issued a memorandum to federal agencies stating that agency actions and documents, including, "significant policy and guidance documents," would "remain subject to OIRA's review under Executive Order 12866." In contrast to OMB's formal review of rules, there is no requirement to disclose changes made to guidance as a result of OIRA reviews. Congress has used provisions added to OMB's appropriation to limit the scope of certain reviews. For example, since 1983, language has been included in OMB's appropriation stating that none of the funds provided to OMB could be used for the purpose of reviewing any agricultural marketing orders issued by the Department of Agriculture "or any activities or regulations under the provisions of the Agricultural Marketing Agreement Act of 1937 (7 U.S.C. 601 et seq.)." Members of Congress have inserted this restriction in each appropriation bill, asserting that the Department of Agriculture, not OMB, has statutory authority in this area.
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On May 23, 2005, during President George W. Bush's second term, then-Office of Management and Budget (OMB) Director Joshua B. Bolten issued a memorandum to the heads of agencies. The memorandum announced that OMB would involve itself systematically in some aspects of how agencies execute laws related to mandatory spending. Under the process outlined in the OMB memorandum, if an agency wished to use discretion under current law in a way that would "increase mandatory spending," the memorandum required the agency to propose the action to OMB. Such actions might include regulations, demonstration program notices, and other forms of program guidance. For purposes of OMB's process, an increase was defined as spending more than the amount that the Administration assumed in its most recent projection of what is required under current law to fund the mandatory spending program. To offset such a difference in spending, the memorandum also required the agency to propose actions that would "comparably reduce" mandatory spending. The memorandum did not address, however, whether agencies' administrative actions and corresponding spending changes would be consistent with congressional intent or expectations, or whether agencies' proposals and OMB's decisions would be transparent to Congress and the public. For the most part, mandatory spending programs are provided for in substantive laws under the jurisdiction of House and Senate authorizing committees. The Administration characterized the OMB review process as "augmenting its ... controls" on agency decisions. It also referred to the process as "administrative PAYGO." In using the term "PAYGO," the Administration juxtaposed this OMB involvement in agency decision making with a statutory and comparatively transparent mechanism that Congress has used when carrying out its legislative function. In 2009, the Barack Obama Administration said it would continue the OMB memorandum's process. After several years of implementation, however, very little is publicly known about the scope and effect of OMB's process, the rationales for OMB determinations, or whether the process has achieved its stated purpose of constraining mandatory spending. In one case, concerning a program in the U.S. Department of Agriculture, some details about OMB's process were disclosed publicly in June 2010. The disclosure prompted congressional concerns about the relationships between congressional intent, agency policy implementation, and the role of OMB. Even though OMB's process is not transparent, it is possible to analyze some of the memorandum's other potential implications, if its process were used. While potentially limiting spending, the OMB process may have measurable effects on program outcomes for entitlement programs, for example, and may impose administrative burdens on federal agencies. Moreover, if agencies experience difficulty in identifying plausible offsets, it is conceivable that agencies may choose to not consider, pursue, or submit to OMB an administrative action that would cost money, regardless of the agency's perception of a policy's merits or whether it would be consistent with congressional intent. Differences may arise between OMB and CBO baselines of projected federal spending. In approaching the subject of OMB controls on agency mandatory spending, Congress might assess at least five general options. First, if Congress sees no need to engage in lawmaking or oversight of the process, it might continue with the status quo. Second, if Congress wished to learn more about the process, Congress could conduct oversight. If Congress wished to address the topic prospectively through lawmaking, Congress might consider three other options: increasing transparency of OMB's process, legislating in greater detail, or modifying how OMB's process operates.
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T he farm bill is an omnibus, multi-year law that governs an array of agricultural and food programs. Although agricultural policies are sometimes created and changed by freestanding legislation or as part of other major laws, the farm bill provides a predictable opportunity for policymakers to comprehensively and periodically address agricultural and food issues. The farm bill is renewed about every five years. The Agricultural Act of 2014 ( P.L. 113-79 , H.Rept. 113-333 ), referred to here as the "2014 farm bill," is the most recent omnibus farm bill. It was enacted in February 2014 and generally expires in 2018. It succeeded the Food, Conservation, and Energy Act of 2008 ( P.L. 110-246 , "2008 farm bill"). The 2014 farm bill contains 12 titles encompassing farm commodity revenue supports, agricultural conservation, international food aid and agricultural trade, nutrition assistance, farm credit, rural development, agricultural research, forestry, bioenergy, horticulture and organic agriculture, crop insurance and disaster assistance, and livestock issues. Provisions in the 2014 farm bill reshaped the structure of farm commodity support, expanded crop insurance coverage, consolidated conservation programs, reauthorized and revised nutrition assistance, and extended authority to appropriate funds for many U.S. Department of Agriculture (USDA) discretionary programs through FY2018. The omnibus nature of the bill can create broad coalitions of support among sometimes conflicting interests for policies that individually might not survive the legislative process, but it can also stir competition for available funds, particularly among producers of different commodities or between those who have differing priorities. Such competition often results in farm state lawmakers seeking urban legislators' backing for commodity price supports in exchange for votes on domestic food assistance programs—and vice versa. In recent years, a more diverse range of groups has become involved in the debate, including national farm groups, commodity associations, state organizations, nutrition and public health officials, and advocacy groups representing conservation, recreation, rural development, local and urban farming facilities, faith-based interests, land-grant universities, and certified organic production. For more background on the farm bill and the major provisions in the 2014 farm bill, see CRS Report R43076, The 2014 Farm Bill (P.L. 113-79): Summary and Side-by-Side , and CRS Report RS22131, What Is the Farm Bill? This report provides background on each of the major titles of the current farm bill and previews of some of the potential issue s that could factor into the debate. (For a list of contributors to this report and for more direct assistance on specific programs and topics, see table on previous page for contact information for individual CRS staff.) Since the 1930s, periodic farm bills have traditionally focused on farm commodity program support for a handful of staple commodities—corn, soybeans, wheat, cotton, rice, dairy, and sugar. In recent farm bills, however, the breadth of the farm bill has steadily grown to include new and expanding food and agricultural interests. Titles have been added to address emerging issues, and the farm bill has become increasingly omnibus in nature. Prominent additions to the farm bill have been nutrition assistance, farmland conservation, agriculture-based biofuels, and horticulture (specialty crops, such as fruits and vegetables, and organic agriculture). Farm bill titles have also become increasingly integrated. For example, the conservation and commodity titles both include provisions that affect land use and markets. Support for specialty crops, despite its stand-alone title, includes a series of provisions contained in other farm bill titles. The text box below briefly describes provisions in these titles. See the Appendix at the end of this report for a complete list of titles and subtitles of the 2014 farm bill. As the 115 th Congress considers a new farm bill, it does so in an economic setting of generally lower farm prices and income for the main commodity crops as well as continued focus on the overall cost of nutrition assistance programs. The largest of these programs—the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program)—accounts for the overwhelming majority of total farm bill spending. At the same time, some groups continue to call for further expansion of the farm bill to create and/or expand support for other competing policy priorities and to address equitability concerns across the nation's farm sectors. These include enhanced support for small and medium-sized farms, specialty crops, cottonseed, organic agriculture, local and regional food systems, urban farming, healthy and nutritious foods, food waste reduction, research, conservation, and rural development, among others. Efforts to reduce overall farm bill costs, given overall constraints on federal spending, may create heightened competition and tension among a range of U.S. farm policy stakeholders. There is also general uncertainty regarding priorities for farm policy under the new Trump Administration. Potential expiration of the current farm bill and the consequences of allowing it to expire may also motivate legislative action. When a farm bill expires, not all programs are affected equally. Some programs cease to operate unless reauthorized, while others might continue to pay old obligations, as provided under current law. For example, the farm commodity programs would not only expire but revert to permanent law dating back to the 1940s. Nutrition assistance programs require periodic reauthorization, but appropriations can keep them operating. Many discretionary programs would lose statutory authority to receive appropriations, though annual appropriations could provide funding and implicit authorization. Other programs have permanent authority and do not need to be reauthorized (e.g., crop insurance). Whether to retain the nutrition title in a new farm bill or to consider nutrition programs separately was debated during consideration of the 2014 farm bill. In 2013, after a farm bill with a nutrition title was defeated on the House floor, the House passed the bills separately—a farm bill without a nutrition title and a nutrition-only bill. After the conference committee negotiations began, the bills were joined together. The enacted law included a nutrition title. Some continue to argue for a separate SNAP reauthorization, but many farm and nutrition policy stakeholders argue for retaining the nutrition title in a new farm bill. Farm bills since 1973 have included reauthorization of the Food Stamp Program (renamed SNAP by the 2008 bill). This partnership between nutrition programs and farm programs is generally understood to generate rural and urban support for the farm bill. (For more information, see " Food and Nutrition .") As with all areas of the federal budget, agriculture faces spending constraints. Budget issues are usually an important element when debate on a new farm bill begins. Federal spending is divided into two main categories: mandatory and discretionary spending. In the farm bill, mandatory spending—which does not require a separate appropriation—is authorized primarily for the farm commodity programs, crop insurance, nutrition assistance programs, and some conservation and trade programs. Discretionary spending is authorized for everything else that is not considered mandatory spending, including most rural development programs, research and education programs, and agricultural credit. Research, bioenergy, and rural development programs sometimes secure both types of funding, but most of their funding is discretionary. Programs with discretionary spending are authorized in the farm bill but are paid for separately in annual appropriations under the jurisdiction of the appropriations committees. Mandatory spending programs often dominate the farm bill debate and its budget. The farm bill "pays" for mandatory spending in addition to determining its policy. These procedures follow a framework of budget enforcement laws that use projected "baseline" and "scores" from the Congressional Budget Office (CBO). An earlier pivotal decision may be whether the multi-year baseline projection, described below, is the appropriate amount for the farm bill or whether more or less spending should be built into the farm bill budget. The CBO baseline is a projection at a particular point in time of what future federal spending on mandatory programs would be assuming current law remains intact. This baseline is the benchmark against which proposed changes in law are measured. When a new bill is proposed that would affect mandatory spending, the impact ( score ) is measured in relation to the baseline. Changes that increase spending relative to the baseline have a positive score; those that decrease spending relative to the baseline have a negative score. Increases in cost above the baseline may be subject to budget constraints such as pay-as-you-go (PAYGO) requirements. Reductions from the baseline may be used to offset other provisions or reduce the deficit. Having a baseline essentially gives programs built-in future funding if policymakers decide that the programs should continue. Straightforward reauthorization would not have a scoring effect. However, programs without a continuing baseline beyond the end of a farm bill do not have assured future funding. Reauthorization would have a positive score that increases the bill's cost. When the 2014 farm bill was enacted, four titles accounted for 99% of anticipated farm bill mandatory spending: nutrition, crop insurance, conservation, and farm commodity support ( Table 1 ). The nutrition title, which includes SNAP, comprised 80% of the total. Commodity support and crop insurance combined to be 13% of mandatory spending, with another 6% of costs in USDA conservation programs. The trade title was next in size, providing less than 0.5% of the total. In dollars, the projected cost of the 2014 farm bill when it was enacted was $484 billion for the largest four titles and $489 billion for all 12 titles ( Table 1 ). In the years since enactment of the farm bill, CBO has updated its projections of government spending based on new information about the economy and program participation. However, reductions in projected farm bill spending since enactment do not generate savings that can be credited elsewhere, and higher-than-projected costs do not imply insufficient resources. Three years after enactment, the current projected cost of the 2014 farm bill is $456 billion for the four largest titles (FY2014-FY2016 actuals, and updated projections for FY2017-FY2018; Table 1 , Figure 1 ). For the FY2014-FY2018 period, this is $28 billion less (-6%) than what was projected at enactment. Lower farm commodity prices have reduced the projected cost of crop insurance and increased the cost of the counter-cyclical farm subsidies, while lower-than-expected enrollment in SNAP has reduced nutrition title costs. These changes reflect shifts in the underlying economy—that is, the farm bill is costing $28 billion less than initially expected. For a new farm bill, there is presently no official baseline covering all titles. The official "scoring baseline" during 2017 would likely be the March 2017 CBO baseline, and a farm bill enacted in 2018 would likely use the March 2018 CBO baseline for the FY2019-FY2028 period. However, early baseline projections indicate a continuation of the economic changes above. The January 2017 CBO baseline projection for the four largest titles of the farm bill (assuming current law continues) is $435 billion over the next five years FY2018-FY2022 and $870 billion for the next 10 years FY2018-FY2027 ( Table 2 ). The nutrition title is about 77% of these amounts, compared to about 80% when the 2014 farm bill was enacted. Beyond these four titles, other farm bill programs with baseline can be expected to add about another $4 billion of baseline over the five-year period. Figure 2 shows how the relative proportions of farm bill spending have shifted over time. The figure combines actual USDA spending data (FY1990-FY2016) and CBO projections for those programs (FY2017 through FY2027). Since 1990, conservation and crop insurance spending have steadily risen as policy and enrollment have increased participation. Farm commodity program spending has risen and fallen with changing market price conditions and policy responses, though costs have generally decreased recently as counter-cyclical payments were smaller due to higher market prices. This trend, however, has reversed at least temporarily in the current projections for future spending. Nutrition assistance rose sharply after the recession in 2009 but began to decline during the economic recovery and is expected to continue to decline in the near future. The U.S. agricultural sector experienced a golden period from 2010 to 2014, driven largely by strong commodity prices and agricultural exports. This period included a four-year run of record farm income and land values that culminated with the enactment of the 2014 farm bill. Since 2014, the U.S. farm economic outlook has changed dramatically. Bountiful U.S. crop harvests and fading international demand prospects have put downward pressure on commodity prices, farm incomes, and asset values while raising farm sector debt and debt-to-asset ratios. USDA projects that U.S. net farm income—a key indicator of U.S. farm well-being—will fall to $62.3 billion in 2017, down 9% from 2016 and down 50% from 2013's record of $123.7 billion. The 2017 forecast would represent the third year of decline and would be the lowest national net farm income since 2002. The forecast for lower net farm income is primarily the result of the outlook for both lower crop and livestock receipts. Record grain, oilseed, and meat supplies in 2016 have depressed prices for most commodities—especially when compared with the period of 2011-2013, when prices for many major commodities experienced record or near-record highs. Agricultural exports were projected higher in 2017 at $134 billion, up 3% from 2016 but well below 2014's record $152.3 billion—due largely to a strong U.S. dollar coupled with a continued weak economic outlook in several major foreign importing countries. Despite the year-over-year decline, U.S. agricultural exports are still projected to account for over 30% of farm sector gross earnings in 2017. Farm wealth is also projected to decline for a third year in 2017 (down about 1% from 2016) to $2,836 billion. Farm asset values reflect farm investors' and lenders' expectations about long-term profitability of farm sector investments. The outlook for lower commodity prices and the expected decline from the past four years' strong outlook for the general farm economy have reversed the growth of farmland values. Because they comprise such a significant portion of the U.S. farm sector's asset base, change in farmland values is a critical barometer of the farm sector's financial performance. Farm credit conditions also appear to be deteriorating: Loan delinquencies and requests for loan extensions are increasing, and interest rates are rising. Despite the downturn in the U.S. agricultural sector's financial outlook, it is still outperforming U.S. households in general. At the farm-household level, average farm household incomes have been well ahead of average U.S. household incomes since the late 1990s. In 2015 (the last year with comparable data), the average farm household income (including off-farm income sources) of $119,880 was about 51% higher than the average U.S. household income of $79,263. The outlook for lower commodity prices and farm income and wealth suggests a weakening financial picture for the agricultural sector heading into 2017 but with substantial regional variation. Relatively weak prices for most major program crops and livestock products signal tougher times ahead for agricultural producers and are expected to trigger substantial payments under the new safety net programs of the 2014 farm bill. However, actual 2017 agricultural economic well-being will hinge on crop harvests and prices, as well as domestic and international macroeconomic factors, including economic growth and consumer demand. The federal government supports farm income and helps farmers manage risks associated with variability in crop yields and prices through a collection of programs often referred to as the "farm safety net." These programs include (1) commodity-based revenue support programs; (2) disaster assistance programs, which are reauthorized by periodic farm bills (most recently by Title I of the 2014 farm bill); and (3) federal crop insurance, which is permanently authorized under the Federal Crop Insurance Act of 1980. Each of these three components is covered in this section and summarized in Table 3 . Through the first three years of the 2014 farm bill (2014 to 2016), USDA estimates the cost of farm safety net programs at $14.2 billion per year ($5.2 billion for commodity programs, $2.4 billion for disaster assistance, and $6.6 billion for crop insurance). Most of the cost for the farm safety net is traditionally attributed to a few major crops. For example, CBO projects that corn (48%), wheat (14%), soybeans (13%), rice (7%), peanuts (7%), and sorghum (3%) will cumulatively account for 91% of commodity program payments under revenue support programs in FY2017. Similarly, in 2016 four crops accounted for 77% of crop insurance premium subsidies: corn (38%), soybeans (20%), wheat (12%), and cotton (8%). Although these seven crops receive a majority of farm program support, they do not constitute a majority of farm output value: From 2010 to 2016, these crops accounted for 32% of total farm receipts (including fruits and vegetables, livestock, dairy, and poultry). Farm support began with the 1930s Depression-era efforts to generally raise farm household income when commodity prices were low because of prolonged weak consumer demand. While initially intended to be a temporary effort, the commodity support programs survived but have been modified away from supply control and management of commodity stocks to direct revenue support payments. Similarly, federal crop insurance has expanded over the decades, with expanded commodity coverage and increased producer subsidies. Many policymakers and farmers consider federal support of farm businesses necessary for financial survival, given the unpredictable nature of agricultural production and markets. Yet some producers have criticized farm safety net programs for being too slow to respond to disasters, for not being well integrated, or for not providing adequate risk protection. In contrast, long-time farm program critics question the need for any farm subsidies, contending that government funding could be better spent advancing environmental goals or improving productivity. Many environmental groups argue that subsidies encourage overproduction on environmentally fragile land. Others cite economic arguments against the programs—that they are a market-distorting use of taxpayer dollars, capitalize benefits to the owners of the resources, encourage concentration of production, favor large-scale farming at the expense of small or beginning farms, pay benefits to high-income recipients or when there are no losses, and harm farmers in lower-income foreign nations. Congressional limits on the federal budget, particularly constraints on new spending, could play an important role in the policy design of the farm safety net in a new farm bill. Several other critical policy issues and options have emerged that are also likely to factor into the debate shaping a new farm bill. These issues include the general perception that the current suite of safety net programs is failing to provide a sufficient safety net for both cotton producers and dairy operations. In addition, the current policy design favors planting peanuts on generic base acres despite market incentives to the contrary: In the past, policymakers have expressed their intent to avoid such market distortions in the farm safety net design. Also, large county-level variations in Agricultural Risk Coverage at the county level (ARC-CO) program—attributable to county yield data shortcomings—have emerged in 2014 and 2015 payments and could be addressed by a new farm bill. Additional issues and options for a new farm bill are discussed in the report sections titled " Budget Considerations " and " Commodities Covered Under Safety Net Programs ." The commodity provisions of the 2014 farm bill provide support for 26 farm commodities including food grains, feed grains, oilseeds, upland cotton, peanuts, pulse crops, and milk. Producers of program commodities are eligible for a variety of payments, much of which is financed through mandatory funding by USDA's Commodity Credit Corporation ( Table 3 ). Revenue support programs include ARC and the Price Loss Coverage (PLC) programs created under the 2014 farm bill. PLC is a revamped version of the counter-cyclical price support program from the 2008 farm bill, but it relies on elevated support prices. ARC is a shallow-loss revenue program that uses five-year Olympic moving averages of historical data for national farm prices and county yields to determine a revenue guarantee. The ARC program is available at either the county level for individual commodities (ARC-CO) or the farm level (ARC-IC) on a whole farm basis for all program crops. Both ARC and PLC make payments on a delayed basis, because their payment formulas require an entire marketing year worth of monthly price data. For example, for corn grown and harvested in 2016, complete data for the season-average farm price are not available until September 2017, and payments are made after October 1, 2017. In addition to ARC and PLC, producers of an expanded list of other "loan commodities" are eligible for benefits under nonrecourse marketing assistance loans (MALs). Current farm law also mandates that raw cane and refined beet sugar prices are supported through a combination of limits on domestic output that can be sold for human use, nonrecourse loans for domestic sugar, and quotas that limit imports. The 2014 farm bill made significant changes to the structure of U.S. dairy support programs, including the elimination of several major farm revenue support programs from the 2008 farm bill and their replacement by two new support programs: the Margin Protection Program (MPP) and the Dairy Product Donation Program (DPDP). The MPP is a voluntary program that makes payments to participating farmers when a formula-based national margin—calculated as the national average farm price for all milk minus a national-average feed cost ration —falls below a producer-selected insured margin that can range from $4.00 per hundredweight (cwt.) to $8.00/cwt. Milk producers must pay an annual administrative fee of $100 for each participating dairy operation and statutorily fixed premiums that rise steadily for higher margin protection levels and greater volumes of insured milk. In contrast to producers of traditional farm bill commodities, producers of specialty crops (e.g., fruits, vegetables, and tree nuts) and livestock have generally received little or no direct government support through commodity programs. Instead, these commodities benefit from federal investments in agricultural research and extension programs and from federal support for food and nutrition programs. These farms may manage risks through business diversification, purchase of federal crop insurance, and participation in federal disaster assistance programs. The federal crop insurance program provides risk management tools to address losses in revenue or crop yield—revenue policies represent about 77% of total premiums; yield policies about 23%. Federally subsidized policies protect producers against losses during a particular season, with price guarantee levels established early in the year using the preplanting values of harvest-time futures contracts. This is in contrast to commodity programs, where protection levels are fixed in statute (e.g., PLC reference prices and MAL loan rates) or use five-year Olympic moving average data for national farm prices and county yields to determine a revenue guarantee (e.g., ARC-CO). Federal crop insurance has grown in importance as a farm risk management tool since the early 1990s, due in large part to increasing federal subsidy intervention. The federal government pays about 62%, on average, of the farmer's crop insurance premium. Thus, as both participation in crop insurance programs and the value of insured crops have grown over time, so too has the absolute level of federal premium subsidies. From 2006 through 2015, the federal crop insurance program cost taxpayers, on average, $7.2 billion per year, including premium subsidies of $5.6 billion, administrative and delivery support of $1.4 billion, and other costs of $0.2 billion. Crop insurance has perhaps the widest commodity and regional coverage of any federal farm program. In 2016, crop insurance policies covered 290 million acres and more than 100 commodities including fruit trees, nursery crops, dairy and livestock margins, pasture, rangeland, and forage. Major field crops such as corn, soybeans, wheat, and cotton are covered in most counties where they are grown, and crop insurance covers at least 85% of planted acres for each of these crops. Crop insurance is also available for over 80 specialty crops. In 2014, specialty crop policies covered more than 7.7 million acres, which constituted 53% to 75% of specialty crop area, depending on how total area is calculated. A prominent crop insurance feature of the 2014 farm bill is the authorization of two new policies designed to reimburse "shallow losses"—an insured producer's out-of-pocket loss associated with the policy deductible—STAX and SCO. STAX is made available for upland cotton producers, while SCO is made available for other crops. STAX, or the Stacked Income Protection Plan, was created in response to upland cotton's removal from eligibility for Title I revenue support programs as the result of a final ruling from a World Trade Organization (WTO) dispute settlement case successfully brought by Brazil against U.S. cotton support programs. To address conservation concerns, the 2014 farm bill links eligibility for crop insurance premium subsidies to compliance with wetland and conservation requirements for highly erodible land. Also, crop insurance subsidies are reduced for plantings on native sod acreage in certain states. The 2014 farm bill permanently authorized four agricultural disaster programs for livestock and fruit trees: (1) the Livestock Indemnity Program (LIP); (2) the Livestock Forage Disaster Program (LFP); (3) the Emergency Assistance for Livestock, Honey Bees, and Farm-Raised Fish Program (ELAP); and (4) the Tree Assistance Program (TAP). The programs provide compensation for a portion of lost production following a natural disaster. These programs, originally established in the 2008 farm bill for only four years, were authorized retroactively (with no expiration date) to cover losses beginning in FY2012. All programs except ELAP receive uncapped mandatory funding via the CCC. That is, LIP, LFP, and TAP receive "such sums as necessary" to reimburse eligible producers for their losses. ELAP is capped at $20 million per year, and loss payments are reduced in order to fit under the cap. The four permanent disaster assistance programs (LIP, LFP, ELAP, and TAP) in combination with federal crop insurance and the Noninsured Crop Disaster Assistance Program (NAP) cover nearly the entire U.S. farm sector with a permanent disaster program. This broad array of disaster support reduces the potential need for emergency assistance that Congress previously provided to farmers and ranchers in the form of ad hoc disaster payments. CBO periodically undertakes 10-year baseline projections for the total cost of mandatory USDA programs under the assumption that current legislation remains intact for the projection period. The 2014 farm bill expires at the end of 2018 (calendar year for dairy and marketing year for program crops) unless it is reauthorized. If a new farm bill is finalized by 2018, then the CBO baseline budget projection for FY2019-FY2028 produced in March 2018 would provide the official benchmark used to write such a new farm bill. The CBO score establishes a baseline against which policy proposals are measured for their budgetary impact. The CBO baseline score for agricultural programs is particularly important under current PAYGO restrictions, because it represents the pool of money available for farm safety net programs including both commodity and crop insurance programs. Under PAYGO, any changes to the farm bill—including the farm safety net and other programs—must either fit within the CBO baseline score or find equivalent offsets within the larger federal budget score. As with most farm bills, a critical factor in determining the baseline budget for a new farm bill will be the price outlook for the program crops. Since payments under both the revenue-support programs—ARC and PLC—and the marketing assistance loan program are counter-cyclical to market conditions, an outlook for low commodity prices relative to program support levels could result in CBO projections of higher annual farm program outlays. A large CBO projected baseline could provide policymakers with greater flexibility in redesigning the farm safety net if they are so inclined. Currently, CBO projects farm program outlays for FY2017-FY2027 at about $14 billion per year on average—including $5.5 billion for commodity programs, $7.9 billion for crop insurance, and $0.3 billion for annual disaster assistance. These projections compare with the final CBO score for the 2014 farm bill of $13.4 billion in average annual outlays for the farm safety net, including $4.4 billion annually for commodity programs (plus disaster assistance) and $9.0 billion for crop insurance. Thus, commodity programs are currently costing about $1 billion more per year on average than projected, while crop insurance is averaging about $1 billion less. Actual historical outlays during FY2006 to FY2014 were higher still at $15.4 billion per year on average—$6.7 billion for commodity programs, $7.1 billion for crop insurance, and $1.7 billion for disaster assistance. The highest combined outlay for USDA safety net programs was recorded in FY2005 at $24.8 billion. The extent of current commodity coverage of the farm safety net is primarily a result of the historical and evolving nature of farm policy. Producers of major commodities have benefited the most from farm programs because farmers and policymakers representing those commodities shaped the programs from their inception. Since then, other commodity advocates have not had the interest or sufficient political support to add their commodities to the mix. Coverage could be increased by enhancing crop insurance for nonprogram crops, developing a new whole-farm revenue support program that would encompass all crops grown on a farm or revising the current whole-farm insurance product so it would be more widely accepted by producers. Perhaps the most notable omission from eligibility for the Title I revenue support programs (ARC and PLC) is upland cotton, which, as mentioned earlier, was removed from eligibility under the 2014 farm bill in response to a WTO dispute settlement case. Instead, cotton producers were given their own insurance-based program—STAX. In contrast to the revenue guarantees available under ARC and PLC, which have a statutorily fixed lower bound, the revenue guarantee under STAX is recalculated each year. Thus it decreases following consecutive years of market declines—as has been the case since 2014. Many cotton producers contend that STAX is both expensive and ineffective, since the STAX revenue guarantee has fallen below their cost of production and, thus, no longer serves as a useful safety net. This perception has contributed to low participation: In 2016, only 25% of cotton-planted acres were insured under STAX. In 2016, the U.S. cotton sector requested that USDA designate cottonseed as an "other oilseed," thus allowing cottonseed to be eligible for the ARC and PLC payments. However, then-Secretary of Agriculture Tom Vilsack contended that he did not have such authority. Furthermore, some argued that designating cottonseed as a program crop would constitute reopening the 2014 farm bill and could have substantial costs associated with such a decision. According to news reports, USDA's internal estimates in early 2016 projected related costs in excess of $1 billion (or about $100 per acre) annually. Such potentially large support payments could significantly affect producer crop choices and could attract the attention of other WTO members, including Brazil. In response to the removal of cotton from eligibility for ARC and PLC payments, the 2014 farm bill reclassified former cotton base acres from the 2008 farm bill as "generic" base acres. Generic base acres are added to a producer's total base for potential payments but only if a program-eligible crop is planted on them. In other words, ARC and PLC payments on generic base acres are coupled to actual plantings. As a result, a combination of market conditions and government program incentives determine producer planting choices on generic base. Because of a favorable advantage stemming from peanuts' disproportionately high PLC reference price relative to both other program crop reference prices and to current market conditions, peanut production is favored on generic base acres over other crops. This unintended outcome has resulted in the outlook for large government payments to peanut producers relative to other crops: CBO projects annual USDA peanut program outlays (ARC, PLC, and MAL combined) of $580 million, or $349 per harvested acre, through 2027. This compares with CBO projected program payments of $30 per harvested acre for corn, $7 for soybeans, $32 for wheat, and $199 for rice. The U.S. dairy industry, like the agriculture sector in general, has experienced a sharp downturn in both market and financial conditions the past two years. Despite a significant drop in milk prices, minimal support payments have been made under MPP through the first three years of operation (and these have been largely offset by producer-paid premiums). By June 2016, farm-level milk prices had fallen by 42% from their September 2014 high. However, this output price decline was largely offset by a similar decline for major feed grain prices, thus preventing the MPP margin from falling below meaningful program payment triggers. As a result, the dairy sector has expressed widespread dissatisfaction with the program. In 2016, 54% of dairy operations were enrolled in MPP, and most of those (77%) were enrolled at the minimum $4.00/cwt. catastrophic level, thus missing out on MPP payments made when the margin briefly fell below the $6.00/cwt. threshold in May-June 2016. Significant discrepancies in county-level payments for 2014 and 2015 were discovered under the ARC-CO program due, in part, to how USDA's National Agricultural Statistics Service (NASS) calculates average county yields. NASS relies on a cascading sequence of prioritized county-level data for its calculations. With respect to ARC-CO revenue calculations, the top data priority is based on NASS surveys of producers in counties with production of major program crops to obtain estimates of planted and harvested area, yields, and production. USDA currently requires that the NASS survey yield estimate be used if there are at least 30 producer survey responses or when survey responses represent at least 25% of a county's harvested acreage. If neither of these conditions is met, then the NASS county yield estimate is based on crop insurance data held by RMA. A comparison of the two estimates suggests that RMA yields are frequently higher than NASS yields. As a result, payments to producers in counties where RMA yields are used can be substantially lower than payments in counties using NASS yields. USDA is under no legislative requirement or guidance for this cascade policy. With no short-term fix in sight, the issue of substantial disparities in payment rates may reemerge for ARC-CO crop payments in future years. Barring any near-term fix by USDA, lawmakers could address county-to-county payment disparities in the context of a new farm bill. Under the 2014 farm bill, producers were give a one-time choice that would last for the duration of the 2014 farm bill (2014 through 2018) for how to allocate their historical base acres across crops and by program: ARC or PLC. Most corn (93%) and soybean (97%) base acres opted for ARC-CO, while most rice (99%), peanut (100%), and barley (75%) base acres were placed under PLC. Wheat base acres were divided: 56% selected ARC-CO, 43% PLC. Less than 1% of all farms selected ARC-IC. It is unknown if a new farm bill will retain the ARC and PLC programs and, if so, whether farmers will be given a new opportunity to reallocate their base acres between the two revenue programs. However, current market conditions and the long-term outlook for relatively low prices tend to favor PLC for all program crops. CBO projections assume that participating farmers can reallocate their base acres among PLC, ARC-CO, and ARC-IC in 2019 and that most farmers significantly expand their base acres signed up under PLC: corn producers shift from a 7% share to 82%, soybeans from 3% to 49%, and wheat from 43% to 82%, according to CBO's January 2017 baseline. As a result, the CBO projections show PLC outlays exceeding ARC outlays by 2020. Unlike other commodity programs in the 2014 farm bill, Congress reauthorized the sugar program with no changes. Also, in contrast to dairy and other commodity programs, Congress structured the sugar program to operate at no cost to the federal government—an objective that has been largely achieved over the last decade with the exception of the 2012/2013 crop year, when low sugar prices triggered forfeitures under the program, resulting in federal outlays of $259 million. An issue that is currently outside the purview of the farm bill but could influence the debate over the U.S. sugar program is trade in imported sugar from Mexico. Subsequent to the enactment of the 2014 farm bill, the United States and Mexico reached agreements that regulated bilateral trade in Mexican sugar, including setting volume limits and minimum export prices and other parameters around this trade that are unique in the U.S. sugar market. The U.S.-Mexico sugar suspension agreements are controversial. A broad cross-section of participants in the U.S. sugar market have asserted that the agreements are not working as intended and may not have succeeded in entirely eliminating the injury caused to U.S. sugar interests. These stakeholders also contend that these agreements could undermine various objectives of the U.S. sugar program—including that it operate at no cost—if market distortions created by these agreements trigger forfeitures of domestic sugar leading to government outlays. Given the importance of Mexican sugar as a source of supply to the U.S. sugar market, revising the agreements, withdrawing from them, or allowing them to remain in force as agreed upon in December 2014 could each have implications for the program. As concerns the sugar program itself, sugar producers and processors—as represented by the American Sugar Alliance—have favored retaining the current program structure. They contend that it should not be eliminated prior to addressing foreign sugar subsidies that distort the world sugar market and thus pose a threat to efficient U.S. producers. Sugar users generally view the current program as overly prescriptive, which they argue has led to overly tight supplies and elevated prices in the domestic market. They advocate for providing USDA with greater program flexibility for managing domestic sugar supplies and allocating import quotas. Payment limits for the farm commodity programs, with the exception of the marketing assistance loan program, either set the maximum amount of farm program payments that a person can receive per year or set the maximum amount of income that an individual can earn and still remain eligible for program benefits (i.e., a means test). The payment limits issue is controversial, because it directly addresses questions about the size of farms that should be supported, whether payments should be proportional to production or limited per individual, and who should receive payments. Some policymakers want limits to be tightened in order to save money, to respond to general public concerns overpayments to large farms, and to reduce the possibility of encouraging expansion of large farms at the expense of small farms. Others say larger farms should not be penalized for the economies of size and efficiencies they have achieved. Crop insurance has no payment limits, a feature that some policymakers say makes crop insurance an attractive centerpiece of farm policy because it helps small and large farms alike, with neither apparently gaining at the expense of the other. Trade plays a critical role in the U.S. agricultural sector: Exports account for over 30% of U.S. farm sector gross earnings. As a WTO member, the United States has committed to abide by WTO rules and disciplines, including those that govern domestic farm policy. Because the United States plays such an important role in so many global agricultural markets, its farm policy is often subject to intense scrutiny, particularly for compliance with current WTO rules—as evidenced by the 2009 WTO challenge successfully brought by Brazil against U.S. cotton support programs. In particular, the United States faces pressure to minimize any "trade-distorting" incentives inherent in its farm safety net programs. CBO projections suggest that the United States is unlikely to violate its WTO spending limit of $19.1 billion for nonexempt, trade-distorting amber box outlays. Perhaps more relevant to U.S. agricultural trade is the concern that, because the United States plays such a prominent role in most international markets for agricultural products, any distortion resulting from U.S. policy would be both visible and vulnerable to challenge under WTO rules. An unexpected period of extended low market prices in future years could generate substantial PLC and/or ARC-CO outlays and lead to a potential challenge, particularly if the current farm safety net structure is retained under a new farm bill. Some producers have criticized farm safety net programs for being too slow to respond to disasters, for not being well integrated, or for not providing adequate risk protection. In contrast, long-time farm program critics question the need for any farm subsidies, contending that government funding could be better spent advancing environmental goals or improving productivity. Others cite economic arguments against the programs—that they distort production, capitalize benefits to the owners of the resources, encourage concentration of production, harm smaller domestic producers and farmers in lower-income foreign nations, and pay benefits to high-income recipients or when there are no losses. During the past few farm bill debates, a diverse set of agricultural producers—covering specialty crops, certified organic agriculture, and local and regional foods—have argued that their sectors should occupy a larger role in farm bill policy discussions and that benefits supporting major commodity producers should be extended to these producers in order to create "a broader, more equitable farm bill." Producers in these sectors are not eligible for support under USDA's farm commodity revenue support programs, but these sectors are eligible for other types of USDA programs and support throughout several farm bill titles. These include, but are not limited to, programs in the nutrition, conservation, research, crop insurance, disaster assistance, rural development, and trade titles. Other federal agencies also play important roles in these sectors. Specialty crops—defined as "fruits and vegetables, tree nuts, dried fruits, and horticulture and nursery crops (including floriculture)" —comprise a major part of U.S. agriculture. In 2012, the value of farm-level specialty crop production totaled nearly $60 billion, representing about one-fourth of the value of U.S. crop production but only 3% of all harvested cropland acres. USDA reports that retail sales of fresh and processed fruits and vegetables for at-home consumption total nearly $100 billion annually. Exports of U.S. specialty crops totaled about $26 billion in 2015. In 2012, about 244,000 farming operations grew more than 350 types of fruit, vegetable, tree nut, flower, nursery, and other horticultural crops. Specialty crop production is concentrated in California, Florida, Washington, Oregon, North Dakota, and Michigan, but every state has some commercial specialty crop production. Agricultural products certified as "USDA organic" account for a small but growing share of the U.S. farming sector. USDA reports that farm sales of certified organic products totaled $5.5 billion in 2014, spanning an array of plant and animal products. Leading organic commodities based on farm value include milk, eggs, broiler chickens, lettuce, apples, meat products, grapes, corn for grain, hay, and spinach. In 2014, there were more than 14,000 organic farms and ranches, covering a total of 3.7 million acres, or about 1% of total U.S. cropland in farms. Production is concentrated in California, Florida, Washington, Pennsylvania, Oregon, Texas, and Wisconsin, but USDA reports organic production in each U.S. state. At the retail level, U.S. organic sales totaled $43.3 billion in 2015, representing roughly 5% of all food sales in the United States. Exports of all U.S. organic products total about $2 billion annually. In addition, a range of farm businesses are considered to be engaged in local food production. There is no established definition of what constitutes a "local food," but generally local food systems refer to agricultural production and marketing that occurs within a certain geographic proximity (between farmer and consumer) or that involves certain social or supply chain characteristics in producing food (such as small family farms, urban gardens, or farms using sustainable agriculture practices). Sales of locally produced foods also comprise a small but growing part of U.S. agricultural sales. Though estimates vary, USDA reports that local food sales totaled an estimated $6.1 billion in 2012, reflecting sales from nearly 164,000 farmers selling locally marketed foods. This represents 8% of U.S. farms and an estimated 1.5% of the value of total U.S. agricultural production. The 2008 farm bill expanded support and funding for existing specialty crop and organic programs and created new incentives for producers under a new bill title, "Horticulture and Organic Agriculture." The 2014 farm bill reauthorized many of the existing farm bill provisions and increased spending on programs supporting specialty crops and certified organic agriculture, as well as local foods, as part of the "Horticulture" title. When the 2014 farm bill was enacted, CBO estimated that mandatory outlays for programs authorized in the horticulture title would increase nearly $340 million over the next five years (FY2014-FY2018) compared with the previous five-year period. Despite this increase, funding under this title still comprises a small share—less than one-half of 1%—of total mandatory farm bill spending. Across all farm bill titles, mandatory spending for specialty crops, organic agriculture, and local food systems was expected to average about $770 million annually (FY2014-FY2018). Key programs include the Specialty Crop Block Grant Program (SCBGP), the Specialty Crop Research Initiative (SCRI), pest and disease prevention programs (including the so-called Section 10007 program), and nutrition programs targeting fruits and vegetables. The 2014 farm bill also provided for an additional roughly $300 million in average annual appropriations across related programs. In general, the types of programs in which many of these groups share a common interest are USDA marketing and promotion programs (including rural development programs), domestic food and nutrition programs, research and cooperative extension programs, and conservation programs, among others. Although USDA has historically not provided direct support for specialty crops and organic production, over the decades Congress has authorized a wide range of programs in these areas that are viewed as facilitating the growth of and benefiting the economic health of these and related sectors. A discussion of the programs of particular importance to specialty crop and certified organic producers is in CRS Report R42771, Fruits, Vegetables, and Other Specialty Crops: Selected Farm Bill and Federal Programs ; and CRS Report R43950, Local Food Systems: Selected Farm Bill and Other Federal Programs . Despite some shared program interests and a shared farm bill title, there are often significant differences between U.S. specialty crop and organic producers in terms of their overall farm bill priorities and in the types of key farm bill programs each group supports. The U.S. horticulture sector is among the most diverse of U.S. farm sector groups, with advocates spanning a wide range of policy priorities. The certified organic and the local foods sectors are even more diverse, with wide-ranging priorities. Given the perception of the importance of fruits and vegetables within many varied policy arenas, including child nutrition and wellness, and continued calls for enhanced equity across farm sectors, the specialty crop industry is expected to call for continued expansion of funding for a range of existing USDA programs. Similarly, continued growth in both consumer demand and producer investment in the certified organic and locally produced food sectors is likely to drive calls for increasing support for these markets both within USDA and at the state and local levels. Such expansion proposals may draw resistance from more traditional agricultural producers as well as by more established program recipients within the fruit and vegetable sectors due to competition for limited funds. Previously, farm bill recommendations by specialty crop interest groups (as well as some leading fruit and vegetable producing state agencies, such as California) spanned most farm bill titles. Most groups supported maintaining funding for each of the primary nutrition programs—such as the Fresh Fruit and Vegetable (Snack) Program, minimum purchase requirements under the Section 32 program, and the DOD Fresh program—and also called for changes to improve the nutritional status of U.S. food stamp recipients. They also recommended expanded funding for block grants, plant pest and disease programs, research programs (such as SCRI), and disaster assistance (including raising payment limitations on tree replacement). Within export promotion, these groups recommended maintaining funding for USDA's Market Access Program (MAP) and expanding the Technical Assistance for Specialty Crops (TASC) to address sanitary and phytosanitary and technical barriers to U.S. specialty crop exports. They also recommended that certain conservation programs be expanded to assist specialty crop producers and that AGI limitations not apply to conservation programs. Finally, SCFBA recommended continued funding for the Value-Added Producer Grant Program and other changes to certain rural development title programs that affect farmworkers. Farm bill recommendations promoted by the organic industry that could resurface in the next farm bill are focused on existing programs, including funding for the National Organic Program and the National Organic Certification Cost-Share Program and support for research under the Organic Agriculture Research and Extension Initiative (OREI) and the Organic Transitions Integrated Research Program (ORG). Other priorities have included improving organic producers' access to USDA conservation programs and crop insurance, as well as addressing certain marketing issues, such as organic data collection at USDA and potential losses associated with contamination of organic crops from genetically engineered crops. Many of the farm bill programs supporting specialty crops and organic agriculture are also supported by organizations promoting local and regional food systems. Some of the leading programs for local food producers also include the Farmers Market and Local Food promotion programs, the Senior Farmers Market Nutrition Program, and also related policies and incentives under SNAP, such as the Food Insecurity Nutrition Incentives, support for Community Food Projects, and Farm to School provisions. These groups also generally promote several rural development programs, including the Rural Micro-Entrepreneur Assistance Program. They also promote grant and loan programs that broadly support strategic regional community and economic development as well as beginning and socially disadvantaged farmers and ranchers. In anticipation of the 2018 farm bill reauthorization, the ranking member of the Senate Agriculture Committee, Senator Debbie Stabenow, introduced the Urban Agriculture Act of 2016 ( S. 3420 ) in the 114 th Congress. This bill proposed to expand existing farm programs and funding, as well as fund new programs and incentives, to promote urban agriculture by expanding provisions in several titles throughout the farm bill. Proposed provisions include expanded support for competitive grants and research initiatives supporting urban farming along with expanded risk management tools, among other provisions. When this bill was introduced, it was widely noted as being intended to become part of the 2018 farm bill and could be reintroduced in the 115 th Congress. In addition, in the 114 th Congress, comprehensive legislation was introduced to address food waste and recovery in both the House ( H.R. 4184 ) and Senate ( S. 3108 ). These bills proposed to expand the mission and funding for several existing federal programs to cover a range of food waste efforts, including additional funds for loans and grants to support composting and energy projects. Other bills addressing food waste were also introduced in the 114 th Congress, and the House Agriculture Committee held a hearing on the subject in May 2016. Accordingly, food waste efforts could be considered as part of the larger farm bill debate. Farm bills have traditionally not provided livestock and poultry producers with farm revenue support programs like those for major crops such as grains, oilseeds, and cotton. Instead, the livestock and poultry industries look to the federal government for leadership in protecting animal health; establishing transparent, science-based rules for trading animal products; resolving foreign trade disputes; and assuring that supplies of domestic and imported meat and poultry are safe, of high quality, and free from pests and diseases. The "Miscellaneous" title of the 2014 farm bill contained eight provisions addressing livestock and poultry producers. Five provisions were related to animal health. These included funding and certification process changes for the Trichinae Certification Program and additional funding for three other programs: the (1) National Aquatic Animal Health Plan, (2) the National Animal Health Laboratory Network, and (3) the National Poultry Improvement Plan. It also included a sense of Congress provision that feral swine eradication be considered a high priority. In addition, the last farm bill addressed both country-of-origin labeling (COOL) and USDA catfish inspection, which were originally in the 2008 farm bill. The 2014 farm bill directed USDA to conduct an economic analysis of the COOL rule that USDA wrote and amended to implement 2008 farm bill requirements. During the 2014 farm bill debate, the United States was in the midst of a WTO dispute settlement case over COOL with Canada and Mexico, and the WTO had determined that COOL violated U.S. WTO obligations. Congress repealed the beef and pork COOL provisions in December 2015. The 2014 farm bill also confirmed the catfish inspection provision that transferred catfish inspection from the Food and Drug Administration to USDA. It also defined catfish as "all fish of the order 'Siluriformes'" in order to require inspections of both domestic and imported catfish. USDA issued the final rule in December 2015 that went into effect in March 2016. Finally, the farm bill provided funding for the National Sheep Industry Improvement Center, which works to enhance the sheep and goat industry. Aside from the animal-related provisions in the miscellaneous title, the 2014 farm bill's permanent reauthorization of disaster assistance programs was a key achievement for livestock and poultry producers. (See discussion in " Farm Safety Net Programs .") In the upcoming farm bill debate, Congress is expected to consider extending support for the livestock and poultry sectors through reauthorizing and funding existing animal health programs, which protect the health of animals and the livelihood of producers. In particular, the outbreak of highly pathogenic avian influenza (HPAI) in 2014-2015 in U.S. laying hen flocks and the subsequent economic losses for producers and disruptions in trade for the entire poultry industry demonstrated the crucial role that USDA plays in animal health. Ongoing concerns about HPAI suggest that the livestock and poultry industries may be interested in engaging Congress on possible policies such as expanded indemnities or animal disease insurance that could aid producers affected by outbreaks. The livestock industry would like USDA to develop a vaccine stockpile for foot-and-mouth disease (FMD). Congressional hearings in 2016 addressed FMD and preparedness at USDA's Animal and Plant Health Inspection Service (APHIS) in the event that it should ever be reintroduced into the United States. The last U.S. FMD outbreak was in 1929. Another FMD outbreak would be devastating for U.S. livestock producers, with estimated annual losses of nearly $13 billion over 10 years, according to one study. U.S. law does not allow for the domestic production of FMD vaccine. USDA stockpiles viral antigen concentrate (VAC) that is used to produce vaccine doses. USDA's current vaccine supplies, however, would be insufficient in the event of a large FMD outbreak. The livestock industry is calling for USDA to expand funding and capabilities to provide sufficient doses of vaccine if ever needed. Expansion of feral swine eradication programs is another potential farm bill issue. Feral hogs were found in 39 states in 2016. By one estimate, feral swine cause $1 billion in damages to agriculture and another $1.5 billion to other parts of the U.S. economy in crop and natural resource destruction annually. Feral swine are also a vector for animal disease. Congress appropriated $20 million to APHIS in 2014 for feral swine programs that are undertaken cooperatively with states and tribal nations. Congress could consider whether additional support for expanding existing funding and programs is merited. During past farm bill debates, there has been interest is addressing consolidation and competition in the livestock and poultry sectors. USDA rules proposed by the Grain Inspection, Packers and Stockyards Administration (GIPSA) in 2010—partly finalized in 2011 and partly reproposed in 2016—continue to divide livestock and poultry producers, agricultural associations, and Members of Congress. It is now up to the Trump Administration to decide whether to proceed with the GIPSA rules released by the Obama Administration in December 2016. Some farm and rancher groups and rural advocacy groups may look to the farm bill as an opportunity to propose new policies that support producers, especially contract growers. Current law under the Animal Welfare Act (9 U.S.C. §2131 et seq.) requires minimum care standards for most types of warm-blooded animals bred for commercial sale, used in research, transported commercially, or exhibited to the public. Although farm animals are exempt, they are covered by other federal laws addressing humane transport and slaughter. Some members of the House and Senate Agriculture Committees have expressed a preference for farmers to continue to pursue voluntary approaches to farm animal welfare. Increased consumer interest in farm animal welfare, as well as interest among some Members of Congress, may lead to proposals addressing animal welfare on the farm. For example, since FY2007, horse slaughter has been debated each year during appropriations debates, and Congress has prohibited USDA's Food Safety Inspection Service (FSIS) from carrying out horse slaughter every year except FY2012-FY2014. In the 115 th Congress, the Safeguard American Food Exports Act of 2017 ( H.R. 113 ) proposed deeming horse meat as unfit for human consumption and banning the transport of horses to be slaughtered for human consumption. A new farm bill could be viewed as an avenue to permanently settle the annual appropriations debate on horse slaughter. The federal government has a long history of providing credit assistance to farmers. This intervention has been justified by many factors, including market failure due to imperfect knowledge of information between lenders and farmers, lack of competition in some rural lending markets, insufficient lending resources in rural areas, and the desire to targeted lending to disadvantaged groups. The agricultural lender with the greatest connection to the federal government is the USDA Farm Service Agency (FSA). It issues direct loans to farmers who cannot qualify for regular commercial credit and guarantees the repayment of certain loans made by other lenders. FSA also has statutory mandates to target loans to beginning farmers and socially disadvantaged groups based primarily on race and gender. Of the $350 billion in total farm debt as of year-end 2015, FSA provides about 2% through direct loans and guarantees about another 4%-5%. Another agricultural lender with a federal mandate is the Farm Credit System (FCS). FCS is a cooperatively owned and federally chartered private lender with a statutory mandate to serve only agriculture-related borrowers. FCS makes loans to creditworthy farmers. It is not a lender of last resort but it is a government-sponsored enterprise receiving tax benefits, among other preferences, in return for restrictions on its lending base. FCS accounts for about 40% of farm debt. A third agricultural lender created by federal statute is Farmer Mac, another government-sponsored enterprise that is privately held and provides a secondary market for agricultural loans. The statutory authority for FSA, FCS, and Farmer Mac is permanent, but farm bills often make adjustments to eligibility criteria and the scope of operations. The 2014 farm bill made relatively small policy changes to USDA and FCS farm lending programs. It eliminated term limits on USDA-guaranteed farm operating loans, gave USDA discretion to recognize alternative legal entities to qualify for farm loans, and allowed alternatives to meet a three-year farming experience requirement. It also increased the maximum size of down payment loans. It further increased the percentage of a conservation loan that can be guaranteed, added another lending priority for beginning farmers, and facilitated loans for the purchase of highly fractionated land in Indian reservations. The farm bill also stated that compensation decisions for FCS executives rests with FCS boards of directors. Credit issues are not expected to be a major part of a new farm bill, and changes that might occur are not expected to be particularly significant or comprehensive within the scope of agricultural credit statutes. Nonetheless, several issues could arise as legislation develops, including: Further targeting of FSA lending resources to beginning and socially disadvantaged farmers; Providing carve-outs for emerging or nontraditional parts of the agricultural industry, such as local or regional food systems, organic agriculture, and sustainable production, or providing financing for farmers, cooperatives, and/or food businesses that serve food deserts or finance urban agriculture; and Determining the scope of FCS and/or Farmer Mac lending activities, including the carve-outs mentioned above. USDA was created in 1862 in part to support agricultural research in an expanding, agriculturally dependent country. USDA conducts intramural research at federal facilities with government-employed scientists and supports external research at universities and other facilities through competitive grants and formula-based funding. The breadth of contemporary USDA research spans traditional agricultural production techniques, organic and sustainable agriculture, bioenergy, nutrition needs and composition, food safety, animal and plant health, pest and disease management, economic decisionmaking, and other social sciences affecting consumers, farmers, and rural communities. Four agencies carry out USDA's research and education activities, grouped together into the Research, Education, and Economics (REE) mission area. The Agricultural Research Service (ARS) is USDA's intramural science agency and conducts research on food and agriculture issues of national and regional importance. The National Institute of Food and Agriculture (NIFA) sponsors extramural research by distributing federal funds to land-grant universities and other outside partners for state- and regional-level research, education, and extension activities. The Economic Research Service (ERS) conducts economic and social science research about agriculture, rural development, food, commodity markets, and the environment. Finally, the National Agricultural Statistics Service (NASS) conducts the Census of Agriculture and provides official statistics on agricultural production and other relevant indicators about the farm sector. The research title of the 2014 farm bill reauthorized funding for various USDA research activities through FY2018, subject to appropriations, and amended authority so that only competitive grants can be awarded under certain programs. Mandatory spending was increased for several programs, including the Specialty Crop Research Initiative (SCRI), the Organic Agricultural Research and Extension Initiative (OREI), and the Beginning Farmer and Rancher Development Program (BFRDP). It also provided mandatory funds to establish the Foundation for Food and Agriculture Research, a nonprofit corporation designed to accept private donations and award grants for collaborative public/private partnerships among USDA, academia, and the private sector. Several research programs mentioned above received mandatory funding in the 2014 farm bill but do not have a budget baseline that extends beyond FY2018. If policymakers want to continue these programs in a new farm bill, they would need to pay for them with other offsets. These include $100 million over five years for both OREI and BFRDP and $200 million to establish the Foundation for Food and Agriculture Research ($200 million in FY2014). USDA differs from most other federal science agencies in allocating more than half of its annual research appropriation to intramural research agencies, including ARS, ERS, and NASS. Coordinating intramural and extramural research objectives and activities continues to be a concern and could be considered as part of a new farm bill debate. Likewise, the appropriate split between formula funding and competitive funding for extramural research in NIFA remains a concern of various interests. Lastly, within the competitive grants programs, especially the flagship Agriculture and Food Research Initiative (AFRI), allocation and prioritization of funding among various research areas remains a concern. Interest groups that want more funding for their research needs and commodities may seek inclusion via farm bill legislation. The federal government provides support for U.S. agricultural exports through two types of programs: export market development and export credit guarantees. The 2014 farm bill repealed the Dairy Export Incentive Program, thereby eliminating the use of direct export subsidies for U.S. agricultural products. Legislative authorizations for agricultural trade programs are included in the trade title of the 2014 farm bill. USDA's export promotion programs are administered by USDA's Foreign Agricultural Service (FAS) and generally funded using mandatory monies. One of the larger programs, MAP, was targeted for cuts or elimination in a number of deficit reduction proposals but was retained intact in the 2014 farm bill. Export market development programs—whose primary aim is to assist U.S. industry efforts to build, maintain, and expand overseas markets for U.S. agricultural products—include MAP, the Foreign Market Development Program (FMDP), the Emerging Markets Program (EMP), the Quality Samples Program (QSP), and TASC. The 2014 farm bill extended budget authority for these programs through FY2018, making funding mandatory and thus not subject to annual appropriations. The 2014 farm bill also reauthorized GSM-102, the FAS-administered short-term export credit guarantee program, and the Facility Guarantee Program (FGP). Under these programs, the CCC provides payment guarantees for the commercial financing of U.S. agricultural exports. GSM-102 guarantees repayment of commercial financing by approved foreign banks, mainly of developing countries, for up to two years for the purchase of U.S. farm and food products. FGP guarantees financing of goods and services exported from the United States to improve or establish agriculture-related facilities in emerging markets. While the 2014 farm bill extended these programs largely intact, it did make several changes. To comply with a WTO decision in a cotton case won by Brazil, Congress made several changes to GSM-102. These changes included shortening the loan guarantee period from three years to two, repealing a requirement that the Secretary of Agriculture maximize the amount of credit guarantees available each year, and removing a provision that restricted the Secretary from adjusting program fees to fully cover the cost of operating the program. Congress also broadened the scope of TASC to fund projects that address technical barriers to trade beyond sanitary and phytosanitary measures. At a more strategic level, the 2014 farm bill directed USDA to consult with the House and Senate Agriculture Committees and Appropriations Committees and then propose a plan to reorganize the international trade functions of USDA. The law directs that the plan establish an Under Secretary for Farm and Foreign Agricultural Affairs within USDA, a position that would require Senate confirmation. Currently, USDA's Under Secretary for Farm and Foreign Affairs oversees FAS and the export programs the agency administers, as well as several major domestic farm program areas. At a hearing of the Senate Agriculture Committee in September 2016, former USDA Secretary Vilsack said he intended to lay the groundwork for the next Administration to pursue this task. At the beginning of 2017, however, USDA had not transmitted a reorganization plan to Congress. Federal support for agricultural export promotion invariably raises questions about the appropriateness of government support for private sector export promotion and the effectiveness and impact of these programs. Some have argued that MAP and FMDP are forms of corporate welfare in that they fund activities that private firms and industry groups could and should fund themselves. Other critics argue that the principal beneficiaries of export promotion programs are foreign consumers and that funds could be better spent, for example, on educating U.S. firms about how to export and on overcoming trade barriers. Questions about whether export promotion programs are as effective as they could be, and whether new approaches to facilitating and promoting U.S. farm exports may be needed (or both), could be topics of discussion in a new farm bill, considering that the value of U.S. exports and farm income have both declined since the enactment of the previous farm bill. The eligibility of certain types of organizations and producer groups, and the levels of funding for various programs are likely topics of debate as policymakers consider farm bill trade programs. Congress could also revisit the unfinished business of its directive to reorganize the international trade functions of USDA under a new Under Secretary position with a unique focus on promoting U.S. farm and food exports. Other trade-related issues that are outside the context of the farm bill—but may arise in the debate around the trade title in view of lower farm export sales in recent years—may include various multilateral and bilateral trade negotiations that are generally supported by some U.S. agricultural groups. The United States has led global funding support for international food assistance for over 60 years. These programs originated with blended goals to support the domestic agricultural safety net, agricultural trade goals, and the maritime industry in addition to supporting efforts to alleviate hunger abroad. This blending of objectives is manifested through statutory requirements that most U.S. international food assistance be (1) based on the donation of U.S. agricultural commodities to be distributed as food or sold to generate funds for development programs and (2) shipped primarily on U.S.-flag vessels. Two agencies implement the international food assistance programs authorized under the farm bill: the U.S. Agency for International Development (USAID), and FAS. USAID implements the largest program, Food for Peace Title II (Emergency and Private Assistance Programs), which averaged $1.8 billion in annual outlays from FY2006-FY2015. FAS implements all other international food assistance programs funded through the farm bill authorization, with total annual average outlays of $395 million per year from FY2006-FY2015. The United States provides U.S. agricultural commodities, procured by USDA, as the primary form of emergency and economic development assistance in response to food security problems in developing countries. The suite of programs that govern U.S. international food assistance was reauthorized in the trade title of the 2014 farm bill. Programs include (1) Food for Peace, (2) Food for Progress, (3) the McGovern-Dole International Food for Education and Child Nutrition Program, and (4) the Bill Emerson Humanitarian Trust. The Food for Peace Act's Title II, Emergency and Private Assistance Programs, is the primary vehicle for U.S. international food aid. Title II of Food for Peace is administered by USAID. Title II provides donations of U.S. agricultural commodities to respond to emergency food needs or to be used in development projects. All other food aid programs are administered by FAS. The 2014 farm bill also enacted modest flexibilities into the Food for Peace Act. The 2014 farm bill also made permanent the Local and Regional Food Aid Procurement Projects program (which was authorized in the 2008 farm bill as a temporary pilot program), but it also changed its funding from mandatory to discretionary, increasing the authorization from $60 million total during FY2009-FY2012 to $80 million per year, subject to annual appropriations. It also introduced additional reporting requirements on administrative costs, transportation, storage, and cost recovery of monetized food aid authorized through the farm bill. U.S. international food assistance programs have evoked considerable debate on whether to relax, retain, or strengthen statutory requirements that affect implementation of the programs. The 115 th Congress might continue these discussions or might consider new legislation that also addresses global hunger issues. In previous Congresses, debate about U.S. international food assistance programs intensified during farm bill discussions and other legislative proposals. Issues that Congress discussed included whether to alter requirements on where food aid is purchased, how it is transported, and the extent to which U.S. agricultural commodities must be sold (or "monetized") to support Food for Peace development programs. Proponents for increased flexibility argue that requirements on sourcing and transportation increase program expenses, and flexibility could allow U.S. international food assistance programs to benefit more people at no additional cost. Supporters of the existing program mechanisms cite the value of leveraging the international programs to also support U.S. agriculture, shipping, and military readiness. The 2016 Global Food Security Act ( P.L. 114-195 ) codified a new program—the Emergency Food Security Program (EFSP)—but did not alter programs that are authorized through the farm bill. The new EFSP operates without restrictions on sourcing or shipping—cash transfers are permissible. The Global Food Security Act mandated additional coordination efforts of all U.S. programs that address hunger internationally. Authorizations for food aid programs under both the farm bill and the act expire after FY2018. The simultaneous expiry of these programs with similar goals and distinct reporting mechanisms may generate congressional discussion on how to coordinate oversight and reauthorization across both agricultural and foreign affairs jurisdictions. USAID's Office of Food for Peace implements EFSP, but the program does not operate with funding authorized through the Food for Peace Act. The program reports to the foreign affairs committees, not to the agricultural committees. Domestic food assistance programs reauthorized in the farm bill's nutrition title include the Supplemental Nutrition Assistance Program (SNAP, formerly the Food Stamp Program), the Emergency Food Assistance Program (TEFAP), the Commodity Supplemental Food Program (CSFP), the Food Distribution Program on Indian Reservations (FDPIR), and other programs administered by USDA's Food and Nutrition Service (FNS). According to CBO's projected costs at the time of enactment, the nutrition title makes up nearly 80% of spending under the 2014 farm bill (though subsequent estimates show that actual spending has been less than was projected at that time; see Table 1 and Figure 1 ). SNAP accounts for the vast majority of the spending in this title. At the time of enactment, the policy changes contained in the nutrition title of the 2014 farm bill were projected to save $8 billion relative to baseline spending over 10 years (FY2014-FY2023). The savings are primarily from changes to SNAP, but there are increasing investments in some areas. Most farm bill domestic food assistance programs—except for CSFP, FDPIR, and the administrative cost component of TEFAP—are generally treated as mandatory spending for budget purposes. SNAP is open-ended mandatory spending and is funded through appropriations laws. As such, amending SNAP eligibility, benefits, or other program rules can have a budgetary impact, but the availability of appropriated funding also affects operations. Discretionary spending programs in the farm bill include CSFP, the administrative cost component of TEFAP, and a portion of FDPIR. Typically, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and the child nutrition programs (National School Lunch Program, School Breakfast Program, Child and Adult Care Food Program, Summer Food Service Program, and others) are not reauthorized in the farm bill. These programs, located in the Child Nutrition Act of 1966 and the Richard B. Russell National School Lunch Act, were last reauthorized in 2010 in P.L. 111-296 , the Healthy, Hunger-Free Kids Act of 2010. Despite efforts to complete the next child nutrition reauthorization during the 114 th Congress, the legislation did not advance beyond committees. The sections to follow provide program background and highlight some of the 2014 farm bill's major changes. For a more comprehensive treatment of the 2014 farm bill's nutrition title, see CRS Report R43332, SNAP and Related Nutrition Provisions of the 2014 Farm Bill (P.L. 113-79) . Formerly known as the Food Stamp Program, SNAP provides benefits to eligible low-income households on electronic benefit transfer (EBT) cards. Benefits can be exchanged for eligible foods at authorized retailers. In FY2016, an average of 44.2 million individuals in 21.8 million households participated in SNAP each month. Federal spending for FY2016 totaled approximately $70.8 billion. The vast majority of the spending ($66.6 billion, 94%) was the cost of benefits themselves, which are 100% federally financed. SNAP eligibility and benefits are calculated on a household basis. Financial eligibility is determined through a traditional or a categorical eligibility path. Under traditional eligibility, applicant households must meet gross income, net income, and asset tests. Specifically, household gross monthly income (all income as defined by SNAP law) must be at or below 130% of the federal poverty level, and household net monthly income (with SNAP-specified deductions subtracted) must be at 100% of the federal poverty level. The traditional asset rules are set at $2,000 per household (inflation adjusted). (Households that contain an elderly or disabled member have a higher asset limit and also do not have to meet the gross income test.) Under categorical eligibility, SNAP eligibility is automatically conveyed based upon the applicant's participation in other means-tested programs, namely Supplemental Security Income (SSI), Temporary Assistance for Needy Families (TANF), or General Assistance (GA). Because TANF is a broad-purpose block grant, the state option to extend SNAP eligibility to applicants that receive a TANF-funded benefit allows states to offer program eligibility under rules that vary from those discussed in this paragraph, including an elimination of the asset test ("broad-based categorical eligibility"). Applicants are also subject to nonfinancial rules, which include work-related requirements such as a time limit for Able-Bodied Adults Without Dependents (ABAWDs). If eligible for SNAP, an applicant household undergoes a calculation of its monthly benefit amount (or allotment) based on household size and any applicable SNAP deductions. Although the nutrition title of the 2014 farm bill ( P.L. 113-79 ) contains a number of provisions that changed aspects of SNAP, Congress retained most of SNAP's existing authorizing law. The 2014 farm bill amended how Low-Income Home Energy Assistance Program (LIHEAP) payments are treated in the calculation of SNAP benefits, reducing benefit amounts in some states. The law included policies related to the SNAP Employment and Training (E&T) program, including a pilot project authority and related funding ($200 million over FY2014 and FY2015) for states to implement and for USDA to evaluate a variety of work programs for SNAP participants. Since SNAP provides benefits redeemable for SNAP-eligible foods at SNAP-eligible retailers, much of SNAP law pertains to retailer authorization and benefit issuance and redemption. The 2014 farm bill included changes to retailer and redemption provisions. The law now requires stores to stock more fresh foods, requires retailers to pay for their EBT machines, and provides additional funding for combatting trafficking (the sale of SNAP benefits). The 2014 farm bill also includes $100 million in mandatory funding (over 10 years) for Food Insecurity Nutrition Incentive grants, which will support organizations that offer bonus incentives for SNAP purchases of fruits and vegetables. Under TEFAP, the federal government provides USDA-purchased commodity foods to states. This assistance supplements other sources of food aid for needy persons and is often provided in concert with food bank and homeless shelter projects as either food packages or meals. States make eligibility decisions for TEFAP assistance and choose local administering agencies. National emergency provider and food bank networks (such as Feeding America) are also heavily involved. In addition to state allocations in entitlement commodities, each state receives a share of discretionary money to fund expenses of administration and distribution (e.g., storage, transportation) of the commodities. State entitlements to TEFAP commodities are supplemented with bonus commodities (about $305 million in FY2016) that USDA has acquired in its agriculture support programs. The 2014 farm bill increased mandatory funding for TEFAP entitlement commodities. According to CBO's estimate (which accounts for inflation), the 2014 farm bill increases funding for TEFAP's entitlement commodities by $125 million over 5 years and $205 million over 10 years. The increases first took effect in FY2015 with an increase of $50 million above prior law. Among other changes, the 2014 law also requires funding for TEFAP to be available to be spent over a two-year period. CSFP provides supplemental foods primarily to low-income elderly persons. For elderly participants, eligibility is limited to those with income below 130% of the federal poverty income guidelines. USDA purchases the foods and distributes them to grantees. CSFP grantees also receive funding for administrative costs. Commodities and administrative funding are generally apportioned by the number of persons served in the prior year. If new money is appropriated or if allocated "slots" are not used, new projects can be added. In FY2016, 47 states, the District of Columbia, and two Indian Tribal Organizations (ITOs) operated CSFP projects. The 2014 farm bill changed CSFP's eligibility rules, phasing out eligibility for low-income pregnant, postpartum, and breastfeeding women, infants, and children. According to FY2016 FNS administrative data, nearly all of the over 585,000 program participants were elderly (defined as 60 years of age or older). Puerto Rico, American Samoa, and the Commonwealth of the Northern Mariana Islands (CNMI) do not participate in the SNAP program. Instead, they receive a nutrition assistance block grant, under which they administer a nutrition assistance program with service delivery unique to each territory. Indian tribal organizations may choose to operate FDPIR instead of having the state offer SNAP benefits. The full cost of benefits and most administrative expenses are covered by the federal government. This option operates on over 250 Indian reservations in 22 states. The 2014 farm bill included policies related to the programs in lieu of SNAP. For instance, it required certain feasibility studies of the food assistance programs in Puerto Rico and CNMI. Under the SFMNP, low-income seniors receive vouchers that they can redeem at farmers' markets and roadside stands for fresh produce. The 2014 farm bill maintained mandatory funding at $20.6 million per year. As discussed above, the school meals programs are reauthorized in legislation separate from the farm bill. However, the 2014 farm bill did include several provisions and resources that pertain to the child nutrition programs, in particular the USDA commodity foods served in the school meal programs. Related policies include: Processing of USDA c ommodities. The 2014 law extended the authority for USDA to enter into reprocessing agreements with private companies to process commodity foods. The law also included a new provision that allowed USDA to contract with processors and retain title to those foods while processing. USDA purchases of fresh fruits and vegetables; farm to school. The 2014 law continued the requirement that $50 million of USDA's additional acquisitions of fruits and vegetables be fresh fruit and vegetables. The law also created a pilot grant program that would allow eight states to use this funding for their own local sourcing of fresh fruits and vegetables. Pulse crop pilot program. The new law included the Senate bill's proposal to create a pilot project to purchase pulse crops (dry beans, dry peas, lentils, and chickpeas) and pulse crop products for schools. Up to $10 million in appropriations was authorized. Fresh Fruit and Vegetable ("snack") Program. This program was permanently authorized and funded in the 2008 farm bill, but in 2014 a pilot was authorized to test and evaluate providing fruit and vegetable snacks in other forms. In the 1996 farm bill (Federal Agriculture Improvement and Reform Act of 1996, P.L. 104-127 ), Congress established a program of assistance for community food projects intended to promote innovative local self-help initiatives to meet nutrition and farm needs. The 2014 farm bill made some amendments to the grant program and increased mandatory funding from $5 million per year to $9 million per year (beginning FY2015). As discussed earlier, the 2014 farm bill was formulated and enacted amid contentious debate that centered on SNAP spending, eligibility and benefit rules, and inclusion of certain programs in the farm bill. It is possible that some of the controversial policies included in House-passed bills but not in the enacted law will be debated again in the 115 th Congress's consideration of the next nutrition title. The Trump Administration may affect how and what issues are discussed in the next reauthorization. Developments in the 114 th Congress—namely the findings from the bipartisan congressional commission, the National Commission on Hunger, and the House Committee on Agriculture's 114 th Congress hearing series, "Past, Present, and Future of SNAP" —may also preview future issues and options. It is also possible that SNAP, as the lion's share of the farm bill's mandatory spending, will be part of budgetary decisionmaking for the bill as a whole. The sections to follow briefly discuss examples of SNAP issues that came up during the last farm bill or have come up since that time. In current law, SNAP eligibility is available to applicants that already receive benefits from low-income programs, including SSI, TANF, and state-financed GA programs. As of August 2016, 42 states adopted the "broad-based" categorical eligibility option, which gives states increased flexibility with the income and asset limits. Because of this "broad-based" option, most states are assessing applicants' eligibility without conducting an assessment of their assets. As these policies are considered, possibly in a new farm bill, so may be the role of asset tests in general. SNAP law has rules on employment or work-related activities for able-bodied, nonelderly adult participants. Some rules apply in all states that operate SNAP—for example, requiring unemployed program participants to register for work and accept a suitable job if offered one. However, some requirements can vary by state, depending on how each state designs its own SNAP Employment and Training Program (E&T)—for example, whether a work registrant's E&T participation is voluntary or mandatory. In addition to the nationwide and state-specific work eligibility rules, SNAP law has a time limit for ABAWDs who are not working a minimum of 20 hours per week. If such individuals do not work the required number of hours, they can receive no more than three months of benefits over a 36-month period. SNAP law also authorizes waivers (tied to job availability in a state or portions of a state) and exemptions from the time limit. Some controversy has developed in recent years, including the years of the 2014 farm bill's formulation, because the vast majority of states had statewide waivers from enforcing the time limit. Currently, fewer states are eligible for those statewide waivers, and the time limit is becoming more prevalent. Participants are increasingly being time-limited off benefits, and there are anecdotal reports of food banks experiencing increased demand as a result. A new farm bill may consider work-related rules. As mentioned earlier, the 2014 law ultimately authorized and funded E&T pilot programs in 10 states; each pilot is participating in a rigorous evaluation. It is possible that a new farm bill could propose changes to work-related rules based on (likely interim) findings from the evaluation of the 2014 farm bill's pilot programs and/or political and ideological positions around work requirements. For decades, policymakers and the general public have debated what SNAP benefits should be allowed to purchase and whether further restrictions would promote better eating habits. Under current law, SNAP benefits can buy most foods for household consumption sold at SNAP-authorized retailers. In recent months, FNS released a study of SNAP participants' foods purchased, and the House Committee on Agriculture held a hearing on SNAP-eligible foods. A new farm bill may revisit rules around eligible foods or eligible retailers or may propose policy options to promote healthier eating for SNAP participants. The current definition of SNAP-eligible foods is in federal law. If states or localities wish to implement SNAP-eligible foods policies different than this definition—for instance, one restricting sugar-sweetened beverage purchases—they must apply to USDA for permission to run demonstration projects. Over the years, some states have sought permission to restrict foods from SNAP purchase, but USDA has not yet approved one. The last two farm bills expanded federal funding to provide and test incentives for SNAP participants' purchases of fruits and vegetables. The 2008 farm bill authorized and funded the "Healthy Incentives Pilot." The 2014 farm bill authorized and funded the Food Insecurity Nutrition Incentive grant program. It is possible that a new farm bill could further support incentive-based approaches. The 2014 farm bill required significant changes to the inventory requirements for SNAP-authorized retailers. The changes to stocking requirements will go into effect in May 2017 for new applicant stores and January 2018 for currently authorized stores. Retailers' experiences under the new rules may impact development of a new farm bill. The conservation title of the farm bill generally contains a number of reauthorizations, amendments, and new programs that encourage farmers and ranchers to voluntarily implement resource-conserving practices on private land. Starting in 1985, farm bills have greatly broadened the range of topics considered to be conservation. While the number of programs has increased and techniques to address resource problems continue to emerge, the basic approach has remained unchanged: financial and technical assistance supported by education and research programs. USDA currently administers a number of conservation programs that assist private landowners with natural resource concerns. These programs provide technical and financial assistance to willing landowners in exchange for the implementation of resource-conserving practices. Some of these programs focus on improving or restoring resources that have been degraded, while others create conditions to limit degradation in the future. In most cases, conservation programs have multiple resource conserving goals related to soil, water, and wildlife. Since 1985, each succeeding farm bill has expanded the range of natural resource problems to be addressed as well as the number of conservation programs and level of funding. The 2014 farm bill reauthorized, repealed, consolidated, and amended a number of conservation programs. Generally, farm bill conservation programs can be grouped into the following categories based on similarities: working land programs, land retirement programs, easement programs, conservation compliance programs, and other programs and overarching provisions (see text box below). For more information, see CRS Report R40763, Agricultural Conservation: A Guide to Programs . Most of these programs are authorized to receive mandatory funding (i.e., they do not require an annual appropriation) and include authorities that expire with other farm bill programs at the end of FY2018. Other types of conservation programs—such as watershed programs, emergency land rehabilitation programs, and technical assistance—are authorized in other nonfarm bill legislation. Most of these programs have permanent authorities and receive appropriations annually through the discretionary appropriations process. These programs are not generally addressed in the context of a farm bill unless amendments to the program are proposed. The conservation title is one of the larger nonnutrition titles of the farm bill, accounting for 6% of the total projected 2014 farm bill, or $58 billion of the total $956 billion in 10-year mandatory funding authorized (FY2014-FY2023). Current budgetary constraints continue to drive the debate on conservation in a new farm bill. Similar to the conditions during debate on the 2014 farm bill, the current farm bill debate may be driven in part by demand for fiscal restraint. Ultimately the 2014 farm bill reduced the conservation title by $3.97 billion over 10 years, or 24% of the total $16.5 billion in savings. In addition to a reduction in mandatory authorization, the conservation title continues to be affected by budgetary dynamics such as sequestration and reductions through annual appropriations. It remains uncertain what impact these reductions will have on a new farm bill's baseline. While most producers are in favor of conservation programs, it is unclear how much of a reduction in other farm program spending they would be willing to support to expand or maintain conservation efforts. Arguments for expanding conservation in earlier farm bills proved particularly persuasive when documentation was presented of large backlogs of interested and eligible producers that were unable to enroll because of a lack of funds. Debate on a new farm bill could see similar arguments, as demand to participate in many of the conservation programs exceeds the available program dollars several times over. For example, in FY2015 (most recent data available), the working lands programs funded 27% of the applications received for CSP, 31% of the applications received for EQIP, and 12% of the applications received for AMA. The FY2016 CRP general sign-up resulted in 1.9 million acres offered for enrollment and 411,000 acres accepted (22%). The acceptance rate was even lower for the CRP grasslands enrollment, which had over 1 million acres offered and 101,000 accepted acres (10%). Easements under ACEP also faced a limited acceptance rate, with agricultural land easements enrolling 26% of applications and wetland reserve easements accepting 38% of offers in FY2015 (most recent data available). The new RCPP also experienced high demand, accepting 88 of the 147 projects proposed (60%) in FY2017 and 84 of the 265 project proposed (32%) in FY2016. Large, ongoing backlogs could provide a case for additional funding, while other policy mechanisms could be proposed to reduce demand. Land retirement programs (e.g., CRP) provide producers with financial incentives to temporarily remove from production and restore environmentally sensitive land. In contrast, working lands programs (e.g., EQIP) allow land to remain in production and provide producers with financial incentives to adopt resource-conserving practices. Over time, high commodity prices, changing land rental rates, and new conservation technologies have led to a shift in farm bill conservation policy toward an increased focus on conservation working lands programs. Some of this shift has already occurred in the last decade and was continued in the 2014 farm bill as the percentage of mandatory program funding for land retirement programs has declined relative to working lands programs. With lower commodity prices, a new farm bill could shift this focus again, potentially increasing funding for land retirement programs. Most conservation and wildlife organizations support both land retirement and working lands programs, but the appropriate "mix" continues to be debated. With any proposal, it is likely that environmental interests will not support a reduction in one without an increase in the other. Interest is increasing in programs that partner with state and local communities to target conservation funding to local areas of concern. These partnership programs leverage private funding with federal funding to multiply the level of assistance in a select area. A number of these partnership programs were repealed in the 2014 farm bill and replaced with the new Regional Conservation Partnership Program (RCPP). The program receives $100 million annually in mandatory funding and redirects 7% of the funding from other programs—EQIP, ACEP, CSP, and HFRP—to partnership agreements. Now in its fourth year of project selection, RCPP has received considerable interest (see backlog discussion above). Some praise the program's ability to leverage nonfederal funding and incorporate the use of other state and local partners in a targeted effort. Others question whether the program redirects funds to areas with the greatest established support rather than those with the greatest resource concerns. The 1985 farm bill created the highly erodible lands (HEL) conservation and wetland conservation compliance programs, which tied various farm program benefits to conservation standards. The provision has since been amended numerous times to remove certain benefits and add others. Most recently, the 2014 farm bill added crop insurance premium subsidies as a program benefit that could be denied if conservation standards were not met. In 2015, USDA issued a requirement that to remain eligible for crop insurance premium subsidies, producers must certify their compliance with the conservation compliance provisions through a standard form. Following the 2015 deadline, USDA reported a 98.2% certification rate, suggesting that those not certified were likely no longer farming or had filed forms with discrepancies that may still be reconciled. Despite this high compliance rate, many view the conservation compliance requirements as burdensome, and they continue to be unpopular among producer groups. Since its introduction in the 1985 farm bill, conservation compliance has remained a controversial issue, and debate will likely continue. Farm bill conservation programs are a voluntary federal policy to address environmental impacts related to agriculture. Another way for the federal government to address environmental impacts is through regulation. Increasingly, conservation programs are called upon to prevent or reduce the need for environmental regulation. While a new farm bill debate will not likely focus specifically on environmental regulations—because most environmental law originates outside the House and Senate Agriculture Committees—debate could focus on strengthening the voluntary response to environmental issues through conservation programs. This, in turn, could influence the funding debate and the portion of the overall farm bill budget made available for conservation programs. Since 1973, omnibus farm bills have included a rural development title. How to create and support new competitive advantage in rural areas so these areas can better compete in a global economic environment is a key issue framing current debates about the future of rural America. While the search for new sources of rural economic development is part of the policy equation, also increasingly appreciated is the need to develop new approaches for federal assistance to rural areas that go beyond the largely piecemeal programming that has long characterized rural economic development policy. The rural development title of farm bills generally provides assistance for rural business creation and expansion and also rural infrastructure with traditional assistance for housing, electrical generation and transmission, broadband, water and wastewater, and economic and institutional capacity in local communities. In the past several farm bills, policymakers have also supported innovative and alternative business development (e.g., bioenergy, value-added production, local food production) and innovative mechanisms to finance it (e.g., the Rural Microentrepreneur Assistance Program). Support for such alternative approaches is expected to continue as policymakers recognize the great diversity among rural communities, with some rural areas growing and prospering and others falling further behind as their primary industries (including agriculture) decline and population outmigration continues, particularly among younger, educated residents. The rural development title of the 2014 farm bill generally reauthorized or amended long-standing programs under the Consolidated Farm and Rural Development Act (P.L. 92-419) and the Rural Electrification Act of 1937. New programs are also authorized under these statutes. Concerns about how effectively USDA targets its rural development loan and grant assistance have been a recurring consideration for policymakers and rural development practitioners. The general concern is that rural development funding may not be targeted as well or as effectively as it could be. The 2014 farm bill directed USDA to begin collecting data regarding economic activities created through its rural development grants and loans and to measure the short- and long-term viability of award recipients. It also directed USDA to report to Congress every two years on rural employment generation, new business start-ups, and any increased local revenue. The 2014 farm bill authorized a new Strategic Economic and Community Development initiative to support economic development plans on a multi-jurisdictional basis, giving priority to certain projects and reserving 10% of available appropriations for community facilities, rural utilities, and rural business, among other types of operations. The bill created other rural development programs and/or modified or reauthorized other existing programs. It authorized the Rural Energy Savings Program to provide loans to utility districts and Rural Utility Service borrowers to assist rural households and small businesses in implementing energy efficiency measures. It also authorized the Rural Business Development Grants program, merging the general functions of two grant programs—the Rural Business Enterprise and the Rural Business Opportunity grant programs—which were terminated. It also reauthorized loans and loan guarantees under the Business and Industry Guaranteed Loan Program for locally or regionally produced agricultural food products—those products that travel less than 400 miles between production and marketing—and targeted low-income areas without access to fresh fruits and vegetables. Priority is given to projects benefitting underserved communities (i.e., those with limited access to affordable, healthy foods and with high rates of poverty or food insecurity). Grants were also authorized to fund technical assistance and training. In addition to these programs, the rural development title includes other provisions to reauthorize and/or amend a wide variety of loan and grant programs that provide further assistance in four key areas: (1) broadband and telecommunications, (2) rural water and wastewater infrastructure, (3) business and community development, and (4) regional development. Each of these programs has authorized discretionary spending subject to annual appropriations, with the exception of one mandatory spending authorization of $150 million for reducing the backlog of pending water and wastewater applications. The 2014 farm bill also modified the definition of rural area for the Housing Act of 1949. The provision increased the maximum eligible population threshold to 35,000 from 25,000 and permits any rural area that was eligible in the 1990, 2000, and 2010 censuses to remain eligible for Rural Housing Service programs until the 2020 decennial census. Some policymakers contend that current farm policies, which rely heavily on commodity support for a few production sectors, play a lesser role in the vitality of most rural areas. Rural manufacturing, which tends to be lower-skilled and lower-waged, continues to lose out to foreign competition. While transformation to a service economy continues in rural America, service employment in many rural areas also tends to be in lower-wage personal services rather than business and producer services. Economic development efforts in some areas have targeted entrepreneurial strategies and microenterprise development, including new markets for value-added agricultural products. Rather than simply seeking to attract relocating businesses, these approaches attempt to capitalize on a particular area's distinctive social, economic, and environmental assets and advantages to build endogenously on existing local and regional strengths. Developing a regional entrepreneurial culture seems to be an important approach in these efforts. The mixed success of these and past efforts, as helpful to rural areas as they may be, suggests to many rural development experts and policymakers that the current structure of federal assistance to rural areas needs to be reexamined. For example, regularly tweaking the definition of rural to determine eligibility for certain programs seems unlikely to produce significantly improved economic development outcomes. Some contend that greater emphasis on the socioeconomic relations between rural communities and urban areas within a regional context could lay the foundation for more successful rural (and regional) development outcomes. While both the 2008 and 2014 farm bills provided a greater emphasis on regional efforts, some policymakers believe that redesigning existing programs to better target regional efforts could yield positive results. To that end, the 2014 farm bill authorized a new data collecting activity to assess the effectiveness of federal development assistance to rural businesses. Application processes for program loans and grants can be a barrier for many rural projects, especially those in smaller, poorer rural areas. The way assistance is currently provided (mostly through direct and guaranteed loans) has limitations because it is often driven by individual projects rather than integrated into an overall development strategy. Many rural communities may benefit from technical assistance support for strategic planning. The Obama Administration saw interagency coordination among federal agencies that target rural areas (e.g., Department of Housing and Urban Development, Department of Health and Human Services) as in need of significant improvement. These are not so much new concerns about federal assistance to rural areas as they are continuing issues identified by rural development experts and rural policymakers. In the current budget environment, it may be difficult to advance substantively new approaches to rural development in a new farm bill. However, with many in Congress concerned that current federal approaches to rural development need to be reexamined and programs better targeted to overall development strategies, a new farm bill is likely the major legislative vehicle to address these issues. Commercial interest in renewable energy, mainly ethanol and biodiesel production, expanded rapidly with the enactment of the Renewable Fuel Standard (RFS) and in response to a strong rise in domestic and international fuel prices. Many policymakers view agriculture-based biofuels as a catalyst for rural economic development, an important source of demand for agricultural production, and a home-grown response to lowering U.S. dependence on imports of foreign energy. USDA renewable energy programs have been used to incentivize adoption of renewable energy projects including solar, wind, and anaerobic digesters. Initially, the primary focus of these programs was to promote U.S. biofuels production and use—including cornstarch-based ethanol, soybean-based biodiesel, and cellulosic ethanol—but over time their focus has shifted toward promoting renewable power, biomass-based products, and efforts to bring biomass-based fuel, such as cellulosic ethanol, and other advanced renewable fuels to market. Many of the federal programs that currently support renewable energy production are outside the purview of USDA and have legislative origins outside of the farm bill. The 2002 farm bill (Farm Security and Rural Investment Act of 2002, P.L. 107-171 ) was the first omnibus farm bill to explicitly include an energy title. The energy title authorized grants, loans, and loan guarantees to foster research on agriculture-based renewable energy, share development risk, and promote the adoption of renewable energy systems. The 2002 farm bill was followed by two major energy bills (the Energy Policy Act of 2005, P.L. 109-58 ; and the Energy Independence and Security Act of 2007, P.L. 110-140 ), which established and expanded the RFS along with several other renewable energy programs. The 2014 farm bill built on the 2008 farm bill, which had refocused earlier biofuels policy initiatives in favor of noncorn feedstocks, especially cellulosic-based feedstocks. This was in response to growing concerns about the emerging spillover effects of increased corn use for ethanol production. Like the 2002 and 2008 farm bills, the 2014 farm bill contained a distinct energy title that extended most of the existing bioenergy programs. In reauthorizing these programs, Congress significantly reduced mandatory funding, which was lowered to $694 million (FY2014-FY2018) from $1 billion under the 2008 farm bill. Discretionary funding authorization was also reduced to $765 million from $1.1 billion under the 2008 farm bill. Subsequent to the enactment of the 2014 farm bill, Congress has rescinded or reduced funding for a number of these programs through annual appropriations bills. Congress has also generally refrained from providing discretionary funding for these programs, with the exception of limited funds it has appropriated for the Rural Energy for America Program (REAP) and the Sun Grant Initiative. While most of the farm bill energy programs are authorized in the energy title, several programs are contained in other titles. Among significant changes to these programs that were ushered in by the 2014 farm bill, Congress made a number of substantive changes to BCAP, including lowering rates for establishment and matching payments, altering eligibility requirements, and sharply curbing the previously open-ended availability of funding. The 2014 law also precluded the use of REAP funding for retail energy dispensers (such as blender pumps) and repealed the Forest Biomass for Energy Program and the Agricultural Bioenergy Feedstock and Energy Efficiency Research and Extension Initiative, in addition to several bioenergy-related studies. The Rural Business-Cooperative Service within USDA's Rural Development Agency administers the major grant, loan, and loan guarantee programs—BAP, RAP, and REAP. In contrast, FSA administers BCAP, and NIFA administers BRDI. Among the farm bill's bioenergy programs, only REAP is authorized beyond FY2018, as the law provides mandatory funding for REAP for FY2014 and each fiscal year thereafter. Mandatory baseline funding authority for several other bioenergy programs expires prior to FY2018, including RAP (after FY2014), BAP (FY2016), and BRDI (FY2017). An upcoming farm bill could provide an opportunity for Congress to consider the ongoing utility of these programs in light of budgetary constraints. For instance, mandatory funding for BCAP, which was authorized at "such sums as necessary" in the 2008 farm bill, was limited to $25 million annually under the 2014 farm bill. Since then, Congress has further limited funding for BCAP through annual appropriations laws, most recently limiting it to $3 million for FY2016. Most of these programs were conceived in a prior era when oil prices were higher, the United States was more dependent on imported energy, and new techniques for extracting tight oil deposits and shale gas (such as directional drilling and hydraulic fracturing) were not being deployed widely enough to bring onto the market transformational quantities of domestic oil and gas. These changes largely occurred after the 2008 farm bill was enacted. At the same time, biofuels and renewable energy may have tangible advantages in that they are not derived from finite resources, can offer environmental benefits compared with traditional energy alternatives, and can provide an economic benefit to rural America. These are among the considerations that Congress could weigh as it considers the direction of energy policy and the role of a new farm bill in defining the opportunities the agricultural sector and rural America may have in contributing to the country's energy future. One-third of the land area in the United States is forestland (766 million acres). These lands provide wood for lumber, plywood, paper, and other materials, as well as a host of ecological services, including recreation, clean water, wildlife habitat, and more. The federal government owns one-third of the forestland in the United States (238 million acres), and nonindustrial private landowners (private, noncorporate entities that do not own wood processing facilities) own 298 million acres (39%). The Forest Service is the principal federal forest management agency, managing 19% of all U.S. forestlands (145 million acres). In addition to administering the National Forest System (NFS), the Forest Service provides technical and financial assistance—primarily through state forestry agencies—to nonfederal landowners. The Forest Service also conducts research to advance the science of forestry and engages in international forestry assistance and research efforts. Past farm bills have contained forestry provisions or a separate forestry title. Although many forestry provisions are permanently authorized, a new farm bill would allow Congress to modify programs to support assistance to nonfederal forest owners, forest research, and the management of federal forests. The forestry title of the 2014 farm bill repealed, modified, created, and reauthorized several forestry programs. For example, the 2014 farm bill permanently authorized stewardship contracting and extended the good neighbor authority nationwide. A new farm bill may modify existing programs and possibly establish new options for forestry research, management of federal lands, and assistance to nonfederal forest owners. Among the issues that might be considered in a new farm bill's forestry title are expanded wildfire protection, support of woody biomass for energy, and additional controls to address invasive species. The threat of wildfires to forests, communities, and homes seems to have grown. The 2002 farm bill authorized a new community wildfire protection program, but the program has been funded only as part of state fire assistance. New programs to enhance wildfire protection on both federal and nonfederal lands might be considered in a new farm bill. Interest in producing energy from woody biomass and other renewable sources (as discussed above) derives from both supply and demand. Supply could come from efforts to reduce wildfire threats and to control invasive species. Demand is likely to be driven by state and federal requirements for renewable transportation fuels and possibly for electricity production. Many of the energy programs face budgetary challenges, and a new farm bill might extend, expand, alter, or terminate these programs or possibly replace them with alternative approaches. Invasive species, typically exotic plants and animals, are increasingly displacing or harming native plants and animals in the United States and worldwide. Invasive species have been described as one of the four major threats to the nation's forests and rangelands. Options and opportunities to prevent and control the spread of invasive species, especially forest pests and especially on private forestlands, might be a farm bill issue.
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Congress periodically establishes agricultural and food policy in an omnibus farm bill. The 115th Congress faces reauthorization of the 2014 farm bill—the Agricultural Act of 2014 (P.L. 113-79, H.Rept. 113-333)—because many of its provisions expire in 2018. The 2014 farm bill is the most recent omnibus farm bill. It was enacted in February 2014 and succeeded the Food, Conservation, and Energy Act of 2008 (P.L. 110-246, "2008 farm bill"). In recent decades, the breadth of farm bills has steadily grown to include new and expanding food and agricultural interests. The 2014 farm bill contains 12 titles encompassing farm commodity revenue supports, farm credit, trade, agricultural conservation, research, rural development, energy, and foreign and domestic food programs, among other programs. Provisions in the 2014 farm bill reshaped the structure of farm commodity support, expanded crop insurance coverage, consolidated conservation programs, reauthorized and revised nutrition assistance, and extended authority to appropriate funds for many U.S. Department of Agriculture (USDA) discretionary programs through FY2018. When the 2014 farm bill was enacted, the Congressional Budget Office (CBO) estimated that the total cost of mandatory programs would be $489 billion over the five years FY2014-FY2018. Four titles accounted for 99% ($483.8 billion) of anticipated farm bill mandatory program outlays: nutrition, crop insurance, conservation, and farm commodity support. The nutrition title, which includes the Supplemental Nutrition Assistance Program (SNAP), comprised 80% of the total, with the remaining 20% mostly geared toward agricultural production across other titles. Traditionally, a primary focus of omnibus farm bills has been commodity-based revenue support policy—namely, the methods and levels of federal support provided to agricultural producers. The 2014 farm bill amended U.S. farm safety net programs by expanding crop insurance provisions and modifying counter-cyclical support while eliminating direct payments to growers of grains, cotton, and peanuts. Upland cotton was removed from eligibility for participation in the new revenue support programs as part of compliance with a World Trade Organization dispute settlement case with Brazil. Instead, cotton producers were offered an insurance-like support program that protects against within-season revenue shortfalls. Another major change involved dairy: Previous support programs were replaced with a new insurance-like margin program that insures against shortfalls in the difference between milk prices and feed costs. Most farm program proponents agree that the new cotton and dairy programs have performed ineffectively and are likely to see proposals for change. Other farm interest groups, however, continue to point to competing policy priorities—covering a range of equity concerns across the entire farm sector—and call for enhanced support for small and medium-sized farms, specialty crops, organic agriculture, local and regional food systems, healthy and nutritious foods, research, conservation, and rural development, among others. One of the principal drivers of a new farm bill debate will be the federal budget. According to CBO estimates, if ongoing programs were to continue under current law, mandatory farm bill spending by the four largest titles—nutrition, crop insurance, farm commodity programs, and conservation—is projected to be about $435 billion over the next five years (FY2018-FY2022), with domestic nutrition assistance accounting for nearly 77% of the total. This compares with actual costs for the first three years of the 2014 farm bill and projections for its last two years, which suggest that these four titles may cost $456 billion over FY2014-FY2018.
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Reports of "waste, fraud, and abuse" in federal contracting often prompt questions about what the government can do to hold its vendors accountable for failure to perform as required under their contracts, or for legal violations or other misconduct unrelated to contract performance. Because agencies rely extensively on contractors in their operations, it is important that contractors perform on time and in conformity with the contract's requirements. Failure to do so can negatively affect the services that the agency provides to taxpayers, as well as the conditions under which federal personnel work. Relatedly, there is a widespread (although not universal) view that contracting with the government is a "privilege," and contractors should be exemplary in all aspects of their operations, including in performing legal responsibilities and duties unrelated to their obligations under a federal contract. When a contractor is implicated in wrongdoing, its suitability for doing business with the government may be publicly questioned. This report provides an overview of selected legal mechanisms that the federal government could rely upon in holding contractors accountable for deficiencies in their performance under the contract, or for other misconduct. Not all of these mechanisms involve "penalties" as that term is generally understood. In some cases, the controlling legal authority expressly provides that the government may take certain actions only to protect the government's interest, and "not for purposes of punishment." However, in all cases, the government's action represents a consequence of and response to the contractor's delinquencies, and could be perceived as punitive by the contractor or other parties. The government generally has discretion as to whether to employ any of these mechanisms in particular circumstances, and could employ multiple mechanisms in a given case. In some cases, though, the government must choose between particular mechanisms. For ease of discussion, the various mechanisms discussed in this report are broadly divided into two categories. The first category includes rights provided to the government as terms of its contracts, which the government may exercise without resort to judicial proceedings. The second category includes other actions, not necessarily provided for by contract. In some cases, the government may take these actions on its own behalf, without resort to judicial proceedings. In other cases, the government must seek sanctions or damages through the courts. Individual mechanisms are listed alphabetically within the first of these sections, and grouped by topic in the second. Within each of these sections, the discussion of individual mechanisms explains the underlying legal authority, the mechanism's basic operation, and key issues the government may encounter when exercising contractual rights or taking other actions. Recent developments regarding particular mechanisms are highlighted in accompanying text boxes, where relevant. The report does not address prosecution of government contractors, although it is important to note that contractors could be subject to criminal penalties for misconduct related to contract performance or otherwise. Also, the discussion of the government's potential mechanisms for holding contractors accountable in this report should not be taken to mean that contractors and contractor employees are more likely to fail to perform or engage in misconduct than government employees. That is a separate debate, outside the scope of this report. The standard terms of government contracts grant the government certain rights that the government could exercise on its own, without the permission of a court or board of contract appeals, in response to a contractor's failure to perform as required under the contract. Examples include the assessment of liquidated damages, termination for default, and withholding of award or incentive fees. A specific right must generally be expressly provided for in the contract for the government to exercise it, although the government's right to terminate contracts for default may be "read into" (or treated as a constructive term of) certain federal procurement contracts that do not expressly provide for it. The government's exercise of the right must also generally be in conformity with the contract (e.g., providing any required notice of the government's intent to exercise the right). In addition, depending upon the facts and circumstances of the case, a contractor could challenge the government's exercise of a contractual right by bringing suit before a court or board of contract appeals, alleging that the contractor's deficient or delinquent performance must be excused because it was caused by an event that is beyond the contractor's control and without its fault or negligence. Alternatively, a contractor could assert that the government has waived particular contractual rights in specific cases. A waiver is an intentional or voluntary relinquishment of a legal right, or conduct that warrants an inference that the right has been relinquished. The government could be bound by a waiver if the contractor relies upon the waiver to its detriment. The Federal Acquisition Regulation (FAR), which generally governs the acquisition of supplies and services by executive branch agencies, requires that clauses granting the government the right to inspect and test the supplies or services to be provided under the contract be incorporated into many contracts. These inspection clauses also provide the government with the right to require the contractor to correct or re-do some or all deficient work at its own expense, as discussed below. The inspection clauses may also provide that the contractor must furnish (or have furnished by subcontractors) "all reasonable facilities and assistance for the safe and convenient performance" of inspection and testing at no cost to the government. In addition, the inspection clauses may provide that, if the contractor fails to correct or re-do the deficient work, the government may procure the supplies or services in question at the contractor's expense. The extent to which the government may require contractors to correct or re-do deficient work at the contractor's expense depends, in part, upon whether the contract is fixed-price or cost-reimbursement. With fixed-price contracts, the contractor is generally liable for the costs of correction, and sometimes also for any additional costs of inspection or testing if the supplies are not ready at the time specified, or if prior rejection makes re-inspection or retesting necessary. The situation is somewhat different as to cost-reimbursement contracts because the government, and not the contractor, may be liable for the costs of "ordinary" correction of work, or of furnishing facilities and assistance for testing and correction. However, even under cost-reimbursement contracts where they are not otherwise liable for the costs of correction, contractors may be liable for these costs when the deficiency is due to fraud, lack of good faith, or willful misconduct on the part of the contractor's "managerial personnel;" or the conduct of one or more contractor employees who were selected or retained by the contractor after its managerial personnel had "reasonable grounds" to believe that the employee is "habitually careless or unqualified." Correction is not limited to the repair or replacement of defective supplies; it can encompass other work necessary to make the defective supplies operable. The fact that the contract places the responsibility for inspection on the government generally does not relieve the contractor of its responsibility to furnish conforming supplies and services and, thus, to correct or re-do deficient work. However, other factors could potentially constrain the government's ability to insist that the contractor perform corrective actions. Depending upon the facts and circumstances of the case, such factors could include (1) the government's furnishing defective specifications or materials to the contractor; (2) the government's acceptance of the deficient performance before requesting corrective action; and (3) the government's failure to inform the contractor of the need for corrective work before obtaining it from another contractor, whose costs the government then seeks to recoup. Also, while the government generally has the right to insist on "strict compliance" with the contract's specifications, it may not be able to insist on work being redone to specifications when doing so would be "economically wasteful and the work is otherwise adequate for its intended purpose." Instead, in such situations, the government may be limited to an equitable reduction in contract price. See " Equitable Reduction in Price or Other Compensation ." The FAR requires or authorizes the use of several standard contract clauses that give the government the right to an equitable reduction in price or other compensation if it accepts supplies or services that do not fully conform to the contract's requirements. These clauses differ in the circumstances in which they are used, as well as in the supplies and services to which they apply, as discussed below. However, any exercise of the government's rights under such a clause can be seen as holding the contractor accountable for failure to perform as required by the contract because the contractor would receive less compensation than the parties had initially contemplated as a result of deficiencies in its performance. Provisions for reductions in price or other compensation appear in a number of standard contract clauses, perhaps most notably those that grant the government the right to inspect and test the supplies or services provided under the contract and, in some cases, require the contractor to correct or re-do defective work at the contractor's expense. See " Correction or Re-Work at the Contractor's Expense ." For example, the standard "Inspection of Supplies—Fixed-Price" clause provides that "[u]nless the Contractor corrects or replaces the [deficient] supplies within the delivery schedule, the Contracting Officer may require that delivery and make an equitable reduction in price." However, other contract clauses, not involving inspection, also make express provision for reductions in price or other consideration for specified issues in contractors' performance, including (1) violations of the prohibitions upon disclosing or obtaining procurement information set forth in 41 U.S.C. §§2102-2103; (2) furnishing certified cost or pricing data that were not complete, accurate, or current; (3) incurring "excessive pass-through charges" under certain contracts that involve subcontracting; and (4) breach of certain express warranties made by the contractor. Yet other clauses make provision for the reduction of payments to the contractor if the contractor fails to comply with any material requirement of the contract; endangers performance of the contract by failure to make progress or by its unsatisfactory financial condition; or is delinquent in paying subcontractors or suppliers under the contract in the ordinary course of business. Any reduction in price is generally effectuated by modifying the contract. However, the contractor could potentially bring a suit challenging the government's right to the reduction, or the amount of the reduction, under the Contract Disputes Act (CDA) of 1978, as amended. In particular, the contractor could assert that its performance was not defective, or that there is a cognizable excuse for any failure to perform. The contractor could also assert that the government is barred from exercising its right to a price reduction because the government had "accepted" the supplies or services in question before seeking a price reduction (although certain defects or contract terms may permit a price reduction even after acceptance). Alternatively, the contractor could assert that the government has not acted in conformity with the contract's terms regarding the exercise of its right to a price reduction. The FAR requires or authorizes executive agencies to incorporate provisions that call for the assessment of liquidated damages into their contracts in certain circumstances. "Liquidated damages" are "amounts fixed, settled, and agreed upon [by the parties to a contract] in advance to avoid litigation as to the damages actually sustained" in the event of specified breaches of the contract. The amount may "exceed or fall short of the actual damages sustained, but the sum thus determined in advance binds both parties to such agreement." Liquidated damages are not "penalties" as that term is generally understood. However, the assessment of liquidated damages can hold contractors accountable for certain deficiencies in their performance by making them pay an amount which represents a reasonable estimate of the damages the government incurred as a result of such deficiencies. Specifically, the FAR requires the incorporation of certain liquidated damages provisions in (1) contracts for public construction projects subject to the Davis-Bacon Act; and (2) any contracts that include "subcontracting plans," or goals for the percentage and dollar value of work under the contract to be subcontracted to small businesses. Individual agencies may also require the use of liquidated damages provisions in other contracts as a matter of law or policy. In yet other cases, the FAR authorizes (but does not require) the use of liquidated damages provisions when the contracting officer determines that the time of delivery or timely performance is "so important" that the government may "reasonably expect to suffer damage if the delivery or performance is delinquent," and the extent or amount of such damage would be "difficult or impossible to estimate accurately or prove." In such cases, the contracting officer also has discretion in determining the amount of liquidated damages specified in the contract. If the contract has a liquidated damages provision and the requisite conditions are met, damages are generally assessed The government could recover these damages by withholding a corresponding amount from the payments to be made under the contract, or by asserting a claim under the CDA. Contractors could, however, avoid the assessment of damages by showing that the amount stipulated in the contract is "so disproportionate to any damage reasonably to be anticipated in the circumstances disclosed" that the ostensible liquidated damages provision actually constitutes an "unenforceable penalty." The contractor has the burden of proof here, and this burden has been described as an "exacting one" by the U.S. Court of Appeals for the Federal Circuit, which has further noted that it is "rare ... for a federal court to refuse to enforce the parties' bargain on the issue." Contractors could also assert that the government waived its right to liquidated damages by delaying or hindering the contractor's performance, or by failing to mitigate the damages (e.g., not providing timely inspections). In federal procurement, bonds—which are written promises to pay or to act in a certain way upon the occurrence of specified conditions—can be used to ensure that contractors fulfill their obligations to the government (including their promises to the government to pay subcontractors and suppliers). Under the FAR, executive agencies must obtain adequate security for bonds (e.g., via surety, certified check, irrevocable letter of credit). Where the FAR requires the use of bonds, standard contract terms generally reserve the government's right to increase bond protection in the event of price increases and provide the bond's amount, permissible forms of security, and when the bond is to be provided to the contracting agency, among other things. The three most common types of federal procurement bonds are (1) bid bonds; (2) performance bonds; and (3) payment bonds. However, only two of these—performance and payment bonds—involve express terms of federal contracts and are discussed here. Performance Bonds. A performance bond secures the "performance and fulfillment" of the contractor's obligations under the contract. The FAR generally requires construction contractors to provide the government with performance bonds when the value of their contract exceeds $150,000. For other contracts, the FAR generally restrictions agencies from requiring performance bonds unless the agency determines such bonds are "necessary to protect the Government's interest." Standard contract terms provide the performance bond's amount and reserve the government's right to increase the bond amount in the event of price increases. Under the FAR, performance bonds of construction contracts must generally be for 100% of the original contract plus any price increases permitted in the contract unless the contracting officer determines that a lesser amount would adequately protect the government's interest. It is the bond amount that the government can generally recover in the event a contractor fails to meet its performance obligations. More specifically, the bond's security can be made available to the government to offset the costs of contract completion, which can include delays and finding a new contractor. However, it is important to note that defenses to a contractor's failure to perform its contractual obligations can preclude the government's recovery on a performance bond. Payment Bonds. A payment bond generally ensures that a contractor pays subcontractors and other persons supplying labor or materials used in performing the contract. As with performance bonds, the FAR generally requires payment bonds for construction contracts that exceed the simplified acquisition threshold. Outside of the construction contract context, payment bonds are only required when performance bonds are required and when use of a bond is in the government's interest. Standard contract terms prescribe the payment bond's amount and reserve the government's right to increase the bond amount if the price paid by the government under the contract increases. Unless a contracting officer makes a written determination that such an amount is impracticable, payment bonds for construction contracts must generally be for 100% of the original contract price plus any price increases, and must be for no less than the performance bond. The FAR authorizes agencies to use contracts that provide for the payment of award or inventive fees in certain circumstances. Such fees are paid as an additional allowance for profit in the case of fixed-price contracts; or paid separate from and in addition to the contractor's costs in the case of cost-reimbursement contracts . Fees are intended to "motivate" the contractor to perform better under the contract, because the contractor can receive the fee only if it meets or exceeds certain conditions prescribed in the contract. Standard contract terms providing for the payment of award and incentive fees expressly grant the government certain discretion in determining whether the contractor receives a fee, and how much that fee is. For example, one standard clause used in certain incentive fee contracts provides that "when the Contracting Officer considers that performance or cost indicates that the Contractor will not achieve [its] target the Government shall pay on the basis of an appropriate lesser fee ." Similarly, contracts involving award fees are required to include terms which specify that "the award amount and the award-fee determination methodology are unilateral decisions made solely at the discretion of the Government ." Such language makes reducing or withholding contractor fees one means by which the government could hold contractors accountable for deficiencies in performance under the contract. The government can resort to reducing a contractor's fees only when the contract expressly provides for the payment of fees and grants the government discretion in determining the amount. (In contrast, the government's discretion to pay a reduced price, or not to pay certain costs, is more limited, and discussed elsewhere in this report. See " Equitable Reduction in Price or Other Compensation .") Also, while broad, the government's discretion is less than it might seem given the standard contract terms quoted above. Notably, although the FAR and the standard contract terms regarding award fees state that the amount of such fees is a "unilateral decision" of the contracting officer, the U.S. Court of Appeals for the Federal Circuit has held that this language does not shield award fee determinations from review under the CDA and potential reversal if "the discretion employed in making the [award fee] decision is abused, for example, if the decision was arbitrary and capricious." Similarly, if the contract provides a methodology for determining the award fee amount, that methodology could be found to constrain the discretion of the fee-determining official. Note also that even if the government would be within its rights to reduce or withhold award or incentive fees, it is generally not required to reduce award fees, in particular, and the amount of any reduction in award or incentive fees is generally within the contracting officer's discretion. Standard contract terms generally give the government the right to inspect and test all supplies or services provided by the contractor "at all places and times," including "in any event before acceptance." When the government observes the contractor has provided supplies or services which do not conform to the requirements of its contract with the government—and thus failed to perform as required under the contract—the FAR generally requires the contracting officer to reject the supplies or services. However, standard contract provisions generally give the contractor the opportunity to correct or replace the nonconforming supplies or services within the previously agreed upon delivery or performance period. Further, the federal courts have recognized that if goods are not in "substantial conformity" with contract requirements, contractors must be given a "reasonable time" to cure any defects. In such instances, the contractor bears the burden of showing that it "had reasonable grounds to believe that [its] delivery would conform to contract requirements," and any defects are minor. If the contractor provides nonconforming supplies or services on or after the agreed upon delivery or performance date, the FAR provides two exceptions to the general rule that the supplies or services must be rejected. First, if the nonconformance is "critical" or "major," the contracting officer can accept or conditionally accept the supplies or services if doing so would be in the best interest of the Government. Second, if the nonconformance is minor, the government can choose to accept or reject the supplies or services. When the government accepts nonconforming supplies or services, standard contract terms generally grant the government the right to receive the supplies or services at reduced prices. See "Equitable Reduction in Price or Other Consideration." For example, when the government accepts supplies or services with critical or major nonconformances, the contracting officer must modify the contract to provide the government with a price reduction or other consideration. If the government conditionally accepts the goods or services, then the price reduction or consideration must sufficiently cover the estimated cost of correcting any deficiencies. However, when the government accepts supplies or services with "minor" nonconformances, the contract does not need to be modified unless it seems as though the contractor's savings in providing the nonconforming goods or services will exceed the cost to the government of accepting such goods or services. If the government rejects nonconforming goods, standard contract terms generally give it the right to replace or correct any deficiencies in supplies or services "by contract or otherwise" and charge the costs of replacement or correction to the contractor (see "Correction or Re-Work at the Contractor's Expense"), or to terminate the contract for default. In certain contracts, the FAR requires the use of terms that would permit the government to re-procure the supplies or services in question at the contractor's expense if the contractor fails to perform as required. The most notable of these are the standard termination for default clauses used in fixed-price contracts, which are the focus of discussion in this section. See also " Termination for Default ." However, other standard contract clauses similarly provide for deficient work to be re-done at the contractor's expense in a manner analogous (although not necessarily identical) to that in the termination clauses. The government could also be entitled to recover the costs of its administrative expenses in re-procuring the defaulted work, separate and apart from the costs of re-procurement in the case of default. Agency contracting officers have substantial discretion when awarding re-procurement contracts after terminating a contract for default, and generally need not comply with the FAR's solicitation, competition, and related requirements in doing so. Indeed, Section 49.402-6 of the FAR expressly provides that the contracting officer may use "any terms and acquisition methods deemed appropriate for the repurchase" after a termination for default, provided that competition is obtained "to the maximum extent practicable." In other words, the contracting officer's conduct in selecting re-procurement vendors need only be reasonable; it need not involve the same source-selection methods or contract types as the defaulted contract. Note also that the terminated contractor could potentially be awarded the re-procurement contract, although not at a higher price than that provided for in the defaulted contract. At one time, terminated contractors were seen to be ineligible for re-procurement contracts on the grounds that they could not be considered responsible bidders on these contracts. However, this view began to change in 1976, partly because of concerns that precluding a defaulted contractor from bidding or offering constitutes an improper premature responsibility determination (i.e., one made before determining to whom to award the contract). In practice, though, terminated contractors are generally at a disadvantage when competing for re-procurement contracts because their recent default on a contract for the same or similar supplies or services suggests they are unable or unwilling to perform the proposed contract. For the contractor to be liable for the costs of re-procurement, the supplies or services obtained must be the "same" or "similar" to those under the defaulted contract. They need not be identical, but there should not be any substantial alterations in their function, use, design, or mechanical characteristics. Also, the government has a duty to mitigate its damages (e.g., by conducting the re-procurement in a timely fashion). Because re-procurement at the contractor's expense represents a claim by the government, the government generally has the initial burden of "demonstrating that it acted reasonably and in accordance with the procedures set out in the contract for calculating damages." Once that showing is made, the burden then shifts to the contractor to show, for example, that differences between the supplies or services re-procured and those under the original contract caused unreasonable expense. The FAR generally requires that agencies incorporate terms in their contracts which give the government the right to terminate the contract for default (also known as "cause") if the contractor fails to (1) perform within the time specified; (2) make progress, so as to endanger performance; or (3) perform other requirements of the contract. Indeed, in some cases, a right to terminate for default will be "read into"—or treated as an implied term of—contracts that do not expressly provide for it, and the common law of contracts generally permits one party to a contract to cease performance if the other party fails to perform or repudiates the contract. The exact terms can vary depending upon the type of the contract (i.e., fixed-price or cost-reimbursement) and the specific supplies or services being procured. However, in addition to specifying that the government has the right to terminate the contract for default if the contractor fails to perform in specified ways, the contract generally provides that the termination may be total (encompassing all the work remaining to be performed on the contract), or partial (encompassing only some of the remaining work); the termination may be based on actual or anticipated delinquencies; the government's liability in the event of termination may be limited to the contract price for any completed work the government has accepted; any termination for default found to be improper will be treated as a termination for convenience, thereby generally ensuring that the government avoids liability for breach of contract; and the contractor may be liable to the government for liquidated damages, as well as the excess costs of re-procurement and certain other costs. Also, although not expressly provided for in the contract, any termination for default could affect the contractor's ability to receive future contracts because the FAR requires that terminations for default be reported in the Federal Awardee Performance and Integrity Information System (FAPIIS), and contracting officers must generally check FAPIIS when making responsibility determinations prior to the award of a contract. See " Responsibility Determinations ." In addition, delinquent performance resulting in a termination for default could serve as grounds for exclusion from contracting with the government. See " Debarment and Suspension ." The government has discretion as to whether to terminate a contract in the event of a default. Termination is not automatic. In fact, the FAR requires that any termination be "in the Government's interest." It also requires that contracting officers consider certain factors—such as the "specific failure of the contractor and the excuses for the failure"—when determining whether to terminate, although a termination for default is not necessarily invalid if an agency neglected to consider one or more of these factors. The default must also be substantial, not de minimis . In addition, the default must be one that is not excused, and has not been waived by the government (e.g., by permitting the contractor to perform after the due date). Further, the termination must generally be effectuated pursuant to the procedures set forth in the contract, which may require that the contractor receive written notice of the default. The contract could also expressly limit the scope of the government's recovery in certain cases. The government has the burden of proving that termination was proper, but the contractor has the burden of proving excuse or waiver. Federal statutes and regulations also require or authorize the government to take certain actions in response to contractors' failure to perform or other misconduct that are not expressly provided for as terms of a federal contract. In some cases, the government may take these actions on its own behalf, without resort to judicial proceedings, as is the case with debarment and suspension and consideration of agency evaluations of past performance in source-selection decisions. In other cases, the government must seek sanctions or damages through the courts, as is the case with suits under the civil provisions of the False Claims Act. In either case, the government's recourse is generally limited by the controlling legal authority (e.g., suspension under the FAR must be on one of the grounds specified in the FAR ). Agency actions could also be challenged on the grounds that the action deprives the contractor of certain contractual or other rights, or is arbitrary and capricious. In addition, in some cases, contractors are entitled to due process in the form of notice and an opportunity for a hearing before being subjected to agency action or sanctions. The FAR generally requires agencies to evaluate and document contractors' performance on all contracts or orders whose value exceeds the simplified acquisition threshold (typically $150,000) "at least annually and at the time the work under a contract or order is completed." The FAR also generally requires agencies to consider contractors' past performance when making source-selection decisions in negotiated procurements whose value exceeds the simplified acquisition threshold. Taken together, these two requirements make negative past performance evaluations one mechanism for holding contractors accountable for poor performance, because deficiencies in performing past or current contracts could put the contractor at a disadvantage in future awards. The FAR prescribes how agencies are to compile and post evaluations of contractors' performance, including the timing of evaluations, the factors to be evaluated, and the terms to be used in describing performance (e.g., exceptional, satisfactory, marginal). Broadly speaking, the FAR contemplates contracting officers (or other agency personnel who have been delegated this responsibility) evaluating performance as to (1) technical factors/quality; (2) cost control; (3) timeliness; (4) business relations; (5) subcontracting with small businesses; and (6) other applicable factors (e.g., tax delinquency). Once the evaluation is complete, it is furnished to the contractor, who has "up to 14 calendar days ... to submit comments, rebutting statements, or additional information." Disagreements between the contractor and the contracting officer as to the evaluation are reviewed "at a level above the contracting officer." However, the "ultimate conclusion on the performance evaluation is a decision of the contracting agency," and contractors' ability to challenge allegedly erroneous or biased evaluations outside the agency is limited. The U.S. Court of Federal Claims and the boards of contract appeals now generally exercise jurisdiction over claims under the CDA as to contractors' performance evaluations, but the court, in particular, has taken the view that it lacks the authority to order an agency to rescind a poor evaluation or to revise its evaluation. The FAR similarly prescribes agencies' consideration of contractors' past performance in "negotiated procurements," or procurements wherein the agency selects the vendor that represents the "best value" for the government after discussions with offerors. In addition to requiring that past performance generally be considered in negotiated procurements whose value exceeds the simplified acquisition threshold, the FAR requires that agencies' evaluation of past performance be in accordance with the terms of the solicitation, and that contractors' performance in subcontracting with "small disadvantaged businesses" be considered. However, beyond these requirements, the FAR gives agencies broad discretion in their use of the past performance evaluation factor. In particular, agencies may determine (1) what constitutes "past performance" for purposes of the procurement; (2) what performances qualify as recent and relevant for purposes of the procurement; (3) whose performances are considered when past performance is evaluated; (4) what role the past-performance factor plays in relation to other evaluation factors; and (5) the sources the agency consults when assessing past performance. While contractors may protest a procuring activity's evaluation of their own past performance or that of the winning offeror in making source-selection decisions, the agency's determination will typically be afforded substantial deference. This generally means that, to succeed, the protester must show that the evaluation was unreasonable, inadequately documented, or not in accordance with the law or the terms of the solicitation. The FAR generally requires agencies to determine that a prospective vendor is "affirmatively responsible" prior to the award of a contract. As used here, "responsible" is a term of art, indicating that the contractor meets certain "general standards" which apply regardless of whether they are expressly incorporated into the solicitation. These standards require that contractors (1) have adequate financial resources; (2) are able to comply with the delivery or performance schedule; (3) have a satisfactory performance record; (4) have a satisfactory record of integrity and business ethics; (5) have the necessary management, experience, and technical skills; (6) have the necessary equipment and facilities; and (7) are "otherwise qualified and eligible" to receive an award under applicable laws and regulations. Several of these standards serve to hold contractors accountable for failure to perform under prior contracts, as well as other misconduct. For example, performance under prior contracts is generally considered in assessing whether vendors have a satisfactory performance record, and criminal violations may be considered when assessing whether they have a satisfactory record of integrity and business ethics. Responsibility determinations are made just before a vendor is awarded a contract. In making these determinations, contracting officers are required to consider information in the Federal Awardee Performance and Integrity Information System (FAPIIS), "including information that is linked to FAPIIS such as from the Excluded Parties List System (EPLS) and the Past Performance Information Retrieval System (PPIRS)," and other relevant past performance information. Contracting officers are also encouraged to consider other sources of information, including "verifiable knowledge of personnel within the contracting office, audit offices, contract administration offices, and other contracting offices." However, contracting officers generally have broad discretion as to the conclusions they draw based on the information they consider. A determination is not unreasonable merely because another contracting officer made a different determination after considering the same information. Contractors are generally not entitled to notice or an opportunity for a hearing prior to being determined nonresponsible. If challenged, contracting officers' determinations as to vendors' responsibility are generally afforded substantial deference on the grounds that these determinations are committed to agency discretion by law, and the procuring agencies "must bear the brunt of any difficulties experienced during performance." This generally means that the party challenging a responsibility determination must show that the determination lacked "any reasonable basis," or was arbitrary or made in bad faith. However, a contractor could have more success in its challenge if the contractor can show that the agency has used the responsibility determination process to effectively exclude the vendor without the procedural protections associated with suspension and debarment. This could result if an agency based a nonresponsibility determination solely upon an earlier nonresponsibility determination; made repeated determinations of nonresponsibility based on the same grounds; or made statements or engaged in other conduct evidencing a refusal to do business with the vendor. Multiple provisions of federal law provide for the debarment or suspension (collectively known as exclusion) of federal contractors. Debarment lasts for a prescribed period of time (often three years), while suspension is temporary, pending an investigation of the vendor's conduct or legal proceedings. Contractors that are excluded are generally barred from receiving new contracts—or new orders or other work under existing contracts—from an executive agency for the duration of the exclusion. They are also barred from serving as individual sureties, or as subcontractors on subcontracts to which the government must consent. Exclusions may encompass "affiliates" of the principal contractor, and exclusion-worthy conduct may be imputed from a contractor's employees or other associates to the contractor, and vice versa. Various statutes require or authorize debarment for specified violations of the statute (depending on the statute involved, covered violations may pertain to contract performance or other matters). Examples include (1) convictions for certain violations of the Clean Air Act or Clean Water Act; (2) failures to pay locally prevailing wages under the Davis-Bacon Act, Service Contract Act, or Walsh-Healy Act; (3) misrepresentations of size or status for purposes of small business contracting preferences; and (4) convictions or other findings of fault for intentionally affixing a "Made in America" designation to an ineligible product. Such statutory exclusions are generally punitive in nature. The FAR similarly provides for exclusion on specified grounds, which can encompass both failure to perform as required under a contract and other misconduct. Examples include (1) the commission of fraud or a criminal offense in obtaining or performing under a government contract; (2) delinquent federal taxes in an amount that exceeds $3,000; (3) willful failure to perform in accordance with the terms of a contract; and (4) "any other cause of so serious or compelling a nature that it affects the present responsibility" of a vendor. Exclusion under the FAR differs from exclusion under the statutes previously noted in that it may be imposed only "for the Government's protection," and not "for purposes of punishment." The FAR also requires that agency suspending and debarring officials (who are not the contracting officers) consider mitigating factors or remedial measures undertaken by the contractor in debarment determinations, in particular. However, while not punitive in the usual sense of the term, exclusion under the FAR serves to hold contractors accountable for delinquencies, and may be perceived as penal in nature by those excluded. The determination to exclude a contractor is made after an administrative proceeding, not a judicial one. Contractors are generally entitled to due process in the form of notice and an opportunity for a hearing when excluded, although the nature of that process can vary depending upon the type and grounds of exclusion. For example, notice and an opportunity for a hearing must generally be provided prior to debarment, although it could potentially be provided after suspension. Particularly under the FAR, exclusion is always discretionary; it is not automatically imposed given the existence of potential grounds for exclusion. Also, a vendor's current contracts are not automatically terminated when the vendor is excluded. Instead, the agency would have to take action to terminate those contracts, as previously discussed (see " Termination for Default "). In addition, the vendor's exclusion could be waived to permit the government to do business with a contractor in particular cases. The FAR permits the waiver of FAR-based exclusions when there is a "compelling reason," and certain statutes similarly permit waivers of statutory exclusions in the "paramount interest of the United States." The civil provisions of the False Claims Act (FCA) are one of the primary tools available to the federal government to address and deter contractor fraud, and, in recent years, have enabled the government to recover billions of dollars per year for procurement and other fraud. There are seven types of conduct that can lead to civil liability under the FCA. Of these, the two that are arguably most relevant in the procurement context include "knowingly present[ing], or caus[ing] to be presented, a false or fraudulent claim for payment or approval" and "knowingly mak[ing], us[ing], or cau[sing] to be made or used, a false record or statement material to a false or fraudulent claim." In short, these provisions penalize contractors who knowingly and fraudulently try to get the government to pay money on federal contracts, among other things. However, the government must show that the contractor's false or fraudulent claim, statement, or record was material in order for a contractor to be held liable under the FCA. This generally means that the government must establish that the false statement or claim has a "natural tendency to influence" or be "capable of influencing" the contracting agency's decision as to whether or not to pay the claim. Federal contractors can face liability under the FCA for a range of misconduct. This includes (1) submitting a claim for payment when the contractor has not provided the government with the supplies or services in question. or has provided supplies or services that were not as described in the contract; (2) falsely certifying compliance with a required contract provision or law; or (3) making false representations to the government during the contract formation process that cause the government to enter a contract that it would not have but for the false representations. Civil actions can be brought against contractors who are alleged to have violated the FCA by the Attorney General, or by private persons—called relators—on behalf of the federal government in what are known as qui tam actions. Such actions must be brought within the later of six years from the date of the misconduct or three years from when the misconduct was known or should have been known to the government. No FCA action can be brought more than ten years after the occurrence of the misconduct. Additionally, qui tam lawsuits cannot be brought by relators when: (1) the relator was convicted of criminal conduct stemming from their role in the FCA action; (2) another qui tam action is pending concerning the same conduct ("first-to-file bar"); (3) the same allegations are the subject of a civil suit or penalty in a proceeding wherein the government is a party; or (4) the qui tam action results from misconduct that has already been disclosed to the public ("public disclosure bar"). If a relator brings a qui tam action under the FCA, the government must receive a copy of the complaint, and the complaint remains sealed and unserved upon the defendant for 60 days. Within this 60-day period, the government has the right to "intervene and proceed with the action," although it can (and frequently does) request an extension of this period. If the government intervenes in the action, the relator has the right to continue as a party to the action, but generally cedes control over the action to the government (e.g., the government can settle or dismiss the action notwithstanding the private party's objections). If the government declines to intervene, the relator can proceed with the qui tam lawsuit. If a contractor is found to have violated the FCA, it can face a civil penalty of $5,500 to $11,000, plus treble the amount of damages that the FCA violation caused the government. In qui tam lawsuits, if the government intervenes in the action, the relator is generally entitled to receive between 15 and 25 percent of the amount recovered by the government. If the government declines to intervene, the relator is generally entitled to receive between 25 and 30 percent of the amount recovered. The Program Fraud Civil Remedies Act (PFCRA) provides a mechanism through which contracting agencies can seek civil penalties against contractors that submit false or fraudulent claims for payment under a federal contract. Unlike the civil provisions of the FCA, discussed above (see " Civil Provisions of the False Claims Act "), which provide contracting agencies with a judicial remedy for dealing with false or fraudulent payment submissions, the PFCRA offers contracting agencies an administrative one. More specifically, the PFCRA outlines processes for agency investigations and administrative hearings through which contractors can be found civilly liable for defrauding the government. Additionally, unlike the FCA, the PFCRA applies only to false or fraudulent claims for payment that do not exceed $150,000 in value. Thus, the PFCRA could seemingly only be used to address false or fraudulent contractor claims in connection with relatively small procurements, or fraud involving small claims on larger contracts. The FCA, in contrast, contains no such dollar cap, and can be used by the government to hold contractors accountable for false or fraudulent payment submissions in connection with larger contracts or claims. Under the PFCRA, a contractor cannot, among other things, submit or cause to be submitted to an agency a claim that the contractor knows to be false or fraudulent. When a contractor is suspected of violating PFCRA, the matter is referred to the agency's investigating official, who investigates the allegations and reports all findings to the agency's designated reviewing official. If, after considering the investigating official's findings, the reviewing official determines that there is adequate evidence that a contractor violated the PFCRA, the matter is referred to the Attorney General. The Attorney General, or designated Assistant Attorney General, then informs the reviewing official of whether the referral is approved. If the referral is approved, the matter then goes to the contractor, who can attempt to settle or can request a hearing before an administrative law judge (ALJ) within the contracting agency. Upon finding that a contractor violated PFCRA, an ALJ can issue a civil penalty against the contractor of up to $5,500, and can require that the contractor pay up to twice the amount of the false or fraudulent claim if the government paid the claim. If an ALJ finds a contractor liable under the PFCRA, the contractor can appeal the determination to the agency head or his or her designee. If the agency head affirms the ALJ's decision, the contractor can then appeal to the appropriate federal district court. Significantly, the PFCRA provides that any civil penalties issued under it are "in addition to any other remedy that may be prescribed by law." Thus, as has been observed by the U.S. Court of Appeals for the Federal Circuit, the PFCRA is not an exclusive remedy. A contractor that submits false or fraudulent claims for payment to the government can therefore face PFCRA penalties in addition to those otherwise permitted by law.
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Reports of "waste, fraud, and abuse" in federal contracting often prompt questions about what the government can do to hold its vendors accountable for failure to perform as required under their contracts, or for legal violations or other misconduct unrelated to contract performance. Broadly speaking, the government can be seen as having two types of legal recourse available to it in such situations. The first type involves rights provided to the government as terms of its contracts, which the government may exercise without resort to judicial proceedings. The second type involves other actions, not necessarily provided for by contract. In some cases, the government may take these actions on its own behalf, without resort to judicial proceedings. In other cases, the government must seek sanctions or damages through the courts. Not all of these mechanisms involve "penalties" as that term is generally understood. In some cases, the controlling legal authority expressly provides that the government may take certain actions only to protect the government's interest, and "not for purposes of punishment." However, in all cases, the government's action represents a consequence of and response to the contractor's delinquencies, and could be perceived as punitive by the contractor or other parties. The government generally has discretion as to whether to employ any of these mechanisms in particular circumstances, and could employ multiple mechanisms in a given case. In some cases, though, the government must choose between particular mechanisms. Rights Granted to the Government as Terms of Its Contracts Government contracts include standard terms granting the government certain rights that could be exercised if the contractor fails to perform as required under the contract, such as the right to assess liquidated damages and the right to terminate the contract for default. A specific right must generally be expressly provided for in the contract for the government to exercise it, although the government's right to terminate contracts for default may be read into contracts that do not expressly provide for it. The government's exercise of the right must also generally be in conformity with the terms of the contract. In addition, depending upon the facts and circumstances of the case, a contractor could challenge the government's exercise of a contractual right by bringing suit before a court or board of contract appeals, alleging that the contractor's deficient or delinquent performance must be excused because it was caused by an event that is beyond the contractor's control and without its fault or negligence. Alternatively, a contractor could assert that the government has waived particular contractual rights in specific cases. A waiver is an intentional or voluntary relinquishment of a legal right, or conduct that warrants an inference that the right has been relinquished. Other Agency Actions Not Necessarily Provided for as Terms of a Contract The government could also take certain actions in response to contractors' failure to perform or other misconduct that are not expressly provided for as terms of a federal contract, but are authorized under federal statutes or regulations. In some cases, the government may take these actions on its own behalf, without resort to judicial proceedings, as is the case with debarment and suspension and consideration of agency evaluations of past performance in source-selection decisions. In other cases, the government must seek sanctions through the courts, as is the case with suits under the civil provisions of the False Claims Act. In either case, the government's recourse is generally limited by the controlling legal authority (e.g., suspension must be on a ground specified in statute or regulation). Agency actions could also be challenged on the grounds that the action deprives the contractor of certain contractual or other rights, or is arbitrary and capricious. In addition, in some cases, contractors are entitled to due process in the form of notice and an opportunity for a hearing before being subjected to agency action or sanctions.
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During the final year of the Clinton Administration, proposals by the National Park Service to enforce long-standing policies that regulated the use of snowmobiles in national parks raised a number of questions regarding the potential regulation of such vehicles. These questions continue to be debated, as the National Park Service (NPS) explores optional winter use plans for Yellowstone and other units of the national park system, and as various parties challenge the actions of the NPS in court. National Park System units account for only about 3% of the land mass of the United States and possess few trails and roads suitable for snowmobiles, compared to areas available on other federal lands; but—for both proponents and opponents—the question of snowmobile access to the parks has taken on a far greater importance. To the snowmobile industry and to many in communities neighboring national parks, "Snowmobiling is an important part of the economic engine that supports northern communities, winter tourism." To environmental groups, snowmobiling "is one of the most environmentally devastating recreational activities permitted by the Park Service .... resulting in adverse impacts to Park wildlife, air and water quality, vegetation, Park ecology, and Park users." Underlying the debate are broader questions concerning regulation of emissions and noise from the vehicles and the degree to which restrictions may serve as a precedent or stigma affecting snowmobile and motorized recreation use more generally. In the 1990s, snowmobiles were allowed access to 43 units of the National Park System, including such major parks as Yellowstone, Grand Teton, Rocky Mountain, Acadia, Zion, Mount Rainier, and Sequoia. While numerous park units allowed such access, recreational use of snowmobiles has not been widespread in the park system as a whole. The National Park Service administers 391 units (parks, seashores, monuments, etc.). Of these, 348 (89%) have not been open to snowmobiles. Many units are located in climates unsuitable for them or are too small to be used for such recreation. Others (e.g., Glacier National Park and Yosemite) have banned snowmobiles since the 1970s. According to the National Parks Conservation Association, use of snowmobiles outside of Alaska has mostly been concentrated in five units of the park system: Yellowstone National Park, Voyageurs National Park, Rocky Mountain National Park, Pictured Rocks National Lakeshore, and the John D. Rockefeller Memorial Parkway. Yellowstone accounted for about 40% of the snowmobile visitors at these five parks, with a total of 76,571 in the 1999-2000 winter season. Comparative data for all five of these units are not available for years after 1999-2000. One of the five, Rocky Mountain National Park, has closed all but one snowmobile route since 2004—the one route remaining being a 2-mile trail that provides access to National Forest land heavily used by snowmobiles. Snowmobile visits to Yellowstone increased during the 2000-2001 and 2001-2002 winter seasons, peaking at 87,206 in the latter winter. In subsequent years, snowmobile visitors to Yellowstone plummeted, to a low of 24,049 in 2004-2005. Changes in access policy (described later in this report) as well as drought and low snow pack in recent years contributed to the decline. Two other Yellowstone area park units, Grand Teton National Park and the Rockefeller Memorial Parkway, experienced an even more steep decline, from a combined 35,000 snowmobile visits in 2000-2001 to about 7,500 in 2004-2005. Snowmobile visits have rebounded somewhat since 2004-2005, but in 2007-2008 they remained at only about 35% of visits in the peak years. Although recreational access by snowmobiles has been permitted in units of the national park system, the Park Service, in the late 1990s, concluded that such use has generally been in violation of Executive Orders 11644 and 11989, issued by Presidents Nixon and Carter respectively. The Nixon Order directed that use of off-road vehicles on public lands "be controlled and directed so as to protect the resources of those lands, to promote the safety of all users of those lands, and to minimize conflicts among the various uses of those lands." It specified that off-road vehicle "areas and trails shall be located in areas of the National Park system ... only if the respective agency head determines that off-road vehicle use in such locations will not adversely affect their natural, aesthetic, or scenic values," and it directed the Park Service to "monitor the effects of the use of off-road vehicles" and to rescind or limit this use "as necessary to further the policy of this order." In January 1999, the Park Service received a rulemaking petition from the Bluewater Network and 60 other environmental organizations seeking a ban on snowmobiles from all units of the National Park Service. In response, the Service surveyed units of the System to assess the extent to which they were complying with the Executive Orders. According to Interior Department testimony: "The results graphically demonstrated that the National Park Service was not complying with its statutory and regulatory mandates.... Consequently, maintaining the status quo with regard to snowmobiling was simply not an option." On April 27, 2000, the Department of the Interior and the National Park Service announced that "snowmobiling for general recreational purposes will be prohibited throughout the Park System, with a limited number of narrow exceptions." By July 2000, the Department had backed away from its strict enforcement stance with a clarification: there would be no snowmobile ban in park units pending a formal rulemaking and public comment period, and snowmobile practices prior to the April 2000 announcement (i.e., access to more than 40 parks) would continue through the 2000-2001 winter season. NPS has taken no further action to enunciate a general policy. Since the summer of 2000, the focus has been on Denali National Park in Alaska and the Yellowstone/Grand Teton area. Both of these areas had been considered exceptions subject to special consideration even under the April 2000 policy announced by the Park Service. Whether snowmobile access to these parks will be allowed to continue has generated substantial public interest. In Alaska, vast distances, lack of roads, abundant snow cover, and small dispersed populations make snow machine use ubiquitous. In general, national parks in Alaska allow snowmobile access under the provisions of the Alaska National Interest Lands Conservation Act (ANILCA, P.L. 96-487 ). However, access to the 2 million acres formerly known as Mt. McKinley National Park (now the core of Denali National Park) has been an issue. Prior to passage of ANILCA (1980), snowmobiles had been banned from this park. In 1999, the Park Service reinstated this policy, banning snowmobiles first on a temporary and later on a permanent basis. Litigation regarding access to Denali was initiated by snowmobile user groups, but was withdrawn in June 2001, on the assumption that legislation would be introduced to address the issue. Legislation ( H.R. 4677 / S. 2589 , 107 th Congress) was introduced in the spring of 2002 that would have allowed access to some portions of the old Park, while continuing the ban elsewhere. No action was taken on these bills, however, and similar legislation has not been introduced in subsequent years. In January 2006, the National Park Service published a Final Backcountry Management Plan for Denali National Park and Preserve. The plan notes that as a result of technology improvements that have extended the range of snowmobiles, the use of such machines is now widespread in the southern park additions and "growing rapidly." "... [C]onflicts with other users, especially non-motorized winter recreationists and subsistence users, are increasing, and concerns have been raised about the effects of snowmachine use on wildlife, vegetation, water quality, air quality, natural soundscapes, and other park resources." Despite raising these issues, the plan concludes, "There are currently few guidelines for managing use." The other exception to the National Park Service's general policy was the Yellowstone/Grand Teton National Park area. The NPS had been sued in May 1997 by groups who alleged that the Service was violating the National Environmental Policy Act, the Endangered Species Act, the National Park Service Organic Act, and the Yellowstone Act in allowing use of snowmobiles in the two parks and on the Rockefeller Memorial Parkway (which links them). The lawsuit was settled within months when the NPS agreed to conduct an Environmental Impact Study (EIS) of winter use of the parks. Upon completion of the study, the Clinton Administration promulgated a final rule in January 2001, banning snowmobiles from Yellowstone, Grand Teton, and the Rockefeller Parkway beginning in the winter of 2003-2004, but allowing continued visitor access through the use of "snowcoaches"—guided tour-vans that run on rubber treads. Snowmobile manufacturers, represented by the International Snowmobile Manufacturers Association (ISMA), have suggested that "cleaner, quieter" snowmobiles—a phrase not initially defined—be allowed continued access to the parks. Their suggestion found a receptive audience in the Bush Administration. On June 29, 2001, the Administration responded to a suit filed by ISMA and the State of Wyoming by agreeing to reopen the decision to ban the vehicles from the three Yellowstone area units. The Park Service agreed to prepare a Supplemental EIS and reach a new Record of Decision by November 15, 2002 (a deadline subsequently extended to March 15, 2003). The Record of Decision was signed March 25, 2003, and a final rule implementing it was promulgated December 11, 2003. Despite receiving 104,802 comments on the final proposal, 91% of which "believed the proposed regulation does not adequately protect park resources due to the presence of snowmobiles," the Park Service reversed the ban in favor of daily limits on entrants, emission standards for the snowmobiles, other access requirements, and an "adaptive management strategy," allowing park managers to take remedial action if monitoring indicates unacceptable impacts from implementation. In explaining its position, the NPS stated: "We are trying to provide a range of appropriate activities in the parks, while protecting park resources and values." The 2003 rule would have set a daily limit of 950 snowmobile entrance passes for Yellowstone Park, 115 in Grand Teton National Park, and 400 on Rockefeller Memorial Parkway. On most days, this limit would result in no reduction of snowmobile users; but on weekends and holidays, when as many as 1,700 snowmobiles have entered the three park units, it could limit the number of entrants. Snowmobile users would generally have been required to be accompanied by trained guides (although the regulations would have allowed group members to be as much as 1/3 of a mile from the guide, and the rule preamble conceded, given the noise of a snowmobile, that communication is difficult if not impossible even between passengers on the same machine). To discourage irresponsible behavior, alcohol use by snowmobile users would have been strictly limited. The machines themselves would have been required to achieve a 90% reduction in hydrocarbon emissions and a 70% reduction in carbon monoxide under the 2003 rules. Noise emissions would have been limited to 73 dB(A), which the NPS estimates is about a 50% reduction compared to conventional snowmobiles. To implement these provisions, the Yellowstone Park Superintendent released a list of 10 snowmobile models approved for use during the 2003-2004 winter season, on September 16, 2003. This list has been updated annually. The most recent version, released in February 2008, contains 26 models. A hearing on the 2003 rules was held in the U.S. District Court for the District of Columbia on December 15, 2003. The rules were vacated and remanded to the National Park Service by Judge Emmett Sullivan on December 16. The judge held that there was no evidence in the record to support the Bush Administration reversal of the previous agency position and that the decision, therefore, was "arbitrary and capricious." The court also held that the Supplemental EIS accompanying the changes was "flatly inadequate" under NEPA and that the snowmobile decision was "completely politically driven and result oriented." The judge also ordered NPS to respond to Bluewater Network's 1999 rulemaking petition (seeking a ban on snowmobiles in all National Park System units) by February 17, 2004. Judge Sullivan's decision reinstated the Clinton Administration rule and cut the number of snowmobiles entering the three Yellowstone area park units in half for the 2003-2004 winter season in preparation for a complete ban in 2004-5. Both ISMA and the State of Wyoming appealed the court's ruling. Their request for a stay of the Clinton-era rules pending resolution of their appeal was denied by Judge Sullivan in late December 2003 and by a three-judge panel of the Court of Appeals January 13, 2004. Meanwhile, however, the same groups petitioned the Federal District Court for Wyoming to overturn the Clinton-era rules. That court responded February 10, 2004, when Judge Clarence Brimmer issued a temporary restraining order against the Clinton rules and ordered the National Park Service to develop temporary rules for the remainder of the 2004 winter season. The next day, the Park Service issued such rules, allowing 780 snowmobiles to enter Yellowstone Park each day, an increase of 287 machines. Grand Teton Park and the Rockefeller Parkway were allowed 140 snowmobiles, an increase of 90. An appeal of Judge Brimmer's order was denied by the 10 th Circuit Court in Denver on March 10. (The Wyoming court vacated and remanded the Clinton rules on October 14, 2004.) As a result of the court decisions, snowmobile use in the three parks was substantially reduced during the 2003-2004 winter season. According to NPS, an average of 258 snowmobiles entered Yellowstone in January and February 2004, a reduction of two-thirds from the historic average. In Grand Teton and the Rockefeller Parkway, the reduction was almost total: through February 10, only about 5 snowmobiles a day entered the two parks. After the February 10 court decision, this number increased to about 20. The NPS subsequently issued Temporary Winter Use Plans for the 2004-2005, 2005-2006, 2006-2007, and 2007-2008 winter seasons. The temporary plans, which were intended to guide access policy while additional studies were performed leading to a more permanent solution, allow 720 snowmobiles per day in Yellowstone, all commercially guided, and 140 snowmobiles in Grand Teton National Park and the John D. Rockefeller, Jr., Memorial Parkway. With minor exceptions, all of the snowmobiles are required to meet NPS best available technology (BAT) requirements shown below in Table 2 . Snowcoaches are also allowed. NPS concluded that the combination of snowmobiles and snowcoaches "should provide a viable program for winter access to the parks, and ... the opportunity for achieving historic visitor use levels." The plans also include the prohibition on alcohol use by snowmobilers that the Park Service had promulgated in its remanded 2003 rule. Despite the temporary plans' allowable limits, snowmobile visits continued at levels far lower than in the previous decade in the 2004-2008 winter seasons ( Table 1 ). At 31,420, the number of snowmobiles entering Yellowstone in 2007-2008 was 64% below the peak in 2001-2002, and was less than half of the permitted number. The other two area units (Grand Teton National Park and the Rockefeller Memorial Parkway) have seen even steeper declines. Grand Teton fell to 149 snowmobile visitors in the entire winter of 2004-2005, rising only to 799 in 2007-2008, compared to its peak of 4,800 in 1999-2000. The Continental Divide Snowmobile Trail hosted only 11 snowmobiles last winter, compared to a peak of 2,006 in 2001-2002. The Rockefeller Parkway saw more activity than Grand Teton, but still a marked decrease compared to earlier years: 7,351 snowmobile visitors in 2004-2005, rising to 11,695 in 2007-2008, compared to a peak of 31,011 in 2000-2001. One result of the declining snowmobile use was a marked increase in visitors using other modes of travel. Snowcoach visitors to Yellowstone increased to 22,344 in 2007-2008, up 89% compared to the peak snowmobile year. In Grand Teton, the number of cross country skiers more than doubled (to 13,003) compared to the number in the peak snowmobile year. The Park Service also began additional studies to develop a final winter use plan in 2004, and on November 20, 2007, it finalized the fruits of its effort by issuing a Record of Decision. Termed a "Winter Use Plans/Final Environmental Impact Statement," this latest plan evaluated seven alternatives. It presented additional data on the effects of snowmobiles and snowcoaches on air quality, noise, and wildlife, and evaluated the economic impacts on surrounding communities of restricting snowmobile access to the three Yellowstone area NPS units. The new plan set final rules and access limits somewhat more stringent than those that have been in place during the past four winter seasons, but significantly higher than actual use during that period. It would allow 540 snowmobiles per day access to Yellowstone, and a combined 65 in Grand Teton National Park and the Rockefeller Memorial Parkway. The snowmobiles would be required to meet best available technology requirements for emissions and noise, and it would require that snowmobilers be accompanied by commercial guides. It would also authorize entry to 83 snowcoaches per day. On September 15, 2008, Judge Emmett Sullivan of the U.S. District Court for the District of Columbia vacated the plan, finding it "arbitrary and capricious, unsupported by the record, and contrary to law." The judge found: According to NPS's own data, the WUP [Winter Use Plan] will increase air pollution, exceed the use levels recommended by NPS biologists to protect wildlife, and cause major adverse impacts to the natural soundscape in Yellowstone. Despite this NPS found that the plan's impacts are wholly "acceptable," and utterly fails to explain this incongruous conclusion. With the rule vacated, it is unclear what limits will apply in the coming winter season. On October 1, 2008, NPS announced that it would propose a new temporary Winter Use Plan that would be ready for public comment in early November and would be in place before the December 15 scheduled opening of the winter season. In reversing the Clinton Administration rules on Yellowstone access, the National Park Service set limits on emissions and noise from the snowmobiles that would be allowed in the three Yellowstone area park units. Simultaneously, the Environmental Protection Agency developed emission limits applicable to new snowmobiles offered for sale anywhere in the United States beginning in 2006 and 2007. The following sections of this report describe the EPA regulations and look at the broader issue of snowmobile emissions. The Clean Air Act gives EPA authority to regulate emissions from mobile sources of pollution, including off-road sources such as snowmobiles; but until 2006, snowmobiles (with the exception of those entering the Yellowstone area national parks) were not subject to any federal or state emission regulations. Nor, with the exception of those allowed in Yellowstone since 2004, have they ever been subject to noise regulations. EPA has authority under Section 6 of the Noise Control Act of 1972 to regulate noise from "transportation equipment (including recreational vehicles and related equipment)." But the Agency's Office of Noise Abatement and Control was disbanded in 1982, and EPA has not issued any regulations under the statute in the 26 years since then. Snowmobiles generally run on two-stroke engines—the type of engine that traditionally has powered outboard motors and lawnmowers. In a two-stroke engine, fuel enters the combustion chamber at the same time that exhaust gases are expelled from it. As a result, as much as one-third of the fuel passes through the engine without being combusted. This causes poor fuel economy and high levels of emissions, particularly hydrocarbons and carbon monoxide. In one hour, a typical snowmobile emits as much hydrocarbon as a 2008 model automobile emits in 54,000 miles of driving. In a day of use, a snowmobile may emit as much hydrocarbon as an automobile emits over its entire lifetime. The hydrocarbons (gasoline) emitted by snowmobiles (or other mobile sources, for that matter) are of concern because they contain benzene, formaldehyde, and at least three other substances that are known or suspected human carcinogens. Snowmobiles meeting EPA regulations also emit as much carbon monoxide (CO) in an hour as a 2008 model auto does in 1,050 miles of driving. Carbon monoxide is a poisonous gas that, at low levels, can affect those who suffer from cardiovascular disease, such as angina. The impact of CO emissions on ambient air quality is of at least equal concern as that of hydrocarbons because of the tendency for atmospheric accumulation of CO in winter. In preparing the 2000 Environmental Impact Statement for the decision on snowmobile access to Yellowstone, the National Park Service measured emissions from snowmobiles and compared them to other emission sources in the park. The Service also estimated the concentrations (ambient levels) of carbon monoxide (CO) and particulate matter (PM) present in the air and compared these concentrations to air quality standards. The EIS concluded that the 8-hour maximum concentration of carbon monoxide at the West Yellowstone entrance to the park exceeded the National Ambient Air Quality Standard for CO by nearly 70% (a concentration of 15.15 parts per million vs. the standard of 9). The analysis also concluded that snowmobiles accounted for 97.9% of the CO at West Yellowstone during winter months. Noise has also been an issue. Opponents of allowing snowmobiles in Yellowstone and other units of the national park system argue that the parks are special places whose remoteness, beauty, and quiet inspire reflection and awe. The noise of engines is incompatible with this atmosphere, they argue. As the National Park Service itself states in its Record of Decision, "Snowmobile use, in historical numbers, is inconsistent with winter park landscapes that uniquely embody solitude, quiet, undisturbed wildlife, ... and the enjoyment of these resources by those engaged in non-motorized activities." Snowmobile enthusiasts counter that the parks cover vast areas and that snowmobiles are restricted to a few roads—the same roads traversed by cars, recreational vehicles, and buses in summer. They also assert that snowmobile use is compatible with the NPS responsibility to promote visitor use and enjoyment of park resources. Park Service studies indicate that the sound of snowmobiles can be heard for significantly greater distances than that of automobiles, however, and in the late 1990s was essentially continuous during the winter at key locations in Yellowstone: snowmobile noise could be heard 95% of the time by visitors at Old Faithful and 87% of the time at the Grand Canyon of the Yellowstone, according to NPS's December 2000 Federal Register notice. Regulations for snowmobile and other non-road engine emissions were signed by the EPA Administrator September 13, 2002 and appeared in the Federal Register November 8, 2002. As shown in Table 2 , the regulations require reduction of both carbon monoxide and hydrocarbon emissions from new snowmobiles by a little more than 30% starting in 2006 and by an average of 50% by 2012, with an intermediate step in 2010. (The regulations did not require any controls on snowmobiles sold before 2006.) For comparison, Table 2 also shows the Yellowstone-specific standards that have been imposed by the National Park Service. According to EPA, the 2006/2007 reductions can be achieved without major changes in technology, in part because they apply to the average of a manufacturer's fleet emissions, rather than to individual machines. This allows manufacturers to provide a range of models, some with advanced emission controls and others without: "While some advanced technologies such as two-stroke direct injection and four-stroke engines, would be found in some models, many models would still be equipped with two-stroke engines with relatively minor engine modifications resulting in minimum emission reductions, while some models may not even have any emission controls." EPA estimates the cost of these Phase 1 controls at $73 per snowmobile. Vehicles meeting the standards will be more fuel-efficient, resulting in an average reduction in operating cost of $57, thus offsetting most of the initial cost increase. The 2010 and 2012 standards, which also are fleet averages, can also be met without eliminating two-stroke engines, according to the Agency. Because two-stroke engines produce more power than similar size four-strokes and are easy to start in cold weather, the Agency expects the industry to continue to manufacture mostly two-stroke engines even in 2012, although many would be modified with direct injection technology to reduce emissions. According to the Agency, "A potential scenario for meeting these standards could be a mixture of 50 percent direct injection, 20 percent four-stroke engines, and 30 percent with engine modifications." The cost of these changes would average an additional $131 per snowmobile in 2010, according to EPA, but the costs would be offset by $286 in fuel savings and improved performance, so that lifetime costs would actually be $155 lower. The same is true of the 2012 standards: the added cost of $89 per snowmobile is offset by $191 in fuel savings and improved performance, according to EPA, for a net savings of $102 per vehicle. The costs of each of the three phases are incremental. Thus, when fully implemented, the standards would cost an additional $293 per snowmobile, according to the Agency; lifetime operating costs, however, would decline by $534. Combining these two factors, the standards would decrease total costs by $241 per snowmobile when fully implemented. The standards do not include noise limits. While acknowledging that the Agency has the authority to set noise standards, the proposal stated that "at this time we do not have funding to pursue noise standards for nonroad equipment that does not have an existing noise requirement." An Agency source confirmed that the proposed standards would have essentially no impact on noise. Despite receiving comments from a number of organizations that the standards should address noise, the Agency restated in its response to public comments that it would not address the issue, adding that Congress would need to provide appropriations for the Agency to begin any noise control initiative. As noted, the National Park Service promulgated noise standards applicable to snowmobiles entering its three Yellowstone area park units beginning December 17, 2003, under the winter use rule that was vacated; it restated these standards in its Temporary Winter Use Plan that took effect in 2004. According to Park Service estimates, these standards would require a reduction of about 50% in noise emitted by the affected snowmobiles, compared to conventional uncontrolled snowmobiles. Both the snowmobile industry and environmentalists challenged EPA's standards in court. On June 1, 2004, the U.S. Court of Appeals for the D.C. Circuit vacated the standard for nitrogen oxides and remanded the 2012 standards for hydrocarbons and carbon monoxide. The court directed EPA "to clarify (1) the statutory and evidentiary basis of the Agency's assumption that the standards must be sufficiently lenient to permit the continued production of all existing snowmobile models, and (2) the analysis and evidence underlying the Agency's conclusion that advanced technologies can be applied to no more than 70% of new snowmobiles by 2012." EPA has not yet responded to the remand, and does not expect to do so until 2010 at the earliest. The International Snowmobile Manufacturers Association (ISMA) has argued that EPA grossly underestimated the costs of compliance, and that the standards will lead to the elimination of entry-level snowmobiles from the market. Cleaner, quieter machines can be made, according to ISMA, but they cost more, are heavier, and can only be ridden on groomed roads. ISMA has estimated that the cleanest four-stroke engines cost an additional $1,700 (about 30% more than average prices). Even modest improvements to two-stroke engines will cost $350-$400 per machine, according to the Association. Bluewater Network, on the other hand—the environmental group most identified with snowmobile issues—feels the rules should be much stronger. In comments submitted to EPA, Bluewater encouraged the Agency to set standards "that can only be met using the best available technology, which we believe to be four-stroke engines with particle traps and three-way catalysts." They also want mandatory emission labels for the machines, and are disappointed that the Agency chose not to set noise standards. Bluewater has pointed to the Clean Snowmobile Challenge, an annual design contest open to college engineering students and sponsored by the Society of Automotive Engineers, as demonstrating that machines far cleaner than EPA's standards are feasible. The winning entry in the 2001 Challenge reduced CO 78.8% and unburned hydrocarbons 97.6% and significantly reduced noise, at a cost of $600. In the 2006 contest, the winning entry reduced CO emissions 83% and unburned hydrocarbons more than 99% at a cost of $314. "If college students are able to build cleaner and quieter machines, surely the billion-dollar snowmobile industry can do as well," said Bluewater Public Land Director Sean Smith. Both Bluewater and the snowmobile manufacturers argue that EPA has misinterpreted the legal authority on which the new standards rely. Bluewater (as well as other environmental groups and the National Association of Clean Air Agencies (formerly STAPPA), the association representing state air pollution program administrators, argue that EPA has promulgated standards that are less stringent than the law requires. Section 213(a)(3) of the Clean Air Act requires the Agency to promulgate standards that "achieve the greatest degree of emission reduction achievable ... giving appropriate consideration to the cost ... and to noise, energy, and safety factors...." Four-stroke engine technology, achieving greater emission reductions than the Agency promulgated, is already available, they note—machines using this technology are on the market. Cost, noise, and energy factors cannot be used as arguments against adoption of this technology: the lifetime cost of such engines would be lower than that of current engines, according to the Agency's own analysis; the technology uses far less energy, and could be substantially quieter than current engines. Thus, according to these groups, the Agency's standards do not meet the requirements of the act. Snowmobile and other nonroad-vehicle manufacturers, on the other hand, focus on Section 213(a)(2) of the act, which ties the Agency's authority to regulate nonroad engines to a finding by the Administrator that emissions from such engines or vehicles "are significant contributors to ozone or carbon monoxide concentrations in more than 1 area which has failed to attain the national ambient air quality standards for ozone or carbon monoxide." EPA addressed this issue before beginning the process of developing regulations: on June 17, 1994, the Agency made an affirmative determination that emissions from nonroad engines and vehicles are significant contributors to ozone, CO, and particulate matter in more than one nonattainment area. On December 7, 2000, the Agency issued a finding that recreational vehicles (including snowmobiles) are among the specific categories of nonroad vehicles that contribute to such pollution. In its October 5, 2001 Federal Register notice, which proposed the snowmobile standards, the Agency identified 7 areas in Alaska, Washington, Colorado, Oregon, and Montana that have significant populations of snowmobiles and have failed to attain the air quality standard for CO. Manufacturers of snowmobiles and other nonroad vehicles note, however, that carbon monoxide concentrations have declined [chiefly as a result of auto emission standards] and that none of the 7 areas identified by the Agency has exceeded the CO standard in recent years, even if they were still formally classified as nonattainment at the time of the proposal. CO nonattainment today is essentially a problem in urban "hot spots," according to manufacturers, and snowmobiles make no contribution to that problem. Members of Congress, both from western and other states, have expressed an interest in whether there will be continued snowmobile access to national parks. At least five hearings have been held on these issues since the 106 th Congress, and Congress has on three occasions approved language in appropriations bills to require that NPS Temporary Winter Use Rules permitting snowmobiles in Yellowstone and Grand Teton National Parks and on the Rockefeller Memorial Parkway remain in effect for the year covered by the appropriations bill. The FY2008 Interior appropriations bill ( S. 1696 , §116), as reported by the Senate Appropriations Committee ( S.Rept. 110-91 ), would have continued this temporary solution, stipulating that Yellowstone's interim winter management rule remain in effect during the 2007-2008 winter season, but the final Consolidated Appropriations Act ( P.L. 110-161 ) did not include such language. Lawsuits challenging the NPS Final Winter Use Plan did not request preliminary injunctions, however, allowing local operations to continue under the same temporary rules that had been in effect for the previous three years. In the 108 th Congress, Representative Holt twice attempted to amend Interior Department Appropriation bills to prohibit spending to manage recreational snowmobile use in the three Yellowstone area park units except in accordance with the Clinton Administration rule phasing out snowmobiles. The first such amendment ( H.Amdt. 266 to H.R. 2691 ) was defeated on a tie vote, 210-210, July 17, 2003. The second attempt ( H.Amdt. 563 to H.R. 4568 ) was defeated on June 17, 2004, by a vote of 224-198. Other legislation to prohibit snowmobile access to national parks and to grant continued access was introduced, but not acted on, in the 107 th and 108 th Congresses. Snowmobile issues remain far from resolved, despite actions by Congress, EPA, the National Park Service, and the courts. Congress and the NPS have provided a temporary resolution of the Yellowstone access issue since 2004, but the issue is now returning to the limelight, as a federal district court has vacated final regulations for Yellowstone access for a third time. The development of these rules showed that public interest in snowmobile issues remains significant, and that the National Park Service's preferred alternatives for snowmobile access to Yellowstone remain overwhelmingly unpopular. The draft Yellowstone area Winter Use Plan that was open for comment from March through June 2007 generated 122,190 public comments, of which only 193 (0.1%) supported the NPS preference. Among those opposed, environmental groups and individuals that want snowmobiles banned from the park form a solid majority. They are joined by 7 of the 8 living former directors of the National Park Service itself. The Environmental Protection Agency was also critical of the spring 2007 preferred alternative, noting that it would result in five times more carbon monoxide emissions and 17 times more hydrocarbon emissions than the exclusive use of multi-passenger snowcoaches. EPA concluded that "either the preferred alternative should be modified or a different alternative should be selected that meets the resource protections identified by the National Park Service." This level of opposition would seem to guarantee that Members of Congress will retain an interest in the resolution of these issues. Continued action is also likely in the courts, as the National Park Service responds to the latest court decision.
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For at least a decade, the use of snowmobiles in Yellowstone and other national parks has been controversial because of the potential impacts on wildlife and, until recently, the absence of standards for snowmobile emissions and noise. The National Park Service has attempted to address the issue by developing Winter Use Plans that establish regulations and limits at individual park units. These plans have been the subject of numerous legal challenges. On September 15, 2008, the U.S. District Court for the District of Columbia vacated the National Park Service's most recent Winter Use Plan for Yellowstone National Park. The plan would have allowed up to 540 snowmobiles per day into the park beginning in the 2008-2009 winter season, provided that they met noise and emission standards and that the riders were accompanied by commercial guides. The NPS plan was opposed by environmental groups and the vast majority of public commenters. With the rule vacated, it is unclear what limits will apply in the coming winter season. Current model snowmobiles emit significant quantities of pollution. In one hour, a new model snowmobile emits as much hydrocarbon as a 2008 model auto emits in about four years (54,000 miles) of driving. The Environmental Protection Agency (EPA) promulgated regulations limiting air emissions from snowmobiles in 2002, but the regulations have the effect of allowing the machines to emit as much hydrocarbon pollution in a day as a new auto emits in its lifetime. Snowmobiles also emit significant amounts of noise. EPA has no snowmobile noise standards. The National Park Service has allowed snowmobile use in 43 units of the national park system, in many cases in apparent violation of Executive Orders from the Nixon and Carter years. Outside of Alaska (where snowmobiles are permitted in most national parks by law), the most popular national park for snowmobiling has been Yellowstone, which saw more than 87,000 snowmobile visits in the 2001-2002 winter season. Under the Clinton Administration, the Park Service decided that the emissions and noise from snowmobiling were incompatible with protecting the park, and promulgated rules that would have phased out snowmobiles from Yellowstone by the winter of 2003-2004. The Bush Administration revisited these rules and announced modifications in March 2003 that would have allowed continued use of snowmobiles. The 2003 rules and the Clinton Administration action have been the subject of conflicting court rulings: a federal court in Wyoming has vacated and remanded the Clinton Administration's phaseout, while a D.C. federal court has vacated and remanded the Bush Administration rules. For the last four winters, Yellowstone and two neighboring park units have operated under a temporary plan that permits 720 snowmobiles per day in Yellowstone, but sets standards for their emissions and requires snowmobilers to be accompanied by commercial guides. Under these rules, snowmobile visits have declined by two-thirds. Efforts to reduce snowmobile emissions and noise remain contentious. This report discusses snowmobile access to the parks, snowmobile emissions, EPA's emission standards, and congressional efforts to address these issues.
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The federal budget deficit has exceeded $1 trillion in each of the last three fiscal years and is expected to exceed that level in FY2012. Concern over these large deficits, as well as the long-term trajectory of the federal budget, has resulted in significant debate during the 112 th Congress over how to achieve meaningful deficit reduction and how to implement a plan to stabilize the federal debt. At the same time, the economy is recovering from its largest downturn since the Great Depression, and concerns have been expressed that growth in the United States may falter to the point where the U.S. economy again experiences recession. This has resulted in some renewed debate over whether additional stimulus may be needed. Over the next few months through the early part of calendar year 2013, Congress will be facing choices on how to deal with numerous expiring provisions, across-the-board spending cuts, and other short-term considerations that will have major effects on the federal budget. Some have referred to this as the "fiscal cliff." Choosing how to address these issues will have a significant impact on the size of the budget deficit and the pace of economic recovery going forward. Further changes to other spending and revenue policies could also address some of the longer-term drivers of projected budgetary imbalance, while simultaneously impacting the economy. This report provides a brief overview of the major tax and spending policy changes set to take effect under current law at the end of 2012 or early in 2013. Collectively, these policies have been referred to by some as the "fiscal cliff." The report also includes links to other CRS reports which provide more information and analysis of the individual provisions discussed below. A variety of revenue and spending provisions are set to expire around the end of calendar year 2012, including the Bush tax cuts and other related tax provisions, extended emergency unemployment benefits, the Social Security payroll tax reduction, the "doc fix," and other tax extenders. If Congress and the President allow all of these measures to expire as scheduled under current law and let the spending cuts under the Budget Control Act (BCA) take effect (see discussion below), the budget deficits beginning in FY2013 will gradually fall as a percentage of gross domestic product (GDP) and are projected to remain at sustainable levels through FY2022. The decline in projected budget deficits is a result of declines in spending levels and increases in revenue levels as a percentage of GDP, relative to the levels seen over the past few fiscal years. Under current law, the budget deficit is estimated to fall $502 billion between FY2012 and FY2013 (see Table 1 ) as a result of fiscal policy changes set to take place at the end of 2012 and early in 2013. This estimated deficit reduction assumes that current law will be implemented as scheduled. If, however, Congress changes the trajectory of these policies by increasing spending (i.e., by eliminating the BCA automatic spending cuts) or decreasing revenue (i.e., by extending a portion of the Bush tax cuts), these policies would increase the deficit relative to the baseline. However, the amount by which the deficit would increase as the result of such policy changes could be different than the figures shown below. This is due to various factors that are taken into account when compiling a cost estimate. Because these factors could be different than the ones assumed in the figures below, the budgetary impact of reversing these policies may not be directly comparable to their impact on the deficit under current law. The full effects of the economic and budgetary impact of these policies may not be felt immediately. Immediate effects would be felt by individuals who have been receiving emergency unemployment compensation who would face the expiration of long-term benefits. The effects of tax changes, such as the expiration of the two-percentage-point payroll tax rate reduction, would be spread out over the course of the year. Likewise, for taxpayers experiencing an increase in tax liability as a result of the expiration of Bush tax cut provisions, these effects may be spread out over the course of the tax year through adjusted tax withholdings, or may be realized when 2013 taxes are paid early in 2014. The effects on the spending side may also be muted in the early part of 2013. The automatic cuts scheduled to be implemented as part of the Budget Control Act will result in agency budget authority being immediately reduced on January 2, 2013. The effects of these reductions will be seen throughout the remaining nine months of the fiscal year, and in future fiscal years, as outlays that would have otherwise occurred, do not. Though these gradual effects may provide Congress with additional time to act to address these policies, delaying such action can increase uncertainty throughout the economy and will further delay the return of the federal budget to a sustainable path. Despite the fact that these spending reductions and revenue increases are spread over the entire year, CBO estimates that if all of these policies go into effect as scheduled under current law, the economy will contract during the first two quarters of calendar year 2013. The Bush tax cuts included provisions to reduce tax rates initially enacted as part of the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) and the Jobs and Growth Tax Relief Reconciliation Act of 2003 ( P.L. 108-27 ). Also included in the Bush tax cuts were provisions that reduced tax rates on long-term capital gains and dividends; reduced and ultimately repealed limitations for personal exemptions (PEP) and itemized deductions (Pease); and expanded certain tax credits, including the Earned Income Tax Credit (EITC), child tax credit, adoption tax credit, and dependent care tax credit. The Bush tax cuts also contained provisions to reduce the marriage tax penalty, as well as modified various education-related tax incentives. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) made modifications to two provisions of the Bush tax cuts and enacted two new tax provisions. Specifically, ARRA's modifications expanded the refundability of the child tax credit and further reduced the marriage penalty of the EITC. In addition, ARRA increased the EITC for families with three or more children and enacted a new higher education tax credit—the American Opportunity Tax Credit (AOTC). The original Bush tax cut provisions, as well as the modifications enacted by ARRA, were extended through 2012 by the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). Under current law, beginning in January 2013, marginal tax rates and tax credits and deductions will return to the 2001 levels that existed prior to the enactment of EGTRRA. For more information on how changing current law with regard to these tax provisions could change federal revenue levels, see CRS Report R42020, The 2001 and 2003 Bush Tax Cuts and Deficit Reduction , by [author name scrubbed] and CRS Report R42485, An Overview of Tax Provisions Expiring in 2012 , by [author name scrubbed]. For a comparison of recent legislative proposals to extend the Bush tax cuts, see CRS Report R42622, An Overview and Comparison of Proposals to Extend the "Bush Tax Cuts": S. 3412, S. 3413, H.R. 8 , by [author name scrubbed]. EGTRRA enacted provisions to phase out the estate and generation-skipping taxes over a 10-year period. In 2010, there was no federal estate or generation-skipping tax. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 temporarily reinstated, through 2012, the estate and generation-skipping taxes. As reinstated, the top rate for the estate tax was lower than it had been in 2009 (35%, as opposed to 45%). The exemption amount, as reinstated, was also higher than it had been in 2009 ($5.0 million, as opposed to $3.5 million). Absent legislative action, after 2012 the estate tax will return to pre-EGGTRA rules, with a top rate of 55% and a $1 million exemption. Extending current estate tax provisions would increase the budget deficit, relative to current law. For additional information on the estate tax, see CRS Report R41203, Estate Tax Options , by [author name scrubbed]; CRS Report 95-416, Federal Estate, Gift, and Generation-Skipping Taxes: A Description of Current Law , by [author name scrubbed]; and CRS Report 95-444, A History of Federal Estate, Gift, and Generation-Skipping Taxes , by [author name scrubbed]. When the alternative minimum tax (AMT) was enacted, the exemption amounts were not indexed for inflation. This means that absent legislative action, the cumulative effect of inflation will result in an estimated 27 million additional taxpayers to being subject to the AMT in 2012. Congress has regularly increased the AMT exemption amount to adjust for inflation (this adjustment is also known as the AMT "patch"). The 2001 and 2003 Bush tax cuts temporarily increased the basic exemption for the AMT. This exemption amount has been extended and adjusted a number of times over the past decade. In 2005, the Tax Increase Prevention and Reconciliation Act of 2005 ( P.L. 109-222 ) allowed nonrefundable personal tax credits to offset AMT liability in full. The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 patched the AMT and extended provisions allowing nonrefundable personal tax credits to offset AMT liability through 2011. Patching the AMT for 2012 and beyond will increase the budget deficit relative to current law. Indexing the AMT for inflation permanently, as proposed in the President's FY2013 budget, would cost an estimated $1.9 trillion over the 2013 to 2022 budget window, as measured against current law. For more information, see CRS Report RL30149, The Alternative Minimum Tax for Individuals , by [author name scrubbed]. In an effort to stimulate the economy, Congress, in December 2010, temporarily reduced the employee and self-employed shares of the Social Security payroll tax by two percentage points (to 4.2% for employees and 10.4% for the self-employed). Social Security trust funds were "made whole" by a transfer of general revenue, so that Social Security did not lose revenues as a result of the payroll tax rate reduction. The temporary reduction was scheduled to expire at the end of 2011, but the reduction was extended for two months as part of the Temporary Payroll Tax Cut Continuation Act of 2011 ( P.L. 112-78 ). Congress later extended the payroll tax rate reduction through the remainder of 2012 as part of the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ). CBO estimates that allowing the two-percentage-point payroll tax reduction to expire would reduce the budget deficit by $95 billion between FY2012 and FY2013 (see Table 1 ). Further extensions of the payroll tax rate reduction would increase the budget deficit, unless the cost of the extension were offset. For more information on the temporary payroll tax rate reduction, see CRS Report R42103, Extending the Temporary Payroll Tax Reduction: A Brief Description and Economic Analysis , by [author name scrubbed] and [author name scrubbed] and CRS Report R41648, Social Security: Temporary Payroll Tax Reduction , by [author name scrubbed]. A number of temporary tax provisions expired at the end of 2011, and more are scheduled to expire at the end of 2012. A tax extender package was included as part of the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ). This legislation extended a number of temporary provisions that had been allowed to expire at the end of 2009, as well as several temporary provisions that were set to expire at the end of 2010. In August 2012, the Senate Finance Committee voted to approve a package that would extend more than 50 expired and expiring tax provisions through 2013. Amongst provisions that would be extended under the Family and Business Tax Cut Certainty Act of 2012 ( S. 3521 ) are those that benefit research and development (R&D), increased expensing allowances designed to encourage investment, provisions related to the tax treatment of foreign-source income such as the active financing exception under subpart F, and a number of energy-related tax incentives, among others. Extending temporary tax provisions that have expired or are scheduled to expire will increase the budget deficit, relative to current law. CBO estimates that allowing other expiring tax provisions to expire as scheduled would reduce the budget deficit by $65 billion between FY2012 and FY2013 (see Table 1 ). For additional background on expired or expiring provisions, see CRS Report R42105, Tax Provisions Expiring in 2011 and "Tax Extenders" , by [author name scrubbed] and CRS Report R42485, An Overview of Tax Provisions Expiring in 2012 , by [author name scrubbed]. The Patient Protection and Affordable Care Act (ACA; P.L. 111-148 as amended) will, among other things, increase access to health insurance coverage (with most coverage provisions effective in 2014). In addition to financial penalties imposed on most individuals who do not purchase health insurance coverage and certain employers who do not provide affordable and/or adequate coverage, the law includes a number of explicit revenue provisions to pay for expanded coverage. One-third of those revenues will be derived from taxes and fees on health insurers, plan administrators, and employers, with initial effective dates varying from 2011 up to 2018. However, nearly half of those revenues are to be derived from taxes on high-income taxpayers that will be effective in 2013, the same year in which the Bush Tax cuts expire. These include a Medicare payroll tax and a tax on unearned income. According to CBO, these two taxes are projected to raise $18 billion in revenue in 2013. Under current law, employers and employees each pay a payroll tax of 1.45% to finance Medicare Hospital Insurance (Part A). ACA includes additional hospital insurance taxes on high-income taxpayers. Specifically, ACA imposes an additional payroll tax of 0.9% on high-income workers with wages over $200,000 for single filers and $250,000 for joint filers effective for taxable years after December 31, 2012. The additional payroll tax only applies to wages above these thresholds. Thus, the hospital insurance portion of the payroll tax will increase from 1.45% to 2.35% for wage income over the threshold amounts. These revenues will be credited to the Medicare Hospital Insurance Trust Fund (Part A). ACA as amended also imposes an additional tax on net investment income. Households with modified adjusted gross income (MAGI) under specified thresholds will not be subject to the investment income tax. Specifically, effective for taxable years after December 31, 2012, the law will impose a tax equal to 3.8% of the lesser of (1) net investment income for such taxable year, or (2) the excess of MAGI over $250,000 for joint filers and $200,000 for single filers. For more information about these taxes, see Archived CRS Report R41128, Health-Related Revenue Provisions in the Patient Protection and Affordable Care Act (ACA) , by [author name scrubbed] and CRS Report R41413, The 3.8% Medicare Contribution Tax on Unearned Income, Including Real Estate Transactions , by [author name scrubbed]. In addition to the expiring provisions discussed above, additional spending cuts are scheduled to take effect beginning on January 2, 2013. On August 2, 2011, President Obama signed into law the Budget Control Act of 2011 (BCA; P.L. 112-25 ). The BCA contained a variety of measures intended to reduce the deficit by at least $2.1 trillion over the FY2012-FY2021 period, along with a mechanism to increase the debt limit. The deficit reduction provisions included $917 billion in savings from statutory caps on discretionary spending and the establishment of a Joint Select Committee on Deficit Reduction (Joint Committee) to identify further budgetary savings of at least $1.2 trillion over 10 years. On November 21, 2011, the co-chairs of the Joint Committee announced that they were unable to reach an agreement before the committee's deadline. As a result, a $1.2 trillion automatic spending reduction process has been triggered to begin in January 2, 2013, unless Congress and the President act to eliminate or change the process. In FY2013, across-the-board spending reductions amounting to $109 billion are scheduled to take effect, with $54.7 billion being cut from defense spending and $54.7 billion cut from non-defense spending through a sequester. Spending reductions of a similar amount are also scheduled to occur in each year between FY2014 and FY2021. There have been several measures proposed to cancel or modify this process including the Sequester Replacement Reconciliation Act, H.R. 5652 , which was passed by the House on May 10, 2012. If the 2013 sequester is fully canceled, in other words, the reductions in spending no longer occur, the deficit would increase as a result by roughly $65 billion in FY2013. Eliminating the entire automatic reduction process from FY2014 to FY2021 would cost an additional $1.105 trillion through FY2022. For more information on how the Budget Control Act's automatic spending reductions effect the budget deficit, see CRS Report R42506, The Budget Control Act of 2011: The Effects on Spending and the Budget Deficit When the Automatic Spending Cuts Are Implemented , by [author name scrubbed] and [author name scrubbed]. The Unemployment Compensation (UC) program is a joint federal-state effort with basic income support for unemployed workers provided through the state-funded UC benefit. Once UC benefits are exhausted, the temporarily authorized Emergency Unemployment Compensation (EUC08) and the permanently authorized Extended Benefit (EB) programs may provide additional unemployment benefits, depending on worker eligibility, state law, and state economic conditions. States provide funds for the regular UC benefit (approximately the first 26 weeks of benefits) and the state share of the EB payments. The federal government provides funds for UC program administration, the federal share of EB payments, and the EUC08 program. Under permanent law (P.L. 91-373), the EB program is funded 50% by the federal government and 50% by the states. P.L. 111-5 , as amended most recently by P.L. 112-96 , temporarily provides for 100% federal funding of the EB program until the end of 2012 when the federal share reverts back to 50%. The 100% federally funded EUC08 program was first authorized by P.L. 110-252 . The EUC08 program's structure and authorization have been amended numerous times, most recently by P.L. 112-96 . Currently, the entire EUC08 benefit structure is scheduled to expire at the end of 2012. The EUC08 program provides up to four tiers of additional weeks of unemployment benefits to certain workers who have exhausted their rights to UC benefits in states with high unemployment. While the authorization for the temporary provisions ends on December 31, 2012, CBO has projected that federal spending would be lowered by $26 billion in FY2013 if those provisions were not extended through FY2013. For more information on unemployment insurance benefits, including benefits from the EUC08 and EB programs, see CRS Report RL33362, Unemployment Insurance: Programs and Benefits , by [author name scrubbed] and [author name scrubbed]. Reductions in payment rates to physicians under the Medicare program, as required under the Sustainable Growth Rate (SGR) system, were averted through December 31, 2012 as part of the Middle Class Tax Relief and Job Creation Act of 2012 ( P.L. 112-96 ). The SGR system, the statutory method for determining the annual updates to the Medicare physician fee schedule, was established as part of the Balanced Budget Act of 1997 ( P.L. 105-33 ) in an attempt to maintain Medicare physician spending levels close to a "sustainable" target level that reflected growth in GDP per capita, efficiency in delivering health care, and other measures. In the first few years of the SGR system, the actual expenditures did not exceed the targets and the updates to the physician fee schedule were close to the Medicare economic index (MEI, a price index of inputs required to produce physician services). For the next two years, in 2000 and 2001, the actual physician fee schedule update was more than twice the MEI for those years. Beginning in 2002, the actual expenditure exceeded allowed targets, and the discrepancy has grown with each year. With the exception of 2002, when a 4.8% decrease was applied, Congress has enacted a series of laws to override the reductions. However, legislative overrides since 2002 have only provided temporary reprieve from projected reductions in payments under the SGR calculation, requiring even steeper reductions in payment rates in the future. Unless Congress enacts legislation to override projected SGR changes, physician fees would be reduced by 27% in calendar year 2013. Allowing for a reduction in Medicare payment rates for physicians would reduce the budget deficit by $11 billion between FY2012 and FY2013. For additional background information and history on the SGR system, see CRS Report R40907, Medicare Physician Payment Updates and the Sustainable Growth Rate (SGR) System , by [author name scrubbed] and [author name scrubbed]. In addition to the policies discussed above, there are several other policy items that Congress may consider late in 2012 or early in 2013. By the start of FY2013, October 1, 2012, Congress must agree to and the President must sign a set of 13 appropriations bills or a continuing resolution, which will provide discretionary funding to departments and agencies for the fiscal year. If there is a funding gap due to the absence of an agreement to provide appropriations or as a result of the expiration of a continuing resolution at a later date, government activities will cease, except for emergency operations. In the past, government shutdowns have necessitated furloughs of several hundred thousand federal employees, required cessation or reduction of many government activities, and affected numerous sectors of the economy. Dealing with issues related to a potential shutdown may divert legislative attention from other activities awaiting consideration. In addition to the specific fiscal policies discussed above, Congress will likely have to consider an increase to the debt limit sometime in late 2012 or early 2013. Negotiations on this issue in 2011 led to the passage of the BCA, which included a debt limit increase and deficit reduction provisions shortly before the limit was reached. Some in Congress have expressed a desire to see a similar agreement accompanying the next debt limit increase. The debt subject to limit will generally continue to rise as long as the budget remains in deficit or trust funds remain in surplus. Further, seasonal fluctuations could still require Treasury to sell debt even if the annual level of federal debt subject to limit does not increase. The current debt limit stands at $16.394 trillion. CBO estimates that the debt subject to limit at the end of FY2013 could reach $16.796 trillion, or $402 billion above the current limit. However, this estimate is based on maintaining current law. Changes in fiscal policy, as discussed throughout this paper, would impact the budget deficit and resulting levels of federal debt. For more information on the debt limit and potential consequences of not increasing it, see CRS Report R41633, Reaching the Debt Limit: Background and Potential Effects on Government Operations , coordinated by [author name scrubbed] and CRS Report RL31967, The Debt Limit: History and Recent Increases , by [author name scrubbed] and [author name scrubbed]. Many budget analysts are concerned about future levels of federal debt and acknowledge that the current spending and revenue collection cannot continue at current or projected future levels. However, making significant changes to spending or revenue policies at this time may be harmful to the ongoing economic recovery. The effects on the economy of certain policies enacted to combat the economic downturn, such as extended emergency unemployment benefits and the spending and revenue provisions of the American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ), are waning under current law. CBO recently projected that economic output (as measured by GDP) will not return to its potential until FY2018. Further, they estimate that allowing the policies included in Table 1 to take effect as scheduled under current law, would result in real GDP growth of 0.5% in calendar year 2013. In contrast, CBO estimates that reversing these policy changes as scheduled under current law would lead to real GDP growth of 4.4% in calendar year 2013. There are also timing issues associated with various tax and spending policies scheduled to take effect under current law that have potential implications on the economy. Policies that are felt immediately, such as those that would reduce unemployment benefits, are more likely to have an immediate adverse effect on the economy than those policies that are spread out over the course of the year or beyond, such as the BCA's automatic spending cuts and income and payroll tax increases. Thus, the timing associated with various tax and spending policies scheduled to change under current law at the end of 2012 or early in 2013 has important consequences for the expected economic effects of individual policy choices. The contraction economists expect will occur should current law fiscal policies take effect can likely be dampened with action taken to prevent spending cuts or tax increases. There are differences, however, in the level of expected growth and employment given different policy choices. A 2010 CBO report concluded that policies designed to increase aid to the unemployed are more effective at boosting unemployment than across-the-board income tax reductions. Similar results were presented by Mark Zandi of Moody's Analytics in 2010 testimony before the Senate Finance Committee. This result reflects the general tendency for policies that increase income of lower-income households to have greater short-run stimulative impacts than policies that benefit higher-income households. Lower-income households are more likely than higher-income households to spend additional disposable income, thus providing a greater contribution to aggregate demand in the short-run. While spending cuts and tax increases are generally contractionary, there are differences in the potential magnitude of the growth and employment effects of allowing different fiscal policies to take effect as scheduled. Federal Reserve Chairman Ben Bernanke, among others, has told Congress that they should take steps to "work to address the nation's fiscal challenges in a way that takes into account both the need for long-run sustainability and the fragility of the recovery." He stated that the spending and tax policies set to take effect in 2013 could endanger the recovery and recommended that Congress work to implement a credible medium-term plan for deficit reduction. Table A-1 below provides a list of the major expiring provisions discussed above, the Budget Control Act's automatic spending reductions scheduled to begin in January 2013, and other short-term considerations , which will confront Congress around the end of the calendar year. It illustrates how specific deficit reduction plans or budget outlines propose to deal with these fiscal issues. The table examines the Debt Reduction Task Force (Domenici-Rivlin; November 2010), the National Commission on Fiscal Responsibility and Reform (Simpson-Bowles; December 2010), the President's FY2013 budget (February 2012), and the House FY2013 Budget Resolution ( H.Con.Res. 112 ; March 2012). Using any of the proposals or recommendations in the plans listed in Table A-1 to sort out fiscal issues comes with certain constraints. First, outside of the President's Budget proposal and the House Budget resolutions, none of these plans were accompanied by legislative language. Therefore, specific language would have to be written and agreed to. Second, budget resolutions do not become law. Therefore, separate legislation would have to be enacted in order to make the policy changes specified in the resolution, even if the House and Senate were to come to an agreement on the resolution itself. If an agreement were to be reached but certain provisions in the budget resolution did not become law, the spending, revenue, and deficit levels projected could change significantly. Finally, given the fairly lengthy time horizon over which these proposals were written and that fiscal conditions changed significantly, it is difficult to compare the amount of deficit reduction between plans. Both the Domenici-Rivlin and Simpson-Bowles plans include comprehensive tax reform as part of broader debt or deficit reduction packages (see Table A-1 ), and thus do not present explicit recommendations regarding current fiscal policy choices. The substantial tax policy considerations being faced at the end of 2012 continue to stimulate interest in fundamental tax reform. Depending on its design, tax reform may or may not contribute to deficit reduction. Comprehensive tax reform that is revenue-neutral would not directly contribute to a longer-term deficit reduction strategy.
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This report provides a brief overview of the major tax and spending policy changes set to take effect under current law at the end of 2012 or early in 2013. Collectively, these policies have been referred to by some as the "fiscal cliff." Extending current revenue policies (e.g., extending the Bush tax cuts) and changing current spending policies (e.g., not allowing the BCA sequester to take effect) would increase the projected budget deficit relative to current law. The Congressional Budget Office (CBO) estimates that if current law remains in place, the budget deficit will fall by $502 billion between FY2012 and FY2013. Revenue provisions that are set to expire at the end of 2012 include the "Bush tax cuts," as well as provisions related to the estate tax and the Alternative Minimum Tax (AMT). Collectively, the Bush tax cuts reduced income taxes by reducing tax rates, reduced the marriage penalty, repealed limitations on personal exemptions and itemized deductions (PEP and Pease, respectively), expanded refundable credits, and modified education tax incentives. The Bush tax cuts also reduced estate tax liabilities by increasing the amount of an estate exempt from taxation and by lowering the tax rate. The two-percentage-point reduction in the Social Security payroll tax is also set to expire at the end of 2012 and a number of temporary tax provisions (also known as "tax extenders") expired at the end of 2011 with more scheduled to expire at the end of 2012. Under current law, these provisions are collectively estimated to reduce the budget deficit by nearly $400 billion between FY2012 and FY2013. There are a variety of spending policies set to change at the end of 2012 or early in 2013. These include the federal share of extended benefit payments for unemployment and the authorization for temporary emergency unemployment benefits. Payments to physicians under Medicare are scheduled to be reduced by 27% in 2013 under the Sustainable Growth Rate (SGR) system. Automatic spending cuts enacted as part of the Budget Control Act of 2011 (BCA; P.L. 112-25) are scheduled to reduce spending beginning in FY2013. Under current law, these policy changes are collectively estimated to reduce the budget deficit by over $100 billion between FY2012 and FY2013. In making fiscal policy choices, Congress will have to weigh the benefits of deficit reduction against the potential implications of fiscal policy choices for the ongoing economic recovery. Maintaining current revenue and spending policies will add to the deficit, while increasing revenues and reducing spending, as under current law, could slow economic growth. Thus, deficit reduction measures must be balanced against concerns that spending cuts or tax increases could dampen an already weak economic recovery. CBO has concluded that allowing current law fiscal policies to take effect will dampen short-term economic growth, but accelerate long-term economic growth. Conversely, CBO has concluded that postponing the fiscal restraint would accelerate short-term economic growth, but dampen long-term economic growth. In that context, several policy observers have recommended implementing a credible medium-term plan that balances economic considerations with deficit reduction.
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One view of the financial crisis of 2007-2008 is that it was not centered in traditional banking. The term shadow banking " ... refers to credit intermediation involving leverage and maturity transformation that is partly or wholly outside the traditional banking system." That is, shadow banking substitutes at least partially for simple banking in the creation and funding of debt. Several components of the shadow banking system contributed to the breadth of the financial turmoil that began in 2007, and the magnitude of the financial panic in September 2008, according to the Financial Crisis Inquiry Commission (FCIC). In response, regulatory policymakers have been analyzing how the shadow banking system works, and considering options to promote greater financial stability in shadow banking. Congress is considering several shadow banking regulatory reform proposals (e.g. changing the status of repurchase agreements [repos] in bankruptcy proceedings), overseeing related agency rulemaking (e.g., regulations for Money Market Funds [MMFs]), and overseeing the implementation of related financial reform legislation (e.g. applying the capital requirements in Section 171 of the Dodd-Frank Act to nonbanks). This report develops a general framework for analyzing financial intermediation, and applies these concepts to several specific shadow banking sectors. The report focuses on comparing and contrasting the fundamental economic problems of simple banking (which will be referred to as luminated banking ) and associated policy responses to analogous problems and policy proposals in shadow banking. Shadow banking provides a similar general service (financial intermediation) as luminated banking, and is subject to similar fundamental economic problems. Furthermore, many of the proposed regulatory responses for shadow banking have policy trade-offs analogous to regulatory policies in banking, and some shadow banking sectors already have a financial regulatory regime (such as securities regulations). Many of these economic problems and potential policy responses are illustrated by the experiences of five shadow banking sectors (repos, nonbanks, asset backed commercial paper [ABCP], securitization, and MMFs) during 2007-2008, and by regulatory responses currently being considered. Similarities and differences between securities market regulation and banking regulation can influence the size and stability of the financial system. In many cases (but not all), the kind of regulation applied to securities market activities is fundamentally different from the regulation of chartered depository banks. Banking regulation is typically applied only to specific institutions, is risk-based, takes into account the linkages between banks through the payment system, and includes government emergency backstops, such as a lender of last resort and a deposit guarantor. Securities regulation, which several categories of shadow banking involves, generally requires disclosure of material risks, but typically does not limit the risk that sophisticated securities market participants may take. On the other hand, the regulation of securities is often product and activity based, and therefore may adapt to financial innovations in which debt-related securities are offered by new kinds of business entities. Differences in these regulatory regimes can affect the degree to which debt is created through banking or shadow banking. The diversity of shadow banking activities and institutions makes it difficult to generalize; however, the degree to which debt financing in the financial system is covered by risk-based regulation, has access to emergency backstops, or can easily adapt to innovation in the provision of similar services may be influenced by regulatory choices for banking and shadow banking. By extension, changes to the regulation of shadow banking can affect the relative stability of the overall financial system. The organization of the report is as follows. The report defines luminated banking and shadow banking, and identifies several common sources of financial instability from an economic perspective. The report describes some of the standard economic tools (including regulations and emergency support) that are often applied to banking. It then describes five major components of shadow banking, and for each one, recounts its experience during the financial turmoil of 2007-2008 and analyzes policy proposals to change the regulatory approach and emergency support for that sector. The policy proposals are related back to analogous policy proposals in banking regulation. Defining "shadow banking" is difficult because defining banking is difficult. Some analysts might be tempted to define banking as whatever firms with bank charters do; however, policy discussions of shadow banking include activities in which chartered banks participate, sometimes only with each other. Therefore, a definition that is based on functions may be more useful for policy analysis, but even the functional definitions offered by various researchers have varied significantly, with important implications for what gets included under the label "shadow banking." This report will follow a functional definition, seeking to provide a framework for analyzing several large sectors of the financial system that are usually included under the rubric "shadow banking," yet excludes insured deposits of chartered banks that hold their loans. In broad terms, both banking and shadow banking provide the same service, which is financial intermediation. Financial intermediation includes gathering funds from savers, screening and qualifying applicants for funds, issuing and holding financial assets, and coordinating the payment of returns to savers. Shadow banking involves providing this financial intermediation with at least one difference from simple banking. In many cases (but not all), that difference involves reliance on securities markets to fund loans. If shadow banking has at least one difference from simple banking, what is simple banking? Simple banking, or luminated banking, has each of the following four elements. The first row of Figure 1 illustrates the flow of funds connecting savers and borrowers in a luminated banking business model. Luminated banks 1. gather funds in the form of deposits (time and transaction) 2. have special business charters identifying them as depositories 3. offer loans (and screen applicants) 4. hold the loans they originate. Repayments of loans fund the interest for depositors. The term shadow banking has been used to describe a variety of firms and activities that have little in common. However, they each differ in an at least one respect from the simple conception of banking illustrated in the first row of Figure 1 . In this illustration, the term luminated banking is being used to describe a simple form of the "originate-to-hold" model of depository banking. In Figure 1 , each following row provides an illustrative example of an activity or firm that deviates from luminated banking in at least one respect, yet provides similar financial intermediation. Adjusting the focal point of intermediation from left to right, the first shadow banking example in Figure 1 illustrates a substitute for deposits (in this case repos), the second shadow banking example illustrates a substitute for firms with special bank charters (non-bank intermediaries), and the third row illustrates a substitute for holding loans (in this case selling loans through securitization). The following five examples are a non-exhaustive list of shadow banking sectors. This list is included because each of these sectors will be addressed more fully in the policy analysis section of the report. They are presented here to see how each fits into the general concept of financial intermediation and how each differs from, or can be incorporated in, simple banking. (A) The Repo Market—Rather than gathering funds from depositors, some chartered banks (and nonbanks) borrow through repurchase agreements (repos, discussed more fully below). In a repo, a firm sells a security today with a promise to repurchase the security at a later date for a specified price. The time span and price differences are analogous to a loan and interest. Repos differ from simple banking in the way in which intermediaries gather funds from savers. Financial firms that fund themselves with repos may or may not have bank charters, may or may not extend credit or purchase debt, and may or may not hold the loans they originate. However, the first row of Figure 1 shows that if a chartered bank borrows through repo markets (rather than deposits) in order to fund its lending activity, the financial intermediation is very similar to luminated banking. Furthermore, firms without bank charters can also gather funds from savers through repos. (B) Firms without bank charters—A firm does not have to be a chartered bank in order to borrow or lend, and luminated banking involves borrowing from depositors in order to offer and hold loans. In a trivial, but highly illustrative example, there was an ice cream shop in Pennsylvania that accepted deposits and offered loans. Trusts and non-depository investment banks are more common than ice cream shops that offer banking services. The second row of Figure 1 shows that if a firm without a bank charter funds itself with deposit-like loans while at the same time extending credit or purchasing debt, the resulting financial intermediation is very similar to luminated banking. (C) Commercial Paper—Firms do not have to go to banks to in order to borrow. Debt can be issued and traded through securities markets. Rather than originate and hold individual loans, chartered banks (and nonbanks) have at times sponsored interests in commercial paper, which is an example of marketable debt. One common form is to issue asset-backed commercial paper (ABCP), in which the commercial loans serve as collateral for shorter term debt issued in securities markets. Although not depicted in Figure 1 , ABCP represents relatively short term borrowing (on the deposit side of financial intermediation) that is used to acquire and fund generally longer-term commercial debt. Commercial paper is not funded by deposits, and can be sponsored by a non-bank, and can involve acquiring commercial loans rather than originating commercial loans, yet the organization of the financial flows are similar to luminated banking. That is, savers extend short term loans to intermediaries, which hold commercial debt. (D) Securitization—Banks (and nonbanks) do not have to hold the loans that they originate. They can sell the loans to other banks (or nonbanks). If the loans are then funded by issuing securities, typically passing through the loan repayments, it is said to be securitization. The third row in Figure 1 illustrates securitization by a bank. Securitization by banks differs from luminated banking primarily in the way that intermediaries interact with borrowers, rather than savers (although the fact that intermediaries in securitization don't hold the loans can have important indirect effects on savers). Securitization can also facilitate lending by nonbanks. (E) Money Market Mutual Funds—MMFs gather funds from investors in order to buy relatively low risk short-term debt in securities markets. MMFS are not depicted in Figure 1 , and the description appears to differ from luminated banking in every respect. The MMF has investors, not depositors. The MMF does not have a bank charter. The MMF generally buys debt in securities markets, rather than hold debts that it originated itself. Yet, MMFs perform financial intermediation services that are very similar to luminated banks. On the lefthand side of financial intermediation, investor withdrawals from MMFs can be very similar to depositor withdrawals from banks. On the righthand side of financial intermediation, the effect of loan defaults on an MMF has some similarities to the effect of loan defaults on a bank that holds its own loans. There are several "banking" charters in the United States, and the definition of luminated banking used above includes these firms as well. Credit unions and thrifts also accept insured deposits, have special charters which subject them to bank-like regulation, screen applicants, offer loans, and hold loans. The term insured depository institution (IDI), which can include banks, credit unions, and thrifts, is sometimes used in the same manner that the term banking is used in discussions about shadow banking. IDIs can focus solely on simple banking, but they might also participate in some shadow banking activities, such as repurchase agreements or selling the loans they originate. When this report uses the term simple banking, IDIs are considered to satisfy the requirement for a banking charter. If luminated banking is limited to the four elements of simple banking described above, then the United States has always had a shadow banking sector. In a large but perhaps analytically trivial example, the borrowing of the U.S. Treasury is almost entirely conducted through shadow banking. Or, at least, Treasury is not funded through luminated banking —chartered banks do not screen and qualify Treasury for loans funded by deposits, and with the intention of being held by the originating institution. Rather, loans to Treasury take the form of bonds originated through securities markets, with the intention of being marketable. Some Treasury securities are ultimately held by chartered banks, but even those securities were not originated by that bank. The exact size and growth of the shadow banking sector is sensitive to the definition of "simple banking." If shadow banking is being contrasted with deposit-funded banking, then shadow banking has historically been responsible for funding most of the debt outstanding in the United States. However, the share of total debt funded by deposits at commercial banks fell from slightly over 30% in 1975 to just over 13% in 2005, and then began rising after the financial crisis. Figure 2 shows that deposits at commercial banks are now more than 16% of total debt in the United States. To the extent that shadow banking is being used to describe alternatives to debt funded by deposits, Figure 2 is consistent with the view that the share of the luminated banking sector dropped by nearly half after 1975, but began rising after the mortgage crisis. Shadow banking is a global phenomenon. Because the range of permissible activities of chartered banks varies considerably across countries, the relative size of shadow banking sectors also varies considerably across countries. Because many financial markets are global, potential instability of shadow banking sectors has drawn the attention of policymakers in many countries. Shadow banking in the United States is of particular importance to international institutions such as the International Monetary Fund (IMF), Financial Stability Board (FSB), and Bank for International Settlements (BIS), because the United States financial system holds the largest single share of global nonbank assets. According to a study done by the FSB, the U.S. accounted for 44% of total world nonbank financial assets at the end of 2005 (See Figure 3 ). The relative decline in the U.S. shadow banking sector, partly due to the severity of financial crisis in the U.S. shadow banking system, can be seen in that the relative share of the U.S. shadow banking institutions had declined to 35% of world nonbank assets. Note, the definition of shadow banking in these pie charts is assets held by nonbanks, and thus excludes several shadow banking activities conducted in part by chartered banks. The FSB study reinforces the observation that it is hard to generalize about the organizational structure of shadow banking, or its regulation. The FSB study also attempted to provide a measure of the composition of global nonbank assets by institution type, rather than by country. Figure 4 shows that there is a wide variety of nonbank organizations that perform financial intermediation. Structured finance vehicles (an element of many securitizations) accounted for 10% of the assets held by nonbanks, while money market funds accounted for 7%. Other investment funds, including bond and equity funds, held a combined 35% of global financial assets. The shadow banking sector may exist in the United States for historical or institutional reasons. Historically, the United States had impediments to the geographic reach of chartered banks, and the scope of services they could offer. For example, during industrialization, it was not always easy for chartered banks to open branches in multiple states (limited deposit taking), and during some periods of time U.S. banks had restrictions on the interest they could pay depositors. Perhaps in response to regulatory restrictions on banks, financial markets evolved in the United States to aggregate funds through securities markets to assist large industrial enterprises, such as railroads and factories. Similarly, savings associations in the eastern United States could and did buy whole loans originated by western financial institutions; in addition to holding loans that they originated themselves. Furthermore, during the 19 th century, classes of marketable securities called debentures were issued by trusts and sold to eastern investors (and others), with the proceeds used to buy and hold mortgages originated in the west. In summary, the United States has a long tradition of funding debt (including mortgage debt) through securities markets; in addition to luminated banking. It is difficult to generalize about the policy problems of shadow banking because the same term is used to describe firms or activities that focus on different bank-like functions. This section reviews several fundamental economic vulnerabilities in financial intermediation, and provides examples of how similar problems can exist in sectors of shadow banking. This is not an exhaustive list. Recall that luminated banks accept deposits in order to fund loans held by the bank. This basic business model has a number of vulnerabilities. One vulnerability is the risk that the borrowers that the luminated bank lent to will not repay their loans (credit risk), rendering it difficult or impossible for the luminated bank to honor its obligations to its depositors. If the value of a bank's assets (the loans it holds) drops below its liabilities (to depositors) the bank has a solvency problem. Like a luminated bank, a shadow bank that holds loans is vulnerable to credit risk. During the 2007-2009 mortgage crisis, rising mortgage defaults reduced the value of mortgage-backed securities (MBS) and whole mortgage loans held by banks and shadow banks. These losses associated with MBS and other mortgage-related securities and derivatives brought the solvency of many financial institutions into question, reducing the willingness of financial institutions to lend to each other. Realized credit risk (mortgage defaults) reduced financial institution solvency, which in turn reduced liquidity. Examples of firms with reduced solvency due to credit losses include the failure of the bank (thrift) IndyMac, and the conservatorship of Fannie Mae and Freddie Mac, two mortgage securitization firms who could be considered shadow banks. A second problem that a luminated bank might face is interest rate risk related to its maturity mismatch. Maturity mismatch refers to the difference in length of time (term) of repayment of money borrowed compared to money lent. One way a luminated bank makes money is that the interest rate it pays to its deposits (short-term loans) is usually less than the interest rate it receives on the loans it offers (typically longer term). However, if all interest rates rise, then the simple bank may have to pay higher interest to keep its deposits, but continue to receive the lower interest rate on the longer-term loans that it still holds from the earlier time period. Paying out higher interest rates than those received is not sustainable. Furthermore, the market value of existing fixed rate bonds (the assets the bank holds) falls when interest rates rise (causing a capital loss). An example of mortgage-related interest rate risk occurred in the late 1970s and early 1980s. A 1982 Brookings publication estimated the accumulated capital loss of the mortgage portfolios of thrifts in mid-year 1981 to be $111.2 billion. Like luminated banks, shadow banks that fund themselves with short-term obligations (albeit not deposits) in order to fund longer term assets have a maturity mismatch and are also vulnerable to interest rate risk. Interest rate risk during the 2007-2009 mortgage crisis is more difficult to assess, because policy rates targeted by the Federal Reserve and rates on safe assets (like U.S. Treasury bonds) were falling, but the spread between these rates and the rate paid by many private firms widened. However, even if interest rate risk was not the primary contributor to the 2007-2009 mortgage crisis, shadow banks with a maturity mismatch are still vulnerable to similar problems that plagued the savings and loans during the 1970s and 1980s. A third problem a luminated bank might have is the ability to maintain liquidity. Even if all loans are fully repaid (no credit risk) and interest rates remain stable (no interest rate risk), simple banks are still vulnerable to the possibility that too many of their depositors will wish to withdraw their funds at the same time (sometimes called a "run"). Even though the bank's assets in this example are objectively sound, it might not have time to convert the loans it holds to cash to cover withdrawals. That is, the depositor withdrawals create a need for cash (the most liquid asset), but the bank's own assets take more time to convert to cash (are less liquid). For example, objectively, there may be no reason to discount the value of an auto loan or mortgage held by the bank, but if it tries to sell it in a hurry, potential buyers may not have time to evaluate and verify the quality of the auto loan or mortgage. As a result, the bank might have to sell the auto loan or mortgage at a discount. Like a simple bank, shadow banking activities can have liquidity problems. For example, during the 2007-2009 mortgage crisis, especially in the second half of 2007, uncertainty surrounding the condition of the mortgage market caused several asset classes in shadow banking to become less liquid (more difficult to sell without suffering a severe discount). Potential investors began to reduce their exposure to financial institutions (both banks and nonbanks) that were believed to hold assets that were becoming less liquid, making it more difficult for these firms to continue to fund the illiquid assets. Some analysts, such as Gary Gorton, have described the sharp reduction in non-deposit liabilities of financial institutions in September 2008 as a nonbank run . In many financial transactions, the two parties do not have the same information, a characteristic known as information asymmetry. Several categories of financial vulnerabilities are potentially related to, or magnified by, information asymmetries. For example, before the creation of the FDIC, bank runs could occur if depositors heard damaging rumors about their bank, but could not confirm the true quality of their bank's assets. The potential problem of information asymmetries is more general than bank runs; for example, asymmetries can affect the ability of banks to screen loan applicants. Information asymmetries are of particular importance to those categories of shadow banking that rely on securities markets to perform bank-like functions. For example, if a financial intermediary has several classes of assets, but needs to quickly raise cash, does the intermediary have an incentive to sell its "lemons", that is, keep its "good assets" while it sells those assets whose value has declined, but whose quality cannot be easily verified? Even if intermediaries don't actually follow this strategy, potential buyers might fear that the strategy will be followed—and discount the value of all similar securities offered for sale. For example, during the mortgage-related financial crisis of 2007-2009, private issuance of mortgage-related securities approached zero at the height of the financial crisis, even though more than 90% of mortgage borrowers did not default on their mortgages. A fourth problem faced by luminated banks is related to the collateral for some of their loans. Collateral refers to an asset a borrower surrenders to the lender if the borrower fails to repay a loan. Examples of collateralized bank lending include auto loans and residential mortgages, in which the car or property being purchased by the borrower serves as collateral for the loan. Some other types of lending, like credit cards, typically are not collateralized. When an asset being purchased also serves as collateral for the loan used to finance it, lenders are vulnerable to fluctuations in the price of the collateral. Although rising house prices insulate mortgage lenders from borrower defaults, declining house prices can cause self-reinforcing fire sales. That is, during periods of declining prices, borrower defaults will result in more houses being seized as collateral for the loans, and offered at foreclosure sales. These distress sales may reinforce the decline in house prices, and contribute to even more borrower defaults and additional distress sales. Shadow banking that relies on collateral can also be subject to self-reinforcing fire sales. For example, during the mortgage crisis of 2007-2009, some forms of ABCP were collateralized by the mortgage-backed securities that they funded. Rising mortgage defaults increased losses among for the MBS. Accounting rules and capital requirements could affect the ability of certain financial institutions to continue to fund affected MBS or attempt to raise capital. As a result, some firms might choose to sell their MBS at fire sale prices, rather than try to adjust their capital or adapt in other ways. The fire sales could reinforce price declines in MBS. The vulnerabilities of financial intermediation described above have been framed in the context of a single institution or market. However, one definition of systemic risk is the potential for the financial system itself to spread and magnify the losses of a single institution to the wider economy. For example, financial intermediaries (both banks and nonbanks) can borrow from each other, not just from depositors, investors, or other counterparties. If financial intermediaries rely too heavily on their ability to borrow from each other should financial conditions worsen, then the resilience of the system as a whole may decline. That is, each institution in isolation might maintain too small level of a cushion against credit losses, or take too few precautions against interest rate risk, or reserve too small a proportion of liquid assets, or maintain too high a proportion of loans backed by a single class of collateral, compared to the precautions that would be appropriate if they took into account the tendency of the system as a whole to magnify losses. Thus, if financial intermediaries rely on their ability to borrow should they suffer unexpectedly high defaults (credit risk), they might not sufficiently take into account the rising cost of liquid assets and maintaining solvency during times when many financial firms need to acquire additional funding at the same time. Systemic concerns in simple banking also apply to shadow banking. In the above example, if shadow banks suffer unexpectedly high defaults (credit risk), they may all try to increase their liquidity and raise new capital (to restore their solvency) at the same time. However, each firm's planning during the "good times" may have overestimated the availability and affordability of raising additional capital, and of acquiring and maintaining liquid assets, during "bad times", when many other financial intermediaries also need additional liquidity and capital. If so, then during bad times, interbank lending may decline significantly, or interest rates on interbank loans may rise substantially, exactly at the time that many financial intermediaries seek additional financing. Because the term shadow banking is used to describe such a diversity of firms and practices, it would be incorrect to categorize luminated banking as regulated and shadow banking as unregulated. However, in many cases (but not all), the kind of regulation applied to shadow banking activities is fundamentally different than banking regulation. Banking regulation is typically risk based, and typically takes into account the linkages between banks through the payment system and the interbank lending market. Securities regulation, which several categories of shadow banking involves, generally requires disclosure of material risks, but typically does not limit the risk that sophisticated securities market participants may take. This section will briefly summarize four fundamental elements (not exhaustive) of banking regulation, because several reform proposals for shadow banking can be thought of as attempting to apply the principles of banking regulation to nonbank financial intermediaries or activities. Earlier sections of this report described economic vulnerabilities of the simple banking approach. Most of these vulnerabilities also apply to shadow banking; therefore, it may be useful to review general policy intended to stabilize luminated banking before discussing policy reform proposals intended to stabilize specific shadow banking sectors. Bank regulators have authority to promulgate and enforce regulations to limit the risks that chartered banks take. Recall that two of the fundamental problems of financial intermediation were credit risk (the risk that loan assets would default) and interest rate risk (the risk that differences in interest rates for assets and liabilities could threaten the institution). Within its statutory framework, safety and soundness regulation includes the ability to examine the bank's assets and liabilities prior to any particular sign of financial trouble. Thus, bank examiners can attempt to look for potential problems in the firm's assets or liabilities (or assets compared to liabilities). They also have the potential ability to limit the total risk that any given institution has to any single counterparty, or to limit the aggregate exposure of the chartered banking system as a whole to any single asset class (such as real estate). In the extreme, a banking regulator can revoke a firm's charter. One general policy proposal for shadow banking is to apply safety and soundness regulation to nonbank financial intermediaries, if they are not already subject to analogous regulation. Capital requirements are a subset of safety and soundness regulation. In this context, capital refers to the equity stake, or similar investment, of the investors in the bank; in general, this equity stake can absorb losses before the financial interests of depositors and other creditors of the bank are threatened. Recall that credit risk was one of the fundamental problems of financial intermediation. Capital requirements can establish a minimum level of resiliency in the banking system—the ability to absorb loan losses before the institution becomes insolvent. Furthermore, if capital requirements are risk-based, they can provide incentives to limit the risk of the assets held by covered institutions. Because capital is not free, an institution subject to risk-based capital requirements would tend to evaluate the relative return of two alternative loan types against the risk-based capital requirement for that loan type. Thus risk-based capital requirements can be used to direct covered institutions toward less risky asset classes. However, and also because capital is not free, higher capital requirements tend to limit the aggregate amount of assets that can be held by covered institutions. One general policy proposal in shadow banking is to apply capital requirements to nonbank intermediaries, if they are not already subject to analogous regulation. A lender of last resort is an institution that has the ability to provide emergency loans during times of financial instability. Recall that liquidity was one of the fundamental problems of financial intermediation. That is, even if interest rates remained stable, and borrowers did not default, intermediaries are vulnerable to excessive withdrawals because the price of their assets might suffer steep discounts if they had to be sold in a hurry. In the United States, the Federal Reserve System is a lender of last resort to member institutions, and can expand its lending authority during financial turmoil, subject to a number of statutory restrictions. One common policy approach for a lender of last resort, known as the Bagehot Rule, would encourage loans to solvent institutions, but at an above market rate (penalty rate). In some cases, for example, the Federal Reserve may only lend if it receives good collateral, which insolvent firms may run out of because their liabilities are greater than their assets. However, one critique of the 2008 financial crisis is that the lender of last resort should not just lend to solvent institutions, but also lend to insolvent institutions if those institutions are interconnected to the financial system in a way that could cause wider financial instability. One general policy proposal is to extend lender of last resort eligibility to shadow banking institutions, if they are not already eligible. One of the fundamental problems of financial intermediation is a depositor run, which may be more likely to occur during times of financial panic. If the sources of funding for financial intermediaries disappear, either through withdrawals or through refusals to renew expiring contracts, then intermediaries may not be able to continue to fund their assets, even if there are no loan defaults and no fluctuations in interest rates. Deposit insurance provides assurance to bank depositors that they will be protected (up to a limit) if their bank fails. If deposit insurance is credible, then panic-driven depositor withdrawals may be avoided. Thus, credible deposit insurance may have prevented bank runs against savings and loans during the 1980s, even though the Federal Savings and Loan Insurance Corporation (FSLIC), which provided deposit insurance for S&L depositors, did not prevent hundreds of savings and loans from failing, or the system from requiring a bailout. The report thus far has presented an economic framework to understand the disparate institutions and markets that are gathered under the term shadow banking. Some policymakers have proposed extending the principles of bank regulation to financial intermediation that is either conducted by nonbanks, or that might be conducted by banks but funded by nondeposits. Other options include regulating activities regardless of the type of firm engaging in it, or attempting to correct mispricing that may occur when financial intermediation occurs through shadow banking. This section will focus on several specific elements of shadow banking that have been highlighted by the Financial Crisis Inquiry Commission (FCIC), the Financial Stability Oversight Council (FSOC), the Financial Stability Board (FSB), the Federal Reserve Board (FRB), or the International Monetary Fund (IMF). In each case, the report briefly describes the institution or market, links it to the description of financial intermediation described above, briefly discusses its experience during the financial crisis, and describes related policy concerns. These categories are neither exhaustive nor mutually exclusive. In the context of shadow banking, a repurchase agreement is analogous to a banking deposit. In a repurchase agreement, one party sells another party an asset (perhaps a U.S. Treasury Bond) for one price, with an agreement to repurchase the asset on a future date at another (higher) price. The difference in the prices is functionally similar to interest on a loan. The asset being traded is similar to collateral for a loan because failure of the first party to repurchase would result in the other party keeping the asset, just as if the first party had defaulted on a loan and the second party seized the asset as collateral. Sometimes a third party is hired to assist repo transactions, often providing clearing and settlement services (tri-party repos). Intermediaries (both banks and nonbanks) can borrow funds through repos instead of through insured deposits. Like deposits, if repos are set for shorter time periods than the intermediary's assets, then the intermediary will be potentially exposed to interest rate risk, maturity mismatch, etc. There are also differences between repos and deposits. Unlike deposits, repos are not eligible for deposit insurance. Because nonbanks can use repurchase agreements, there may be substantial financial intermediation processed by firms that are not eligible for assistance from the lender of last resort in the normal course of financial affairs. Unlike deposits, repurchase agreements use an asset as collateral. Doubts about the continued value of the asset generally used as collateral can reduce the volume of repurchase agreements available to fund intermediation (analogous to depositor withdrawals). Furthermore, if there are unexpectedly high repo defaults, the asset used as collateral may be dumped on the market, causing fire sales. The repo market experienced severe stress during the financial crisis. Economist Gary Gorton has documented the equivalent of a nonbank run on firms that had relied on the repo market for short-term financing. Staff at the Federal Reserve Bank of New York (FRBNY) have been assessing the vulnerability of repos to the kinds of runs that Gorton described. These authors identify both a liquidity constraint (which results in vulnerability to runs) and a collateral constraint (which results in vulnerabilities to fire sales). It is difficult to isolate the contribution of the repo market to the general crisis because many other markets experienced declines in liquidity at the same time. Repo market policy concerns can be divided into three general categories. First, some have suggested that nonbanks that rely on repo transactions to conduct financial intermediation similar to banks should be subject to safety and soundness regulations. Title I of the Dodd-Frank Act (DFA) allows for this if the firm has more than $50 billion in assets and is designated as systemically important by the FSOC. For firms so designated, the DFA requires that the standards set for systemic nonbanks be no weaker than similar standards for banks. However, the DFA does not create a safety and soundness regime for nonbanks with less than $50 billion in assets. Second, some have called for reforming the way repos are handled when a firm fails. For example, like other qualified financial contracts (QFCs), repo contracts are exempted from the bankruptcy estate of failing nonbanks. Under bankruptcy, payments subject to the automatic stay are retrieved by the bankruptcy estate, reducing the incentive of a failing firm's creditors to race to its assets (a form of run). To the extent that the automatic stay in bankruptcy reduces the incentive of a firm's creditors to run to its assets, the exemption from the automatic stay may have contributed to the nonbank run in the repo market during 2008. Under Title II of the DFA, the FDIC would be able to avoid the bankruptcy process if there was a finding of systemic risk, and Title II gives the FDIC a limited ability to address potential problems of QFCs, including repo agreements. A firm does not have to have over $50 billion in assets or have prior designation of systemic risk for Title II to apply. Third, some have called for reform of the techniques of repo trades. For example, the New York Federal Reserve, which participates in many repo transactions, has sought to improve certain technical features of the settlement system (the "plumbing" or "back office" function). Similarly, some have expressed concern that delays in clearing and settlement expose the intermediaries in tri-party repos (the 3 rd party) to undue credit risk. Finally, because repos are similar to collateralized loans, some are concerned that repo defaults or settlement fails could lead to fire sales. A nonbank intermediary is a firm without a bank charter that gathers funds from savers in order to fund loans to borrowers. Nonbank intermediaries come in many forms. For example, a mortgage company such as EMC Mortgage and an investment firm (nondepository) such as Bear Stearns could partner to generate mortgages that are then packaged and sold to investors (securitization through nonbanks). Similarly, a nonbank such as Fannie Mae can sell short term bonds that it uses to fund the acquisition of longer term mortgages that it keeps in portfolio. Or, in a non-securitization setting, a nonbank like MF Global can fund itself through repo transactions to acquire and hold debt issued by sovereign governments. The exact form of nonbank intermediation can vary a great deal, and the regulatory status of the firms participating can also vary a great deal. In these examples, Fannie Mae was subject to safety and soundness regulation, capital requirements, and had access to some emergency liquidity, but MF Global was not. Yet, MF Global was subject to regulation for securities that it issued to potential investors, and the way it handled customer accounts. During the mortgage crisis, many nonbank intermediaries experienced a liquidity crunch, and some failed outright. In some cases, financial turmoil prevented evaluation of the true value of complex mortgage-related securities in a timely manner, perhaps exacerbating price declines, and contributing to further fire sales. Under the normal course of events, failing nonbanks would be resolved through the bankruptcy process, in which similarly situated creditors must be treated similarly. Perhaps believing that financial instability would be magnified if certain creditors suffered losses, some policymakers wanted to avoid the bankruptcy process. Policymakers responded in at least two ways. The Federal Reserve set up special lending facilities (such as TALF) to support the liquidity concerns of nonbanks that could pledge eligible collateral. The Federal Reserve created special lending facilities to avoid the bankruptcy filing of Bear Stearns and AIG (but not of Lehman Brothers). Congress enacted the Housing and Economic Recovery Act (HERA). Under HERA, the newly created Federal Housing Finance Agency (FHFA) and Treasury administered a conservatorship of the GSEs in which the returns on some GSE senior securities were curtailed, but many other GSE obligations were fully honored. Because there are many types of nonbanks, and nonbank business models, it is difficult to generalize about this category. However, it may be useful to distinguish between policy proposals directed at activities in which banks and nonbanks both participate, and policy proposals about the eligibility of nonbanks for government efforts to address financial instability. The DFA attempts to address the participation of nonbanks in loan originations for consumers. Title X of the DFA creates a Consumer Financial Protection Bureau (CFPB) with authority to make rules for many consumer lending transactions that apply to both banks and nonbanks. The DFA changes policy options regarding nonbanks before and after a future crisis. Before a crisis, nonbanks with more than $50 billion in assets can be subjected to safety and soundness regulation if there is a determination of systemic risk concerns under Title I. Even smaller nonbanks can be resolved by the FDIC if there is a determination that their failure could contribute to financial instability under Title II. However, Title XI of the DFA limits the ability of the Federal Reserve to provide emergency lending to a single nonbank (as it did for Bear Stearns); rather, future emergency lending facilities would have to have more general eligibility criteria. Commercial paper is a very old type of security in which commercial loans are funded through securities markets, even if sponsored by a chartered bank. Asset Backed Commercial Paper (ABCP) commonly refers to senior short-term debt securities that are backed by commercial loans. Both banks and nonbanks can sponsor vehicles to issue ABCP; for example, a bank could create ABCP to sell its credit card loan collectibles, while an auto financing company could create ABCP to sell its auto loan repayments. Typically, the sponsor of ABCP receives a fee for administering the assets of the ABCP facility and often promises to provide emergency loans (liquidity) to the ABCP facility if other sources of funding are distressed. Part of the mortgage boom during the housing bubble was financed with ABCP. Beginning in August 2007, ABCP for subprime mortgage loans found it difficult or impossible to get external financing to support continued activity. As a result, many ABCP facilities turned to their sponsors for liquidity. As a result, many began absorbing subprime assets from sponsored ABCP that had not previously been disclosed on their balance sheets. Furthermore, the value of these mortgage-related assets had to be written-down. Late 2007 and early 2008 has been referred to as a liquidity crunch, in which uncertainty about further mortgage security related write-downs created financial uncertainty and mistrust in the interbank lending market. Some of these problems led to fire sales of the mortgages and mortgage-related assets that backed ABCP. Thus, credit losses on subprime mortgages contributed to liquidity problems for bank and nonbank intermediaries. The Federal Reserve created the Term Asset Backed Loan Facility (TALF) during the financial crisis to alleviate further fire sales of ABCP assets. Several policy changes have been implemented to attempt to address future problems in ABCP. The accounting profession has attempted to address some of the uncertainty issues by revising the way contingent liabilities (such as ABCP liquidity sponsorship) are reported in accounting statements. For example, FAS 166 and 167 have amended FAS 140 to address concerns about the recording of a true sale of assets from a sponsor to its ABCP. Similarly, the banking regulators have also addressed ABCP sponsorship by revising capital treatment for contingent liabilities, including promises to provide liquidity to sponsored ABCP. Emergency lending facilities such as TALF have expired, but the Federal Reserve's emergency lending authority for similar general access programs is preserved under Title XI of the DFA. Securitization is similar to ABCP in that loans are funded through securities markets. Under securitization, a trust or similar facility is created that acquires assets with a stream of payments, such as loans. The trust issues new securities under its own name that pass through the asset payments to the holders of the securities. For example, a trust could be formed that holds mortgages, with the payments by mortgage borrowers being passed through to the holders of the securities. Although this example used mortgages, any stream of payments from credit cards to toll booth collections can be securitized. One feature of securitization is that the terms of the securities issued by the trust (time of scheduled payments, relative seniority to other securities issued by the trust, etc.) do not have to match the timing or interest of the assets held by the trust as long as all payments are accounted for (complete pass through except for administrative expenses, and perhaps credit support). Chartered banks can participate in securitization by selling their loans, as can nonbank lenders. Typically, securitization conducted through private label firms did not include an issuer guarantee to cover credit risk. In contrast, securitization by the government sponsored enterprises does include a guarantee for credit risk, but not for interest rate risk. Most observers, including all three opinions in the FCIC report, consider aspects of securitization to have contributed to the magnitude of the financial crisis, although there are different views on how or why. All three FCIC opinions agree with the following description of events. Once credit losses escalated in the mortgage market, the demand for mortgage-backed securities disappeared. Many mortgage finance companies that originated and sold mortgages to private label securitizers failed. Some issuers of private label MBS suffered large losses because they retained some credit interest in the securities they sold (in some cases by retaining junior tranches to improve the credit rating of other tranches and in other cases by offering other contingent liabilities). Banks and other firms owned private label MBS, and had overestimated the relative safety of MBS. Firms that provided insurance to MBS securitization, or securities with similar functions, failed (this includes the monoline insurers and AIG). Fannie Mae and Freddie Mac, which had to cover the credit losses of the mortgages they securitized, were placed in government conservatorship, with contracts with Treasury to assure their financial condition. Legal challenges to the servicing of securitized mortgages by defaulting homeowners delayed resolution of foreclosed homes, potentially extending the time period of surplus distressed homes in geographic areas with the highest concentration of mortgage defaults. Many changes have been made to private-label and GSE securitization since the beginning of financial turmoil in August 2007. In July 2008, HERA created a new regulator for Fannie Mae and Freddie Mac. In September, 2008, these two GSEs were placed in conservatorship. However, the final disposition of the mortgage GSEs has not yet been determined. The volume of private label securitization is still extremely low compared to before the financial turmoil began. The Dodd-Frank Act created a new regulatory framework for the securitization process, especially for residential mortgage securitization. Under Title IX of the act, a new office was created within the SEC to regulate nationally recognized credit rating organizations (NRCRO), which are the firms that provide a label for the relative risk of marketable securities. Under Title VII, financial derivatives that were used to help construct complex securitized products must be standardized and cleared on an organized exchange regulated by the CFTC (or SEC), if possible. Under Title IX, firms that sponsor securitizations must retain a portion of the risk of the securities issued. Financial regulators issue rules for retained risk for each asset class, including for mortgages (QRM Rule). Under Title XIV, mortgages must meet certain standards to be assured certain legal protections in the case of default (QM rule), including securitized mortgages. Under Title X, most consumer financial products that are securitized, including credit cards, mortgages, and student loans, will be regulated for consumer protection by a single agency, the CFPB. Some policies have yet to be fully specified and implemented. Some industry participants believe that the volume of securitization, especially for mortgages, will remain low until regulatory uncertainty is addressed. For example, mortgage securitizers would like to see the standards for the QM rule and the QRM rule be consistent, but differing legal contexts for the primary market (mortgage origination) and some secondary markets (securities regulation) may make such consistency problematic even if regulators use identical language in the two rules. Another potential concern is the creation and maintenance of a national mortgage database, which some analysts believe could address some of the uncertainty about the contents of MBS during the period of financial turmoil, and the legal challenges to the securitization process that escalated when the foreclosure volume increased. The SEC describes money market funds (MMFs) as "a type of mutual fund that is required by law to invest in low-risk securities." MMFs raise their funds by selling shares, which are technically not deposits and are not insured. MMFs hold short-term debt in the form of government securities, certificates of deposit, commercial paper of highly rated companies, or other low-risk and highly liquid securities. MMFs can be structured to allow investors to redeem their shares (open ended MMF), or not (closed end). The difference between the value of an MMF's assets and its liabilities is called the Net Asset Value, or NAV. Since investors would like to receive more than a dollar for every dollar invested, MMFs attempt to keep their NAV greater than $1.00. If the NAV falls below $1.00, the MMF has "broken the buck," and its investors are essentially receiving negative interest on their shares. The MMF industry suffered a run after the failure of Lehman Brothers in September, 2008. Recall that in Figure 1 , an open end MMF has structurally similar financial intermediation as a depository bank. Lehman's bankruptcy filing meant that holders of its debt would likely receive less than full payment of the debt (credit risk). As a result, a prominent MMF (the Reserve Fund) that held Lehman's debt announced that it had "broken the buck." The Reserve Fund's announcement, combined with more general financial turmoil, led investors to withdraw their shares from MMFs, which open end funds could not avoid. People who had relied on MMFs to finance their activities, such as governments and issuers of commercial paper, lost their traditional source of funding. Policymakers undertook emergency measures to try to stabilize the MMFs following the run on the industry. Treasury announced an insurance plan for MMFs, backed by the exchange stabilization fund (ESF)—a fund available to Treasury to stabilize the dollar under the old Bretton Woods exchange rate system. Subsequently, Congress enacted legislation to prohibit Treasury from using the ESF to stabilize MMFs in the future. However, the extension of government assistance for one asset class during a crisis may create an expectation of assistance should a future crisis occur, perhaps encouraging excessive risk taking (moral hazard). MMFs continue to face the risk of runs. Structurally, the industry faces possible credit risk, maturity mismatch, liquidity problems, and other fundamental problems of financial intermediation. Prior to the financial crisis, the regulatory approach of the SEC had been to treat MMFs as securities issuers. Although eligible assets of MMFs are limited, and the portfolios of MMFs are subject to diversity requirements, MMFs are not subject to periodic examinations in the way that banks are. Rather, MMFs are required to provide periodic disclosures like other firms funded through securities markets. The experience of the crisis has led other financial regulators to encourage the SEC to adopt a prudential regulatory approach, more similar to banking, than the traditional securities regulation for MMFs. Through the minutes of the FSOC, other regulators have formally expressed their desire for additional regulations to address the potential for runs. The SEC proposed several new rules for MMFs on June 5, 2013. The formal comment period ended in September 2013, but final rules had not been issued as of time of this report's publication. The proposed rule contained two primary features designed to avoid runs in the MMF industry. The first would require a floating net asset value (NAV) for prime institutional money market funds. The second would allow the use of liquidity fees and redemption gates in times of stress. Redemption gates include provisions that limit the ability of investors to fully withdraw their funds in a crisis, such as temporary fees or aggregate withdrawal limits. The call for comment included discussion of allowing these as alternatives or to be used in combination. In addition to these primary features, proposed rule also included additional diversification and disclosure measures that would apply under either alternative. Although researchers use the term shadow banking inconsistently, with important implications for their policy analysis, the concept always excludes luminated banking. The term luminated banking describes debt funded by the insured deposits of firms with special banking charters. Nonbanks often facilitate shadow banking by funding debt through securities markets. Similarly, banks can be involved in shadow banking if they find short-term substitutes for insured deposits. Whether offered by nonbanks or by banks, the creation and funding of debt is often subject to several economic vulnerabilities linked to financial intermediation, such as vulnerabilities to runs or fire-sales. Securities markets and firms with banking charters are both regulated; thus, much of what is described as shadow banking is subject to some federal regulation. However, the type of regulation that applies to shadow banking varies. Banking regulation is typically prudential (risk-based), but securities regulation typically is not. Securities regulation is typically not limited to firms with a special charter, but banking regulation typically is. Bank holding companies that participate in shadow banking are subject to prudential regulation, at least on a consolidated level. The FSOC and the FSB have identified several components of shadow banking that may be of heightened concern. The diversity of these practices and firms makes broad generalizations about policies to address shadow banking difficult. In many cases, policy proposals attempt to apply bank-like regulation to nonbanks. The Dodd-Frank Act extends several prudential regulatory principles associated with banking regulation to nonbanks if they are designated as systemically important. Some believe that extension of bank-like regulation is inappropriate for some firms with different balance sheets (such as insurance companies). Others believe that the Dodd-Frank Act did not extend bank-like regulation enough because some intermediaries are too small to be systemically important, but the industry as a whole may be financially vulnerable (such as MMFs).
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Shadow banking refers to financial firms and activities that perform similar functions to those of depository banks. Although the term is used to describe dissimilar firms and activities, a general policy concern is that a component of shadow banking could be a source of financial instability, even though that component might not be subject to regulations designed to prevent a crisis, or be eligible for emergency facilities designed to mitigate financial turmoil once it has begun. This concern is magnified by the experience of 2007-2009, during which financial problems among nonbank lenders, and disruption to securitization (in which both banks and nonbanks participated), contributed to the magnitude of the financial crisis. This report provides a framework for understanding shadow banking, discusses several fundamental problems of financial intermediation, and describes the experiences of several specific sectors of shadow banking during the financial crisis and related policy concerns. Shadow banking is contrasted with luminated banking, a term which the report uses to describe chartered banks that gather funds from depositors in order to offer loans that the chartered bank holds itself. Luminated banking, like all forms of financial intermediation, is subject to well-known risks, including credit risk, interest rate risk, maturity mismatch, and the potential for runs. Each sector of shadow banking is generally subject to the same problem of financial intermediation to which the sector is analogous. For example, if a sector of shadow banking such as money market funds (MMF) has investors that are analogous to depositors in luminated banking, then the potential for runs may be similar. Or, if the sector relies on collateralized loans, such as asset-backed commercial paper (ABCP), then disruptions in the market for the underlying collateral can cause fire sales that may reinforce and magnify price declines. The regulatory regime and eligibility for emergency financial assistance for shadow banking varies from sector to sector and type of firm to type of firm. For example, the Dodd-Frank Act subjects certain large nonbank firms funded by repurchase agreements (repos) to safety and soundness regulation similar to banks. The Dodd-Frank Act prohibits emergency assistance to individual firms as was done in 2008 for Bear Stearns or AIG, but preserves the ability of the Federal Reserve to provide more generally eligible assistance to shadow banking sectors such as ABCP through the Term Asset Backed Liquidity Facility (TALF). Title II of the Dodd-Frank Act allows the FDIC to resolve the failure of any firm, including shadow banking firms, whose failure may pose a threat to financial stability. Several components of shadow banking rely on securities markets to fund debt. These securities regulations are typically activity based, applying to all securities market participants if there is no explicit exemption. Securities regulation requires disclosure of material risks, but often does not attempt to limit the risks of firms funded through securities markets. In contrast, banking regulation sometimes applies only to firms with specific charters. Furthermore, banking regulators oversee linkages between banks, such as the payment system. Thus, debt funded through securities markets is likely to be subject to regulation no matter who does it, but that regulation is unlikely to be risk-based or to incorporate linkages between firms. Banking regulation is likely to be risk based, but to miss debt funded through securities markets. Some policy options for shadow banking firms and markets are often analogous to policy options for depository banking or securities markets. Firms that engage in shadow banking could be subjected to safety and soundness regulation and capital requirements in order to limit risk and encourage resilience. Providers of short-term credit to shadow banks could be offered guarantees analogous to deposit insurance in order to minimize runs. Non-bank firms that rely on short-term credit to fund lending (or the holding of debt) can be made eligible for emergency lending facilities from a lender of last resort in order to address liquidity problems. There are alternatives to the banking approach. Banks and other firms that fund themselves with substitute for deposits could be assessed higher fees to account for potential systemic costs that current market prices might not incorporate. More financial regulation could be made activity based, rather than charter based, in order to lessen regulatory arbitrage. Differences in banking regulation and securities regulation for the funding of debt could be preserved, but each separate category of regulation could be addressed where it applies. The report analyzes five sectors of shadow banking. These sectors include (1) repos, (2) non-bank intermediaries, (3) ABCP, (4) securitization, and (5) MMFs. For each of these sectors, the report briefly defines the sector, recounts the sector's experience during the financial crisis, and outlines some related policy concerns. Each policy problem is described in the context of the general problems of financial intermediation introduced earlier in the report.
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RS21948 -- The Director of National Intelligence and Intelligence Analysis Updated February 11, 2005 The fundamental responsibility of intelligence services is to provide information to support policymakers and military commanders. In reviewing theperformance of the U.S. Intelligence Community prior to the terrorist attacks of September 11, 2001, the 9/11Commission, the National Commissionon Terrorist Attacks Upon the United States, concluded that greater coordination of the nation's intelligence effortis required to enhance thecollection and analysis of information. Specifically, the 9/11 Commission recommended that a new position ofNational Intelligence Director (NID)be established to ensure greater inter-agency coordination. A number of legislative proposals were introduced in2004 to establish such an officeseparate from the Director of the Central Intelligence Agency (CIA). (1) The NID was envisioned by the 9/11 Commission as having a number of budgetary and managerial responsibilities. (2) In addition, the occupant of theposition would "retain the present DCI's role as the principal intelligence adviser to the president." (3) The Commission also envisioned that the NIDwho would "be confirmed by the Senate and would testify before Congress, would have a relatively small staff ofseveral hundred people, taking theplace of the existing community management offices housed at the CIA." (4) The Commission adds, however, that "We hope the president will cometo look directly to the directors of the national intelligence centers [the National Counterterrorism Center, and othercenters focusing on WMDproliferation, international crime and narcotics, and China/East Asia] to provide all-source analysis in their areasof responsibility, balancing theadvice of these intelligence chiefs against the contrasting viewpoints that may be offered by department heads atState, Defense, Homeland Security,Justice, and other agencies." (5) There is some debate whether the 9/11 Commission envisioned the NID as having the responsibility for coordinating national intelligence estimatesand other community products. The Director of Central Intelligence (DCI) has been responsible for providingintelligence to the President, to theheads of departments and agencies of the Executive Branch, the Chairman of the Joint Chiefs of Staff and seniormilitary commanders, and "whereappropriate" the Senate and House of Representatives and the committees thereof. The statute provides that "suchnational intelligence should betimely, objective, independent of political considerations, and based upon all sources available to the intelligencecommunity." (6) Draft legislation inthe fall of 2004 did include the assignment of responsibilities for preparing national intelligence estimates to theDNI. On December 17, 2004, the President approved the Intelligence Reform and Terrorism Prevention Act of 2004 (hereafter the "Intelligence ReformAct")( P.L. 108-458 ). The Act incorporated many of the proposals of the 9/11 Commission, including theestablishment of a Director of NationalIntelligence (DNI) separate from the Director of the CIA. Although most of the debates prior to passage of thelegislation addressed the DNI'sresponsibilities for managing the intelligence budget, the Act also made a number of changes affecting thepreparation of analytical products forconsumers at the highest levels of government. The DNI will serve as head of the Intelligence Community and asthe principal adviser to thePresident and the National Security Council, and the Homeland Security Council for intelligence matters relatedto the national security. (7) Under the new legislation, the Office of the DNI will include the National Intelligence Council (NIC), composed of senior analysts within theIntelligence Community and substantive experts from the public and private sector. (8) The members of the NIC "shall constitute the seniorintelligence advisers fo the Intelligence Community for purposes of representing the views of the [I]ntelligence[C]ommunity within the United StatesGovernment." The members of the NIC are to be appointed by, report to, and serve at the pleasure of the DNI. The Intelligence Reform Act, provides that the DNI, when appointed, will be responsible for NIEs and other analytical products prepared under theauspices of the NIC. The three statutory responsibilities of the NIC have been to: produce national intelligence estimates for the Government, included, whenever the Council considers appropriate, alternativeviews held by elements of the intelligence community; evaluate community-wide collection and production of intelligence by the intelligence community and the requirements andresources of such collection and production; and otherwise assist the [DNI] in carrying out responsibilities established in law. (9) The DCI historically, and the DNI in the future, has a unique responsibility for the quality of intelligence analysis for consumers at all levels ofgovernment. While a number of agencies produce analytical products, the most authoritative intelligence productsof the U.S. IntelligenceCommunity are published under the authority of the DCI and potentially the DNI. NIEs are the primary, but not thesole, form in which theIntelligence Community forwards its judgments to senior officials, and they are the only one prescribed in statute. NIEs are produced at the NIC'sinitiative or in response to requests from senior policymakers. NIEs are sometimes highly controversial. They are designed to set forth the best objective judgments of the Intelligence Community, but theyoccasionally are more closely related to policy rationales than some analysts would prefer. An NIE produced inOctober 2002 on Iraq's ContinuingPrograms for Weapons of Mass Destruction has been much criticized; a more recent NIE on prospects for Iraq hasbeen the source of significantmedia attention. (10) Although the importance of particular NIEs to specific policy decisions may be debatable, (11) the NIE process provides a formal opportunity fortheIntelligence Community's input to policy deliberations. Arguably, it is the responsibility of policymakers to seekthe input of the IntelligenceCommunity, but most observers would argue that the DNI should not be reticent in presenting intelligenceinformation and judgments on majorpolicy issues when difficult decisions are under consideration. The most recent chairman of the NIC is Ambassador Robert L. Hutchings, who had previously served in the State Department and in academicinstitutions. (12) In addition, there are senioranalysts, known as National Intelligence Officers (NIOs), for Africa, East Asia, Economics and GlobalIssues, Europe, Intelligence Assurance, Latin America, Military Issues, Near East and South Asia, Russia andEurasia, Transnational Threats,Warning, and Weapons of Mass Destruction and Proliferation. The NIOs, who do not receive Senate confirmation,come from a variety ofgovernment agencies, inside and outside the Intelligence Community, and from the private sector. National Intelligence Officers supervise the production of NIEs and other community-wide products. Typically, an analyst in one agency isdesignated by the relevant NIO to prepare a draft analytical product; the draft then is reviewed by relevant analyststhroughout the Community. Subsequently, if approved by the leadership of the Intelligence Community (the National Foreign Intelligence Board)and the DCI, the draft has beencirculated to policymakers in the Executive Branch and, on occasion, to Members of Congress. NIEs set forth thebest information and judgments ofthe Intelligence Community and are usually directed at significant issues that may require policy decisions. The NIOs have worked for the DCI in his capacity as head of the Intelligence Community rather than in his capacity as director of the CIA. (In thefuture they will report to the DNI.) Thus, NIEs and related analytical products have not been CIA products; theyhave represented the consolidatedviews of the Intelligence Community (with alternative views held by elements of the Intelligence Community noted,in accordance with the statutorymandate (13) ). It may be reasonably assumed that the NIC will continue to depend heavily on the resources of the CIA. The CIA contains the most extensiveanalytical capability across the board on all subjects that might concern national policymakers, as well asconsiderable capability to support militarycommanders and mid-level desk officers. The CIA was originally designed to be "central," without obligations tosupport departmental objectives ashas been considered to be the case with the intelligence arms of the military services and the State Department. Insome areas, however, otheragencies have more extensive capabilities and can make an equal or greater contribution to NIEs and other productsdesigned to express thejudgments of the entire Intelligence Community. Some critics, moreover, charge that CIA on occasion developsan agency "position" that tends todiscourage alternate perspectives. (14) On many topics, there are inevitably different perspectives, and according to many observers, policymakers are best served by rigorous presentationsof alternative positions. (15) At the same time,however, some NIEs reflect an effort to craft language that all agencies can agree on and thus to avoidairing differences that might draw agencies into policy arguments between and among government departments. Agency managers understand thattoo close involvement in a policy argument by intelligence analysts can make their analyses unwelcome across theboard. In addition, they wellunderstand that analysis is an uncertain science and art and that even the best analysts can miss developments thatloom large in retrospect and leavetheir agencies open to harsh criticism or retribution. Concern is often expressed about the extent to which intelligence products can become "politicized," i.e., be drafted to support or undermine certainpolicy options. A charge of politicization is difficult to prove and is often dependent upon a reader's subjectiveviewpoint. Most observers believethat analysts make a conscientious effort to avoid policy advocacy, but note that they are fully aware of policydisputes and may have their own viewsthat may, subconsciously or otherwise, influence their products. There is, according to some observers, a tendencyto avoid making intelligencejudgments that directly conflict with policy options that have been chosen. Observers caution that placingintelligence analysis at the center of policydisputes can undermine the effectiveness of the analytical contribution; they suggest that intelligence can best serveby informing policy debates, butanalysts cannot be expected to provide definitive judgments that will resolve disputes that may involve a myriadof different factors, some farremoved from intelligence questions. In addition, observers note that it should be recognized that policymakingsometimes involves makingjudgments based on incomplete intelligence or on a willingness to accept risks and uncertainties beyond the ken ofanalysts. Analysis can have asubjective quality to some degree and can be undermined by unreasonable expectations. The Intelligence Reform Act provides several provisions designed to ensure that analysis is well-prepared and not politicized. In addition to havingauthority to establish an Office of Inspector General, the DNI is to assign an individual or entity to ensure thatagencies conduct alternative analysesof information and conclusions in intelligence products (section 1017). The DNI is also to assign an individual orentity to ensure that intelligenceproducts are "timely, objective, independent of political considerations, based on all sources of availableintelligence, and employ the standards ofproper analytic tradecraft" (section 1019). Another section requires that the DNI assign an individual to addressanalysts' concerns about "real orperceived problems of analytic tradecraft or politicization, biased reporting, or lack of objectivity in intelligenceanalysis" (section 1020). Left uncertain are responsibilities for preparing the written brief on current intelligence that is prepared daily for the President and a very few othersenior officials. The President's Daily Brief (PDB), along with the Senior Executive Intelligence Brief (SEIB) thathas a somewhat widerdistribution, have been prepared by CIA's Directorate of Intelligence (DI) and are considered that directorate's"flagship products." Nonetheless,should the DNI be responsible for daily substantive briefings at the White House rather than the CIA Director, itmight be considered appropriate thatthe DNI staff draft the PDB and the SEIB, based on input from the CIA and other agencies. The number of analystswho actually prepare thePBD/SEIB is not large, but their work reflects ongoing analysis in the CIA and other parts of the IntelligenceCommunity. Some might argue,moreover, that close and important links between CIA desk-level analysts and the PDB would be jeopardized shouldthe briefs be prepared outside ofthe CIA. In addition, there are myriads of other analytical products: reports, memoranda, briefings, etc. that are prepared on a routine basis. The IntelligenceReform Act does not transfer extensive analytical efforts to the NID; leaving such duties to existing agencies; theNIC will be responsible forassessments that set forth the judgments of the Intelligence Community as a whole. The Intelligence Reform Act provides that the DNI will assume responsibilities for managing the NIC. The DNI will be support by the NIC staff(probably numbering less than 100 positions). This gives the DNI the capability to oversee the preparation of NIEsand to ensure that the views of allagencies have been taken into consideration in inter-agency assessments. A major change will be the fact that theNIOs and their staff will work forone person (the DNI) while CIA analysts will report to a separate Director of the CIA. Congress may ultimatelyassess whether these changes, as theyare implemented, have improved the efforts of the Intelligence Community and its analytical products. The future responsibility for the production and presentation of the PDB/SEIBs is uncertain. They are currently prepared by CIA's Directorate ofIntelligence, and that responsibility could be continued. On the other hand, if the DNI, rather than the CIA Director,is to conduct the daily briefingfor the President and senior White House officials, it might be argued that the DNI and the DNI's immediate staffshould have responsibility for thedocument that provides the basis for the daily briefings.
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The 9/11 Commission made a number of recommendations to improve the quality ofintelligenceanalysis. A key recommendation was the establishment of a Director of National Intelligence (DNI) position tomanage the national intelligenceeffort and serve as the principal intelligence adviser to the President -- along with a separate director of the CentralIntelligence Agency. Subsequently, the Intelligence Reform and Terrorism Prevention Act of 2004, P.L. 108-458, made the DNI theprincipal adviser to the President onintelligence and made the DNI responsible for coordinating community-wide intelligence estimates. Some observersnote that separating the DNIfrom the analytical offices may complicate the overall analytical effort. This report will be updated as newinformation becomes available.
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Congress continues to take a strong interest in the health of the U.S. research and development (R&D) enterprise, and in providing sustained support for federal R&D activities. The federal government has played an important role in supporting R&D efforts that have led to scientific breakthroughs and new technologies, from jet aircraft and the Internet to defenses against disease and communications satellites. Most of the research funded by the federal government is in support of specific activities of the federal government as reflected in the unique missions of the funding agencies. The federal government has become the largest supporter of long term fundamental basic research, primarily because the private sector asserts it cannot capture an adequate return on long-term fundamental research investments. Some of the major agencies funding basic research include the National Institutes of Health (NIH), National Science Foundation (NSF), Department of Energy (DOE), National Aeronautics and Space Administration (NASA), and Department of Defense (DOD). The Bush Administration requested $142.7 billion in federal R&D funding for FY2008. Total R&D funding for FY2008 is approximately $142.7 billion, a 1.2% increase over the enacted FY2007 total of $141.1 billion. Funding for FY2008 is provided for in the Defense Appropriations Act, 2008 ( P.L. 110-116 ), signed into law by President Bush on November 13, 2007, and the Consolidated Appropriations Act, 2008 ( P.L. 110-161 ), signed into law on December 26, 2007. P.L. 110-161 provides funding covered in the eleven appropriations acts on which action had not been completed. The President's FY2008 proposed R&D increase over the FY2007 funding level was due primarily to requested increases for NASA's space vehicles development program, the Department of Defense, and continuation of the American Competitiveness Initiative (ACI). While NASA received increased funding for the International Space Station ($2.2 billion, up 24.6%) and the Constellation program (3.0 billion, up 17.3%), DOD and the ACI did not receive the increases requested by the President. The President's proposed FY2008 increase for DOD RDT&E funding resulted almost entirely from its request for $3.9 billion for RDT&E in support of its Global War on Terror (GWOT) initiative. Congress chose not to address the GWOT request in P.L. 110-116 or P.L. 110-161 , and has not completed action on separate legislation. The ACI was proposed by President Bush in response to growing concerns about America's ability to compete in the global market place. The $136 billion ACI funding request included $50 billion for additional research, science education, and the modernization of research infrastructure from FY2007 through FY2016. These funds were intended to double physical sciences and engineering research in three agencies—NSF, DOE's Office of Science, and NIST—over ten years. Congress established authorization levels for FY2008-2010 that would put funding for R&D at these agencies on track to double in approximately seven years. However, FY2008 R&D funding provided in P.L. 110-161 for these agencies falls below these doubling targets. Total FY2008 funding for NSF was increased by 2.5%, though NSF's research and related activities increased by only 1.1%. The DOE Office of Science received a 5.8% increase for FY2008. NIST's FY2008 core laboratory R&D increased by 1.4%. The NIST construction and research facilities account increased 173.4% to $160.5 million in FY2008. In addition, the ACI proposed $86 billion to finance a revised and permanent Research and Experimentation (R&E) tax credit over the 10-year period. Action to make the R&E tax credit permanent was not completed in 2007, nor was the credit extended. As a result, the R&E tax credit expired at the end of calendar year 2007. Funding levels for three federal multiagency research initiatives varied in the President's FY2008 request. Funding for the National Nanotechnology Initiative (NNI) would have increased by 4.0% to $1.447 billion (see CRS Report RS20589, Manipulating Molecules: Federal Support for Nanotechnology Research, by [author name scrubbed]). Funding for the Networking and Information Technology R&D (NITRD) program would have remained essentially at the same level with funding at $3.057 billion (see CRS Report RL33586, The Federal Networking and Information Technology Research and Development Program: Funding Issues and Activities , by [author name scrubbed]). The administration proposed $1.544 billion for the Climate Change Science Program, a decrease of 7.4%, primarily due to a decrease in NASA's funding (see CRS Report RL33817, Climate Change: Federal Program Funding and Tax Incentives , by [author name scrubbed]). FY2008 funding for these initiatives has not been determined. The Department of Energy requested $9.781 billion for R&D in FY2008, including activities in three major categories: science, national security, and energy. (For details, see Table 1 .) This request was 6% above the FY2007 level of $9.236 billion. The House provided $10.448 billion, or $667 million more than the request. The Senate committee recommended $10.566 billion, or $785 million more than the request. The final appropriation was $9.947 billion, or $166 million more than the request. The request for the DOE Office of Science was $4.398 billion, a 16% increase from FY2007. This increase reflected the American Competitiveness Initiative (ACI), which President Bush announced in the 2006 state of the union address. Over 10 years, the ACI would double R&D funding for the Office of Science and two other agencies. The House provided $4.514 billion, or $116 million more than the request. The Senate committee recommended $4.497 billion, or $99 million more than the request. The final appropriation was $4.018 billion, $380 million less than the request but an increase of 6% from FY2007. Within the Office of Science, the final amounts for several major programs were significantly different from either the request or the House and Senate amounts. In basic energy sciences, the request was a $248 million increase, mostly to expand facility operating time. The House provided the requested amount, and the Senate committee recommended an additional $12 million increase, but in the final appropriation, basic energy sciences received only $20 million more than in FY2007. The request for fusion energy sciences was a $109 million increase, almost entirely for the International Thermonuclear Experimental Reactor (ITER). The House and the Senate committee both provided approximately the requested amount, but the final appropriation was $141 million less than requested, with zero funding for the U.S. contribution to ITER. For high energy physics, the House and the Senate committee both provided the requested amount, but the final appropriation was $94 million less, which led to announcements of layoffs at Fermi National Accelerator Laboratory (Fermilab) and Stanford Linear Accelerator Center (SLAC). The requested funding for DOE national security R&D was $3.132 billion, a 3% decrease. Most of the reduction resulted from the scheduled completion of construction projects, most notably the National Ignition Facility (NIF) at Lawrence Livermore National Laboratory. The request included $89 million for the reliable replacement warhead (RRW) program. The House provided $3.245 billion, including increases for nonproliferation and verification R&D, environmental cleanup technology development, and inertial confinement fusion, but no funding for the RRW. The Senate committee recommended $3.285 billion, including increases in the same areas and partial funding for the RRW. The Senate report noted that the committee was divided on the RRW and called for a bipartisan congressional commission "to evaluate and make recommendations on the role of nuclear weapons in our future strategic posture." The final appropriation was $3.199 billion, with increases for nonproliferation and verification R&D and inertial confinement fusion that were between the House and Senate amounts, no increase for environmental cleanup technology development, and no funds for the RRW. The request for DOE energy R&D was $2.252 billion, up 3% from FY2007. Within this total, R&D on nuclear, hydrogen, biomass, and solar energy were to increase, while geothermal and natural gas and oil technology programs were to be terminated. The requested $249 million increase for nuclear energy R&D was mostly for the Advanced Fuel Cycle Initiative. For energy R&D overall, the House provided $437 million more than the request, and the Senate committee recommended $533 million more than the request. Both included additional funds for energy efficiency, renewable energy, and fossil energy, and both included smaller increases than requested in nuclear energy, with less emphasis on the Advanced Fuel Cycle Initiative. The final appropriation was $2.731 billion, or $479 million more than the request and 24% more than FY2007, with allocations generally intermediate between the House and the Senate. (CRS Contact: [author name scrubbed].) Congress supports research and development in the Department of Defense (DOD) through its Research, Development, Test, and Evaluation (RDT&E) appropriation. The appropriation primarily supports the development of the nation's future military hardware and software and the technology base upon which those products rely. Nearly all of what DOD spends on RDT&E is appropriated in Title IV of the defense appropriation bill (see Table 2 ). However, RDT&E funds are also requested as part of the Defense Health Program and the Chemical Agents and Munitions Destruction Program. The Defense Health Program supports the delivery of health care to DOD personnel and family. Program funds are requested through the Operations and Maintenance appropriation. The program's RDT&E funds support Congressionally directed research in such areas as breast, prostate, and ovarian cancer and other medical conditions. The Chemical Agents and Munitions Destruction Program supports activities to destroy the U.S. inventory of lethal chemical agents and munitions to avoid future risks and costs associated with storage. Funds for this program are requested through the Army Procurement appropriation. Typically, Congress has funded both of these programs in Title VI (Other Department of Defense Programs) of the defense appropriations bill. More recently, RDT&E funds have also been requested and appropriated as part of DOD's separate funding to support the Global War on Terror (GWOT). These appropriations have been located in Title IX of the defense appropriations bill. The Joint Improvised Explosive Device Defeat Fund also contains additional RDT&E monies. The Joint Improvised Explosive Device Defeat Office, which now administers the Fund, tracks, but does not report, the amount of funding allocated to RDT&E. For FY2008, the Bush Administration requested $75.1 billion for DOD's baseline Title IV RDT&E, roughly $800 million less than the total obligational authority available for Title IV in FY2007. The FY2008 requests for RDT&E in the Defense Health Program and the Chemical Agents and Munitions Destruction program were $134 million and $221 million, respectively. This year's request for the Global War on Terror included both a FY2008 Title IX request and a FY2007 Title IX Supplemental request, with $2.9 billion and $1.4 billion being requested for RDT&E, respectively. Since FY2001, funding for RDT&E in Title IV has increased from $42 billion to $76 billion in FY2007. In constant FY2008 dollars, the increase is roughly 58%. Historically, RDT&E funding has reached its highest levels in constant dollars, dating back to 1948. Congress has appropriated more for RDT&E than has been requested, every year, since FY1996. RDT&E funding can be broken out in a couple of ways. Each of the military services request and receive their own RDT&E funding. So, too, do various DOD agencies (e.g., the Missile Defense Agency and the Defense Advanced Research Projects Agency), collectively aggregated within the Defensewide account. RDT&E funding also can be characterized by budget activity (i.e. the type of RDT&E supported).Those budget activities designated as 6.1, 6.2 and 6.3 (basic research, applied research, and advanced development) constitute what is called DOD's Science and Technology Program (S&T) and represents the more research-oriented part of the RDT&E program. Budget activities 6.4 and 6.5 focus on the development of specific weapon systems or components (e.g. the Joint Strike Fighter or missile defense systems), for which an operational need has been determined and an acquisition program established. Budget activity 6.7 supports system improvements in existing operational systems. Budget activity 6.6 provides management support, including support for test and evaluation facilities. S&T funding is of particular interest to Congress since these funds support the development of new technologies and the underlying science. Assuring adequate support for S&T activities is seen by some in the defense community as imperative to maintaining U.S. military superiority. This was of particular concern at a time when defense budgets and RDT&E funding were falling at the end of the Cold War. As part of its 2001 Quadrennial Review, DOD established a goal of stabilizing its base S&T funding (i.e., Title IV) at 3% of DOD's overall funding. Congress has embraced this goal. The FY2008 S&T funding request in Title IV is $10.8 billion, about $2.5 billion less than what was available for S&T in Title IV in FY2007 (not counting S&T funding requested as part of the GWOT request). Furthermore, the S&T request for Title IV is approximately 2.2% of the overall baseline DOD budget request (not counting funds for the Global War on Terror), short of the 3% goal. The ability for the Administration to meet its 3% goal has been strained in recent years as the overall Defense budget continues to rise. In the FY2007 defense authorization bill ( P.L. 109-364 , Sec. 217), Congress reiterated its support for the 3% goal, extended it to FY2012, and stipulated that, if the S&T budget request does not meet this goal, DOD submit a prioritized list of S&T projects that were not funded solely due to insufficient resources. Within the S&T program, basic research (6.1) receives special attention, particularly by the nation's universities. DOD is not a large supporter of basic research, when compared to the National Institute of Health or the National Science Foundation. However, over half of DOD's basic research budget is spent at universities and represents the major contribution of funds in some areas of science and technology (such as electrical engineering and material science). The FY2008 request for basic research ($1.4 billion) is roughly $140 million less than what was available for Title IV basic research in FY2007. In Congressional action to date, Congress approved, and the President signed, the U.S. Troop Readiness, Veterans ' Care, Katrina Recovery, and Iraq Accountability Appropriations Act, 2007 ( P.L. 110-28 ). The bill contained emergency supplemental funds, including additional FY2007 RDT&E funds in support of the Global War on Terror. As noted above, the RDT&E-related FY2007 GWOT supplemental request was $1.4 billion. Congress provided $1.1 billion. In addition, the act provided supplemental FY2007 RDT&E funds for the Defense Health Program to support additional trauma-related research. See Table 3 below. The House passed H.R. 3222 , the Department of Defense Appropriations Act, 2008 , on August 5. The bill provided $1.1 billion more in Title IV RDT&E funding than requested. The bill provided $12.2 billion in S&T funding (2.7% of the total funds appropriated for the Department), $1.4 billion more than requested. The House chose not to address the FY2008 GWOT request in this bill. It is not possible to compare directly the House figures with FY2007 numbers in Table 2 , since the latter include GWOT (Title IX) funds from the FY2007 appropriations bill and the House figures do not yet include any FY2008 GWOT funds. In addition to the general increases in the S&T accounts, the House made some notable changes in the President's systems development requests, providing less funds for the Army's Future Combat System ($406 million less) and providing more funds for the Joint Strike Fighter (a total of $705 million more split between the Navy and the Air Force). The House provided $319 million more in RDT&E-related funds for the Defense Health Program, including $127 million for breast cancer and $80 million for prostate cancer research. Also, Section 8105 of the bill includes a provision limiting the use of appropriations to pay negotiated indirect cost rates on basic research grants, contracts or other agreements to 20% of the direct costs. This may have an impact on university grants. The Senate Appropriations Committee reported its version of H.R. 3222 (see S.Rept. 110-155 ) on September 14, 2007. The net effect of the Committee's recommendations was to reduce Title IV RDT&E by approximately $102 million. While increasing Title IV RDT&E by $265 million in the body of the bill, it reduced Title IV funds by $367 million in the General Provisions part of the bill, as part of a general reduction to account for revised economic assumptions. Similar to the House, the Senate Appropriations Committee did not include the FY2008 GWOT request in the bill. The Committee recommended $11.6 billion for the S&T portion of the program (before allocating the general reduction). This is roughly 2.6% of the total amount recommended for the Department (before accounting for the reduction). The Committee recommended roughly $196 million more than requested for the Joint Strike Fighter programs of the Navy and Air Force (reducing program funds in some areas, but increasing funding for a competitive engine development by $480 million). The Committee did not recommend cuts to the Army's Future Combat System programs. The Committee recommended $477 million for the RDT&E portion of the Defense Health Program, including $150 million for peer-reviewed breast cancer and $80 million for peer-reviewed prostate cancer research. It also included $50 million for additional unspecified peer-reviewed medical research. The Committee also increased funding for the RDT&E portion of the Chemical Agents and Munitions Destruction Program. The conference committee filed its report ( H.Rept. 110-434 ) on November 6, 2007. The conferees recommended $76.9 billion for Title IV RDT&E (this includes the $367 million general reduction to Title IV related to improved economic assumptions). The conferees recommended $12.8 billion for S&T (including $1.6 billion for basic research). The S&T appropriation represents approximately 2.8% of the total amount appropriated for the department (before considering the general reductions). The conferees approximately split their differences on the Future Combat System and the Joint Strike Fighter programs. The conferees recommended $536 million for RDT&E within the Defense Health Program (including peer reviewed research for breast cancer ($138 million), ovarian cancer ($10 million), prostate cancer ($80 million), and other medical research ($80 million). The conferees recommended $313 million for RDT&E within the Chemical Agents and Munitions Destruction program. On the issue of indirect costs on government contracts, grants and cooperative agreements for basic research, the conferees accepted the House proposal, but raised the ceiling to 35% and grandfathered those awards entered into before enactment of this act. The conferees also provided $11.6 billion to help accelerate the development and deployment of Mine Resistant Ambush Protected (MRAP) vehicles, to help protect against the improvised explosive devices being use in Iraq and Afghanistan. This is in addition to $5.2 billion provided earlier for the same purpose in H.J.Res. 52 ( P.L. 110-92 ), which made continuing appropriations for FY2008. In both cases, Congress instructed the Secretary of Defense to transfer these funds to appropriate accounts, including the RDT&E account. Both chambers approved the conference report on November 8, 2007. The President signed the bill ( P.L. 110-116 ) on November 13, 2007. To address the FY2008 GWOT funding request, the House passed H.R. 4156 on November 14, 2007. It only considered about $50 million of the total request, those activities considered by the House to be in most immediate need of additional funds. The bill did not include any of the funding for RDT&E, although some of those projects could be supported with the MRAP funds appropriated above. H.R. 4156 also allowed the Secretary to transfer certain funds (e.g. those allocated to the Iraqi Security Forces Fund, and others) to RDT&E accounts, or other accounts, to accomplish the purposes of those funds. On November 16, a Senate vote to end debate on the House bill (and on a Senate Republican alternative, S. 2340 ) failed. (CRS Contact: John Moteff.) NASA requested $12.7 billion for R&D in FY2008. (For details, see Table 4 .) This request was a 7.3% increase over FY2007, in a total NASA budget that was to increase by 6.4%. The House provided $13.1 billion ( H.R. 3093 and H.Rept. 110-240 ). The Senate provided $12.9 billion ( H.R. 3093 and S.Rept. 110-124 accompanying S. 1745 ). The final appropriation was $12.8 billion ( P.L. 110-161 and explanatory statement, Congressional Record , December 17, 2007). Budget priorities throughout NASA are being driven by the Vision for Space Exploration. Announced by President Bush in January 2004 and endorsed by Congress in the NASA Authorization Act of 2005 ( P.L. 109-155 ), the Vision includes returning the space shuttle to regular flight status following the 2003 Columbia disaster, but then retiring it by 2010; completing the International Space Station, but discontinuing its use by the United States by 2017; returning humans to the Moon by 2020; and then sending humans to Mars and "worlds beyond." To replace the space shuttle and carry astronauts to the Moon, NASA is developing a new spacecraft and a new launch vehicle, known as Orion and Ares I. Their first crewed flight is expected in early 2015. In general, the FY2008 request included substantial increases for programs related to the Vision and modest increases or even decreases for other programs. The request for Constellation Systems, the program responsible for developing Orion and Ares I, was an increase of $518 million or 20.3% relative to FY2007. The request for the International Space Station was an increase of $466 million or 26.3%. Meanwhile, among programs not focused on space exploration, the request for Science was an increase of $145 million or 2.7%, and the request for Aeronautics Research was a decrease of $163 million or 22.7%. In the final appropriation, Congress provided smaller increases than requested for Constellation Systems and the International Space Station, a larger increase for Science, and a smaller decrease for Aeronautics Research. The effect of the Vision on science funding is of particular congressional interest. For example, the House report said that the requested budget would "sacrifice future missions of discovery to pay for present efforts," while the Senate report expressed concern that NASA science "is being left behind rather than being nurtured and sustained." Support for Earth Science has been a particular concern in both Congress and the scientific community. Although the FY2008 request included increased funding for Earth Science and projected further increases in FY2009 and FY2010 relative to previous plans, most of the increases were to cover cost growth and schedule delays in existing missions. In Astrophysics, the FY2008 request deferred the Space Interferometer mission (SIM) beyond FY2012. The House provided $180 million more than the request for Science, including $60 million for new Earth Science missions and a $50 million increase for SIM. The Senate provided $102 million more than the request for Science, with the bulk of the increase devoted to Earth Science. The final Science appropriation was an increase of $31 million, including increases for Earth Science ($27 million) and SIM ($38 million) but partially offsetting these with reductions in other programs. (CRS Contact: [author name scrubbed].) The President requested a budget of $28.558 billion at the program level for NIH for FY2008, $480 million (1.7%) below the final level of $29.038 billion for FY2007 (see Table 5 ). The FY2008 program level amount provided by the Consolidated Appropriations Act, 2008 ( P.L. 110-161 , December 26, 2007) was $29.170 billion, an increase of $131 million (0.45%) over the FY2007 level. House and Senate actions on the original individual FY2008 appropriations bills had produced recommendations for increases for NIH above the FY2007 level of $569 million (2.0%) for the House and $770 million (2.7%) for the Senate, with program levels of $29.607 billion and $29.837 billion, respectively. Conferees had settled on a higher level of approximately $29.937 billion, but action could not be completed on the legislation. The FY2007 level had been derived from P.L. 110-5 , the Revised Continuing Appropriations Resolution (CR), although actual FY2007 appropriations levels were not specified by the CR. The precise figures became available as agencies reported their FY2007 operating plans, and the final amount for NIH was also affected by the FY2007 supplemental appropriations legislation, with a transfer of $99 million from NIH to the Office of the Secretary of HHS. The FY2007 NIH appropriation was $570 million (2.0%) more than the FY2006 program level of $28.468 billion. The bulk of NIH's budget comes through the annual Labor-HHS-Education (Labor/HHS) appropriations legislation, with an additional small amount of funding, for environmental work related to Superfund, coming from the Interior, Environment, and Related Agencies appropriations bill. For the FY2008 Labor/HHS bill, the House and Senate Appropriations Committees reported H.R. 3043 ( H.Rept. 110-231 ) and S. 1710 ( S.Rept. 110-107 ), respectively. The eventual conference version of H.R. 3043 ( H.Rept. 110-424 ) was vetoed by the President, who cited overall funding levels that were higher than he had requested. Lengthy negotiations between Congress and the Administration culminated in enactment of the Consolidated Appropriations Act, 2008 ( H.R. 2764 , P.L. 110-161 ), which provided funding for most government programs outside the Department of Defense. (For detailed tracking of the Labor/HHS appropriations bill, see CRS Report RL34076, Labor, Health and Human Services, and Education: FY2008 Appropriations , coordinated by [author name scrubbed], by [author name scrubbed], [author name scrubbed], and [author name scrubbed].) Funding from the two regular appropriations bills (Labor/HHS and Interior/ Environment) constitutes NIH's discretionary budget authority. In addition, NIH receives $150 million pre-appropriated in separate funding for diabetes research, and $8.2 million from a transfer within the Public Health Service (PHS). For the past several years, about $100 million of the annual NIH appropriation has been transferred to the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria. The FY2008 budget request proposed to increase the amount to $300 million, representing the entire U.S. contribution to the Global Fund. The House and Senate Labor/HHS bills agreed with that approach; in P.L. 110-161 , the final amount of the transfer from the NIH appropriation was $295 million. The total of all funding available for NIH activities, taking account of add-ons and transfers, is called the program level. FY2003 was the final year of a five-year undertaking by Congress to double the NIH budget from its FY1998 base of $13.7 billion to the FY2003 level of $27.1 billion. The annual increases for FY1999 through FY2003 were in the 14%-15% range each year. The research advocacy community had originally urged that the NIH budget grow by about 10% per year in the post-doubling years. For FY2004 and FY2005, however, Congress gave NIH increases of between 2% and 3%, levels which were below the biomedical inflation index for those two years. The advocates modified their recommendation to 6% for FY2006 and to 5% for FY2007, maintaining that such increases would be needed to keep up the momentum of scientific discovery made possible by the increased resources of the doubling years. Instead, the NIH appropriation for FY2006 declined 0.3%, marking the first decrease in the agency's budget since 1970. The FY2007 final level was a 2.0% increase over FY2006, compared to a projected biomedical inflation index of 3.7% for the year. For FY2008, the final funding level is 0.45% above FY2007, whereas the advocacy community had urged a 6.7% increase in the appropriation as a step towards reversing the decline in NIH's purchasing power that has occurred since FY2003. The FY2008 funding represents an estimated 11% decrease from FY2003 in inflation-adjusted terms. The agency's organization consists of the Office of the NIH Director and 27 institutes and centers. The Office of the Director (OD) sets overall policy for NIH and coordinates the programs and activities of all NIH components, particularly in areas of research that involve multiple institutes. The individual institutes and centers (ICs), each having a focus on particular diseases, areas of human health and development, or aspects of research support, plan and manage their own research programs in coordination with the Office of the Director. As shown in Table 5 , Congress provides a separate appropriation to 24 of the 27 ICs, to OD, and to a buildings and facilities account. (The other three centers, not included in the table, are funded through the NIH Management Fund, financed by taps on other NIH appropriations.) The FY2008 President's request was developed prior to congressional completion of the FY2007 appropriation, and most of the institutes and centers wound up approximately level-funded from their FY2007 amounts. Several of the ICs that received increases from Congress in the FY2007 CR were dropped back in the FY2008 request to levels closer to their FY2006 funding. For example, the National Center for Research Resources (NCRR) was given $34 million extra in FY2007 for one-year Shared Instrumentation Grants; the FY2008 request decreased the NCRR budget by $19 million. The biggest institute, the National Cancer Institute, would have been cut by over $10 million (0.2%) in the request. The second largest, the National Institute of Allergy and Infectious Diseases (NIAID), would have been increased by $229 million (5.3%) over FY2007, but only $28 million of that amount was for NIAID programs. The other $201 million of the increase was for transfer to the Global Fund to Fight HIV/AIDS, Tuberculosis, and Malaria, mentioned earlier. The House and Senate Labor-HHS-Education appropriations bills, in contrast, would have increased funding for most of the institutes and centers over their FY2007 levels by between 1.4% and 1.7% for the House and between 2.2% and 2.5% for the Senate. Somewhat larger increases would have gone to several ICs in both bills, including NCRR and NIAID. In the FY2008 final appropriation, increases for most of the ICs were considerably below 1%, and three ICs were decreased. The two biggest changes in the request and in the appropriation were in the Buildings and Facilities account and in the Office of the Director. Many of the laboratories, animal facilities, and office buildings on the NIH campus are aging, and are in need of upgrading to stay compliant with health and safety guidelines and to provide the proper infrastructure for the Intramural Research program. The budget requested $136 million for Buildings and Facilities (B&F), an increase of $52 million (63%). The final appropriation included $119 million for B&F, an increase of $35 million (42%). For the Office of the Director, the President and Congress handled the funding in two different ways, with the President requesting a $530 million (51%) drop in the account, and the appropriation giving a $62 million (5.9%) increase. The difference reflects a change in the way Congress funds the NIH Roadmap for Medical Research, which is a set of trans-NIH research activities designed to support high-risk/high-impact research in emerging areas of science or public health priorities. The initiatives are funded through a Common Fund that until FY2007 was supported partially in the OD appropriation and partially by contributions from each IC at a fixed percentage. The original FY2007 Roadmap total of $443 million required $332 million from the institutes and centers (a 1.2% tap on their budgets) and $111 million from the Director's Discretionary Fund. The final FY2007 CR, however, appropriated $483 million and placed the entire sum in OD, boosting that appropriation and allowing the ICs to use all of their funding for their own programs without the Roadmap tap for trans-NIH research. For FY2008, the request divided a planned total of $486 million for the Roadmap/Common Fund between the IC budgets ($364 million, a 1.3% tap) and OD ($122 million). The House and Senate bills supported the Common Fund entirely in OD, with the House bill providing a 2.5% increase to $495 million, and the Senate providing a 10% increase to $531 million. The final amount in P.L. 110-161 was $496 million. Also in the OD account for the first time in FY2007 was $69 million for the National Children's Study. This long-term (25+ year) environmental health study was proposed for cancellation in the FY2007 request. The multi-agency study, mandated by the Children's Health Act of 2000 ( P.L. 106-310 ), plans to examine the effects of environmental influences on the health and development of more than 100,000 children across the United States, following them from before birth until age 21. The overall projected cost for the whole study is about $2.7 billion. For FY2007, both appropriations committees directed NIH to continue with the study, and the CR provided the $69 million. The FY2008 request again included no funding for the study, but the final appropriation provided $110.9 million to OD for its continued support. The NIH's two major concerns in the face of tight budgets are maintaining support of investigator-initiated research through research project grants (RPGs), and continuing to nourish the pipeline of new investigators. The FY2008 request concentrated resources on supporting research grants, planning to fund 10,188 competing RPGs, one of the highest numbers ever. However, the expected "success rate" of applications receiving funding would have remained at about 20%, and scientists with non-competing (continuation) grants would not have received inflationary increases for their costs. Both committee reports indicated that their funding would have supported a larger number of grants than the request and would have funded some increases in the average costs of grants. The explanatory statement for P.L. 100-161 says that it "provides funding for a low percent increase in the average cost of new as well as non-competing grants." Several efforts were focused on supporting new investigators, to encourage young scientists to undertake careers in research despite the discouraging financial climate, and to help them speed their transition from training to independent research. The request and the bills included increases for new types of awards such as the Pathway to Independence, the Directors' Bridge awards, and New Innovator awards in the Common Fund. The Director's Pioneer Awards to encourage high risk research were also supported, as were clinical research training and the new Clinical and Translational Science Awards. In the final appropriation, the explanatory statement indicates that the Pioneer, New Innovator, and Bridge awards were funded at FY2007 levels, and that the Pathways to Independence program received funding at the level of the President's request. The biodefense research portfolio was slated in the request to increase slightly by cycling one-time extramural construction costs into other research areas. The Senate bill as reported included legislative language on human embryonic stem cell research, expanding access to stem cell lines and tightening ethical guidelines for their use. To avoid controversy, however, the provisions were dropped before the bill went to the floor. NIH and other Public Health Service agencies within HHS are subject to a budget "tap" called the PHS Program Evaluation Transfer (Section 241 of the PHS Act), which has the effect of redistributing appropriated funds among PHS agencies. The FY2008 appropriation kept the tap at 2.4%, the same as in FY2007. NIH, with the largest budget among the PHS agencies, becomes the largest "donor" of program evaluation funds, and is a relatively minor recipient. At the end of the 109 th Congress, the House and Senate agreed on the first NIH reauthorization statute enacted since 1993, the NIH Reform Act of 2006 ( P.L. 109-482 ). The law made managerial and organizational changes in NIH, focusing on enhancing the authority and tools for the NIH Director to do strategic planning, especially to facilitate and fund cross-institute research initiatives. It required detailed tracking and reporting on the research portfolio and periodic review of NIH's organizational structure. The measure authorized, for the first time, overall funding levels for NIH, although not for the individual ICs, and established a "common fund" for trans-NIH research. For further information on NIH, see CRS Report RL33695, The National Institutes of Health (NIH): Organization, Funding, and Congressional Issues , by [author name scrubbed]. (CRS Contact: Pamela Smith.) The Consolidated Appropriations Act, 2008 ( P.L. 110-161 , H.R. 2764 ), provides $6.065 billion for the National Science Foundation (NSF) in FY2008, $147.8 million above the enacted FY2007 level, and $364.0 million below the budget request. The act funds the Research and Related Activities (R&RA) account at $4.822 billion in FY2008, $53.5 million (1.1%) above the FY2007 level, and $310.2 million below the Administration's request. Appropriators agreed with the Administration's request to transfer the Experimental Program to Stimulate Competitive Research (EPSCoR) from the Education and Human Resources Directorate (EHR) to the R&RA. Report language from conferees directs NSF to review its polices concerning transformative research, research that is described as "cutting edge" and revolutionary. Several reports have been released recommending that NSF allocate funds specifically for this type of research. Appropriators have directed the agency to issue a report suggesting how transformative research can be included in NSF's portfolio of research activities. Additional report language in the report directs NSF to increase its support for physical infrastructure improvements of its academic research fleet and for aging facilities. P.L. 110-161 funds the Major Research Equipment and Facilities Construction (MREFC) at $220.7 million and the Education and Human Resources (EHR) Directorate at $725.6 million in FY2008. The FY2008 request for the NSF was $6.429 billion, an 8.6% increase ($511.8 million) over the FY2007 estimate of $5.917 billion. (See Table 6 .) President Bush's ACI has proposed to double the NSF budget over the next 10 years. The FY2008 request will be another installment toward that doubling effort. The FY2008 request for NSF was designed to support several interdependent priority areas: discovery research for innovation, preparing the workforce of the 21 st century, transformational facilities and infrastructure, international polar year leadership, and stewardship. These particular areas of investments, similar to the goals contained in the President's proposed ACI, are designed to promote research that will drive innovation and support the design and development of world-class facilities, instrumentation, and infrastructure at the frontiers of discovery. The priorities will support also a portfolio of programs directed at strengthening and expanding the participation of underrepresented groups and diverse institutions in the scientific and engineering enterprise. The NSF asserts that international research partnerships are critical to the nation in maintaining a competitive edge, addressing global issues, and capitalizing on global economic opportunities. To address these particular needs, the Administration had requested $45.0 million for the Office of International Science and Engineering. Also, in FY2008, NSF continued in its leadership role in planning U.S. participation in observance of the International Polar Year, which spans 2007 and 2008. The FY2008 request for addressing the challenges in polar research was $464.9 million. A major focus of planned polar research would be in climate change and environmental observations. Other proposed FY2008 highlights included funding for the National Nanotechnology Initiative ($389.9 million), investments in Climate Change Science Program ($208.3 million), continued support for homeland security ($375.4 million), and funding for Networking and Information Technology Research and Development ($993.7 million). Included in the FY2008 request was $5.131 billion for R&RA, a 7.6% increase ($363.0 million) above the FY2007 estimate of $4.768 billion. R&RA funds research projects, research facilities, and education and training activities. Partly in response to concerns in the scientific community about the imbalance between support for the life sciences and the physical sciences, the FY2008 request provided increased funding for the physical sciences. Research is multidisciplinary and transformational in nature, and very often, discoveries in the physical sciences often lead to advances in other disciplines. R&RA includes Integrative Activities (IA) and is a source of funding for the acquisition and development of research instrumentation at U.S. colleges and universities. IA also funds Partnerships for Innovation, disaster research teams, and the Science and Technology Policy Institute. The FY2008 request transferred support for EPSCoR from the EHR to IA. It was determined that placement in IA would allow the research focus and cross-directorate activities of EPSCoR to be more fully integrated in the agency and give it more leverage for improving and planning its research agendas. The FY2008 request provided $263 million for IA. Included in that amount was $107 million for EPSCoR. The EPSCoR request would support a portfolio of four investment strategies. Approximately 62.6% of the funding for EPSCoR would be for a combination of new and continuing awards. The Office of Polar Programs (OPP) is funded in the R&RA. In FY2006, responsibility for funding the costs of icebreakers that support scientific research in polar regions was transferred from the U.S. Coast Guard to the NSF. While the NSF does not own the ships, it is responsible for the operation, maintenance, and staffing of the vessels. The OPP was to be funded at $464.9 million in the FY2008 request. Increases in OPP for FY2008 were directed at research programs for arctic and antarctic sciences—glacial and sea ice, terrestrial and marine ecosystems, the ocean, and the atmosphere, and biology of life in the cold and dark. The NSF also serves in a leadership capacity for several international research partnerships in polar regions. The NSF supports a variety of individual centers and center programs. The FY2008 request provided $66.2 million for Science and Technology Centers, $59.2 million for Materials Research Science and Engineering Centers, $52.9 million for Engineering Research Centers, $42.4 million for Nanoscale Science and Engineering Centers, $27.0 million for Science of Learning Centers, and $11.5 million for Centers for Analysis and Synthesis. Additional priority areas in the FY2008 request included those of strengthening core disciplinary research, and sustaining organizational excellence in NSF management practices. NSF maintains that researchers need not only access to cutting-edge tools to pursue the increasing complexity of research, but funding to develop and design the tools critical to 21 st century research and education. An investment of $200.0 million in cyberinfrastructure would allow for funding of modeling, simulation, visualization, and data storage and other communications breakthroughs. NSF anticipated that this level of funding will make cyberinfrastructure more powerful, stable, and accessible to researchers and educators through widely shared research facilities. Increasing grant size and duration has been a long-term priority for NSF. The funding rate for research grant applications was 21% in FY2006 and 20% in FY2007. NSF planned to return to the 21% funding rate in FY2008. In addition, the average duration would be lengthened and the average award size increased. The FY2008 request for the EHR Directorate was $750.6 million, $55.9 million (8%) below the FY2007 estimate. The EHR portfolio is focused on, among other things, increasing the technological literacy of all citizens, preparing the next generation of science, engineering, and mathematics professionals, and closing the achievement gap in all scientific fields. Support at the various educational levels in the FY2008 request was as follows: research on learning in formal and informal settings (includes precollege), $222.5 million; undergraduate, $210.2 million; and graduate, $169.5 million. Priorities at the precollege level include research and evaluation on education in science and engineering ($42.0 million), informal science education ($66.0 million), and Discovery Research K-12 ($107.0 million). Discovery Research is structured to combine the strengths of three existing programs and encourage innovative thinking in K-12 science, technology, engineering, and mathematics education. Programs at the undergraduate level are designed to "create leverage for institutional change." Priorities at the undergraduate level included the Robert Noyce Scholarship Program ($10.0 million), Course, Curriculum and Laboratory Improvement ($37.5 million), STEM Talent Expansion Program ($29.7 million), Advanced Technological Education ($51.6 million), and Scholarship for Service ($12.1 million). The Math and Science Partnership Program (MSP), a crosscutting program, was proposed at $46 million in the FY2008 request. The MSP in NSF coordinates activities with the Department of Education and its state-funded MSP sites. The MSP in NSF has made approximately 80 awards, with an overall funding rate of about 9%. At the graduate level, priorities were those of Integrative Graduate Education and Research Traineeship ($25.0 million), Graduate Research Fellowships ($97.5 million), and the Graduate Teaching Fellows in K-12 Education ($47.0 million). Added support was given to several programs directed at increasing the number of underrepresented groups in science, mathematics, and engineering. Among these targeted programs in the FY2008 request were the Historically Black Colleges and Universities Undergraduate Program ($30.0 million), Tribal Colleges and Universities Program ($12.9 million), Louis Stokes Alliances for Minority Participation ($40.0 million), and Centers of Research Excellence in Science and Technology ($29.5 million). The MREFC account was funded at $244.7 million in the FY2008 request, a 28.1% increase ($53.8 million) over the FY2007 estimate. The MREFC supported the acquisition and construction of major research facilities and equipment that extend the boundaries of science, engineering, and technology. Of all federal agencies, NSF is the primary supporter of "forefront instrumentation and facilities for the academic research and education communities." First priority for funding was directed to ongoing projects. Second priority was directed at projects that have been approved by the National Science Board for new starts. NSF required that in order for a project to receive support, it must have "the potential to shift the paradigm in scientific understanding and/or infrastructure technology." NSF stated that the projects scheduled for support in the FY2008 request met that qualification. Six ongoing projects and one new start were proposed for funding in the FY2008 request: Atacama Large Millimeter Array Construction ($102.1 million), Ice Cube Neutrino Observatory ($22.4 million), National Ecological Observatory Network ($8.0 million), South Pole Station Modernization project ($6.6 million), Alaskan Region Research Vessel ($42.0 million), Ocean Observatories Initiative ($31.0 million), and Advanced Laser Interferometer Gravitational Wave Observatory ($32.8 million). On May 2, 2007, the House Committee on Science and Technology passed H.R. 1867 ( H.Rept. 110-114 ), the National Science Foundation Authorization Act of 2007. The bill authorizes a total of $21.0 billion for the NSF for FY2008, FY2009, and FY2010, including $16.4 billion for R&RA, $2.8 billion for EHR, and $787.0 million for MREFC. Priorities to be addressed in the three-year authorization bill include those of supporting successful K-12 science, mathematics, and engineering education programs, promoting university-industry partnerships, balancing funding between interdisciplinary and disciplinary research, and improving funding rates for new investigators. (CRS Contact: [author name scrubbed].) On December 26, 2007, the President signed into law the Consolidated Appropriations Act, 2008 ( P.L. 110-161 , H.R. 2764 ). This act includes appropriations for agencies covered under the Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act, 2008, including the U.S. Department of Agriculture (USDA). P.L. 110-161 provides a total of $2.603 billion for research and education for USDA in FY2008, $301.6 million above the budget request and $74.7 million above the FY2007 enacted level. (See Table 7 .) The Agricultural Research Service (ARS) is USDA's in-house basic and applied research agency, and operates approximately 100 laboratories nationwide, including the world's largest multidisciplinary agricultural research center, located in Beltsville, Maryland. The ARS laboratories focus on efficient food and fiber production, development of new products and uses for agricultural commodities, development of effective biocontrols for pest management, and support of USDA regulatory and technical assistance programs. Included in the total support for USDA in FY2008 is $1.176 billion for ARS, $138.5 million above the request and $47.1 million above the FY2007 enacted level. The Administration had proposed reductions of $141.0 million in funding add-ons designated by Congress for research at specific locations. The amounts were to be redirected to high-priority Administration initiatives that included livestock production, food safety, crop protection, and human nutrition. Included in the FY2008 appropriation for ARS is $47.1 million for buildings and facilities. The Administration had requested funding for the planning and design of the Biocontainment Laboratory and Consolidated Poultry Research Facility in Athens, Georgia. The Cooperative State Research, Education, and Extension Service (CSREES) distributes funds to State Agricultural Experiment Stations, State Cooperative Extension Systems, land-grant universities, and other institutions and organizations that conduct agricultural research, education, and outreach. Included in these partnerships is funding for research at 1862 institutions, 1890 historically black colleges and universities, and 1994 tribal land-grant colleges. Funding is distributed to the states through competitive awards, statutory formula funding, and special grants. P.L. 110-161 provides $1.130 billion for CSREES in FY2008, an increase of $135.9 million over the budget request and $7.8 million above the FY2007 enacted level. Funding for formula distribution in FY2008 to the state Agricultural Experiment Stations is $279.9 million, $5.7 million below the FY2007 level. Support for the 1890 formula programs is $41.3 million, almost level with FY2007. The FY2008 budget request proposed, as in previous years, to modify the Hatch formula program. It would expand the multistate research programs from 25% to approximately 60% and distribute a portion of the funds through competitively awarded grants. In previous years, Congress did not accept the Administration's proposed changes to the Hatch formula. The Consolidated Appropriations Act funds the National Research Initiative (NRI) Competitive Grants Program at $192.2 million, a slight increase over the FY2007 enacted level of $190.2 million. In addition to supporting fundamental and applied science in agriculture, USDA maintains that the NRI makes a significant contribution to developing the next generation of agricultural scientists. The FY2008 appropriation includes funding for grants to educational institutions and community-based organizations to benefit socially disadvantaged farmers and ranchers. These grants are intended to encourage greater participation of black farmers, tribal groups, and Hispanic and other underrepresented groups in the USDA portfolio of commodity, loan, education, and grant offerings. In addition, NRI funding will support projects directed at developing alternate methods of biological and chemical conversion of biomass, and research determining the impact of a renewable fuels industry on the economic and social dynamics of rural communities. The Administration had proposed support for initiatives in agricultural genomics, emerging issues in food and agricultural security, the ecology and economics of biological invasions, plant biotechnology, and water security. The FY2008 appropriation for USDA provides $77.9 million for the Economic Research Service (ERS), $2.7 million above the FY2007 enacted level; and $163.4 million for the National Agricultural Statistics Service (NASS), approximately $16.1 million above the FY2007 level. It is anticipated that the increase for ERS will expand the market analysis and outlook program and strengthen the coverage of increasingly complex global markets for various agricultural products. The increase for NASS will be in support of the 2007 Census of Agriculture. Funding will be available also to obtain contract services for extensive data collection and processing activities scheduled to occur in 2008. (CRS Contact: [author name scrubbed].) The Department of Homeland Security (DHS) requested $1.379 billion for R&D in FY2008, a decrease of 6.3% from FY2007. This total included $799 million for the Directorate of Science and Technology (S&T), $562 million for the Domestic Nuclear Detection Office (DNDO), and $18 million for Research, Development, Test, and Evaluation (RDT&E) in the U.S. Coast Guard. (For details, see Table 8 .) The request for DNDO was a 17% increase. The request for the S&T Directorate was an 18% decrease, about half of which resulted from the transfer of some operational programs out of S&T into other DHS organizations. The House provided a total of $1.351 billion: $777 million for S&T, $556 million for DNDO, and $18 million for Coast Guard RDT&E ( H.R. 2638 , H.Rept. 110-181 ). The Senate provided a total of $1.414 billion: $838 million for S&T, $550 million for DNDO, and $26 million for Coast Guard RDT&E ( S. 1644 , S.Rept. 110-84 ). The final appropriation was a total of $1.328 billion: $830 million for S&T, $473 million for DNDO, and $25 million for Coast Guard RDT&E ( P.L. 110-161 , explanatory statement in Congressional Record , December 17, 2007). Starting in late 2006, the S&T Directorate realigned its programs and reorganized its management structure. The directorate's program structure is now as shown in Table 8 . The directorate's university centers of excellence are expected to be aligned to match the new organization, with new centers being established for some topics. The requested reduction of $41 million in the Explosives program was due to the completion of efforts (known as Counter-MANPADS) to develop a prototype system for protecting commercial aircraft against ground-to-air missiles. The requested $51 million reduction in the Infrastructure and Geophysical program largely reflected the elimination of funding for community and regional initiatives previously established or funded at congressional direction. The operational programs transferred out of S&T are the BioWatch monitoring system, the Biological Warning and Incident Characterization (BWIC) system, and the Rapidly Deployable Chemical Detection System (RDCDS) from the Chemical and Biological program and SAFECOM from the Command, Control, and Interoperability program. The House, citing unfilled staff positions in the S&T Directorate, provided $12 million less than the request for Management and Administration. It rejected the $14 million request for procurement of third-generation BioWatch units in the Chemical and Biological program. It provided $10 million more than the request for University Programs and instructed the S&T Directorate to report on how it selects university centers of excellence, determines the research topics for centers, and evaluates the quality of their work. The House provided no funding for the Analysis, Dissemination, Visualization, Insight, and Semantic Enhancement (ADVISE) program, a data-mining tool, and prohibited obligation of funds for ADVISE until DHS completed a privacy impact assessment. Several other smaller changes added up to a net decrease of $10 million for Research, Development, Acquisition, and Operations (RDA&O). The Senate provided an increase of $41 million for RDA&O. Within this total, reductions relative to the request included $13 million from the Chemical and Biological program, $14 million from the Innovation program, and zero funding for ADVISE. Increases included $18 million for the Explosives program to counter car bombs and other improvised explosive devices (IEDs) and $55 million for earmarks in the Infrastructure and Geophysical and Laboratory Facilities programs. The Senate provided a reduction of $2 million in Management and Administration. The final appropriation included an increase of $35 million in RDA&O and a reduction of $4 million in Management and Administration. The Chemical and Biological program received $21 million less than requested, including $8 million less for third-generation BioWatch procurement. Innovation received $27 million less, and the explanatory statement directed S&T to provide a plan for how the program's funds will be allocated. University Programs received $11 million more than the request, and the explanatory statement called for a briefing similar to the report called for by the House. Explosives received $14 million more, including $15 million to counter car bombs and IEDs. The final appropriation included the Senate earmarks for $55 million. It provided no funding for ADVISE or its follow-ons or successors. In DNDO, the proposed $47 million increase in Research, Development, and Operations focused primarily on the Transformational R&D program, whose goal is to identify, develop, and demonstrate technologies that fill major gaps in the nuclear detection architecture. The proposed $30 million increase in Systems Acquisition was to begin implementation of the Securing the Cities initiative in the New York City area. Congressional attention has focused recently on criticism of a cost-benefit analysis that DNDO conducted to support its assessment of next-generation Advanced Spectroscopic Portal (ASP) technology for radiation portal monitors. The House provided the requested amount for Systems Acquisition. The House committee recommended a $40 million reduction, including a $20 million reduction in the Securing the Cities initiative, but this was reversed by a floor amendment. As in past years, the House report directed DNDO not to procure ASP systems until the Secretary of Homeland Security certifies they are more effective than traditional radiation portal monitors. In the Senate, the largest change relative to the request was a shift of $29 million from Systems Acquisition to Research, Development, and Operations. Of this amount, $20 million was to be spent on screening general aviation aircraft for illicit nuclear materials. The Senate committee recommended a $10 million reduction in the Securing the Cities initiative, half from Systems Acquisition and half from Research, Development, and Operations, but a floor amendment reserved the requested amounts for this initiative. The Senate provided no funding for full-scale procurement of ASP monitors until DHS provides the report and certification called for in the FY2007 appropriations conference report ( H.Rept. 109-699 ). The final appropriation provided $90 million less than the request for Systems Acquisition. As in previous years, it prohibited full-scale procurement of ASP monitors until their performance has been certified by the Secretary, and recognizing "the difficulty the Secretary faces" in making this certification, it provided funds for the National Academy of Sciences "to assist the Secretary in his certification decisions." It required the certification to be made separately for primary and secondary deployments. The final appropriation included the requested amount for Securing the Cities and $13 million related to screening of general aviation aircraft. (CRS Contact: [author name scrubbed].) For FY2008, the Bush Administration requested essentially flat funding for NOAA's R&D programs. The Administration proposed cuts for some other NOAA research activities, including a 46% cut for the National Ocean Service R&D budget. However, it did propose an increase of the $19 million for the Office of Oceanic and Atmospheric Research (OAR), about 6.7% more than the FY2007 AAAS-estimated funding level. The Department of Commerce, NOAA FY2008 Budget Summary , released February 8, 2007, indicated that NOAA R&D funding would be 16% of the agency's total budget request of $3.82 billion. The request was comprised of 86% research and 14% development funding. Seventy percent of NOAA R&D would be intramural, while 30% of applied research would be extramural. OAR accounts for 60% of all NOAA R&D in the President's FY2008 request. The American Association for the Advancement of Science (AAAS) estimates that the Consolidated Appropriations Act of 2008 provides a total of $573 million for NOAA R&D ( Table 9 ). This resulted in an overall increase of $41 million, or 7.6%, for the agency from FY2007 appropriation levels and would "result in a turnaround from the steady fall in Commerce R&D for most of the decade." The largest decrease, compared with the FY2007 request, was a cut of $23 million for the National Ocean Service. However, Congress provided $6 million more than the FY2008 request for certain coastal science and ocean observation and assessment R&D activities. There was a combined increase of $53 million for OAR from FY2007 levels which is primarily targeted for climate change R&D, ocean exploration, and the National Sea Grant College Program. An increase of $3 million from FY2007 was proposed for NOAA satellite programs (NESDIS) National Polar Environmental Orbiting Satellite System (NPOESS) preparatory data project. Funding for NOAA Fisheries and the National Weather Service R&D was requested and appropriated for approximately at FY2007 levels. The explanatory statement for H.R. 2764 directs $6 million of the FY2008 NOAA budget be set aside for the National Academy of Sciences to consider establishment of a congressional Climate Change Study Committee, as was originally proposed by the House, for advising Congress about the scientific underpinning for national policy responses to climate change. The Senate Committee on Appropriations had reported S. 1745 ( S.Rept. 110-124 ) that would have provided $628 million for NOAA R&D, or an 18% increase from the AAAS FY2007 estimated funding level. The Senate report criticized NOAA for requesting steep cuts in key ocean programs in the past and for requesting only modest increases in ocean programs for FY2008 at the expense of steep cuts in other research program areas. The Senate report cited the Joint Ocean Commission (JOCI)s' January 2007 findings about the Administration's progress in developing a U.S. ocean policy which, they indicated may have influenced the Administration to request modest increases for some ocean research and ocean-related NOAA R&D programs. The Senate committee introduced $32 million for competitively-awarded research grants programs in OAR. Overall, the recommendation for OAR R&D was almost 32% percent more than the estimated FY2007 level and would have increased the OAR total to $371 million. For climate change R&D, the Senate recommended $217 million, or $24 million more than the request, including $140 million for competitive climate change research grants that had been funded at $126 million in FY2007. For FY2008, the House Appropriations Committee recommended $585 million for NOAA R&D in H.R. 3093 ( H.Rept. 110-240 ). This is $43 million, or 7.4%, less than recommended in S. 1745 ; $57 million, or 10.8%, more than the request; and $5 million, or 9.9%, more than the FY2007 estimated appropriation. The House would have provided $280 million for OAR climate change research, or $44 million more than the request. House-recommended competitive grants package for climate change research totaled $172 million, or $126 million more than the FY2007 appropriation. The House bill would have provided $346 million for OAR overall, 23% more than the request. The House report did not address funding JOCI policy/research recommendations. (CRS Contact: Wayne Morrissey.) The National Institute of Standards and Technology (NIST) is a laboratory of the Department of Commerce with a mandate to increase the competitiveness of U.S. companies through appropriate support for industrial development of precompetitive, generic technologies and the diffusion of government-developed technological advances to users in all segments of the American economy. NIST research also provides the measurement, calibration, and quality assurance techniques that underpin U.S. commerce, technological progress, improved product reliability, manufacturing processes, and public safety. The President's FY2008 budget requested $640.7 million for NIST, 5.3% below the FY2007 appropriation. Internal research and development under the Scientific and Technology Research and Services (STRS) account would have increased 15.2% to $500.5 million (including the Baldrige National Quality Program). There would be no funding for the Advanced Technology Program (ATP) and support for the Manufacturing Extension Partnership (MEP) would have been reduced 55.8% to $46.3 million. Construction expenses were to increase 60% to $93.9 million. (See Table 10 .) The initial FY2008 appropriations bill passed by the House, H.R. 3093 , provided $831.2 million for NIST, 22.8% above FY2007. Included in this total was $500.5 million for the STRS account (with the Baldrige National Quality Program), an increase of 15.2% over the FY2007 figure. Support for ATP would have increased 17.7% to $93.1 million, while funding for MEP was to increase 3.9% to $108.8 million. The Committee Report to accompany the bill noted support for legislation ( P.L. 110-69 ) that reestablishes ATP as the Technology Innovation Program while making some changes to the activity. The construction budget would more than double to $128.9 million. The version of H.R. 3093 passed by the Senate would have appropriated $863.0 million for NIST, $30.8 million of which was to be directed to other non-NIST programs, for a total appropriation of $832.2 million. The STRS account would have been funded at $502.1 million (including the Baldrige National Quality Program), 15.6% above FY2007. The Advanced Technology Program was to be financed at $100.0 million, with $30.8 million of this amount utilized for other activities in the Federal Bureau of Investigation and the U.S. Marshals Service. There was a stipulation in the bill that no single ATP award was to be made to companies with revenues greater than $1 billion. Support for the Manufacturing Extension Program would have increased 5.1% to $110.0 million. The construction budget would total $150.0 million, over two and one-half times FY2007 funding. P.L. 110-161 , the FY2008 Consolidated Appropriations Act, as passed by Congress, provides NIST with $755.8 million, an increase of 11.7% over FY2007 and almost 18.0% over the Administration's request. Support for the STRS account increases 1.4% to $440.5 million (including $7.9 million for the Baldrige National Quality Program). However, this amount is almost 12.0% below the President's budget proposal. The Technology Innovation Program (formerly the Advanced Technology Program) is appropriated $65.2 million (with an additional $5 million from FY2007 unobligated balances under ATP), 17.6% below the previous fiscal year. Funding for MEP totals $89.6 million, 14.4% less than FY2007, but 93.5% above the budget request. Support for construction almost triples to $160.5 million, an amount over one and one-half times that contained in the original budget proposal. No final FY2007 appropriations legislation for NIST was enacted during the 109 th Congress. A series of continuing resolutions funded the program at FY2006 levels through February 15, 2007. However, P.L. 110-5 , passed in the 110 th Congress, provided $676.9 million in FY2007 support for NIST. Funding for the STRS account increased 10% over the previous fiscal year to $434.4 million while the construction budget decreased 66% to $58.7 million. Financing for ATP at $79.1 million and support for MEP at $104.7 million reflected similar funding in FY2006. As part of the American Competitiveness Initiative, the Administration stated its intention to double over 10 years funding for "innovation-enabling research" performed at NIST through its "core" programs (defined as internal research in the STRS account and the construction budget). To this end, the President's FY2007 budget requested an increase of 18.3% for intramural R&D at NIST; FY2007 appropriations for these programs increased 9.6%. For FY2008, the omnibus appropriations legislation provided for a small increase in the STRS account. This is in contrast to the Administration's FY2008 budget which included a 15.2% increase in funding, as did the original appropriations bill, H.R. 3093 , as passed by the House, while the Senate-passed version contained a 15.6% increase. Continued support for the Advanced Technology Program was a major funding issue. The ATP provided "seed financing," matched by private sector investment, to businesses or consortia (including universities and government laboratories) for development of generic technologies that have broad applications across industries. Opponents of the program cited it as a prime example of "corporate welfare," whereby the federal government invests in applied research activities that, they emphasize, should be conducted by the private sector. Others defended ATP, arguing that it assists businesses (and small manufacturers) in developing technologies that, while crucial to industrial competitiveness, would not or could not be developed by the private sector alone. Although Congress maintained (often decreasing) funding for the Advanced Technology Program, the initial appropriation bills passed by the House since FY2002 failed to include financing for ATP. During the 109 th Congress, the version of the measure reported from the Senate Committee on Appropriations also did not fund ATP. For FY2006, support again was provided for the program, but the amount was 41% below that included in the FY2005 appropriations; FY2007 funding remained the same as the previous fiscal year. The Consolidated Appropriations Act, 2008 provides support, however reduced, for a new effort, the Technology Innovation Program, which replaces ATP and is focused on small and medium sized firms. The budget for the Manufacturing Extension Partnership, another extramural program administered by NIST, was an issue during the FY2004 appropriations deliberations. Although in the recent past congressional support for MEP remained constant, the Administration's FY2004 budget request, the initial House-passed bill, and the FY2004 Consolidated Appropriations Act substantially decreased federal funding for this initiative, reflecting the President's recommendation that manufacturing extension centers "...with more than six years experience operate without federal contribution." However, P.L. 108-447 restored financing for MEP in FY2005 to the level that existed prior to the 63% reduction taken in FY2004. While the level of support decreased in FY2006, it remained significantly above the FY2004 figure; FY2007 funding remained at a similar level. For FY2008, support for this program has been reduced. For additional information, see CRS Report 95-30, The National Institute of Standards and Technology: An Appropriations Overview ; CRS Report 95-36, The Advanced Technology Program ; and CRS Report 97-104, Manufacturing Extension Partnership Program: An Overview , all by [author name scrubbed]. (CRS Contact: [author name scrubbed].) The Bush Administration requested $813 million for the Department of Transportation's (DOT) R&D budget in FY2008, an increase of approximately $19 million (2.4%) from FY2007 funding of $794 million. The House ( H.R. 3074 , H.Rept. 110-238 , H.Rept. 110-446 ) provided a total of $836 million. The Senate ( S. 1789 , S.Rept. 110-131 ) provided a total of $847 million. The Consolidated Appropriations Act of FY2008 provides a total of $852 million, an increase of $58 million (7.3%) over the FY2007 funding level. (See Table 11 .) The President requested $410 million in FY2008 for Federal Highway Administration (FHWA) R&D, an increase of $49 million (13.6%) above the FY2007 funding level. The House and Senate each provided $410 million. The final appropriation for FHWA R&D in FY2008 is $410 million. Highway research includes the Federal Highway Administration's transportation research and technology contract programs. These research programs include the investigation of ways to improve safety, reduce congestion, improve mobility, reduce lifecycle construction and maintenance costs, improve the durability and longevity of highway pavements and structures, enhance the cost-effectiveness of highway infrastructure investments and minimize negative impacts on the natural and human environment. As requested in the President's budget, the final appropriation for FHWA Intelligent Transportation Systems (ITS) R&D is $84 million, an increase of $20 million (30.3%) over FY2007. The FHWA budget also includes state highway R&D distributed to states and local governments to support their local R&D efforts. The President's budget included $172 million for this activity in FY2008, an increase of $9 million (6%) over FY2007. Both the House and Senate acts provided this amount, and the Consolidated Budget Act included $172 million. The President's R&D request for the Federal Aviation Administration (FAA) for FY2008 was $258 million, down $45 million (14.9%) from FY2007. The request included $140 million in Research, Engineering and Development, $90.4 million in Air Traffic Organization Capital,$28.7 million in the Airport Improvement Program, and $0.1 million in Safety and Operations. The final appropriation for FAA R&D in FY2008 is $274 million, down $30 million (9.6%) from FY2007. The President proposed $8 million for the Research and Innovative Technology Administration (RITA) to coordinate and advance the pursuit of transportation research that cuts across all modes of transportation, such as hydrogen fuels, global positioning, and remote sensing. The final appropriation for RITA R&D in FY2008 is $8 million, up $6 million (253%) from FY2007. (CRS Contact: John Sargent.) The Administration requested $621 million for R&D in the Department of the Interior (DOI) in FY2008, an estimated decline of 2.1% from FY2007 funding of $634 million. The House ( H.R. 2643 , H.Rept. 110-187 ) provided a total of $678 million. The Senate ( S. 1696 , S.Rept. 110-91 ) provided a total of $657 million. The Consolidated Appropriations Act of FY2008 provides a total of $661 million, an increase of $27 million (4.2%) over the FY2007 funding level. (See Table 12 .) The U.S. Geological Survey (USGS) is the primary supporter of R&D within DOI, accounting for nearly 90% of the department's total R&D appropriations. The four USGS research divisions are Geographic Research, Geological Resources, Water Resources and Quality, and Biological Research. Total funding for USGS in FY2007 was $564 million. The President's budget proposed a decrease in USGS R&D funding of 3.0% to $547 million. The House provided $602 million (an increase of 6.6%) for USGS, and the Senate provided $581 million (an increase of 3.0%). The Senate bill contained smaller increases for Geological Resources and Biological Research, and did not include funding for the House initiative related to various aspects of global climate change. The final appropriation for USGS in FY2008 is $583 million, an increase of $37 million (3.4%) over the FY2007 budget. Funding is increased in three of the four research areas, and an additional $7 million is provided for climate change research. Funding for Geological Resources R&D in FY2008 increases by 2.5% to $219 million. The Geological Resources Program assesses the availability and quality of the nation's energy and mineral resources. The Geological Resources Program researches, monitors, and assesses the landscape to understand geological processes to help distinguish natural change from those resulting from human activity. Within the earth sciences, the USGS plays a major role in important geological hazards research, including research on earthquakes and volcanoes. Enterprise Information conducts information science research to enhance the National Map and National Spatial Data infrastructure. Geographic Research R&D rises 3.3% to $46 million in FY2007. Funding for Water Resources R&D, which focuses on activities aimed at improving the quality of U.S. groundwater, remains constant in FY2008 at $126 million. The Cooperative Water Program, which supports the collection of basic hydrologic data, studies of specific water-resources problems, and hydrologic research through USGS partnerships with state governments and other entities, is funded at $63 million in FY2008. Funding for USGS Biological Research in FY2008 increases by 2.2% to $180 million. This research program develops and distributes information needed in the conservation and management of the nation's biological resources. The program serves as DOI's research arm, using the capabilities of 17 research centers and 40 Cooperative Research Units that support research on fish, wildlife, and natural habitats. Major research initiatives are carried out by USGS scientists who collect scientific information through research, inventory, and monitoring investigations. These activities develop new methods and techniques to identify, observe, and manage fish and wildlife, including invasive species and their habitats. Nearly 90% of USGS research is performed within Interior labs to address the science needs of DOI and other agencies, such as the Fish and Wildlife Service and the Bureau of Land Management. (CRS Contact: John Sargent.) Title II of Division F of the Consolidated Appropriations Act for FY2008 ( P.L. 110-161 ), provided $785.8 million for the Environmental Protection Agency's (EPA) Science and Technology account, which reflects most of the Agency's R&D funding. The enacted FY2008 appropriation, which includes a transfer from the agency's Superfund account and reflects a 1.56% across the board rescission, was less than 1% above the President's FY2008 request of $780.6 million, and 3% above the FY2007 appropriation of $763.6 million. (See Table 13 .) Without adjusting for inflation, FY2008 funding for certain research activities increased relative to FY2007, however, funding for many of the program areas within the S&T account remained relatively constant or declined. EPA, the regulatory agency responsible for carrying out a number of environmental laws, funds a broad portfolio of R&D activities to provide the necessary scientific tools and knowledge to support decisions relating to preventing, regulating, and abating environmental pollution. EPA's annual appropriations are requested, considered, and enacted according to eight line-item appropriations accounts, which were established by Congress during the FY1996 appropriations process. The Science and Technology (S&T) account incorporates elements of the former EPA Research and Development account, as well as a portion of the former Salaries and Expenses, and Program Operations accounts, which had been in place until FY1996. The S&T account is funded by a base appropriation plus a transfer of appropriated funds from the Superfund account. These transferred funds are dedicated to research on more effective methods to clean up contaminated sites. R&D at EPA headquarters and laboratories around the country, as well as external R&D, is managed primarily by EPA's Office of Research and Development (ORD). Many of the programs implemented by other offices within EPA have a research component, but the research is not necessarily the primary focus of the program. A large portion of the S&T account appropriations fund EPA's R&D activities managed by ORD, including the agency's research laboratories and research grants, but the account also provides funding for the agency's applied science and technology activities conducted through its program offices (e.g. the Office of Water). Most of the S&T account funds "actual" research activities, but the operational and administrative expenses of agency research facilities, such as rent, utilities, and security, are also funded within this account. The overall increase for FY2008 above FY2007 was mostly due to a continued shift in funds from the Environmental Programs and Management account to pay these operational and administrative expenses. When comparing funding for research alone (net after operations and administration expenses), the FY2008 consolidated appropriations provided a $6.4 million increase above the FY2008 request, but $17.5 million less than FY2007 (includes transfers from the Superfund account). (See Table 13 ). Consequently, funding enacted for FY2008 for many of EPA's research areas decreased, or remained flat, relative to FY2007. However, funding for certain areas, such as Climate Protection and Global Change research, rose above the President's request for FY2008 and the prior year appropriation but in many cases not to the level that the House or the Senate Appropriations Committee had proposed for FY2008. For example, the FY2008 appropriations of $19.7 million for Global Change Research, was roughly 20% more than the $16.2 million provided for FY2007 and the $16.9 million requested, but significantly less than the $33.3 million the House had proposed. The Senate committee had proposed $18.6 million for this research activity. The FY2008 consolidated appropriations also did not include the largest increase recommended within the S&T account by the Senate committee. The Senate committee had recommended $14 million in a new-line item program activity for "extramural research grants." No such line-item program activity had been specified in previous appropriations, nor had it been included in the House proposed bill or the President's FY2008 request. These proposed extramural grants would have been in the form of competitive grants for "high-priority" air quality ($10.0 million) and water quality($4.0 million) research supplemental to other funding for these research activities elsewhere in the account. Climate change due to emissions of greenhouse gases (GHG) resulting from human activities has drawn the attention of Congress as scientific understanding of the causes, extent, and impacts has grown. This attention was reflected in the debate regarding the FY2008 appropriations. P.L. 110-161 included increases for EPA's global climate change activities within the S&T account, as noted above, as well as within other accounts. However, the FY2008 consolidated appropriations did not include a new account to establish a Commission on Climate Change Adaptation and Mitigation as the House had proposed; nor did the law provide funding in any other existing account for such a commission. The new account would have been supplemental to funding in the S&T account, and would have provided $50.0 million for FY2008. Of the total, $5 million would have been for the establishment and operations of a two-year multi-agency commission to analyze science questions related to climate change adaptation and mitigation and to recommend research priorities. The remaining $45.0 million proposed for this account would have been distributed to support federal agency climate change adaptation and mitigation research efforts based on the commission's recommendations. Neither the Senate Appropriations Committee nor the President had proposed funding for such a commission. Some Members of Congress and an array of stakeholders have continually raised concerns about the adequacy of funding for scientific research at EPA. For example, EPA's Science Advisory Board (SAB) expressed its concerns about the "decreased trends in the funding of ecosystems research, decreased funding of the Science to Achieve Results (STAR) extramural and fellowship programs, and the elimination of the economics and decision sciences research program within ORD." Similarly, the American Association for the Advancement of Science (AAAS), expressed its concerns regarding the President's FY2008 request and the enacted appropriations. The EPA funding debate for FY2008 took place within the context of a larger discussion about the adequacy of federal funding for many "core" scientific research activities administered by multiple federal agencies, including EPA. Some Members of Congress, scientists, and environmental organizations have expressed concern about the downward trend in overall federal resources for scientific research over time. The debate continues to center around the question of whether the regulatory actions of federal agencies are based on "sound science," and how scientific research is applied in developing federal policy. (CRS Contact: [author name scrubbed]) .
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The Consolidated Appropriations Act, 2008 (P.L. 110-161) was the measure used by Congress and the President to wrap up action on the regular appropriations acts in late 2007. On December 19, 2007, Congress completed action on the act, and it was signed into law by President Bush on December 26, 2007. Previously, action had been completed on only one of the regular appropriations acts, the Defense Appropriations Act, FY2008 (P.L. 110-116) which was signed into law by President Bush on November 13, 2007. The Consolidated Appropriations Act, 2008 provides appropriations covered in the eleven outstanding appropriations acts. To ensure continuity of government operations, Congress had passed four continuing resolutions (P.L. 110-92, P.L. 110-116 Division B, P.L. 110-137, and P.L. 110-149) that provided funding for all agencies that had not received appropriations from the beginning of FY2008 through passage of the Consolidated Appropriations Act. The Bush Administration requested $142.7 billion in federal research and development (R&D) funding for FY2008. Total federal R&D funding for FY2008 provided in P.L. 110-161 and P.L. 110-116 is estimated to be $142.7 billion, a 1.2% increase over FY2007. FY2008 funding for the American Competitive Initiative (ACI) fell short of the President's ten-year doubling target for innovation-related research at the National Science Foundation (NSF), Department of Energy's (DOE) Office of Science, and National Institute of Standards and Technology's (NIST) core laboratory programs. It also falls short of the authorization levels set by Congress that put R&D funding for these agencies on a seven-year doubling pace. Funding for DOE's Office of Science increased by 5.8% in FY2008 to $4.0 billion. NIST's core laboratory programs increased 1.4% in FY2008 to $441 million. Total FY2008 funding for NSF was increased by 2.5%. NSF's research and related activities increased by only 1.1%, joining other R&D agencies (notably the Environmental Protection Agency (-2.4%) and National Institutes of Health (0.5%)) whose R&D budgets decreased or received increases below the rate of inflation. In total, DOE received $9.9 billion for R&D in FY2008, a 7.7% increase over FY2007, led by a 24.0% increase in its energy programs. Total funding for NIST increased by 11.7% in FY2008 to $755.8 million due in large measure to increases in its construction budget. NASA's FY2008 R&D budget increased to $12.8 billion, a 7.5% increase over FY2007, due primarily to increases in two initiatives: the international space station and the crew launch vehicle/crew exploration vehicle combination. FY2008 research, development, test, and evaluation (RDT&E) funding for the Department of Defense increased by 1.1%. DOD's science and technology research programs received $12.8 billion for FY2008, though DOD had requested $10.8 billion. DOD's request for a $3.9 billion RDT&E increase under its Global War on Terror initiative was not included in P.L. 110-116 or P.L. 110-161.
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Section 2 would have addressed the problem of regional shortages of petroleum and natural gas products by amending the Clayton Act to make it unlawful for "any person to refuse to sell, or to export or divert, existing supplies of petroleum, gasoline, or other fuel derived from petroleum or natural gas with the primary intention of increasing prices or creating a shortage in a geographic market." The provision set out the circumstances that were to be considered by a court in determining whether the actions made unlawful were done "with the intent of increasing prices or creating a shortage...." Sections 3-5 would have imposed review, reporting, and study requirements on the Federal Trade Commission (FTC), the Attorney General, and the Government Accountability Office (GAO). Section 3 would have required the FTC and the Attorney General, to (1) conduct a study of section 7 of the Clayton Act (15 U.S.C. § 18), the so-called antimerger section, in order to determine "whether [that] section ... should be amended to modify how that section applies to persons engaged in the business of exploring for, producing, refining ... or otherwise making available petroleum, gasoline or other fuel derived from petroleum or natural gas"; and, within 270 days of S. 2557 's enactment, (2) report to Congress the study's findings, "including recommendations and proposed legislation, if any." The report was to be based, in addition to the parties' own study of section 7 of the Clayton Act, on the Section 4-required GAO study. Section 4 would have required the GAO, within 180 days of enactment, to evaluate "the effectiveness of divestitures required under" consent decrees entered into within the past 10 years between either the FTC or the Department of Justice and "persons engaged in" the same segments of the petroleum or natural gas industries as those subject to study (as noted above) by the Attorney General and the FTC. The GAO study, was to have been submitted to Congress, the Attorney General, and the FTC, within 180 days of S. 2557 's enactment. Further, section 4 of S. 2557 would have required that the Attorney General and the FTC, in addition to reviewing the report for purposes of their report to Congress mandated in section 3(b) of S. 2557 , also "consider whether any additional action is required to restore competition or prevent a substantial lessening of competition occurring as a result of any transaction that was the subject of the [GAO] study...." Section 5 would have required the Attorney General and the FTC to establish a "joint federal-State task force" with any state Attorney General who chose to participate, to investigate information sharing (including [that facilitated] through the use of exchange agreements and commercial information services), among persons [described in the mandates for the above-cited studies, and] (including any person about which the Energy Information Administration collects financial and operating data as part of its Financial Reporting System). Section 6 would have created the "No Oil Producing and Exporting Cartels Act of 2006" ("NOPEC") as an amendment to the Sherman Antitrust Act (15 U.S.C. §§ 1-7) by inserting new provisions to make illegal, and an antitrust violation, actions by "any foreign state, or any instrumentality or agent of any foreign state, … to act collectively or in combination with any other foreign state, ... or any other person, whether by cartel or any other association or form of cooperation or joint action—" to engage in certain, specified actions with respect to natural gas or petroleum products, including those to (1) limit either "the production or distribution," (2) "set or maintain the price of," or (3) "take any [other] action in restraint of trade"— if any of those actions "has a direct, substantial, and reasonably foreseeable effect on" U.S. commerce. Pursuant to proposed section 8(c) of the Sherman Act, the doctrine of sovereign immunity would not protect any foreign state from "the jurisdiction or judgments" of U.S. courts in any action brought on account of conduct alleged to be in violation of the foregoing prohibitions. Proposed section 8(d) would prohibit use of the act of state doctrine as a court's rationale for "declin[ing] ... to make a determination on the merits in an action brought under this section." The final provisions of section 6 would add language to 28 U.S.C. § 1605(a), which lists exceptions to the Foreign Sovereign Immunities Act, to clarify that sovereign immunity does not apply in instances "in which [an] action is brought under section 8 of the Sherman Act." Technical matters concerning references to existing statutes or to statutory provisions (several of which have been renumbered in the past several years, including editorial renumbering after enactment) are best addressed by the Senate Office of Legislative Counsel. Similarly, that Office might also best provide U.S. Code citations to accompany the statutory section references so as to clarify exactly which provisions are being named, amended, or added. In addition, that Office's familiarity with legislative drafting considerations should enable them to suggest the most advantageous placement of proposed provisions. Making it unlawful for "any person to refuse to sell, export or divert, existing supplies of petroleum..." would likely be challenged by those who would note that the courts, beginning with the Supreme Court's 1919 decision in United States v. Colgate & Co., have long acknowledged the right of an individual businessman to do business, or not, with whomever he likes, and on whatever terms and conditions he deems acceptable: In the absence of any purpose to create or maintain a monopoly, the [Sherman] act does not restrict the long recognized right of trader or manufacturer engaged in an entirely private business, freely to exercise his own independent discretion as to parties with whom he will deal; and, of course, he may announce in advance the circumstances under which he will refuse to sell. Section 1 of the Sherman Act prohibits "contracts or conspiracies in restraint of trade" —in other words, collusion. Section 2 prohibits "monopolization" or "attempted monopolization"—which may entail unilateral, "guilty behavior" by either a would-be monopolist in his quest to become one (attempt), or an existing monopolist acting to maintain his monopoly position by other than the "superior product, business acumen, or historic accident" which served to create the monopoly in the first place. Presently, absent either the collusion (joint action) made unlawful by section 1 of the Sherman Act, or the "guilty behavior" which might constitute violation of section 2, there is not any statutory constraint on unilateral business decisions, and the courts have been reluctant to infer one. The Federal Trade Commission has released two reports—in July 2005 and March 2006 - concerning the gasoline industry. The former "analyze[d] in detail the multiple factors that affect supply and demand—and thus prices for gasoline ...; the latter, an interim report, was produced in response to Congressional directives, and outlines the Commission's rationale and methods for combining the mandated studies. Tasking the FTC with the study and reporting requirements contained in sections 3 and 4, in addition to those contained in other legislation, might result in the Commission's inability to conduct timely enforcement activities and/or continue its program to monitor "weekly average gasoline and diesel prices in 360 cities nationwide to find and, if necessary, recommend appropriate action on pricing anomalies that might indicate anticompetitive conduct." Provisions similar to the NOPEC provisions of S. 2557 , an apparent attempt to nullify the courts' refusal, in 1979, to sanction a suit against OPEC by the International Ass'n of Machinists and Aerospace Workers (IAM), would not necessarily accomplish the presumed goal of precluding OPEC's influence on gasoline prices. First, a provision that would add language to the Sherman Act to make certain actions unlawful under that statute, may be redundant: those actions taken abroad by a non-sovereign that have the requisite effect on U.S. commerce are already reachable under the U.S. antitrust laws, even absent specific statutory authorization. As stated by the United States Court of Appeals for the Second Circuit in 1945: We should not impute to Congress an intent to punish all whom its courts can catch, for conduct which has no consequences within the United States. American Banana Co. v. United Fruit Co., 213 U.S. 347, 357, .... On the other hand , it is settled law ... that any state may impose liabilities, even upon persons not within its allegiance, for conduct outside its borders that has consequences within its borders which the state reprehends; and these liabilities other states will ordinarily recognize. In addition, the Foreign Sovereign Immunities Act (FSIA) of 1976 contains a commercial activity exception to the general rule that a foreign state is protected from the jurisdiction of U.S. courts by the doctrine of sovereign immunity. There is no sovereign immunity, according to existing statute (28 U.S.C.A. § 1605(a)(2)), in circumstances in which the [judicial] action is based upon a commercial activity carried on in the United States by the foreign state; or upon an act performed in the United States in connection with a commercial activity of the foreign state elsewhere; or upon an act outside the territory of the United States in connection with a commercial activity of the foreign state elsewhere and that act causes a direct effect in the United States; S. 2557 , for example, would have stated specifically that actions brought pursuant to the Sherman Act do not trigger sovereign immunity, but the provision did not define OPEC as a "country" for purposes of the act; such a lack could present a problem for two reasons. The S. 2557 language did not, seemingly, add meaningfully to the general "commercial activity exception" language of FSIA. The IAM's unsuccessful attempt to use FSIA to sue OPEC for, inter alia , price fixing under the antitrust laws is a useful illustration; it foundered for reasons that do not seem to have been remedied by the bill's proposed statutory provisions. The district court found that because OPEC was not a country, FSIA was inapplicable, and no action could be brought against OPEC under it. Further, and perhaps more important, the court found that the "indirect purchaser" doctrine denied the IAM standing to sue (477 F.Supp. at 560-61). Congress has not granted indirect purchasers standing under the federal antitrust laws, although several states have done so with regard to their own antitrust laws. Although proposed section 8(e) of the Sherman Act would allow suits to be brought by the Attorney General, it would not alter a current prohibition on private actions—the indirect purchaser doctrine. Affirming the district court's dismissal of the IAM suit, the appeals court reasoning was based on non-FSIA, non-antitrust factors, and couched in language that does specifically mention the act of state doctrine, indicating the questionable effectiveness of proposed section 8(d)'s direction that courts not "decline, based on the act of state doctrine, to make a determination on the merits in an action brought on this section." While the case is formulated as an anti-trust action, the granting of any relief would in effect amount to an order from a domestic court instructing a foreign sovereign to alter its chosen means of allocating and profiting from its own valuable natural resources. On the other hand, should the court hold that OPEC's actions are [antitrust] legal this "would greatly strengthen the bargaining hand" of the OPEC nations in the event that Congress or the executive chooses to condemn OPEC's actions.
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This report addresses one of several approaches to the issue of rising gasoline prices put forward in the 109th Congress. S. 2557 was introduced on April 6, 2006, by Senator Specter, Chairman of the Senate Judiciary Committee, reported by that committee on April 27, but was not scheduled for floor action. The bill sought to amend the antitrust laws to accomplish four things. Mitigate regional shortages of petroleum and natural gas products Mandate federal agency reviews to (a) fine-tune the statutory provision most concerned with mergers (Section 7 of the Clayton Act, 15 U.S.C. § 18, which makes unlawful any merger or acquisition in or affecting commerce that may "substantially" lessen competition or "tend to create a monopoly" in any line or commerce in any section of the country) so that it would be particularly applicable to mergers in the oil and gas industry, and (b) examine the effectiveness of the divestiture remedy for mergers in that industry Establish a federal-state task force to examine information-sharing in the oil and gas industries; and Make U.S. antitrust law applicable to certain actions carried out by the Organization of Petroleum Exporting Countries (OPEC).
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In its quest to enhance the U.S. government's capacity to address future conflict settlements, the Bush Administration seeks congressional support for the establishment of a multi-component, civilian "ready reserve" for peacebuilding abroad. The Bush Administration is expected to present a concrete proposal for such a reserve in February 2008 with its FY2009 budget request. In his State of the Union address on January 23, 2007, President Bush invited the 110 th Congress to work with the Administration on the design and establishment of a volunteer Civilian Reserve Corps which would function "much like our military reserve." This Corps "would ease the burden on the armed forces by allowing us to hire civilians with critical skills to serve on missions abroad when America needs them," he stated. "It would give people across America who do not wear the uniform a chance to serve in the defining struggle of our time." On June 1, 2006, the Congressional Research Service held a workshop, entitled Civilian Forces for Stabilization and Reconstruction: U.S. Proposals and International Experience, in order to clarify the issues involved in forming such a reserve. The following report, first issued in 2006, summarizes the main points of workshop proceedings and concludes with a short discussion of related issues for Congress. It will not be updated. The lead speaker was Christopher J. Hoh, the Director for Response Strategy and Resource Management in the State Department Office of the Coordinator for Reconstruction and Stabilization (S/CRS). The Administration has tasked the S/CRS to develop the concept of a civilian reserve force that could rapidly deploy to conflict-torn areas to carry out state-building efforts. This is often referred to as a "surge capability." Personnel in such a force would include rule of law practitioners (police, judges, lawyers, prison administrators), civil administrators and governance experts (people with experience involving local and state government agencies) and infrastructure experts (e.g., civil engineers and planners). Mr. Hoh explained current State Department plans for a civilian reserve. These plans envision the civilian reserve as a group that would fill the gap between permanent U.S. government employees, who could be deployed immediately, and contractors, who take much longer to deploy. (Permanent government employees would be comprised of two groups, an active force of employees dedicated solely to such operations and a stand-by reserve of government employees who have volunteered to be detailed from their permanent jobs to such operations as needed.) Civilian reservists would be deployable within 30 to 60 days, mobilized as government employees, paid at a comparable level with government employees doing the same work and offered comparable incentives such as death and dismemberment insurance and diplomatic privileges, according to the Administration plans outlined by Mr. Hoh. They would be chosen for their expertise in the areas needed for "transitional security," rule of law, essential public services, and civil administration. They would be screened and trained for the capacity to work effectively from the very beginning of their assignment and to function in teams. Because they would be government employees, they would be accountable under U.S. government ethics laws and other regulations and could form part of the U.S. government management structure, e.g., supervising and managing permanent U.S. government employees and contractors. (Mr. Hoh did not provide an estimate of the number of reservists contemplated under current plans. The numbers contemplated by studies prepared for S/CRS are discussed in the " Related Issues for Congress " section, below.) Noting that the State Department had just received a lengthy report (of well over 600 pages) from BearingPoint, Inc. outlining detailed plans for a civilian reserve, Mr. Hoh stated that the Administration would consult with Congress on specific plans for the reserve once intra-executive branch consultations are completed. He said that the Administration would consult with Congress on issues regarding specific functional specialty areas (i.e., rule of law, civil administration, economic development), the types of situations in which the reserve should be deployed, and the period of time over which to build a comprehensive reserve force. Subsequent discussion centered on examining the lessons that the United Nations and others have learned in developing their own roster systems to deploy civilians to peace operations. The speaker from the United Nations was Catherine Rolland, Chief of the newly created Recruitment and Outreach Unit of the United Nations (U.N.) Department of Peacekeeping Operations' (UNDPKO) Personnel Management and Support Service. The Recruitment and Outreach Unit is responsible for the screening of candidates and the maintenance of a roster for U.N. peacekeeping and peacebuilding operations. There were also speakers from the two largest and most sophisticated national roster systems: Jens Behrendt, Head of Recruitment since 2003 at the Center for International Peace Operations (ZIF) in Berlin, a recruitment, training and analysis agency established by the German government, and Christine Vincent, Deputy Executive Director and Director of Operations at CANADEM, the Canadian-government funded recruitment and placement agency which she helped establish in 1997. (CANADEM is the official name of the agency, even though it appears to be an acronym.) These two agencies are government-established and funded, but independent. Neither country has a civilian reserve for stabilization and reconstruction (S&R) operations, such as that contemplated by the Bush Administration or by a Senate bill passed shortly before the workshop was held. (The Reconstruction and Stabilization Civilian Management Act of 2006, S. 3322 , passed by the Senate on May 26, 2006, but never considered in the House, would have provided for the continued development of an extensive expert civilian response capability for S&R activities as a core mission of the State Department and USAID.) Nevertheless, these two organizations recruit civilians from their respective countries to serve in peacekeeping and peacebuilding operations run by international organizations, such as the United Nations, the European Union (EU), and the Organization for Security and Cooperation in Europe (OSCE). Like the United Nations, ZIF and CANADEM pre-screen all candidates and they offer some level of training. (Details on the United Nations, ZIF, and CANADEM rosters can be found in the Table 1 at the end of this report.) While these agencies are not equivalent to the civilian reserve proposals currently under study in the United States, the recruitment and other problems they face may well have implications for the issues that the United States will confront in forming a civilian reserve. A fourth speaker knowledgeable about roster systems was Scott R. Feil, a retired U.S. Army Colonel and an adjunct research staff member at the Institute for Defense Analysis (IDA), a non-profit institute supporting the Department of Defense. He directed a forthcoming study for S/CRS on civilian post-conflict reserve forces which examined the roster systems of various international organizations and countries, as well as in the United States. Two other experts with experience in recruiting and screening civilian volunteers for post-conflict missions were invited to participate in the discussion following speakers' presentations: Elizabeth Anderson, Executive Director, and Michael Maya, Principal Deputy Director, of the American Bar Association's Central European and Eurasian Law Initiative (CEELI). CEELI deploys lawyers to post-conflict zones and new democracies in the Balkans and elsewhere to help establish or reestablish the rule of law. An underlying premise of the development of civilian rosters and reserves in that the quality of people who are deployed in post-conflict and other stability operations is crucial to their success. Mr. Feil stated that while he does not believe any study has yet been done measuring the effectiveness of personnel in post-conflict missions, he believes that such an evaluation would demonstrate that the more experienced, well-qualified people are more successful at their tasks than those less qualified. Participants discussed their organizations' experiences and methods for obtaining and retaining well-qualified people. As the purpose of creating a civilian roster is to provide the best possible person for a specific task in a foreign operation and usually within a short period of time, speakers agreed that proactive recruitment is necessary. According to participants, it is not enough to establish an online application website and to develop a roster based on those who apply. Even though many persons may apply, unsolicited, through an online application link, many may not be qualified. (Mr. Behrendt estimated that ZIF gets some 50 to 80 applicants a month for placement on the roster, and rejects some 60% to 70% immediately as unsuited to the needs of the requesting organizations.) Ms. Vincent of CANADEM said that targeted recruitment is essential to the development of a roster of well-qualified experts, an assessment in which others concurred. Mr. Behrendt described "head-hunting" as an important task of ZIF's six recruiters. One targeted recruitment method cited by CANADEM and ZIF is to build networks in professional communities. For example, CANADEM contacts professional associations in order to build networks. In the future, it may survey its expatriates in business and professional work for potential candidates. ZIF uses networks of Eastern European professionals to work where the Russian language is useful and is also looking to recruit among German Arabic speakers. Another recruitment method is through word-of-mouth contacts with well-qualified individuals: the recruiters request these individuals to recommend others who would be well-suited for such jobs. ZIF representatives talk to corporate leaders in order to persuade them to grant leaves of absence for overseas deployments that would allow qualified individuals to participate in peacebuilding missions. ZIF is also considering recruiting among its expatriate communities. Roster size and depth is also an important determinant in an organization or nation's ability to provide well-qualified people on short notice for specific missions. A sizable roster with some depth in each specialty was recommended by participants. Several participants noted that a large roster was needed, with several people who would be qualified for any one slot. Ms. Vincent stated that a large database increases the chances of being able to deploy a well-qualified person because, in CANADEM's experience, "really good people are not readily available quickly." Ms. Rolland stated that it is very difficult to recruit well-qualified people with the requisite language skills. Whether a roster is of adequate size to fulfill the needs of a particular nation or organization will depend on the number of those sent abroad. For example, CANADEM has drawn the 400 people it currently has abroad from a "core" roster of 4,000. (It considers these the most suited for missions, although its total roster numbers 7,600.) This is a ratio of 10 persons on the core roster to each person deployed. ZIF has a roster of 900 persons and has 200 persons deployed, for a ratio of 4½ to one. (The United Nations, which is making a concerted effort to increase its roster, has a ratio at this time of less than one on the roster to one deployed.) While sizable rosters are necessary, ZIF has decided to limit its roster to no more than 1,500 people. That, it believes, is the maximum number of participants that it can manage with its six recruitment officers, who also provide continuing points of contact for people deployed in the field and returnees. The purpose of continuing contacts is to provide the support necessary to encourage personnel on the roster to participate in future deployments. The ZIF representative also expressed concern that the lack of entry level positions was cutting off a potential source of roster recruits. Because Germany's domestic labor market is tight, ZIF receives a large number of applications from junior professionals. However, entry level positions in peacekeeping and peacebuilding operations are quickly disappearing and the greatest demand is for mature, mid-career professionals. Thus, bringing people in at an entry level and having them develop expertise on the job is difficult. Because ZIF and the other organizations usually limit their rosters to those with overseas experience, they may face a shortage of qualified professionals when current members begin to retire. Participants stressed the need to employ multiple layers of screening in order to ensure that only applicants who are well suited to the extraordinary demands and rigors of peacekeeping and related missions are placed on rosters. Such missions demand people who are not only experts in their fields, but who also have the interpersonal skills necessary to develop rapidly productive working relationships with people from varied cultural backgrounds. (Screening includes references checks and personal interviews, and in the case of ZIF, testing in a hostile environment (see below). See the Table 1 at the end of this report for details on CANADEM, ZIF, and U.N. screening processes.) Screening is used to identify those who seek and are well-qualified for the professional challenge that such positions entail, weeding out those merely looking for adventure or seeking to escape troubled personal lives. Even those recruited directly by an organization because of their expertise must be screened for their ability to withstand the physically demanding environments and psychologically taxing situations presented by such missions. People who are not fit for such missions can pose unnecessary risks to themselves, their colleagues, and others. Not only is intensive screening cited as important in mitigating the risks involved in sending unsuitable people to missions, but it is also necessary to ensure that personnel are able to fulfill their commitments. One speaker noted that two deployed persons had returned from missions in Sudan and the rural areas of Sierra Leone because they were unable to tolerate the situations. The speakers from the United Nations and CANADEM stated that their organizations are currently enhancing their screening efforts. Part of the improved U.N. screening system will enable potential applicants to make better decisions about whether they are suitable for a position by providing greater online information about the circumstances and requirements of a mission as part of the application information. The United Nations is also beginning to use technical experts to screen applications before applicants are included in the roster. CANADEM has also begun to establish a system to assess the performance of those it deploys in order to evaluate them for future deployments. Mr. Behrendt of ZIF stated that he thought it important to personally know each person on the ZIF roster. Ms. Vincent of CANADEM said that she knew everyone on the CANADEM roster when it listed 2,000 names, but knowing everyone personally was impossible when the roster grew far beyond that. The United Nations, ZIF, and CANADEM all offer some level of training to those going on missions. The U.N. training is generally provided in the field at the site of the mission. ZIF has the most extensive initial training, which it also uses as a screening mechanism in its recruitment process. ZIF applicants are required to take a two-week training program, of which four days are spent at a German Army base that requires them to work with police and military personnel. There, they are put through stressful situations that simulate a hostile environment. For instance, applicants must deal with passing through legal checkpoints and encountering illegal checkpoints. They must demonstrate that they can adapt to the sound of weapons fire. During their training ZIF observes whether they have the interpersonal skills and the capacity needed to deal with stress in a difficult mission. CANADEM views it as essential to provide training courses to those without any international experience. Those who have served in previous missions, however, are given predeployment briefings tailored specifically to their new mission. CANADEM is exploring the possibility of increasing the training it offers, and is considering online training. The discussion revealed some ambiguity regarding the extent to which participation in a peacekeeping/peacebuilding roster should be treated as a career path. The United Nations, CANADEM and ZIF representatives all felt that their organizations are in competition for qualified personnel with organizations that offer a career track in related areas, with benefits and incentives. Such competitors include the United National Development Program (UNDP) and other international or non-profit development agencies. This is especially true in cases where participants must quit their jobs in order to deploy. ZIF said that virtually all of those that it deploys must leave their jobs, while in the case of CANADEM this is less true as the Canadian government is disposed to granting leaves of absence for such experiences. Where leaves of absence are not available, participants are likely to extend their commitments or seek another position after their first assignment ends, making a de facto career of a patchwork of overseas deployments. Because of this competition, benefits such as health insurance and life insurance can be important recruitment assets. While Ms. Rolland judges the UNDPKO to have attractive benefits in this respect, CANADEM and ZIF are trying to secure higher benefits for those they send on missions. Follow-up work with those deployed and their families is necessary in order to encourage people to volunteer for future missions, according to Ms. Vincent. The psychological stress of missions on the deployed person and of the deployed person's absence on the family makes "reintegration work" necessary to retain people for second tours, others also observed. On the other hand, the speakers also cautioned against repeated redeployments to hostile situations, noting that working in abnormal situations can extract a psychological toll that is damaging for many people over the long run. The ZIF representative cautioned that at times roster participants showing signs of psychological fatigue had to be dissuaded from seeking an immediate new post-conflict posting after completing an assignment. While ZIF seeks a long-term relationship with the people on its roster, with people deploying to multiple assignments over a period of many years, it seeks to discourage applicants from viewing peacebuilding as a career or even as a source of employment for long periods of time, such as ten continuous years. According to the workshop discussion, determining the appropriate length for a deployment is critical. Even the best people are unlikely to be successful if their deployments are not long enough to build the relationships needed to perform a job adequately. In addition, much time is lost with shorter tours of duty as successive experts duplicate work which was done by a previous person. U.N. contracts are for six months, the length of the standard mission mandate, but are renewable as the missions are generally extended. Mr. Hoh of S/CRS stated that results improved during his tour in Bosnia as the lengths of time for which civilians were retained increased. Ms. Anderson of the ABA commented during discussions that the ABA asks for an initial commitment of one year and offers incentives for a person to remain for another year. Where that is not possible, the ABA tries to arrange for an overlap in order to eliminate duplication of effort. CANADEM and ZIF were both established by and continue to be funded by their respective governments, but both exist as autonomous non-profit organizations. Such arrangements are desirable, according to participants, because they allow the organizations to protect themselves from possible political demands, such as lobbying on behalf of the nominations or appointments of individuals for desirable posts. It also makes them less bureaucratic and able to respond more rapidly, according to the workshop discussion. In addition, CANADEM and ZIF enjoy continuity of managers and personnel, which would not be possible if they were government agencies whose personnel were secured by political appointments or diplomatic rotations. The major points emerging from the workshop raise questions of Congressional interest about the appropriate size, screening, and resourcing of a potential civilian reserve, and additional authorities needed. These questions are especially relevant when compared with the recommendations made by the S/CRS-commissioned BearingPoint study mentioned by Mr. Hoh. The workshop discussion squares with two conclusions of the BearingPoint study: first, that decisions on roster size must evolve over time, and second, that the S/CRS planned roster of 3,000 (according to the study) "is a fraction of what will ultimately be needed to fulfill the program's mission." The entire roster would be deployed if reservists were sent to two large and one small operations, according to BearingPoint estimates of the size of operations. The ratio could be as high as five persons on the roster to one person deployed if reservists were deployed to one small operation or during a year of small operations. Workshop discussion indicated that the BearingPoint ratio, which is about the same as the ZIF ratio and about half of the CANADEM ratio for its core roster, might well be workable for a small operation but problematic for larger and multiple operations. The BearingPoint study states that S/CRS will need to closely track deployment refusal rates as one determinant of optimal roster size. The IDA study contemplates a rule of law reserve of 6,000 people, including police units and judicial teams, and a civilian response corps of 2,500 in other specialities, according to Mr. Feil. In developing its concept, the IDA study looked not only at international rosters, including ZIF and CANADEM, but also several domestic models that are used for a variety of purposes. One that Mr. Feil pointed to as working well is the large online roster of the National Wildfire Coordinating Group, with some 75,000 firefighters available for national emergencies. Mr. Feil spoke highly of another as a possible model for a U.S. civilian reserve—one built on the concept of "directed overstrength" in local agencies, where U.S. government provides funding for or reimburses positions in non-federal agencies whose occupants could be called up when needed for deployments abroad. The emphasis placed by participants on the need to screen personnel, with special observation of their reaction to stress, raises the question as to whether the ZIF model might be more appropriate than the less extensive Bearing Point model. As noted earlier, ZIF screens applicants extensively, placing potential reservists on its roster only after they have successfully completed a training exercise that places them in stressful situations. The Bearing Point model recommends a written exam for applicants as a first screening step and an in-person evaluation relying on multiple screening methods. The BearingPoint model calls for four to six training events while reservists are in service: "baseline training, orientation, annual training, pre-deployment readiness, leadership training and in-country training." One question is whether baseline training should be made part of the screening process, before applicants are actually accepted into the reserve. The workshop discussion indicates that the most extensive training recommended by BearingPoint may well be desirable. There seemed to be a consensus that the longer deployments of a year or more are better than shorter ones. The BearingPoint study contemplates a standard maximum deployment length of one year in the field for most U.S. civilian reservists, with provisions for renewals. BearingPoint found that most participants in its focus groups would be willing to join a civilian reserve that required a commitment to deploy on one tour for a maximum of twelve months over a four year contractual period, although some were also interested in the possibility of extending tours and of additional deployments. The BearingPoint study states that "the experience of comparative organizations indicates that six months to one year as a standard tour length adequately satisfies the requirement for continuity of operations and the [critical] relationship building with local and partner organizations." (BearingPoint did recommend shorter three-to-six-month standard deployment commitments for law enforcement personnel, particularly constabulary police, because "performance can erode" over time in high threat environments. ) A one-year deployment length is consistent with current Administration thinking, which views the civilian reserve as an add-on to the force of permanent employees that fill the gap before contractors can be mobilized. Nevertheless, and despite the BearingPoint assessment that most potential reservists would be unwilling to sign on for longer than a one-year tour, the workshop speakers stress that the need for continuity of personnel may argue for a somewhat altered version of the model. One-year deployments may be adequate for most people in specialties where relationships are not crucial to success, such as infrastructure engineers and other more technical experts. Longer deployments may be considered, however, for positions and specialties where long-term personal relationships and mentoring are important for a successful outcome. Ms. Andersen of the ABA indicated that in rule of law areas involving the courts and rule of law reform, where relationships are crucial to success, tours of one year or more are desirable. (She noted that about one-half of those deployed on ABA missions volunteer for a second year.) Longer deployments may especially be needed when civilian reservists serve as managers or supervisors, as is contemplated by the proposal to activate them as federal employees. Further studies which test for the willingness of potential reservists in different specialties and at different levels of experience and pay to deploy for longer periods may be useful. Workshop discussion raises questions regarding the appropriate use of contractors. For the most part, CANADEM and ZIF rosterees are not government employees. Representatives from both organizations noted their consequent lack of control over deployed rosterees as occasionally problematic and one of the factors that make extensive screening necessary. According to the current civilian S&R deployment concept for the United States outlined by Mr. Hoh, federalized reservists would be deployed to cover the time "gap" before contractors could be deployed. Because the U.S. government similarly lacks control over contractors operating abroad on its behalf, policymakers may wish to consider whether the only factor to consider in choosing civilian reservists over contractors is relative deployment times. Reservists might be considered in circumstances where hostilities persist over a long period of time or where U.S. interests are particularly sensitive. Alternately, because deploying reservists for greater lengths of time would have implications for the size of the civilian reserve force, policymakers may wish to consider greater controls over deployed contractors and greater oversight over contractor rosters.
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The Bush Administration is expected to submit a proposal for a civilian reserve with the February 2008 budget request. On June 1, 2006, CRS gathered a group of experts on the recruitment and deployment of civilians to peacekeeping operations, now generally referred to by the broader term "stabilization and reconstruction" operations. The purpose of the three-hour workshop was to clarify issues that might be involved in the formation of a civilian reserve force for such operations. The Bush Administration is developing proposals for a civilian reserve. Shortly before the workshop was held, the Senate passed the Reconstruction and Stabilization Civilian Management Act of 2006 (S. 3322) to establish such a civilian reserve. The workshop began with a presentation by State Department official, Christopher J. Hoh, who explained Administration plans for a civilian reserve. As outlined by Mr. Hoh, these plans called for the creation of a reserve of civilians from the private and public sector to deploy with or soon after permanent government employees and before contractors. Reservists would train together with U.S. military and civilian government personnel before deployments, and would be mobilized as federal employees. They would be provided a range of benefits and incentives. The workshop included speakers from the U.N. and from two national agencies that recruit civilians for peacekeeping and related missions: the German Center for International Peace Operations (known by its German acronym, ZIF) and Canada's CANADEM, as well as from the Alexandria, VA-based Institute for Defense Analysis. The U.N., ZIF, and CANADEM all have rosters of professionals in rule of law and civil administration to send on missions. The rosters are not equivalent to the reserve force proposed by the Bush Administration or by a Senate bill (S. 3322), the Reconstruction and Stabilization Civilian Management Act of 2006, but all candidates are pre-screened and provided predeployment training. The recruitment and other problems they have faced may be similar to those that the United States may encounter if it forms a reserve. Participants pointed to several needs to attract and retain highly qualified people: (1) proactive recruitment methods; (2) in-depth screening; (3) sufficient training; and (4) retention incentives. To meet the needs of requester organizations, participants agreed on the need for (1) sizable rosters, (2) sophisticated databases, and (3) insulation from political pressures. To enhance the prospects for mission success, participants agreed that deployments should be set for at least a year in order to provide continuity. The workshop discussion raised several questions about the desirability of Bush Administration plans. Among the questions are whether recent plans and proposals on roster size and recommendations by a private firm regarding the screening process and deployment length are adequate. This report will not be updated.
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The passenger airline industry in the United States has gone through significant changes since deregulation in 1978. In domestic operations, airlines now have almost total freedom to determine which markets to serve and what airfares to charge. Competitive forces, as well as higher fuel prices and changing travel patterns, have placed the industry under financial pressure, as evidenced by numerous mergers and bankruptcies. To stay competitive and profitable, many airlines have joined alliances to expand their global reach and achieve economies of scale. At the same time, price competition has forced airlines to contain costs. One of the practices aimed at keeping costs competitive is the outsourcing of aircraft maintenance, repair, and overhaul (MRO), either domestically or to foreign countries. The practice of outsourcing aircraft maintenance is not restricted to U.S. passenger airlines. Many foreign airlines and cargo carriers also send maintenance work to outside service providers. This report focuses on U.S. passenger airlines because their outsourcing of maintenance, especially to foreign countries such as China and El Salvador, has generated specific concern among Members of Congress. This report analyzes trends in MRO outsourcing and explains the major factors contributing to them. It then considers safety consequences, employment effects, and regulatory implications of increased foreign maintenance of U.S. passenger aircraft. MRO includes four major types of activities: Airframe Heavy Maintenance . A detailed inspection of the airframe and certain components, including any applicable corrosion prevention programs and comprehensive structural inspection and overhaul of the aircraft. Heavy maintenance is comparatively labor-intensive. Engine Repair and Overhaul . Off-wing repair and replacement of parts to restore the engine to designed operational condition, following guidelines established by the engine manufacturer. Typically, the engine is disassembled and inspected; parts are repaired or replaced as necessary; and the engine is reassembled and tested. Engine MRO requires considerable technological sophistication. Component MRO . Repair and overhaul of components that provide the basic functionality for air flight, including aircraft control and navigation, communications, cabin air conditioning, electrical power, and braking. Line Maintenance . Light, regular maintenance checks carried out to ensure that an aircraft is fit for flight. Line maintenance includes troubleshooting, defect rectification, and overnight maintenance. According to data reported to the U.S. Department of Transportation (DOT), aircraft maintenance typically accounts for nearly 10% of U.S. passenger airlines' operating costs (see Figure 1 ). The 10 major U.S. passenger airlines reported collective maintenance expenses of $10.2 billion in 2008 and $10.1 billion in 2009. Prior to 2001, most U.S. airlines performed the majority of their aircraft maintenance work in-house. The percentage of work outsourced, in terms of maintenance dollars, has increased from approximately 20% in 1990 to over 44% in 2011 (see Figure 2 ), according to the Bureau of Transportation Statistics (BTS). According to press reports, Northwest Airlines (before it was acquired by Delta), United Airlines, Delta Airlines, and U.S. Airways all eliminated their in-house heavy maintenance capabilities through bankruptcy restructurings. Nine major carriers studied by the Department of Transportation's Office of Inspector General (DOT OIG) sent 71% of their airframe heavy maintenance to outside repair stations in 2007, up from 34% in 2003. Foreign repair stations performed 27% of outsourced airframe heavy maintenance in 2007, up from 21% in 2003. These figures imply that the share of all airframe heavy maintenance performed at foreign facilities rose from 7% in 2003 to 19% in 2007. BTS does not have more detailed data on MRO outsourcing, and does not report the shares of outsourced work sent to third-party service providers in the United States as opposed to foreign locations. Based on research of maintenance contracts, a 2009 presentation by TeamSAI Consulting (the consultancy arm of SAI Engineering, a major MRO provider) indicated that North American MRO outsourcing trends were similar to worldwide behavior: a significant amount of heavy airframe and engine work is done by outside MRO providers; line maintenance is still mostly kept in-house, but outsourcing is beginning to rise; maintenance work that requires significant labor input or capital equipment is more likely to be outsourced; the majority of aircraft engine work, which tends to be more technologically demanding, either stays in North America (84%) or is sent to Western Europe (13%), whereas heavy maintenance, which is more labor-intensive, is more likely to be offshored, particularly to Asian and Pacific countries, including China (see Figure 3 ). The Aeronautical Repair Station Association (ARSA), an industry association, stated in a study that North America was a net provider (exporter) of aircraft MRO services in 2008, with a $2.4 billion trade surplus. According to ARSA, North America had a positive balance of $1.4 billion in engine overhaul and a $1.2 billion positive balance in component maintenance, offset slightly by a small negative balance in heavy airframe MRO. All airlines outsource some of their aircraft maintenance. Some newer carriers have outsourced a large part of their maintenance. Airframe heavy maintenance, which tends to be labor-intensive and requires substantial investments in maintenance facilities and equipment, appears more likely to be outsourced. The share of passenger carrier MRO that is outsourced seems likely to grow, as American Airlines, which has performed most of its maintenance work in-house, is outsourcing some heavy maintenance previously performed at company-owned facilities in Oklahoma and Texas, involving the elimination of approximately 2,000 jobs. Much of this work was transferred to domestic third-party vendors, but some will be performed by HAECO, an MRO based in Hong Kong. The impact of offshoring of MRO on U.S. employment is unclear. According to BTS data, the number of maintenance jobs at passenger carriers peaked at 72,211 in 2000 and fell to 50,580 in 2011. Over the same period, total employment at U.S. airlines fell from 679,723 to 538,300 (see Figure 4 ). The rate of maintenance employee reduction appears to be in tandem with the decrease in total airline employee count, suggesting that airline maintenance workforce reduction seems to reflect the overall employment trend in the passenger airline industry. Another contributing factor could be that the U.S. commercial air carriers are reducing their fleet size and replacing older and less efficient aircraft with more technologically advanced ones, in the face of uncertain economic conditions and rising fuel prices. The mainline carrier fleet, passenger and cargo aircraft combined, stood at 3,739 aircraft at the end of 2011, 16.7% fewer than in 2000. Meanwhile, the regional carriers continue to reduce their fleet of 50-seat and smaller aircraft. In 2011, the regional carrier fleet was reduced by 46 units to 2,567 units, its lowest level since 2003. From 1990 to 2011, airline maintenance workers accounted for about 10% of the total workforce in the passenger airline industry, in a fairly consistent fashion. During the recession in 2009, total airline workforce as well as airlines' MRO employment dropped to the lowest points in many years. Given the increased use of outsourcing, it seems likely that new jobs at maintenance companies unaffiliated with airlines have made up for at least some of the decline in airlines' employment of maintenance workers. Neither BTS nor the U.S. Bureau of Labor Statistics (BLS) compiles data on employment at third-party providers of maintenance for passenger airlines. BLS has a category called "Other Air Transportation Support Activities," which includes employment beyond passenger airline maintenance workers. The employee count in this group was more than 96,500 in 2011, having increased slightly since 2009. There are multiple factors behind airlines' use of foreign maintenance providers. The most commonly mentioned is cost savings from sending MRO work to lower-wage countries such as China and El Salvador. While this is generally true, there are other factors influencing airlines' decision to perform MRO in other countries, including changes in route structures and the increasing availability of MRO services in emerging economies. Although information regarding industry-specific MRO labor costs in various regions and countries appears to be very limited, a recent study in Journal of Aviation Technology and Engineering offers a brief comparison of labor costs in the United States and Central America: With foreign labor costs less than 50% of those in the U.S., it is easy to see that many air carriers have shifted their HMV (heavy maintenance visits) to overseas providers, with estimated savings at $1 million per aircraft each year.... In 2008, starting pay at Aeroman [an MRO provider in El Salvador] was approximately $4,500 per year with veterans earning approximately $15,000. That compares to the U.S. average of $52,000.... Narrow body HMV work tends to stay in the Western Hemisphere, with MRO providers in Central America playing a significant role; lower labor costs and shorter ferry flights contribute to cost savings. Hiring out MRO enables airlines to avoid significant capital investment in facilities, equipment, and inventories of parts and components. For example, Aeroman has four hangars to accommodate 11 production lines for narrow-body aircraft. Its 564,000-square-foot facilities are housed in steel-framed concrete walls with fire protection systems. In addition, the heavy equipment, work stands, test tools, support equipment, and other items all demand a considerable outlay of capital. The Chinese MRO sector seems to have benefited substantially from significant investment by the state, for example, newly built or upgraded airports with expansive hangers for maintenance and repair work. In 2010 alone, the Chinese government invested over Rmb 64.6 billion yuan (approximately $9.5 billion) in its civil aviation system, including over Rmb 44 billion yuan (approximately $6.5 billion) in airport construction and expansion. In the past few decades, international air travel has grown considerably, with population growth, rising income, and the global expansion of business and travel. The aerospace industry has contributed to the fast expansion of global aviation networks by designing and manufacturing bigger and more efficient aircraft capable of flying longer distances. Meanwhile, the real cost of air travel has been reduced by more than 60% between 1970 and 2010, through deregulation of the aviation market and the emergence of low cost carriers. Nowadays it is more affordable for more of the world's population to travel by air. In 2010, the global passenger air travel network consisted of over 1,500 airlines, a total fleet of nearly 24,000 aircraft, and nearly 4,000 airports with scheduled commercial flights. International air travel in and out of the United States more than doubled between 1990 and 2011. In 2011, U.S. airlines operated a total of 830,600 international flights, carrying 92.5 million travelers. The expansion of route networks around the globe made aircraft MRO in foreign countries simpler and less expensive by making it convenient for airlines to use foreign maintenance bases without incurring additional costs for ferrying aircraft. It also made foreign MRO necessary, at least with respect to emergency repairs, as international airlines need some ability to have maintenance work performed at all airports they serve. Global aircraft MRO is estimated to be a $50 billion market in 2012. Engine MRO remains the largest segment, accounting for over 45% of the total MRO value, followed by component MRO (over 19%), line maintenance (nearly 18%), and HMV (nearly 18%). Regionally, North America and Europe are the largest MRO markets, representing a combined share of over 57% of the total market. The Asia-Pacific region including China, which represented approximately 25% of the global MRO market in 2008, is the fastest-growing segment and projected to command 30% of the entire MRO market in 2013. In terms of global MRO service providers, approximately 42% of the MRO market share is taken by OEMs, including leading aircraft manufacturers (Boeing and Airbus) and primary aircraft engine OEMs (GE Aircraft Engines, Pratt & Whitney, and Rolls-Royce PLC). These three OEMs manufacture civil aircraft engines for most Boeing and Airbus aircraft as well as for Bombardier and Embraer regional jets. They also provide engine overhaul, repair, and fleet management services, as well as technical training. The leading OEMs have established a strong presence in fast-growing aviation markets such as China. Major airlines and their MRO subsidiaries, such as Air France/KLM and Lufthansa Technik, have 49% of the MRO market, and the remaining 9% is taken by third-party providers such as TIMCO and TAECO (see Text Box ). Between 2000 and 2010, the commercial airline fleet in China more than doubled to over 1,300 airplanes and the number of passengers soared from 83 million to 202 million, at an average annual growth rate of over 10%. Between 2010 and 2028, Chinese airlines are expected to purchase 3,770 new airplanes, with a market value of $400 billion, according to Boeing's Commercial Market Outlook 2012 . The MRO sector in China has grown along with the airline industry. The Civil Aviation Administration of China (CAAC), which oversees the country's aviation system, has encouraged the growth of the MRO sector with government investment and other state incentives. In June 2011, CAAC issued a document to guide the development of China's MRO sector through 2016. According to this document, there were 389 aircraft MRO companies in China at the end of 2010, more than 30 of which were certified by the U.S. Federal Aviation Administration (FAA), the European Aviation Safety Agency (EASA), or both. As of the same date, 331 foreign repair providers had received certification from China, which enables them to work on airplanes operated by Chinese air carriers. There were a total of 104 hangars in China, able to accommodate more than 360 wide- and narrow-body aircraft for maintenance and repair. In 2010 the Chinese MRO sector had about $2.3 billion in revenue, nearly 5% of the global total. However, Chinese companies had less than 25% of their own domestic market, based on annual revenues, because many of these Chinese companies lack technological or engineering sophistication needed to handle high-value and more sophisticated MRO projects, such as engine work. Chinese air carriers, the document noted, have to send about 70% of their engine overhaul to foreign-owned companies every year. The CAAC document also indicates that MRO professionals are in short supply in China's civil aviation sector, which would need at least 24,000 more technicians by 2015. Furthermore, there appears to be a significant knowledge and experience gap in existing MRO employees, many of whom are relatively young with inadequate work experience. In addition, there is a serious shortage in inspectors overseeing their work and ensuring work quality. With 212 inspectors overseeing some 42,000 MRO technicians, the ratio is approximately 1 inspector for every 200 maintenance technicians. By the end of 2010, there were 44 MRO training schools certified by the government. Major foreign OEM and MRO companies doing business in China, such as Boeing and Airbus, provide training to aircrew, cabin crew, and maintenance technicians, some from outside China. For example, Boeing Shanghai Aviation Services Co. Ltd. (Boeing Shanghai), a joint venture with China Eastern Airlines and the Shanghai Airport Authority, is an MRO center performing line maintenance, heavy maintenance, and airframe modifications, as well as upgrades of airplane interiors, avionics, and in-flight entertainment systems. In cooperation with Chinese airlines, CAAC, and industry, Boeing has provided professional training to nearly 40,000 Chinese aviation professionals since 1993. The training provided by foreign OEMs has helped to improve the skill levels of Chinese aviation professional and maintenance workers, some of whom service U.S. aircraft. In June 2012, Boeing announced plans to expand training capacity at its Boeing Shanghai Aviation Services campus to include the addition of a program to train workers to maintain its new 787 Dreamliner. Another leading MRO company in China, Aircraft Maintenance & Engineering Co. (AMECO Beijing), was established in 1989 as a joint venture between Air China Ltd. and Lufthansa Airlines. AMECO Beijing provides MRO services for airframe, engines, and components, as well as services in training, engineering, and logistics. Another major China-based global MRO provider is Taikoo Aircraft Engineering Company (also known as TAECO). The company is based at Gaoqi International Airport in the Chinese city of Xiamen, with a 58.55% stake controlled by Hong Kong Aircraft Engineering Co. (also known as HAECO). TAECO's customers include American Airlines, Delta Airlines, FedEx, Air Canada, Korean Air, and Deutsche Lufthansa AG, British Airways, and Air France/KLM. Work performed at a TAECO facility raised safety concerns in November 2011 after about 30 screws were found missing from a large protective panel on an Air France Airbus A340 wide-body jet after it had undergone routine maintenance in China. An Air France union spokesperson, reportedly, indicated that there had been another incident in 2010 when "a Boeing 747 was grounded after undergoing maintenance in China because parts of the plane had been painted with flammable paint." On December 1, 2011, Air France announced that an investigation was under way and that it had stopped sending aircraft to TAECO, which had been providing maintenance service to 10% Air France's long-haul fleet. Although El Salvador is a comparatively small country, it plays a significant role in the maintenance, repair, and overhaul of U.S. airliners. Its relative proximity to major airline hubs in the United States has contributed to its growth as a major repair center for narrow-body jets. There are three FAA-certified repair stations in El Salvador. The TACA International Airlines repair facility at its San Salvador hub employs almost 500 personnel, including 61 FAA-certified mechanics as well as 116 mechanics not certified by the FAA. AvioTechnology is a small facility with five employees, including two FAA certified mechanics, that specializes in installing remanufactured aircraft brakes and wheels. Aeroman is major repair and overhaul facility that employs more than 1,800, including 143 FAA-certified mechanics and 1,125 mechanics that are not FAA certified. Aeroman, 80% owned by the bankrupt Canadian company Aveos Fleet Performance Inc., provides a broad array of MRO services for U.S. air carriers, including Southwest Airlines, JetBlue, and US Airways. It has been certified as a repair facility by FAA since 1992. Aeroman has been the subject of press attention because of its rapid growth as a provider of contract maintenance service to U.S. airlines. In October 2009, National Public Radio (NPR) examined Aeroman as part of a series on airline maintenance offshoring practices, and in May 2011, KIRO TV in Seattle, WA, reported on alleged deficiencies and errors at Aeroman. Both investigations highlighted incidents involving improper installation of door components and seals and improper wiring. A door seal component installation error traced back to Aeroman was discovered on a US Airways aircraft in flight in January 2009 and resulted in FAA-issued violations against both US Airways and Aeroman for lapses in maintenance and oversight. The wiring errors involved two aircraft whose engine monitoring gauges were cross-wired, so the reading from the right engine showed on the gauge for the left engine and vice versa. Such an error could cause a pilot to shut down the wrong engine if engine trouble was suspected. No additional incidents involving Aeroman maintenance have been reported in the media. Aeroman employees interviewed by KIRO TV in 2011 stated that newly hired mechanics at Aeroman make about $2 per hour, while mechanics with a decade of experience earn about $5 per hour, which is regarded as a high-paying job in San Salvador. Employees estimated that roughly 40% of maintenance workers at Aeroman are fluent enough in English to read and comprehend aircraft maintenance manuals. Workers complained about time pressures, poor training, and inexperience, although one expert pointed out that similar complaints are commonplace in the industry and not unique to Aeroman. Similarly, Aeroman employees interviewed by NPR in 2009 had expressed concern over time pressures, use of improper parts, improper storage of materials such as glues, and lack of English proficiency among workers. Aeroman CEO Ernesto Ruiz countered that his company has provided its customers with high-quality, on-time service, and that airlines would not contract with facilities "where quality is not a guarantee." Foreign repair stations have been the subject of safety concerns at least since 1995, when the crash of a U.S. passenger plane was attributed to faulty repair work undertaken abroad (see Text Box ). The issues raised have included quality control procedures; the level of regulatory oversight; mechanic pay, skill, training, and experience; the degree of qualified supervision; the lack of English language skills or requirements to read and comprehend maintenance manuals; and the absence of drug and alcohol testing programs on par with those required at U.S. repair stations. Airlines have an interest in making sure that outsourced maintenance is of the highest quality to avoid costly delays and cancellations. Moreover, airlines and aircraft repair service providers assert that the high economic value placed on safety in the airline industry is by itself sufficient incentive to promote high-quality performance among foreign repair stations that maintain U.S. air carrier aircraft. Airlines for America, the advocacy organization for major U.S. air carriers, cited NTSB data showing that, as U.S. airlines have increased their maintenance outsourcing to global providers, "maintenance as a probable cause [of accidents] declined from 0.05 per 100,000 departures to absolute zero in recent years. The industry's safety record remains unmatched; no evidence indicates that offshore MRO services are unsafe or insecure." The group has released data showing that maintenance-related accidents have declined since 1997 despite increased outsourcing of maintenance (see Figure 5 ). This position is supported by a comprehensive research study that failed to find any relationship between airline maintenance outsourcing rates and aircraft accident and incident rates from 1996 to 2008, although the study did not specifically differentiate between domestic outsourcing and offshoring. However, some safety experts caution that the absence of a link between outsourced maintenance and safety is not conclusive evidence that offshoring maintenance work does not have safety implications. Experts point out that FAA does not track in detail where airline aircraft are maintained and exercises limited oversight of foreign repair stations. Former NTSB board member John Goglia, a long-time critic of cost cutting in airline maintenance, recently expressed particular concern that much critical maintenance work continues to be performed with little FAA review, particularly unannounced inspector review, and this is especially the case at foreign repair facilities. Statistical analysis of the relationship between airline service reliability and maintenance outsourcing also is inconclusive. In 2007, Consumer Reports magazine reported a steady increase in both outsourced maintenance and the number of airline flight cancellations from 2002 through 2004, but did not specifically differentiate between domestic outsourcing and offshoring. The report also provided data pointing toward a correlation between outsourced maintenance and airline-caused delays among 14 major U.S. air carriers in 2005. Based on these data alone, it is not possible to assess whether maintenance outsourcing was a direct cause of cancellations and delays, as airlines may have implemented other cost-cutting measures, such as reducing ground crews, which also may have contributed to delays. In contrast, Airlines for America points to Boeing data showing that U.S. airlines' operations utilizing Boeing commercial jets have improved their mechanical dispatch reliability, an indicator of the effectiveness of airline maintenance programs, from about 98.1% in 1991, to between 98.9% and 99.0% in 2008 and 2009 (see Figure 6 ). While the data show relatively consistent improvement in airline maintenance reliability over the past three decades, the exact relationship between outsourcing practices and maintenance dispatch reliability over time is unclear because of cyclical fluctuations in the data that are most likely attributable to the aging of the fleet and the somewhat periodic or cyclical nature of airline fleet replacement programs. Moreover, improved reliability of newer aircraft may be the primary factor influencing dispatch reliability and may mask any trends related to outsourcing practices. Maintenance of U.S. air carrier aircraft at both foreign and domestic locations is subject to regulation and oversight by FAA. Repair stations are regulated under Title 14 Code of Federal Regulations, Part 145, and thus, FAA-certificated repair stations are sometimes referred to as Part 145 repair stations. To be certified under Part 145, a repair station must develop FAA-approved documentation and processes, including quality control procedures and training programs. FAA may also approve foreign repair stations based on a foreign certification issued by a country that has a bilateral aviation safety agreement with the United States. From a regulatory standpoint, FAA reviews and recertifies foreign repair stations annually, or in some cases every two years, whereas domestic repair stations can retain their certification indefinitely unless FAA is prompted to suspend or revoke it based on specific safety concerns. While FAA establishes requirements for foreign repair stations, much of the direct oversight to ensure compliance is conducted by foreign regulatory entities under bilateral agreements and a multilateral agreement with the European Union. A summary of key differences in FAA regulatory requirements for domestic and foreign repair stations is presented in Table 1 . Thus, regulatory requirements for foreign repair station certification are somewhat more stringent than those for domestic repair stations, although foreign repair stations do not have the same requirements as U.S. repair stations with respect to certification of supervisors and individuals authorized to sign off on work performed and return aircraft to service. Moreover, there are concerns that FAA's resources and capabilities to inspect foreign repair stations are spread thin. FAA has 10 international field offices and units, although only 2 (Frankfurt and Singapore) are physically located outside the United States. Collectively, these 10 offices house about 100 inspectors who have primary oversight responsibility for almost 700 foreign repair stations in addition to overseeing foreign air carriers that operate flights to the United States. In total, FAA employs about 4,100 inspectors, so the number of inspectors dedicated full time to oversight of foreign entities, including foreign repair stations, constitutes only a small percentage of the total FAA inspector workforce. FAA inspectors who oversee air carrier maintenance are also responsible for ensuring that work contracted to third parties, including foreign repair stations, adheres to applicable regulations and FAA-approved air carrier procedures. In 2008, the DOT OIG found that FAA's system for determining where to target inspections was inadequate, relying too heavily on incomplete voluntary air carrier reporting of maintenance outsourcing and air carrier audits that varied considerably in their quality and completeness. In particular, the DOT OIG found that FAA was over-reliant on air carriers' initial audits of repair stations to approve substantial maintenance providers for use by air carriers. The DOT OIG found that, in some cases, more than five years passed from the time a facility was first approved for air carrier use until inspectors responsible for overseeing a specific carrier's maintenance programs conducted an inspection. With regard to maintenance work sent to foreign repair stations, the DOT OIG also raised concerns regarding logistical challenges and procedural and cultural barriers that may limit the effectiveness of FAA inspector oversight activities in foreign countries. The DOT OIG noted that the time-consuming process of obtaining visas and other clearances to travel to foreign facilities often gives these facilities several months' advance notice of an upcoming inspection, thus giving foreign repair stations considerable forewarning and thus making it impossible to conduct surprise inspections. The DOT OIG specifically highlighted concerns over the imbalance in FAA inspector staffing, particularly in light of the increasing trend among airlines to outsource maintenance, often to overseas facilities. In 2007, the DOT OIG concluded that FAA still needed to develop an effective process for placing its inspector workforce where it is most critically needed, despite language in the 2003 FAA reauthorization act directing FAA to revamp its inspector staffing model. In April 2012, the DOT OIG reported that, while FAA had implemented a new risk-based system for targeting its repair station surveillance activities following the DOT OIG's 2007 report, the system is being applied inconsistently by FAA inspectors, and surveillance at foreign repair facilities lacked the rigor needed to identify deficiencies and subsequently verify that corrective actions had been taken. The DOT OIG also found that systematic problems it previously identified still persist, including inadequacies in mechanic training, outdated tool calibration checks, and inaccurate work documentation. These concerns are not unique to foreign repair stations, as they were observed at domestic repair stations as well. Foreign regulatory agencies serve a crucial role in the oversight of maintenance performed on U.S. air carrier aircraft overseas. Under reciprocal bilateral aviation safety agreements, FAA delegates some routine inspection functions to the foreign regulator, and FAA is granted negotiated rights to review the foreign regulator's audit and inspection findings. The United States currently has in place about 28 bilateral aviation safety agreements, mostly with European countries. In addition, the United States has entered into a comprehensive multilateral agreement with the European Union (EU) that took effect in May 2011 and includes a detailed annex that provides a structure for coordination of maintenance oversight between the United States and EU member countries. Similarly, the United States and Canada have had formal procedures governing the coordination of repair station oversight in place since 2000. Other countries, including El Salvador and China, however, do not have formal aviation safety agreements in place with the United States. While these countries provide their own regulatory structure for repair stations, these measures are not formally recognized by the United States and FAA primarily relies on its own oversight to monitor safety compliance among these facilities. In 2007, the DOT OIG had found that in some cases where foreign authorities conducted inspections under reciprocal agreements with FAA, FAA was often not provided with sufficient information to determine what inspections covered, what deficiencies were found, and what corrective actions were recommended or made. In many cases, the DOT OIG concluded that inspection documentation was incomplete or incomprehensible, and that foreign inspectors in Europe often focused only on European regulations and not on FAA requirements, missing deficiencies such as FAA-specific tool calibration requirements and prohibitions on subcontracting to facilities that were not FAA-certified. In some cases, inspection documents were not provided in English and FAA had not assigned inspectors fluent in the foreign language used, in these cases French, to review the documents. The DOT OIG concluded that FAA could not adequately verify that inspections conducted by foreign authorities on its behalf ensured that these facilities met FAA standards. It has not reported on whether these problems have been adequately addressed over the past decade or how relations under the recent aviation safety agreement between the EU and the United States have served to address these concerns. Provisions in the 2012 FAA reauthorization act ( P.L. 112-95 ) address concerns over bilateral aviation safety agreements with respect to FAA inspection authority. Specifically, the act requires FAA to ensure that foreign repair stations are subject to appropriate inspections consistent with existing U.S. requirements and that agreements with foreign aviation authorities or other foreign government agencies provide an opportunity for FAA to conduct independent inspections of foreign repair stations when warranted by safety concerns. Additionally, the act requires FAA to conduct annual inspections at all foreign repair stations consistent with obligations under international agreements. Airlines normally conduct rigorous reviews and inspections of contract repair shops as a condition of awarding contracts and on a continuing basis to ensure safety standards stipulated in these contracts are maintained. Airline oversight of contract repair facilities includes detailed preliminary investigations and on-site visits prior to contract awards, periodic on-site inspections and audits, and continuous monitoring of ongoing repair work by on-site air carrier representatives. FAA relies on air carriers to provide oversight of contracted repair stations as part of their overall safety programs. However, in 2008 the DOT OIG found that two of nine major air carriers did not document their spot inspections of repairs and had no method for ensuring corrective actions were taken or tracking trends in repair station errors. Presence of air carrier on-site personnel on the hangar floor observing contract repair operations ranged from 35% to 70% of the time. The number of personnel also varied considerably, ranging from 3 on-site monitors from one carrier to 22 from another at repair stations examined in the DOT OIG audit. DOT OIG recommended that FAA establish formal procedures for air carrier personnel to document their observations and share them with FAA inspectors. Airframe, engine, and aircraft component manufacturers have a regulatory responsibility to disseminate information regarding the maintenance of their products to assure that they can continue to be operated in an airworthy manner. Recently, manufacturers have taken a more direct role in MRO by establishing global MRO networks. For example, Airbus has established a worldwide MRO network that includes 18 repair stations in Europe, the Middle East, and Central and South America. The network currently includes many foreign repair stations that contract to U.S. air carriers including Aeroman in El Salvador, as well as Hong Kong Aircraft Engineering Company (HAECO), TIMCO Aviation Services in the United States, Lufthansa Technik AG, and Mexicana MRO Services. Boeing is a joint venture partner in Boeing Shanghai Aviation Services, mentioned above, and is currently developing a similar joint venture with Air India in Nagpur, India, that is scheduled to open in 2013; it is unclear whether this facility will service U.S. air carrier aircraft. Similarly, Boeing is working with both U.S. carriers and foreign airlines to adopt its "GoldCare" and "Boeing Edge" lifecycle management and maintenance programs using Boeing-selected MROs. Similar trends are taking place among engine manufacturers. For example, Lufthansa Technik and GE Aviation announced a long-term material service agreement in October 2012. GE already maintains an extensive MRO network overseas, with an extensive presence in Asia and Europe. Similarly, in 2010, Pratt & Whitney and Turkish Technic launched Turkish Engine Center (TEC) in Istanbul as a joint venture for engine MRO. The larger role played by airframe and engine manufacturers in MRO around the world may eventually lead to the emergence of large specialty centers for MRO and greater standardization of global services. This could have broad implications for U.S. air carrier maintenance, including the potential for increased offshoring if maintenance practices and quality of service become increasingly standardized throughout the world. Some independent MROs are expressing concern that manufacturers' forays into maintenance operations are making it increasingly difficult for MROs that are not partnering with the manufacturers to access technical data and parts for aircraft that they service. These ongoing changes in the MRO industry on a global scale will likely have important implications for the role of regulators. For example, FAA now focuses on airlines' maintenance activities in conjunction with its oversight of their air carrier certificates. If airlines continue to outsource both maintenance and now the management of that maintenance, the focus of FAA's oversight on airline practices may not be the most appropriate model moving forward. Considerable concern has been raised in the media regarding pay rates for foreign repair station workers, particularly those located in Latin America. For example, it has been reported that at Aeroman in El Salvador new workers start at about $4,500 annually and experienced mechanics make about $15,000 per year. However, another source indicates that hourly rates charged for skilled mechanics across Central America are considerably higher, averaging $36 per hour, but still considerably below comparable wages in the United States of $53 per hour. Moreover, comparing these figures to U.S. salaries is misleading without additional consideration of the relative purchasing power of these wages. In 2010, per capita gross domestic product in El Salvador, adjusted for purchasing power parity (PPP), was around $7,500, compared to $47,800 in the United States. In other foreign hubs for MRO activity, wages for aircraft maintenance workers are higher, but do not appear to fully compensate for higher living costs. For example, in Singapore, the median annual wage for aircraft engine mechanics was roughly $31,600 in 2010. However, PPP adjusted per capita GDP in Singapore was $57,900, considerably higher than the United States. While wage imbalances pose significant challenges for U.S. workers competing in a global marketplace for skilled work as airline mechanics, jobs at foreign repair stations would appear to be sufficiently high paying on a comparative basis to attract considerable competition in local and regional job markets, particularly in Latin American countries. This may not, however, always hold true in high-growth Asian countries, such as Singapore, where advanced technical skills are in high demand in other fields that may compete for top talent and offer higher wages. From a safety standpoint, the skill and experience of maintenance and repair workers at foreign MROs is a greater concern. In at least some countries, significant growth in MRO employment has been supported by the availability of technical training to develop a skilled labor force. For example, in El Salvador, the Universidad Don Bosco began offering a certificate program in aviation maintenance approved by El Salvador's Civil Aviation Authority in 2005. However, Aeroman workers told investigative reporters that much of the hard labor is done by young workers with minimal education and that some jobs go to unqualified members of politically connected families. The workers also commented that they personally could do a better job if the company allowed them to get certified. Some aspects of aircraft maintenance, notably engine maintenance, require comparatively advanced technical and engineering skills. These appear to be in shorter supply in some other countries than in the United States. While airlines in many countries appear to be offshoring routine maintenance and overhaul to foreign countries where labor is comparatively cheap, the United States appears to enjoy an advantage in advanced maintenance capabilities in the globalized MRO marketplace. This advantage could erode in the future if offshore maintenance centers in Asia and Central America begin to invest more heavily in advanced technical training. Although mechanics that are not certificated by the FAA can work on U.S. civil aircraft, only FAA-certificated mechanics can oversee, approve, and certify the work before an aircraft can be returned to service. FAA-certificated mechanics thus represent a form of front-line supervision, particularly at large full-service foreign repair stations, where fewer mechanics have FAA certification. Many smaller foreign repair stations have no certificated mechanics, as this is not a requisite for obtaining an FAA repair station certificate. These smaller facilities often work on aircraft components, and their work can be certified by airline mechanics or mechanics at larger facilities for which they perform subcontracted work. Labor unions in the United States have raised significant concerns regarding the ratio of FAA-certificated mechanics to non-certificated mechanics at foreign repair facilities. A 2011 report by the Transportation Workers Union of America, which represents American Airlines mechanics, asserted that, at larger foreign repair stations, "the ratio of FAA licensed to unlicensed mechanics is mind boggling." Table 2 provides data on the numbers FAA-certificated and non-certificated mechanics at selected FAA-certified Part 145 repair stations. This analysis largely confirms the ratios cited by the Transportation Workers Union in its report. Two important considerations for making meaningful comparisons between domestic and foreign repair stations are not apparent in these data. First, workers at foreign locations may be certificated by foreign regulators, and the requirements for such certification may or may not be comparable to those imposed by FAA. Second, foreign repair stations may work on aircraft from many countries, and a small number of FAA-certificated mechanics may simply reflect that the repair station does relatively little work on U.S. aircraft. This may explain why facilities in El Salvador have relatively more FAA-certificated mechanics than those in China. However, data on the specific aircraft maintained at each facility are not readily available. Besides potential concerns over the levels of training and supervision of repair station aircraft maintenance workers, several reports have raised concerns over the general lack of English language proficiency among repair station workers. As previously noted, language barriers may be a specific concern among foreign repair stations in developing countries like El Salvador, where English as a second language is not commonly taught, as opposed to Europe, where English is routinely offered in education programs. FAA requires demonstrated English proficiency for certificated mechanics and repairmen. As part of its certification testing, applicants are required to demonstrate they can read, speak, write, and comprehend spoken English language. Applicants are required to read from and provide a written interpretation of a technical manual, such as an aircraft maintenance manual. These requirements apply to mechanics and repairmen seeking certification at foreign as well as domestic repair stations. Repair stations are required to ensure that supervisors and inspection personnel who review repairs and maintenance understand, read, and write English, but there is no formal requirement that these workers have any specific English-language skills. However, as previously noted, FAA certification is not required to work at a repair station, and FAA has no formal regulations regarding the number of certificated personnel at foreign repair stations. Lack of English proficiency may be one reason only a relatively small percentage of foreign repair station workers obtain FAA certification. Language may be a greater barrier to certification in developing countries like El Salvador, where many workers may lack English proficiency, than in Europe, where schoolchildren routinely learn English. English has become the international standard language for aviation, particularly with respect to air traffic control communications. Increasingly, it is becoming the standard language for aircraft maintenance as well, with maintenance manuals issued by airframe and engine manufacturers worldwide being published solely in English and fewer airlines customizing maintenance documents or translating them into other languages. Increasingly, computerized aircraft systems with English-only interfaces, including maintenance interfaces, require a working knowledge of technical English to diagnose and repair advanced avionics. Thus, technological advancement is also driving the need for English language proficiency to some degree. That said, aircraft maintenance also involves many less technical tasks, such as interior refurbishing and airframe painting, which may not require English-language skills. It is often these less skilled jobs for which foreign repair stations offer the greatest cost savings compared to domestic repair stations. Consequently, limited English language skill among workers at these facilities may not, by itself, be cause for significant concern. The level of language proficiency among skilled maintenance workers at these foreign repair stations has not been systematically studied. Moreover, repair stations have no obligation to require or report English language proficiency, except among their FAA-certificated mechanics who exercise inspection authority and sign off on repairs to U.S.-registered aircraft. In the past, regulation did not specifically require foreign repair stations to implement drug and alcohol testing programs required of workers in safety-sensitive positions that perform work either directly or by contract to U.S. air carriers. Many foreign countries impose their own drug and alcohol testing programs at foreign repair stations, as the International Civil Aviation Organization (ICAO) specifically defines inclusion of all safety-related positions in drug and alcohol testing programs in its aviation safety standards. ICAO has been working with countries around the world to achieve greater harmonization with respect to the administration of drug and alcohol testing programs throughout the aviation industry. ICAO has also published guidance materials to aid countries in developing policies to prevent substance abuse in the aviation workplace. Despite international efforts to achieve global harmonization with respect to drug and alcohol testing and substance abuse prevention across the aviation industry, privacy laws and other limiting factors may contribute to some differences between drug and alcohol testing programs and policies in the United States and those in countries where foreign repair stations are located. Congress has shown interest in the oversight of foreign repair stations for more than a decade. Vision 100—Century of Aviation Reauthorization Act ( P.L. 108-176 ) directed FAA to develop an oversight plan and implementation schedule to strengthen oversight of domestic and foreign repair stations and to ensure that FAA-certified foreign repair stations are subject to an equivalent level of safety, oversight, and quality control as domestic repair stations. As noted in this report, reviews of FAA's progress toward meeting these objectives have found that several concerns remain. Reflecting these concerns, Congress included provisions related to the oversight of foreign repair stations in the FAA Modernization and Reform Act of 2012 ( P.L. 112-95 ), which was enacted in February 2012. Specifically, Section 308 of the act requires FAA to establish and implement a safety assessment system for all repair stations approved under 14 C.F.R. Part 145 by February 14, 2013, with assessments based on the type, scope, and complexity of work performed; FAA to ensure that foreign repair stations are subject to appropriate inspections consistent with existing U.S. requirements; That agreements with foreign aviation authorities or other foreign government agencies provide an opportunity for FAA to conduct independent inspections of foreign repair stations when warranted by safety concerns; FAA to notify congressional oversight committees within 30 days of initiating formal negotiations with foreign governments on new maintenance safety or maintenance implementation agreements; FAA to issue an annual report describing improvements to identify and track where air carrier (14 C.F.R. Part 121) maintenance is performed; a staffing model regarding the number and geographic placement of FAA inspectors; inspector training; and a quality assessment of FAA and foreign authority inspections performed under existing agreements; FAA to request that all member countries of the International Civil Aviation Organization establish drug and alcohol testing programs encompassing all safety-sensitive maintenance workers that perform work on commercial air carrier aircraft; FAA to publish a proposed rule by February 14, 2013, to require drug and alcohol testing programs at all Part 145 repair stations that service Part 121 aircraft, consistent with the laws of the country where the work is performed; and FAA to conduct annual inspections at all foreign repair stations consistent with obligations under international agreements. While U.S. airlines are increasingly sending aircraft overseas for major repairs and overhauls, highly skilled maintenance workers in the United States working on foreign aircraft have helped the United States retain a positive trade balance of aircraft maintenance work in the globalized MRO industry. Increasing competition in this field coupled with growing opportunities for advanced technical training overseas may reduce this advantage in the future. At the same time, however, the trend of maintenance offshoring may be offset to some degree by rising labor costs in developing countries that could diminish their comparative cost advantage. In this regard, improved data reporting and collection by FAA and BTS would assist in analyzing MRO outsourcing and understanding the movements and trends. Although policymakers often raise the prospect of restrictive safety measures and additional inspections as a means to curtail the loss of American jobs to offshoring, applying such approaches to the aviation MRO industry could lead to reciprocal actions that could affect both maintenance work performed on foreign aircraft within the United States and U.S. companies that operate or have a stake in MRO facilities outside the United States. ARSA noted that many U.S. companies have repair stations internationally, estimating that about 80 foreign repair stations are either wholly or partly owned by U.S. firms. Additionally, ARSA points out that several international companies have MRO facilities within the United States. Thus, globalization of the MRO industry makes it increasingly difficult to apply effective trade actions as a means to protect U.S. jobs. No solid evidence exists that the use of foreign repair stations to maintain U.S. air carrier aircraft has eroded airline safety. Safety concerns raised regarding work performed by foreign repair stations over the past decade have largely been anecdotal, and detailed studies have not identified specific indications that outsourcing maintenance to foreign MROs has increased risk. Nonetheless, examination of maintenance offshoring practices reveals several potential policy implications both for U.S. jobs and for airline safety. With regard to implications for domestic jobs, it appears that the United States has maintained a positive balance of trade in aircraft MRO largely as a result of its superior technological skills and training, positioning it as a global leader in high-skill, high-value maintenance and repair. As such, the United States potentially stands to gain from increasing globalization of the MRO industry. The greatest threat to such standing does not appear to be primarily from the offshoring of heavy maintenance, but rather from the possibility that other countries may invest heavily in advanced training and technical capabilities to compete more directly with the United States on high-value engine and component repair and overhaul operations. With regard to safety, FAA has limited resources to allocate to oversight and inspection of foreign repair stations, thus necessitating reliance on foreign regulators and airline auditors to conduct routine oversight of foreign repair facilities. Realigning the FAA inspector workforce to allow for increased oversight of repair stations located in foreign countries may help respond to the increased utilization of foreign repair facilities by U.S. air carriers. This may involve selecting and assigning FAA inspectors based on proficiency in specific foreign languages and familiarity with foreign cultures. Despite a congressionally mandated examination of FAA's inspector staffing model by the National Research Council, which was completed in 2007, further action may be needed to more specifically address realignment of the FAA inspector workforce to better reflect changes in airline maintenance practices. The lack of English-language proficiency among foreign repair station workers is a particularly complex issue which may deserve more detailed study. Most discussion of this issue has focused broadly on aviation maintenance without looking in detail at the types of jobs, the skills performed, and the resource requirements, including written reference materials, needed to complete these tasks. Such detailed analysis could determine where additional English language skills may be most acutely needed among foreign repair station personnel and possibly lay the groundwork for FAA regulations. Setting regulatory standards regarding the total numbers and ratios of FAA-certified mechanics and repairman to uncertified maintenance workers as a condition of 14 C.F.R. Part 145 approval may be a means to address concerns about the lack of FAA-certificated mechanics at some foreign repair facilities. Such standards might need to take into consideration both the overall volume and the percentage of repair station work that is performed on U.S. airline aircraft to ensure that any additional regulatory requirements are appropriately directed at those repair stations where extensive work on U.S. air carrier aircraft is performed. This and other regulatory considerations may require more extensive reporting requirements for air carriers to allow FAA to better assess where the numbers of FAA-approved mechanics may be insufficient as well as where regulatory oversight activities may need to be targeted.
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Airlines outsource maintenance to countries like China and El Salvador to achieve cost savings from the comparatively lower wages and from lower costs to build and maintain repair facilities. In some cases, particularly in China, government investment and other incentives, along with backing from national airlines, have spurred rapid expansion of the foreign aircraft maintenance industry over the past decade. While airline maintenance work outsourced to foreign repair facilities has increased considerably over the past decade, there are no conclusive data indicating that this has directly resulted in the loss of U.S. jobs. Despite increased maintenance outsourcing, the United States continues to maintain a positive trade balance for airline maintenance work, a trend that likely reflects the United States' advanced capabilities on high-value engine and aircraft component work. While investigative reports and labor union sponsored studies of airline outsourcing practices have been critical of foreign repair facilities, more detailed statistical analysis does not support conclusions that maintenance outsourcing or offshoring has had measurable negative impact on safety, quality control, or reliability. Although some experts believe that safety is being compromised and the regulation and oversight of foreign repair stations needs to be improved, analyses of recent trends do not provide obvious evidence that maintenance outsourcing has adversely affected airline safety. Specific concerns have been raised regarding the Federal Aviation Administration's (FAA's) limited resources to oversee foreign repair stations, and FAA's extensive reliance on foreign regulators and the airlines to monitor these facilities. Additional concerns have been raised over worker training and qualifications at foreign facilities, the relatively low numbers of workers at these facilities with FAA certification, and the lack of English language skills necessary to read and comprehend maintenance manuals and instructions. Congress also has been concerned about the adequacy of drug and alcohol testing programs at foreign repair stations that work on U.S. aircraft. In the FAA Modernization and Reform Act of 2012 (P.L. 112-95), it mandated drug and alcohol testing at those locations in a manner consistent with existing bilateral aviation safety agreements and the laws of countries where the repair stations are located. Additionally, the act directed FAA to ensure that foreign repair stations are subject to appropriate inspections consistent with existing U.S. requirements and bilateral air safety agreements; inspect foreign repair stations annually; and carry out independent inspections when warranted by safety concerns. The United States has continued to maintain a positive trade balance with respect to airline maintenance work. However, future foreign investment in advanced training and technical capabilities related to high-value engine and component repair and overhaul could lead to more direct foreign competition in these areas. While available data do not indicate that offshoring of maintenance work has negatively impacted safety, specific areas for potential improvement include the allocation of FAA inspectors and resources focused on the oversight of foreign repair stations; FAA certification and qualification standards for individuals assigned to supervisory roles at foreign repair stations; and standards or guidelines for English language proficiency and comprehension of written technical materials among foreign repair station mechanics.
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The United States and New Zealand work together in bilateral, regional, and global contexts to address common interests in the areas of defense, foreign affairs, and trade. Bilateral and multilateral military-to-military exercises involving the two countries have increased in number since the signing of the Wellington Declaration of 2010 and the Washington Declaration of 2012. The two nations were both part of the Trans-Pacific Partnership (TPP) trade negotiations until President Trump withdrew the United States from the TPP in January 2017. The 2016 New Zealand Defence White Paper describes New Zealand's engagement with the United States as having "reached a depth and breadth not seen in 30 years." Past differences over nuclear policy have now largely been put to rest by the Wellington (see Appendix B ) and Washington declarations. The shift to normal relations between the two nations was marked by a U.S. naval ship visit to New Zealand in November 2016. This was the first such visit since 1983. Labour Party Leader 37-year-old Jacinda Ardern became the youngest female Prime Minister in New Zealand following the September 23, 2017, election. She became Labour Party Leader only two months prior to the election. Ardern's Labour-led coalition government follows nine years of center-right rule by the New Zealand National Party. Ardern is New Zealand's third female prime minister. (See " 2017 Election " section below for further information.) New Zealand's population of approximately 4.5 million has many shared values with the United States that stem from common historical roots as settler societies of the British Empire. New Zealand, also known to New Zealanders as Aotearoa, or "the land of the long white cloud" in Maori, was first settled by the Polynesian-Maori people around the 10 th century. Dutch navigator Abel Tasman discovered the western coast of New Zealand in 1642, but it was English Captain James Cook who, over three expeditions in 1769, 1773, and 1777, circumnavigated and mapped the islands. (See Figure 1 , "Map of New Zealand.") Cook raised the British flag on the Coromandel Peninsula in 1769 and claimed the area for King George III. The 1840 Treaty of Waitangi, between the British Crown and Maori Chiefs, serves as the basis for relations between the Maori and Pakeha (European) communities. Subsequent conflict over land rights led to the New Zealand Wars (1845-1872) between colonial forces and Maori fighters. In 1893, New Zealand gave all women the equal right to vote. This made New Zealand the first country to do so. New Zealand attained Dominion status in relation to Britain in 1907. It gained full political independence from Britain under the Statute of Westminster Adoption Act of 1947, and in 1951 entered into an alliance with Australia and the United States, known as ANZUS. New Zealand remains a member of the British Commonwealth. New Zealand's demographic makeup defines it as a Pacific nation that is still largely European in character. New Zealand's Pacific identity stems from its geographic location, its indigenous Maori population, and other more recent Pacific Island immigrants. Maori represent 14.1% of the population while Pacific Islanders comprise 7.6%. People of Samoan descent are the largest group of Pacific Islanders in New Zealand. Together these largely Polynesian people account for approximately 21.7% of the population. Auckland, New Zealand's largest city, is also the world's largest Polynesian city. The British Monarch, Queen Elizabeth II, is the constitutional head of state of New Zealand. Her representative, the Governor General, acts on the advice of the New Zealand Prime Minister's Cabinet. New Zealand is a unicameral, mixed-member-proportional (MMP), parliamentary democracy. Elections must be held every three years. MMP was introduced in New Zealand in 1996 following a referendum in 1993. There are approximately 120 seats in parliament of which some are electorate member seats while other seats are selected from party lists. Each voter casts both an electorate vote and a party vote. Under the MMP system, a political party that wins at least one electorate seat or 5% of the party vote gets a share of the seats in parliament. A referendum on the MMP system in 2011 returned a 58% endorsement of the system. The center-right National Party and the opposition center-left Labour Party are the two main political parties. Bilateral relations between the United States and New Zealand improved significantly under former National Party Prime Minister John Key (2008-2016), who resigned in 2016. Key was replaced by former National Party Prime Minister Bill English (2016-2017). In March 2016, New Zealanders were asked to choose whether to keep their current national flag, which was adopted in 1907 and includes Britain's Union Jack at the upper left corner, or to adopt a new flag, which would not include Britain's Union Jack. The referendum chose to keep the current flag. Some who favored a change felt that the new flag would better reflect a more multicultural and independent New Zealand. The Green Party's electoral performance has declined in the past two elections, relative to their performance in 2011. The Green Party, which is more critical of New Zealand's relationship with the United States than other New Zealand political parties, received 5.3% of the vote in 2005, 6.72% in 2008, and 11.06% in 2011 before declining to 10.7% in 2014, and 6.3% in 2017. One of the Green Party's specific policy points is to "Oppose New Zealand involvement in United States-led coalition military operations in Iraq and Afghanistan (but support U.N. peace-building there); and oppose any intelligence assistance to these wars by closing down the satellite communications interception station at Waihopai." The election of September 23, 2017, left no political party with an outright majority of seats in parliament. While the National Party had the most seats, it was Labour that formed a government in coalition with the populist New Zealand First Party with the support of the Green Party. The center-left bloc holds 63 of 120 seats in parliament. The National Party Leader and former Prime Minister Bill English became Opposition Leader following Ardern's swearing in as Prime Minister. Ardern's Labour-led government is expected to move to tighten immigration, curb foreign property ownership, raise the minimum wage, build affordable housing, address child poverty, lock in a goal of zero carbon emissions, and set up an independent climate commission. New Zealand First is led by Winston Peters, who became both Deputy Prime Minister and Foreign Minister in Ardern's government. Peters was previously (1996-1998) Deputy Prime Minister in Prime Minister Jim Bolger's and then Prime Minister Jenny Shipley's National government, and Foreign Minister (2005-2008) in former Prime Minister Helen Clark's Labour government. Peters has been described as a protectionist and a conservative economic nationalist. He is reported to favor curbs on immigration, renegotiation of certain trade deals, adjusting the role of the central bank, and strengthening ties with Australia. For many years after the mid-1980s, differences over nuclear policy rather than shared values or common interests defined relations between the United States and New Zealand. During the mid-1980s, the United States suspended its alliance commitments to New Zealand due to differences over nuclear policy. New Zealand legislation made the country nuclear-free, which had the effect of barring visits from nuclear-powered or nuclear-armed ships. The United States had, and still has, a policy of neither confirming nor denying the presence of nuclear weapons on U.S. Navy ships. These differences over nuclear policy significantly constrained the relationship for many years. The relationship has now largely moved beyond past differences over nuclear policy. This was marked by a U.S. naval ship visit to New Zealand in November 2016. The USS Sampson , which went to New Zealand to participate in the New Zealand Navy's 75 th anniversary celebrations, diverted to Kaikoura, New Zealand, to assist in evacuating civilians following a 7.8 magnitude earthquake which blocked roads, isolating the town of Kaikoura. With past differences no longer defining the relationship, the United States and New Zealand have in recent years expanded collaboration on areas of common concern. A Center for Strategic and International Studies (CSIS) report published in 2011 stated that the United States and New Zealand share many common interests and strategic objectives. The countries have a strong focus on a stable and secure Asia-Pacific region and on a robust international architecture that supports and open trade and investment system, a rules based international legal framework, and sound principles of good governance. The two nations share a commitment to promoting security and development in the South Pacific. They coordinate their support to Pacific Island states in patrolling their Exclusive Economic Zones (EEZs) to try to prevent poaching of fisheries resources. New Zealand and the United States also participate in joint humanitarian and disaster relief exercises with Pacific Island states. The United States and New Zealand are also long-standing partners in Antarctic scientific research. The U.S. Navy support base at Christchurch, New Zealand, is used to support U.S. Antarctic operations. This is one area of bilateral cooperation that was apparently not affected by past differences. Several organizations and groups, some involving Members of Congress, help promote bilateral ties between the United States and New Zealand, including the United States-New Zealand Council in Washington, DC, and its counterpart, the New Zealand-United States Council in Wellington; and the bipartisan Friends of New Zealand Congressional Caucus and its New Zealand parliamentary counterpart. The U.S.-N.Z. Council was established in 1986 to promote cooperation between the two countries. It works with government agencies and business groups to this end. The first New Zealand-United States Partnership Forum was held in April 2006. The forum brings together government, business, military, and community leaders in an effort to advance bilateral relations. Speaking at the June 2015 Partnership Forum, then-Assistant Secretary of State for East Asian and Pacific Affairs Daniel Russel pointed to the "bonds of trust that extends throughout our diplomatic, intelligence and military relationships" before highlighting that two-way goods trade had increased from $5 billion in 2009 to $8 billion in 2014. Foreign Minister Peters met with Secretary of State Tillerson at the East Asia Summit in the Philippines in November 2017. Tillerson visited Wellington, New Zealand, in June 2017, where residents protested the Trump Administration's decision to withdraw from the Paris Climate Accords. New Zealand has offered to take 150 refugees being held at an Australian detention center in Papua New Guinea. Most of the asylum seekers are from Afghanistan, Iran, Burma, Pakistan, Sri Lanka, and Syria. Australian Prime Minister Malcolm Turnbull has stated his preference to continue with an existing arrangement negotiated between Turnbull and former President Obama. Under that arrangement, which reportedly was not welcome by President Trump, up to 1,250 asylum seekers detained by Australia in Papua New Guinea and Nauru would be relocated to the United States in return for Australia accepting Central American refugees. Close bilateral defense cooperation between the United States and New Zealand began during World War II, when U.S. military personnel were stationed in New Zealand as they prepared for battle against Japan in places such as Guadalcanal and Tarawa. Between 1942 and 1944, New Zealand hosted between 15,000 and 45,000 U.S. military personnel at any given time. In 1951, the Australia-New Zealand-United States (ANZUS) alliance was formed. In 1956, New Zealand joined the UKUSA Agreement, governing signals intelligence cooperation. The agreement is often referred to as the "Five Eyes" alliance. The Five Eyes countries are Australia, Canada, New Zealand, the United Kingdom, and the United States. New Zealand's responsibilities under Five Eyes, which are handled by the Government Communications Security Bureau, include the South Pacific. The Government Communications Security Bureau (GCSB) ensures the integrity and confidentiality of government information, and investigates and analyses cyber incidents against New Zealand's critical infrastructure. The GCSB also collects foreign intelligence bearing on New Zealand's interests, and assists other New Zealand government agencies to discharge their legislatively mandated functions. GCSB ... has two communications interception stations: a high frequency radio interception and direction-finding station at Tangimoana, near Palmerston North, and a satellite communications interception station at Waihopai, near Blenheim. As mentioned above, during the mid-1980s, the United States suspended its alliance commitments to New Zealand due to differences over nuclear policy. New Zealand legislation made the country nuclear-free, which had the effect of barring visits from nuclear-powered or nuclear-armed ships. The United States had, and still has, a policy of neither confirming nor denying the presence of nuclear weapons on U.S. Navy ships. New Zealand in the mid-1980s wanted to distance itself from nuclear weapons but not from the United States or the ANZUS alliance. In one poll in 1987, 70% of New Zealanders wished to maintain a ban on nuclear-armed or nuclear-powered ships porting in New Zealand while 66% wanted New Zealand to be in an alliance with Australia and the United States. Bilateral defense ties began to be reestablished following New Zealand's military contribution to the wars in Afghanistan and Iraq. New Zealand's commitment of special forces from 2001 to 2009 and regular troops and other assistance, particularly the Provincial Reconstruction Team (PRT) in Bamiyan Province, Afghanistan from 2003 to 2013, demonstrated to many U.S. policymakers New Zealand's value as a political, diplomatic, and military partner. According to one study, Relations began improving in the early 2000s when New Zealand sent special forces to support the U.S.-led war in Afghanistan in 2001 and a contingent of military engineers to support the U.S. mission in Iraq in 2003. The Wellington Declaration of 2010 (see Appendix B ) was a key turning point in United States-New Zealand relations. It built on ongoing improvements in the relationship to enable a reorientation of bilateral relations. The Wellington Declaration established in a public way the evolving strategic partnership. It stated that "our shared democratic values and common interests" would guide the two nations' collective action: Our governments and peoples share a deep and abiding interest in maintaining peace, prosperity and stability in the region, expanding the benefits of freer and more open trade, and promoting and protecting freedom, democracy and human rights. The declaration reaffirmed close ties and a "strategic partnership to shape future practical cooperation and political dialogue." The agreement pointed to the need to address regional and global challenges including enhanced dialogue on regional security, practical cooperation in the Pacific, foreign ministers meetings, political-military discussions, and joint cooperation on climate change, nuclear proliferation, and Islamist extremism. In 2010, former President Barack Obama invited then-Prime Minister Key to attend the first Nuclear Security Summit and stated that New Zealand had "well and truly earned a place at the table. " New Zealand was the only non-nuclear state invited to the meeting. During Prime Minister Key's visit to Washington in July 2011, President Obama described New Zealand as "an outstanding partner." The two countries instituted an annual strategic dialogue the same year. The 2012 Washington Declaration on Defense Cooperation, which opened the way for further enhanced strategic dialogue and defense cooperation, attested to the degree to which the Wellington Declaration improved bilateral ties. This positive momentum in the relationship was sustained by subsequent developments such as then-U.S. Secretary of Defense Leon Panetta's September 2012 lifting of a ban on New Zealand naval ship visits to the United States, announced during a visit to New Zealand. Military exercises and cooperation in the fight against Islamist extremists in recent years have also bolstered practical aspects of the two nations' bilateral defense and security cooperation. A 2014 White House fact sheet noted common objectives and welcomed New Zealand's participation in RIMPAC. The United States and New Zealand share in joint efforts to build and sustain a peaceful, secure, and prosperous Asia-Pacific region. The United States welcomes New Zealand's participation in RIMPAC (Rim of the Pacific Exercise), the world's largest multinational naval exercise. This will mark the first time a New Zealand navy ship will dock at Pearl Harbor Naval Base in over 30 years, a symbol of our renewed engagement on mutual defense and security, especially in the Asia-Pacific region. Former Secretary of Defense Hagel in 2014 "praised the growth of the bilateral defense relationship and expressed appreciation for New Zealand 's support . " One study in 2014 went so far as to state that improvements in relations between the United States and New Zealand "suggest that a defacto alliance has been restored." In May 2015, the United States and New Zealand held their fifth Strategic Dialogue, at which the cochairs "reviewed the breadth of cooperation and exchanged views on regional and global matters of mutual concern, including maritime security, the coalition to counter ISIL," the Trans-Pacific Partnership trade negotiations, the health of the Ocean and development efforts in the Pacific islands. New Zealand participates in the Small Group of the Global coalition to counter the Islamic State (IS/ISIL). New Zealand's contribution to the global coalition to counter the Islamic State includes a two-year deployment of troops begun in May 2015 to Taji, Iraq, where they are training Iraqi soldiers alongside Australian troops. The training covers basic weapons skills and combat operations as well as medical and logistical skills. New Zealand has extended its training mission at Taji through June 2018. In discussing the ANZAC Spirit of New Zealand and Australian troops (see " Australia " section below), United States Deputy Secretary of Defense Bob Work stated in 2015 that For over 60 years ago, American, Australian, and New Zealander troops have served far from home, risking their lives to ensure the safety and security of their countries, and advancing peace and stability around the world. The partnership between the United States, Australia and New Zealand has led to rapid responses to the world's worst threats and crises, no matter where they erupt. In channeling the tenacity of the Allied troops at Gallipoli, our partnership has served as a model, galvanizing others to participate in struggles around the world. In Afghanistan, our militaries have worked side-by-side for over a decade.... And now, in Iraq, both Australia and New Zealand have become invaluable partners in the international coalition against ISIL. Proving—yet again—that our partnership is not bound by any particular geography, conflict, or adversary. This acute sense of responsibility for global well-being has required no small sacrifice from the people of Australia and New Zealand, and we are grateful for your continued friendship. New Zealand also opened a consulate in Hawaii to engage more regularly with the United States Pacific Command. The continuing positive trajectory of the bilateral relationship was further highlighted in April 2016 testimony before the House Appropriations Defense Subcommittee, by Commander of the Pacific Command Admiral Harry Harris when he stated the following: Despite differences over nuclear policy, our military-to-military relationship with New Zealand, underpinned by the Wellington and Washington Declarations, is on solid footing. The New Zealand military has fought, flown, and sailed with U.S. forces since the beginning of Operation Enduring Freedom. New Zealand continues to be a respected voice in international politics and a recognized leader in the South Pacific that shares common security concerns with the U.S., including terrorism, transnational crime, and maritime security. Military-to-military relations and defense engagements with New Zealand remain strong. New Zealand's defense policy historically supported Great Britain. In recent years, New Zealand's independent defense policy has focused on contributing to international peace operations, New Zealand's maritime environment (including its Exclusive Economic Zone [EEZ] and the Southern Ocean), the South Pacific, Antarctica, and cybersecurity. New Zealand armed forces made a significant contribution in support of the allied cause in World War I and World War II. Approximately 100,000 New Zealand troops, out of a total New Zealand population of 1.1 million in 1914, went to fight in battles such as Gallipoli, Passchendaele, and the Somme as part of the New Zealand Expeditionary Force. This represented about half of the eligible male population. Several thousand more served with British and Australian forces in World War I. By comparison, the American Expeditionary Force in Europe numbered over 1 million troops in 1918 when the total population of the United States was 103.2 million. Approximately 140,000 New Zealand troops served in World War II out of a total New Zealand population of 1.6 million in 1940. They fought in places like Crete, El Alamein, and the Pacific. New Zealand troops also fought alongside American and allied troops in Korea and Vietnam. New Zealand's 2016 Defense White Paper has "a renewed focus on New Zealand's own backyard" and places relatively more emphasis on protecting Southern Ocean resources, the South Pacific, and Antarctica than previous Defence White Papers. It also states that The New Zealand Defence Force must be flexible and able to conduct concurrent operations, from humanitarian and disaster response, operating in the Southern Ocean and supporting Antarctic operations, to participating in international coalition deployments.... These challenges [for the defence force] include maintaining an awareness of and an ability to respond to activities in New Zealand's Exclusive Economic Zone, supporting New Zealand's presence in Antarctica and the Southern Ocean, as well as increasing cyber threats to Defence Force networks. The White Paper further signals "a commitment to a portfolio of planned Defence capability investments valued at close to $20 billion over the next 15 years." One observation on the White Paper points out that many specifics have been left to the Defence Capability Plan. Another observer notes that New Zealand defense spending is low when compared to security partners Australia and the United States. The World Bank estimated New Zealand defense spending to be 1.1% of GDP as compared with 1.8% for Australia and 3.5% for the United States in 2014. A Public Consultation Document was created in 2015 in preparation for production of the 2016 White Paper. The Public Consultation Document described New Zealand's strategic environment as evolving. It noted that "New Zealand's interests beyond our region are growing while the rules and values we rely on are increasingly under threat." It also noted the rising "number of actors operating within New Zealand's Exclusive Economic Zone, Southern Ocean and the Pacific Islands." The document identified "a marked improvement in our relationship with the United States," "China's rising global influence," an "escalation of military spending across Southeast Asia," and "increasing challenges to the rules-based international system." New Zealand's Pacific identity, derived from its geography and growing population of New Zealanders with Polynesian or other Pacific Island backgrounds, as well as its historical relationship with the South Pacific, informs its relationship with the region. New Zealand has the world's fourth-largest Exclusive Economic Zone. New Zealand works closely with Pacific Island states on a bilateral and multilateral basis through the Pacific Islands Forum, which is based in Fiji. The forum has in recent years focused on regional security, sustainable fisheries resources, and climate change. Illegal, Unregulated, and Unreported (IUU) fishing is estimated by one source to be worth $616.11 million each year or 20% of the catch in the Pacific. Other sources report that IUU fishing accounts for 34% of the total catch in the Western Central Pacific. New Zealand works with states in the region to help them monitor their fisheries resources. New Zealand has played a key role in promoting peace and stability in the South Pacific in places such as the Solomon Islands, Timor-Leste, and Bougainville in Papua New Guinea. New Zealand also provides development and disaster assistance to the region. The Defence White Paper of 2016 highlights New Zealand's interests in the South Pacific. Given its strong connections with South Pacific countries, New Zealand has an enduring interest in regional stability. The South Pacific has remained relatively stable since 2010, and is unlikely to face an external military threat in the foreseeable future. However, the region continues to face a range of economic, governance, and environmental challenges. These challenges indicate that it is likely that the Defence Force will have to deploy to the region over the next ten years, for a response beyond humanitarian assistance and disaster relief. In September 2015, New Zealand pledged to increase foreign assistance to the South Pacific by $100 million to reach a total of $1 billion in expenditures over the next three years. Former Prime Minister Key has reaffirmed New Zealand's support for the Pacific Island's Forum and sustainable South Pacific economic development, including for sustainable fisheries in the South Pacific. New Zealand, along with Australia, the United States, and Japan, has traditionally been one of the largest aid donors in the South Pacific. In recent years, China too has become a significant aid donor in the region. While much of China's assistance is bilateral, it also provides assistance to the Pacific Islands Forum. Approximately 80% of Chinese assistance to the region is reportedly in the form of concessional loans. China has become Fiji's largest bilateral aid donor and "... it may overtake the United States as the second largest donor [behind Australia] in the region within a few years." New Zealand has demonstrated its resolve to help maintain peace and stability in Pacific Island region through participation in operations such as the Australia and New Zealand-led Regional Assistance Mission to the Solomon Islands (RAMSI). RAMSI was first undertaken in 2003 under a Pacific Islands Forum mandate to address civil unrest and lawlessness in the Solomon Islands by restoring civil order, stabilizing governance, and promoting economic recovery. Differences between the people of Guadalcanal and Malaita over land and natural resources and the migration of people within the country were viewed as some of the underlying causes of the conflict in the Solomon Islands. New Zealand, along with Australia, has played a critical role in helping to stabilize Timor-Leste, which gained its independence from Indonesia following a 1999 referendum that turned violent. The law and order situation deteriorated again in 2006, leading the Timorese government to issue a call for international assistance to which New Zealand responded. New Zealand Defence Force personnel served alongside their Australian counterparts as part of the International Stabilization Force in Timor-Leste. New Zealand currently has a small number of military and police personnel in Timor-Leste as part of its military assistance and community policing programs. New Zealand played a key role in helping to facilitate peace between the Government of Papua New Guinea and rebels on the island of Bougainville in 1997. Secessionist sentiment and conflict over the Panguna copper mine on Bougainville from 1988 to 1997 led to a low-intensity conflict between the Bougainville Revolutionary Army and Papua New Guinea Defense Force that ultimately claimed over 10,000 lives. The Burnham I and II dialogues hosted by New Zealand played an important part in the process that culminated in the Bougainville Peace Agreement of 2001. Under the terms of the agreement, a referendum on self-determination is to be held by mid-2020. A target date of June 2019 has now been agreed to by the Papua New Guinea government and Bougainville regional government. New Zealand, along with Australia, sent assistance in the form of naval ships, medics, and engineers to Fiji following Cyclone Winston in 2016. Observers described this as the first significant engagement between New Zealand and Fiji since restoration of diplomatic ties following Fiji's elections in 2014, the first elections since a 2006 coup. New Zealand implemented a limited range of sanctions on Fiji following the December 6, 2006, government takeover by Commodore Voreqe Bainimarama and Republic of Fiji Military Forces. New Zealand's and other nations' sanctions sought to pressure Fiji to return to democracy and the rule of law and included restrictions on contact with the military and the regime, travel bans, and restrictions on development assistance. Bainimarama, who was elected Prime Minister in 2014, put in place a "Look North" policy under which relations with China have become relatively more important to Fiji. China has regularly sent specially equipped vessels, used in the tracking of satellites, to the South Pacific, including to Suva Harbor in Fiji. Bainimarama has argued that Australia and New Zealand should only be allowed to remain members of the Pacific Islands Forum if China and Japan are allowed to join. Fiji appears to be attracting the attention of other great powers as well. India is reportedly exploring the possibility of establishing a satellite monitoring station in Fiji. Russia has reportedly sent a shipment of weapons with advisors to help train the Fijian military in the use of the equipment. Some observers have viewed the expansion of Chinese and return of Russian influence in Fiji and the South Pacific as indicative of diminishing influence of Canberra and Wellington in the region. New Zealand has a set of relationships with South Pacific islands that is in some ways similar to the relationships between the United States and various island nations in the Western Pacific, such as the Freely Associated States. In the past, New Zealand had colonial and trusteeship relationships with the Cook Islands, Niue, and Western Samoa. Samoa became independent in 1962, while the Cook Islands and Niue became self-governing in 1965 and 1974 in "free association" with New Zealand. Tokelau and the Ross Dependency fall within the jurisdiction of New Zealand. These islands are concerned about the impact of projected sea level rise due to global warming and have requested related assistance from New Zealand. New Zealand conducts its external affairs through international fora, such as the United Nations and the Commonwealth (the Commonwealth was established in 1949 to maintain an association between countries that were once part of the British Empire), as well as through bilateral ties and other multilateral arrangements. New Zealand has traditionally had particularly close ties with the United Kingdom and Australia and is a member of the Five Power Defence Arrangements (FPDA) of 1971 (discussed below). In recent years, New Zealand has sought to expand its traditionally close relationships by reaching out to develop closer ties with other countries, particularly through expanded trade, with China and other Asian states. New Zealand enjoys very close relations with Australia, its neighbor across the Tasman Sea. These trans-Tasman ties are based, to a large extent, on the two nations' common origin as British colonies. Their ties were strengthened as the two nations fought together in the Australian and New Zealand Army Corp (ANZAC) in places like Gallipoli in World War I. This relationship evolved into what is known as "the ANZAC spirit" of close defense cooperation. This ongoing defense cooperation has been demonstrated most recently through the Joint Australia-New Zealand Building Partner Capacity mission in Iraq. In a 2016 ANZAC Day message, then-Secretary of State John Kerry paid tribute to ANZAC bravery and noted that the United States has worked with Australia and New Zealand in support of Afghan security and stability. He also highlighted that the three nations are working together as part of the Global Coalition to Counter ISIL and to ensure regional stability in the Asia Pacific. Economic ties between New Zealand and Australia are formalized in the Closer Economic Relations (CER) agreement, which prohibits trade tariffs between the two nations. Close economic, people-to-people, and cultural ties, including the shared popularity of rugby, cricket, and other sports, further reinforce bilateral relations between these two states. Over 647,000 New Zealanders, out of a total population of 4.5 million, live in Australia. In 2015, for the first time in 24 years, more people moved from Australia to New Zealand than in the other direction. New Zealand, like many countries in its region, has benefited economically from the rise of China while at the same time found itself in a period of increasing geopolitical uncertainty that has resulted from China's rise and growing assertiveness in the Pacific. Perhaps because of its relatively remote geographic position, New Zealanders' perceptions of China have tended to be based more on the benefits of trade rather than security concerns. New Zealand's economy has grown in recent years while its trade with China has expanded rapidly. New Zealand in 2008 was the first organization for Economic Cooperation and Development (OECD) country to sign a Free Trade Agreement with China. New Zealand dairy exports to China grew from NZ$0.5 billion in 2008 to NZ$4.6 billion in 2013. Overall, New Zealand exports to China grew from less than 3% of all exports in 2000 to approximately 20% of exports in 2014. New Zealand's tourism and education sectors have also been boosted by China, and Chinese investment in New Zealand has grown significantly. New Zealand's growing economic relationship with China has "changed New Zealanders' perceptions of where their economic future now lies." In 2014, New Zealand exports to China totaled $8.8 billion while New Zealand exports to the United States totaled $3.2 billion. In discussing "Rapidly Increasing Chinese Power," the 2014 New Zealand Defence Assessment states "China's rapid economic growth has enabled an increase in its defence spending, much of which is focused on developing force projection capabilities. Chinese military power will continue to increase in relative and absolute terms." While the Defence Assessment noted a rising risk of major interstate conflict, and an increase in defense spending in the Asia Pacific region of 23% from 2010 to 2014, it remained cautiously optimistic that major conflict could be averted due to economic incentives produced by an integrated global economy. The overarching security context articulated in the 2016 Defence White Paper views the rise of Asia as central to shifting global correlates of power. By 2030 Asia is expected to have surpassed North America and Europe combined in terms of global power, a measure defined by gross domestic product, population size, military spending and technological investment. Nowhere is this shift, driven primarily by three decades of sustained economic growth in China, more striking than in North Asia. China is expanding its presence in Antarctica, which, like the South Pacific, is a region where New Zealand has significant interests. China is developing its scientific presence in Antarctica by enhancing its research capabilities, building research bases, and launching ice breakers. Antarctica is increasingly contested by relative newcomers like China. In one analysts view, "The newer players are stepping in to what they view as a treasure house of resources." Increased international activity in Antarctica has attracted the attention of Wellington. The 2016 Defence White Paper notes that New Zealand has a strong interest in the preservation of the natural environment and stability in the Antarctica and Southern Ocean. New Zealanders' affinities for the United Kingdom (U.K.) remain strong despite the U.K.'s decision to sever its preferential trade relationship with New Zealand in order to join the European Community in 1972 and its strategic decision to largely withdraw from East of Suez by 1971. The decline of trade with the United Kingdom led New Zealand to search for new foreign markets. New Zealand's proactive and successful policy of export diversification has expanded New Zealand's markets to include China, Australia, the European Union, the United States, and Japan. The United Kingdom accounted for 88% of New Zealand exports in 1940. This dropped to 35.9% in 1970 and 17% by 1979. New Zealand remains a member of the 1971 Five Power Defence Arrangement (FPDA) with the United Kingdom, Australia, Malaysia, and Singapore. The FPDA was established following the British decision to remove ground troops east of the Suez after 1971 and the Indonesian Konfrontasi. Between 1964 and 1966, New Zealand troops, fighting with Australian and British forces, helped the then-new state of Malaysia to fight off Indonesian attempts to wrest control of north Borneo. New Zealand has developed its relations with the 10-nation Association of Southeast Asia Nations (ASEAN) over recent decades. New Zealand became an ASEAN Dialogue Partner in 1975. The ASEAN-New Zealand-Australia Free Trade Agreement came into force in 2010. New Zealand is active in several ASEAN centered groups such as the East Asia Summit, the ASEAN Regional Forum, and the ASEAN Defense Minister's Meeting-Plus (ADMM+). New Zealand signed the ASEAN Treaty of Amity and Cooperation in 2005. New Zealand is cochair of the ADMM+ Experts Working Group on Maritime Security with Brunei for the period 2014-2017. Two-way trade between New Zealand and ASEAN totaled US$10.7 billion in 2014. Many New Zealanders take pride in their natural environment. According to Statistics New Zealand, 72.7% of New Zealanders "were very satisfied or satisfied with the state of the lakes, rivers, harbours, oceans and coastlines," while 84.2% "were satisfied with the state of the native bush, forests, nature reserves, and open green spaces." International perceptions of New Zealand's clean environment have helped draw international tourists and promote New Zealand's agricultural exports. In the year ending July 2015, over 3 million tourists visited New Zealand—a nation of 4.5 million people—and spent NZ$8.7 billion, which marked an increase in spending of 28% over the previous year. In September 2015, New Zealand created the Kermadec Ocean Sanctuary. The sanctuary covers a maritime area approximately twice the size of New Zealand's land mass that accounts for 15% of New Zealand's Exclusive Economic Zone. New Zealand supports sustainable Pacific fisheries. In 2015, New Zealand protested the resumption of whaling by Japan in the Southern Ocean. The Government of New Zealand joined the United States, Australia, and the Netherlands to state "Our Governments remain resolutely opposed to commercial whaling, in particular in the Southern Ocean Whale sanctuary established by the international whaling commission." On the issue of climate change, New Zealand supports the goal of "limiting global temperature rise to no more than 2 degrees centigrade," and has sought to support international efforts on the environment and climate change. In an effort to reduce emissions from livestock, cropping, and rice production, New Zealand formed the Global Research Alliance on Agricultural Greenhouse Gasses in 2009. Environmental issues will likely receive renewed focus in the Ardern Labour Government given the Labour Party's past focus on environmental issues. Former Labour Party Prime Minister Helen Clark (1999-2008) set a goal for New Zealand to be a leader on climate change and to become carbon neutral. While New Zealand gross emissions have increased 24.1% from 1990 to 2015, gross emissions in New Zealand were 0.1% lower in 2015 than in 2014. The agriculture (47.9%) and energy (40.5%) sectors were the two largest contributors to New Zealand's gross emissions in 2015. The New Zealand Green Party's support for the government, and its desire to push forward a progressive environmental agenda, will be a further impetus to including a renewed focus on the environment. The Labour Party's environmental policy focuses on water and climate change. As part of its water policy, Labour has pledged to do the following: Restore New Zealand rivers and lakes; Assist farmers to fence off waterways and conduct riparian planting through a Ready for Work Program; and Provide resources to regional councils to clean up waterways through a water royalty. Labour has criticized the National Party's promise to reduce greenhouse gas emissions to 5% below 1990 levels by 2020 because they lacked a specific plan to achieve that target. New Zealand submitted a Nationally Determined Contribution (NDC) to reduce greenhouse gas emissions by 30% below 2005 levels by 2030. Labour has articulated a number of measures that it will seek to implement: Set a target of net zero greenhouse gas emission by 2050; Establish an independent climate commission; Initiate a Youth Climate Change Challenge; Show government leadership to actively pursue low-carbon options and technologies; Restore the Emissions Trading Scheme; Ensure that farmers are operating at best practice; Support worker transition and the creation of jobs in sectors that are carbon sinks such as forestry; and Establish a Transitions National Science Challenge to facilitate the transition to a low-carbon economy. The New Zealand Green Party has also emphasized the importance of clean water and green energy. One such initiative would place a levy on nitrate pollution from agriculture including dairy farming. The Greens also have an 11-point Climate Protection Plan, which has some similarities to the Labour environment agenda: Pass a Zero Carbon Act to reach net zero emissions by 2050; Establish an independent climate commission; Replace the emission trading scheme with a new Kiwi Climate Fund; Plant 1.2 billion trees; Establish a Green Infrastructure Fund; Create a Transformational Farming Partnership Fund; No new coal, fracking, or deep sea oil and gas drilling; Divest public investment from fossil fuels; Commit to 100% renewable electricity generation by 2030; Invest in clean electric transport; and Create humanitarian visas for Pacific Islanders displaced by climate change. New Zealand is a trade-dependent nation. As such, its leaders have traditionally been strong advocates of free trade. New Zealand's largest export markets are China, Australia, the European Union, the United States, and Japan. China overtook Australia as New Zealand's largest trading partner in 2013. New Zealand's principal exports are dairy products, meat, timber, fish, fruit, wool, and manufactured products. New Zealand's top export markets are China (19.3%), Australia (17%), the United States (10.9%), and Japan (6.2%). New Zealand has approximately 30 million sheep, 3.5 million beef cattle, 6.5 million dairy cattle, and 1 million farmed deer. New Zealand supports liberalized trade through the World Trade Organization process but is also seeking alternative comprehensive free trade relationships in both bilateral and regional fora. In the lead-up to the September 2017 election, New Zealand, along with Japan, played a leading role by remaining committed to a deal with TPP-11 countries to cut trade barriers in the Asia Pacific. The Labour Party has said it will seek to renegotiate TPP to accommodate its proposed ban on foreign ownership of existing properties. The Green Party has stated that it will oppose the core Comprehensive and Progressive Agreement on Trans Pacific Partnership (CPTPP). Appendix A. New Zealand Political Parties Electoral Performance The following tables provide a look at the electoral performance of political parties in New Zealand since 2005. These data show the prominent role of the National and Labour Parties as well as the performance of smaller parties. Appendix B. Wellington Declaration Wellington Declaration on a New Strategic Partnership Between New Zealand and the United States Media Note Office of the Spokesman U.S. Department of State Washington, DC November 4, 2010 Minister of Foreign Affairs for New Zealand Murray McCully and Secretary of State Hillary Rodham Clinton of the United States met today to reaffirm the close ties between their two nations and to establish the framework of a new United States-New Zealand strategic partnership to shape future practical cooperation and political dialogue. New Zealand and the United States are both Pacific nations. Our governments and peoples share a deep and abiding interest in maintaining peace, prosperity, and stability in the region, expanding the benefits of freer and more open trade, and promoting and protecting freedom, democracy and human rights worldwide. We recall the long history of shared United States and New Zealand sacrifice in battle and we honor those, past and present, who have borne that sacrifice. As we look to the challenges of the 21 st century, our shared democratic values and common interests will continue to guide our collective efforts. The United States-New Zealand strategic partnership is to have two fundamental elements: a new focus on practical cooperation in the Pacific region; and enhanced political and subject-matter expert dialogue—including regular Foreign Ministers' meetings and political-military discussions. We resolve to further our two nations' joint cooperation in addressing broader regional and global challenges, such as climate change, nuclear proliferation, and extremism. We resolve also to develop new joint initiatives that confront the challenges faced by the Pacific. Particular areas of focus are to include renewable energy and disaster response management. We recognize that climate change adaptation in the Pacific is also a priority for both countries and is an issue to which the United States and New Zealand are committed. We intend also to work closely to enhance dialogue on regional security issues. We endeavor to develop deeper and broader people-to-people ties between the United States and New Zealand, encouraging innovation, and expanding our commercial and trade relations, building on the creativity and rich diversity of our societies. To ensure the broadest participation of our citizens in strengthening the relationship between our two nations, we should focus efforts across our societies, including women, youth, minorities and future leaders. We are dedicated to working together to address trade, security and development issues through APEC, the East Asia Summit, the United Nations, and other regional and multilateral institutions. Our goal is a partnership for the 21 st Century that is flexible, dynamic, and reflects our fundamental beliefs and aspirations.
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New Zealand is a close partner of the United States and welcomes a U.S. presence in the Asia-Pacific region. New Zealand and the United States engage each other across a broad spectrum of policy areas, including Islamist extremism, South Pacific regional issues, intelligence cooperation, and Antarctica. Issues for Congress related to New Zealand include oversight and appropriations related to international security cooperation, counterterrorism (CT) and countering violent extremism (CVE), and intelligence cooperation among the so-called "Five Eyes" nations, which include New Zealand. U.S.- New Zealand ties are bolstered by shared cultural traditions and values as well as common interests. New Zealand is a stable and active democracy that has supported liberalizing trade in the Asia-Pacific region. It is one of the 11 nations in the proposed Trans-Pacific Partership (TPP) trade grouping, from which President Trump withdrew in January 2017. New Zealand also has a history of fighting alongside the United States in major conflicts including World War I, World War II, Korea, and Vietnam. New Zealand is a regular contributor to international peace and stability operations and has contributed troops to fight Islamist militants in Afghanistan, where New Zealand had a Provincial Reconstruction Team (PRT) in Bamiyan Province until 2013, and more recently in Iraq where it is training Iraqi military personnel. New Zealand's foreign policy largely supports a rules-based international order, collective approaches to promote stability, and the peaceful resolution of disputes. During the mid-1980s, the United States suspended its alliance commitments to New Zealand due to differences over nuclear policy. New Zealand legislation made the country nuclear-free, which had the effect of barring visits from nuclear-powered or nuclear-armed ships. The United States had, and still has, a policy of neither confirming nor denying the presence of nuclear weapons on U.S. Navy ships. These differences over nuclear policy significantly constrained the relationship for many years. In November 2016, a U.S. naval ship visited New Zealand for the first time since 1983. This marked for many observers the return to a normalization of bilateral relations. The bilateral relationship between the United States and New Zealand was strengthened significantly through the signing of the Wellington Declaration in November 2010. The Wellington Declaration, and a subsequent Washington Declaration (2012), opened the way for increased military exchanges and joint participation in military exercises. With the Wellington Declaration, then-Secretary of State Hillary Clinton and former New Zealand Prime Minister John Key signaled that differences over nuclear policy had been set aside. New Zealand is now a participant in the U.S.-hosted Rim of the Pacific (RIMPAC) naval exercise. RIMPAC, the world's largest maritime military exercise, seeks to promote interoperability among participating militaries. New Zealand favors an open and inclusive strategic and economic architecture in the Asia-Pacific. New Zealand has shown a commitment to humanitarian assistance and conflict resolution both in the South Pacific and beyond. In the South Pacific region, it provides foreign assistance and disaster relief and is widely credited with promoting regional stability. New Zealand participates in the annual Pacific Partnership maritime operation, which seeks to improve humanitarian assistance and disaster relief preparedness in the region. New Zealand's commitment to promoting regional security is demonstrated by its past role in helping to resolve conflict in places such as Bougainville, Papua New Guinea, Timor Leste, and the Solomon Islands. New Zealand has also contributed to peace operations in places such as Bosnia, Sierra Leone, and Kosovo outside its region. The National Party and the Labour Party have traditionally been the two leading political parties in New Zealand. New Zealand has a Mixed-Member-Proportional (MMP) electoral parliamentary system. Labour Prime Minister Jacinda Ardern formed a coalition government with the New Zealand First Party with Green Party support following the November 2017 election.
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On September 26, 2006, President Bush signed into law S. 2590 , the Federal Funding Accountability and Transparency Act ( P.L. 109-282 ). According to supporters of the new law, P.L. 109-282 was an attempt to reduce "wasteful and unnecessary spending" by the federal government, including spending on funds earmarked for special projects. To that end, the legislation required the Office of Management and Budget (OMB) to establish a publicly available, online database containing information about entities that are awarded federal grants, loans, contracts, and other forms of assistance. Using the database, supporters asserted, a citizen or watchdog group would be able to easily determine how much money was given to which organizations, and for what purposes. The premise of the new law was that by making the details of federal spending available to the public, government officials would be less likely to fund projects that might be perceived as wasteful. Supporters of the legislation also suggested that the new database would give citizens the opportunity to better understand how the government distributes funds and enable the public to become more involved in the discussion of federal spending priorities. Three of the primary categories of federal expenditures and obligations to be included in the database—federal grants, loans, and contracts—represent a significant element of federal spending. According to the most recently published Consolidated Federal Funds Report (CFFR), federal agencies award over $880 billion in those three categories of financial assistance alone: $470 billion in grants, $381 billion in contracts, and $29 billion in direct loans. OMB launched the database, USAspending.gov , on December 13, 2007. While the new database has been praised as a step toward a worthy objective—enhancing the transparency of government expenditures—government officials and members of the public have expressed concern about the quality of the data it provides, and about the cost of enhancing and expanding data collection efforts. This report initially discusses the background of S. 2590 , noting in particular how it compared to similar legislation in the House of Representatives. It then discusses the Federal Funding Accountability and Transparency Act's provisions, noting what types of assistance are to be part of the new database, the primary sources of the data, and deadlines for implementation. Finally, the report identifies and discusses issues that might affect the act's implementation, and that therefore might prove to be areas for future congressional oversight. Senator Tom Coburn, along with three cosponsors, introduced S. 2590 on April 6, 2006. On August 2, 2006, the Senate Committee on Homeland Security and Governmental Affairs unanimously reported S. 2590 , with an amendment in the nature of a substitute. That same day, the committee's chair, Senator Susan Collins, and its ranking member, Senator Joseph Lieberman, requested that the bill be brought to the floor for a unanimous consent vote before the August recess commenced. This motion was blocked by an unnamed Senator, which delayed action on the bill until after the recess. On September 7, all holds were lifted and the Senate passed S. 2590 by unanimous consent. The House approved S. 2590 , as passed by the Senate, by voice vote on September 13. Later that same day both chambers agreed to S.Con.Res. 114 , making enrollment corrections to S. 2590 . As noted previously, the President signed the bill into law on September 26, 2006. S. 2590 received extensive bipartisan support at each stage of the legislative process. In the Senate, the bill was introduced with bipartisan sponsors, voted unanimously out of committee, and passed by unanimous consent. The legislation was ultimately cosponsored by 47 Senators, including Majority Leader Bill Frist and Minority Leader Harry Reid. In the House, S. 2590 was passed by voice vote under suspension of the rules, with members of both parties speaking in support of the Senate bill and none speaking against it. The White House did not issue a Statement of Administrative Policy on S. 2590 , but President Bush did express his support in a press release distributed the same day the bill was enrolled, making it apparent he would sign the measure once he received it. According to Senator Coburn, S. 2590 was endorsed by over 150 organizations with a wide range of political leanings. The Senator's list of supporters included representatives of private enterprise, such as the U.S. Chamber of Commerce; unions, like the American Federation of State, County, and Municipal Employees; media groups, such as the American Society of Newspaper Editors; and government watchdog organizations, like OMB Watch. As evidence of the unusual alliance in support of S. 2590 , the list indicated that both People for the Ethical Treatment of Animals (PETA) and Gun Owners of America supported the bill, as did both the National Gay and Lesbian Task Force and the Traditional Values Coalition. S. 2590 was a companion bill to H.R. 5060 , which Representative Roy Blunt introduced on March 30, 2006, as an amendment to the Federal Financial Assistance Management Improvement Act of 1999. On June 21, 2006, the House passed H.R. 5060 , as amended, by voice vote. According to Representative Blunt, the bill was intended to "increase accountability and transparency in the federal awards process" by establishing a public database with information on award recipients. While both S. 2590 and H.R. 5060 had similar objectives, the bills differed in important ways. Table 1 highlights three of the most important differences between the engrossed bills. Most notably, contracts were exempt from the public database under the House bill, but were covered in S. 2590 . Since contracts are one of the largest categories of federal domestic assistance, their exclusion would have significantly reduced the comprehensiveness of the database. When H.R. 5060 was first brought to the House floor in June, critics argued that a database without information on federal contracts was "missing a key component that is essential to public oversight." Even some Members who ultimately voted to pass the bill expressed concern that it did not include contracts. Supporters of H.R. 5060 maintained that a database primarily covering grants would still be a valuable tool, and the bill's sponsors reportedly pledged to develop separate legislation enhancing public access to federal contract information. After S. 2590 passed the Senate, some House members expressed a clear preference for the Senate version, which they argued was "stronger and more comprehensive" because it included contracts. Both S. 2590 and H.R. 5060 required the public database to include information on subrecipients, but only the Senate bill provided funding to cover the costs associated with collecting and reporting that information. Currently, data on subgrantees and subcontractors are not gathered uniformly across the government. Some experts believe that recipients of federal financial assistance—particularly states and local governments—will incur substantial costs as they begin to collect and report information on their subrecipients. Under S. 2590 , recipients and subrecipients of federal assistance might recover the costs associated with new reporting requirements by incorporating those costs into their indirect cost rates; H.R. 5060 had no similar feature, leaving it open to the charge of being an unfunded mandate imposed on award recipients by the federal government. Because no uniform method of collecting detailed information on subcontractors and subgrantees existed, S. 2590 directed OMB to conduct a pilot program to determine the most cost-effective and least administratively burdensome approach to implementing a government-wide subaward reporting process. The pilot program was not included in the Senate bill when it was first introduced by Senator Coburn. It was added after concerns were raised about the potential administrative and financial burden new reporting requirements would place on grant award recipients. H.R. 5060 did not contain provisions for a pilot program, and was criticized in congressional hearings as being "an attack" on federally funded grantees. The database required in the act was to be implemented in two phases. By January 1, 2008, the new database was required to provide information on entities that were awarded funds directly from the federal government. Entities covered in the first phase of the database include corporations, associations, partnerships, sole proprietorships, limited liability companies, limited liability partnerships, states, and localities. By January 1, 2009, the database must include information on subgrantees and subcontractors that receive federal funds through a primary award recipient. The act excluded individual recipients of federal assistance, and organizations with less than $300,000 in total income were not required to report on subawards. Consistent with the objective of providing to the public comprehensive information on federal financial assistance, virtually all categories of awards will ultimately be covered by the database, including grants, contracts, subgrants, subcontracts, loans, cooperative agreements, delivery orders, task orders, and purchase orders. Two special provisions addressed particular types of transactions: individual transactions of less than $25,000 are exempt, and credit card transactions will not be included until October 1, 2008. To achieve greater transparency, the act required the database to provide the following information about each federal award: Name of entity receiving award Amount of award Type of award (e.g., grant, loan, contract) Agency funding award A North American Industry Classification System (NAICS) code for contracts or a Catalog of Federal Domestic Assistance (CFDA) number for grants and loans Program source Award title that describes the purpose of the funding Location of recipient City, state, congressional district, and country in which award performance primarily takes place Unique identifier for entity receiving award and of the parent entity of recipient, if one exists Any other information specified by OMB S. 2590 's sponsors, mindful of the criticism that government databases are often difficult for non-experts to use, included language that required OMB to ensure the database is accessible through a "searchable website." The act thus required that the website permit users to (1) conduct a search of federal funding by any of the data elements listed above, and (2) determine the total amount of federal funding awarded to an entity by fiscal year. In addition, the act stipulated that the website must provide information in a downloadable format, and that agencies must post new information to the website within 30 days of making an award. The legislation also required the new website to allow the public the opportunity to provide input on the site and recommend improvements. Three major financial assistance databases were identified in the act as likely sources of information for the new website—the Federal Procurement Data System-Next Generation (FPDS-NG), the Federal Assistance Award Data System (FAADS), and Grants.gov . According to the provisions in S. 2590 as initially passed by the House and Senate, a user must be able to access information from all three databases in a single search. The bill was explicit on this point; it was not acceptable merely to provide links to these or other databases, because that would force users to search for information at different websites. The "single search" provision of S. 2590 was modified by S. Con Res. 114, allowing grants and contracts to be searched separately on the new public website. S.Con.Res. 114 also added another reporting requirement: the Government Accountability Office is to provide Congress with a compliance report on P.L. 109-282 no later than 2010. As previously noted, the act did not require information on subcontractors and subgrantees to be included in the database until January 1, 2009. The delay reflected the fact that information on subrecipients was not collected consistently across federal agencies and programs. To address existing gaps in the data on subawards, the act required OMB to implement a pilot program that tested the feasibility of having primary recipients provide information on their subgrantees and subcontractors. There was a provision in the legislation that allowed federal award recipients and subrecipients to be reimbursed for the costs associated with collecting and reporting data on subrecipients. The act also specified that any requirements for collecting data on subawards made by state and local governments under block and formula grants be cost-effective. According to CBO, no unfunded mandate would be placed on recipients or subrecipients for complying with the act. The act also required OMB to submit an annual report to the Senate Committee on Homeland Security and Governmental Affairs and the House Committee on Government Reform. The report must include data on public usage of the website, an assessment of the reporting burden on federal award and subaward recipients, and an explanation of any extension of the subaward reporting deadline. The act also required OMB to post a copy of the report on the Web. On December 13, 2007, OMB launched the FFATA-mandated website, USAspending.gov . The website, as required by the FFATA, allows users to search for detailed information on grants, contracts, loans, and other forms of assistance. The data, however, are not complete and some observers question their accuracy. The possible cost to improve the data quality is unclear. Also unclear is the possible cost to collect information that might not currently be available, such as data on subcontractors and subgrantees, which must be available to the public through the website by January 1, 2009. The ability of users to identify earmarks through USAspending.gov also appears to be limited. A database of the breadth and depth contemplated by the Federal Funding Accountability and Transparency Act is only as useful as the quality of the information it contains. As noted previously, the act referred to three existing databases as likely sources of information for the new public database: FAADS, FPDS-NG, and Grants.gov . USAspending.org draws extensively from FAADS and FPDS-NG, but it is unclear whether data from Grants.gov is also incorporated. A number of observers have cautioned that a database of federal assistance relying on information from FAADS and FPDS-NG would be of limited value. Both government officials and knowledgeable members of the public describe significant weaknesses in FAADS and FPDS-NG—such as incomplete and inaccurate information—that cannot be quickly corrected. These observers suggest that substantial changes in the collection, reporting, and verification of information relating to federal assistance awards would likely be necessary before FAADS and FPDS-NG might be considered reliable sources of information. In a 2005 report, GAO noted that FPDS-NG users lacked confidence in the data provided, largely because there was no rigorous system in place to ensure the data were accurate and complete. A panel of procurement experts recently attempted to use FPDS-NG in their evaluation of federal contracting operations, but reportedly found so many errors in the data that the chairman declared that "FPDS-NG is not a reliable database." One reason the data are inaccurate is human error; contract information might be incorrectly entered into FPDS-NG by inexperienced users who have received minimal training. Moreover, agencies might vary in the degree to which they fill out the fields in the database, resulting in data of uneven quality. In one instance, FPDS-NG users reportedly complained that the database failed to consistently identify contracts related to Hurricane Katrina recovery efforts that were awarded without competition. The problem has not been fixed, and gaps in FPDS-NG data are now evident in USAspending.gov . A recent editorial stated that the new database might not provide information on whether $70 billion in FY2007 contracts was awarded with or without competition. By OMB's own estimation, individual agencies have submitted only 61% to 73% of the information on contracts required by the FFATA. Similar problems affect FAADS, the government's primary source of grant award information. In a recent review of 86 federally funded grant programs, GAO determined that in the majority of cases, the administering agencies provided no data, incomplete data, or inaccurate data to FAADS over a three-year period. The report concluded that these problems occurred because (1) the Census Bureau lacked the resources to ensure agencies were submitting accurate and timely data, (2) agency program officials lacked knowledge of FAADS reporting requirements, and (3) agencies had not implemented sufficient oversight to ensure they were submitting accurate data. A Census Bureau official concurred with these findings, adding that a number of data elements required by S. 2590 are not uniformly captured by federal agencies or grant award recipients, such as information on subrecipients and the congressional district in which federal funds are spent. The official also noted that agencies are currently required to update their information in FAADS on a quarterly basis, so it might take time for agencies to develop the capability to update FAADS within 30 days of making an award, as S. 2590 requires. OMB estimates that individual agencies' have submitted only 53% to 65% of the grants data required by the FFATA. Members of Congress have also expressed concerns about FPDS-NG and FAADS. During floor debate of the bill in the House, one supporter cautioned that S. 2590 's potential to improve oversight of Federal funds, while substantial, would be largely determined by the degree to which improvements in FPDS-NG and FAADS were made during implementation. Another supporter expressed concern that the problems with FPDS-NG and FAADS were so significant, that "if the Administration is not committed to making this legislation work, all we will get is another incomplete and hard-to-use database." OMB, acknowledging that data submitted and posted to FPDS-NG and FAADS in the past have been "incomplete, untimely, and inaccurate," has issued guidance on improving data quality so that agency submissions meet the requirements of the FFATA. The guidance, issued November 9, 2007, required agencies to submit a plan to OMB by December 1, 2007, that identified gaps in their data on grants, contracts, and loans, and outlined their plans to address any deficiencies. In addition, agencies were required to implement internal controls to ensure the accuracy, integrity, and timeliness of their submissions. The guidance also indicated that agency compliance with the data reporting requirements of the FFATA would be formally and publicly evaluated through inclusion in OMB's scorecard initiative, beginning in January, 2008. Concerns have been expressed regarding the cost of implementing USAspending.gov . Two types of costs are at issue: the costs of implementing the act as a whole and the costs associated with the development of information on subawards. In response to concerns about the reliability and completeness of the FPDS-NG and FAADS databases, Clay Johnson, the deputy director for management at OMB, reportedly said the new database will meet the requirements of the act within the time frame established by the legislation. Johnson was also quoted as saying that implementing the new public database will "cost a little money, not a lot" because "most of the data exists" already—a view that appears somewhat at odds with previously discussed evidence that there are significant gaps in the data. Moreover, while the database was launched prior to the statutory deadline, the information is so incomplete that some have questioned whether it meets the objectives of the FFATA. According to CBO, it will cost $15 million to establish and maintain the new database of federal assistance between 2007 and 2011. The CBO estimate, however, was based on OMB's assurance that "the government currently collects all of the information needed to create a comprehensive database on federal spending." The estimate might thus reflect the cost of simply combining existing systems without fully accounting for other costs associated with improving the quality of the data in those systems. One expert familiar with FPDS-NG and FAADS said that "an enormous amount of data cleanup" will be necessary to correct inaccurate information in those systems. Another industry observer was quoted as saying that enhancing and integrating existing data sources to meet the requirements of the FFATA was a "complex" problem, and that implementing the database might exceed the $15 million projected by CBO. In a letter to Senator Coburn, the National Association of State Auditors, Comptrollers, and Treasurers (NASACT) expressed strong reservations about the potential financial and administrative burden that the bill's reporting requirements would impose on state and local governments. In particular, NASACT noted that collecting data on subgrantees would be "very, very costly" for state and local governments, since federal grant funds are often passed down multiple levels (e.g., a state receiving federal assistance gives a subgrant to organization A, which in turn gives a subgrant to organization B). Additional costs might be incurred under the bill, NASACT said, if state and local grant recipients were required to modify their financial systems to collect and report any other new information. After S. 2590 was amended to include the pilot program for collecting information on subgrantees, NASACT said it supported the bill with the new language, but also noted that it still believed "obtaining all the required information will be a challenge." Some trade groups have made similar arguments regarding the collection of subcontractor information. The Council of Defense and Space Industry Associations (CODSIA), for example, has reportedly stated that prime contractors do not normally collect subcontractor information at the level of detail required by the FFATA, and that doing so would become a significant administrative burden on both contractors and subcontractors. Although one of the stated purposes of the legislation was to enable the public to use the on-line database to identify congressional "earmarks," it is unclear how users of USAspending.gov might actually do this, since neither FAADS nor FPDS-NG collect that information. Not all grants, loans, or contracts are congressionally directed; some are at the discretion of the responsible federal agency. Unless the congressionally-directed items in the new database are specifically identified as such, the database will be of limited value for purposes of earmark identification. Also, the manner in which a funding action is described under the "award title" field might lead the public to draw different conclusions about the value of a given federally funded project. For example, an earmarked project that some believe has merit might be described in a manner that puts it in an unfavorable light. In this way, award descriptions might influence the public's perception of whether a funding action is "wasteful" or not. As noted previously, the underlying logic of the Federal Funding Accountability and Transparency Act is that, by providing citizens with information on federal assistance awards through an online database, government officials will be less likely to fund earmarks and arguably "wasteful" projects. To put this argument succinctly: greater transparency will yield greater accountability. Most observers agree that in order for a public database of federal awards to provide maximum transparency, it must encompass as broad a range of financial assistance categories as possible. The FFATA database would presumably provide substantial transparency, since it covers all forms of federal financial assistance, including contracts. Arguably, the database would also provide transparency by phasing in information on subcontractors and subgrantees, thus allowing the public to track the flow of federal funds down to the level of the ultimate recipient. Although the creation of the database might require more time or money than some estimates suggest, President Bush, the deputy director of OMB, and Senator Coburn have all indicated they will provide support and oversight during implementation. In remarks prior to signing the legislation, President Bush said the act was an "important step" that "empowers the American taxpayer" with information that can be used to "demand greater fiscal discipline" from both the executive and legislative branches of government. The President also linked the act to a broader agenda of increasing accountability in federal spending, including earmark reform and the line-item veto. President Bush's comments suggest that the Administration is committed to the act and might be prepared to provide the resources needed to implement the database with complete and accurate information, even if the costs exceed OMB's current expectations. The Administration's commitment might also be reflected in OMB's guidance that required agencies to develop and implement data quality improvement plans. The original sponsor of S. 2590 , Senator Coburn, was also quoted as saying that "there will be oversight to make sure we're making progress" implementing the database in accordance with the legislation. Finally, the new law might direct attention to increased transparency on the revenue side of federal fiscal operations. In the Senate report accompanying S. 2590 , the additional views of Senators Coburn and Lautenburg included the statement that, "Transparency in government decision-making should not be limited to simply spending; it should be extended ... to the tax code." This sentiment was echoed by Senator Obama, who said during floor debate on the bill that "greater transparency of targeted tax benefits" was another step in improving government accountability and performance. Given this objective, legislation seeking to increase transparency in the tax code might be supported by some of the same government officials and advocacy groups that supported S. 2590 .
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On September 26, 2006, President Bush signed S. 2590, the Federal Funding Accountability and Transparency Act, into law (P.L. 109-282). In an attempt to expand oversight of federal spending, including earmarks, the new law required the Office of Management and Budget (OMB) to establish a publicly available online database containing information about entities that are awarded federal grants, loans, contracts, and other forms of assistance. Federal agencies award over $880 billion dollars annually in three of the primary categories of financial assistance to be included in the database—$470 billion in grants, $381 billion in contracts, and $29 billion in direct loans. The FFATA was endorsed by leaders of both parties and an array of business, union, and watchdog organizations. OMB launched the new database, USAspending.gov, on December 13, 2007. While the database has been praised as a step toward a worthy objective—enhancing the transparency of government expenditures—government officials and members of the public have expressed concern that issues surrounding its implementation have not been adequately addressed. In particular, many observers question the reliability of information taken from the Federal Assistance Award Data System (FAADS) and the Federal Procurement Data System - Next Generation (FPDS-NG), which are important sources of information for USAspending.gov. They note that information in FAADS and FPDS is often incomplete and inaccurate, and therefore might limit transparency. Some observers also believe that the cost of establishing and maintaining the new database might grow as agencies seek to improve data quality and collect new information on subawards. This report initially discusses the background of S. 2590, noting in particular how it compared to similar legislation in the House of Representatives. It then discusses the Federal Funding Accountability and Transparency Act's provisions, noting what types of assistance are to be part of the new database, the primary sources of the data, and deadlines for implementation. Finally, the report identifies and discusses issues that have been raised regarding the act that might affect its implementation, and that therefore might prove to be areas for future congressional oversight. This report will be updated as events warrant.
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On June 11, 2009, the House and Senate Appropriations Committees announced a conference agreement on H.R. 2346 , a bill providing supplemental appropriations for the remainder of FY2009. The House passed the conference report ( H.Rept. 111-151 ) with a vote of 226 to 202 on June 16; the Senate passed it (91 to 5) on June 18. The full text of the conference agreement was released June 12. President Obama signed the bill into law ( P.L. 111-32 ) on June 24. The agreement includes $5 billion, as in the Senate bill, to support U.S. loans to the International Monetary Fund, and does not include a Senate provision allowing the Secretary of Defense to exempt photos of military detainees from release under the Freedom of Information Act. Because the bill did not include that provision, there was enough support from House Democrats who initially opposed the bill to overcome opposition from Republicans who objected to IMF funding. On June 2, 2009, the White House submitted a request for additional FY2009 supplemental appropriations of $2.0 billion for influenza preparedness and response and $200 million for humanitarian assistance to Pakistan. On May 21, by a vote of 86-3, the Senate approved H.R. 2346 , a bill providing additional supplemental appropriations for the remainder of FY2009. The House passed its version of the bill on May 14 by a vote of 368-60. Senate approval cleared the bill for consideration by a House-Senate conference committee. Procedurally, on May 19, the Senate took up the House-passed supplemental bill and substituted the text of S. 1054 , a version reported by the Senate Appropriations Committee on May 14. As reported and subsequently approved on the floor, the Senate bill provided $91.3 billion, of which $5 billion was to support loans to the International Monetary Fund (IMF) that were not part of the Administration's pending request, but that fulfill commitments that have been under discussion since last Fall. Apart from the IMF funds, the Senate bill provided $86.3 billion, $1.3 billion above the request. The House-passed version of the bill provided supplemental appropriations of $96.3 billion, $11.4 billion more than the Administration's amended request. Earlier, the Administration submitted three requests for FY2009 supplemental appropriations that were addressed in the pending House and Senate bills. On April 9, 2009, the White House requested $83.4 billion in supplemental appropriations for defense, international affairs, domestic fire fighting, and some other purposes. On April 30, 2009, following influenza outbreaks in Mexico and in parts of the United States, the White House requested $1.5 billion for influenza preparedness and response measures. On May 12, the White House submitted a formal request for supplemental appropriations and for legislative language to support IMF loans in response to the global financial crisis. Congress had provided down-payments on FY2009 war-related supplemental funding last year. On June 30, 2008, the President signed into law, P.L. 110-252 , H.R. 2642 , a bill providing supplemental appropriations for FY2008 and FY2009. The bill included $65.9 billion for defense and $4.0 billion for foreign affairs in FY2009. The Department of Defense (DOD) funding was mainly for operation and maintenance accounts, and was intended, together with money in the regular FY2009 defense appropriations act, to sustain ongoing military operations through the first few months of that fiscal year. Between April 9, 2009 and June 2, 2009, the Administration submitted four requests for FY2009 supplemental appropriations, including: An April 9, 2009, request for $83.4 billion in net additional FY2009 funding, mainly for defense and international affairs, with smaller amounts for domestic fire fighting, Department of Energy counter-proliferation programs, Justice Department programs including measures to facilitate closure of the Guantanamo Bay prison, National Security Council administration, and Capitol Police radios; An April 30, 2009, request for $1.5 billion to be appropriated to the Executive Office of the President for transfer to other agencies for H1N1 influenza preparedness and response measures; A May 12, 2009, request for appropriations of $5 billion to support U.S. financial backing of International Monetary Fund loans in response to the global financial crisis; and A June 2, 2009, request for an additional $2.0 billion for influenza preparedness and response, $200 million for humanitarian assistance to Pakistan, and several billion dollars of transfer authority for influenza response. The influenza-related funding and transfer authority were to be contingent on the President determining that additional resources are required to address critical needs related to emerging influenza viruses. On April 9, 2009, the Administration requested a net total of $83.4 billion in additional supplemental appropriations for FY2009, comprised of $86.8 billion in new appropriations, offset by $3.4 billion of recessions of previously appropriated funds. Of the total in the initial April 9 request, $75.5 billion was for Department of Defense and intelligence activities related to operations in Iraq and Afghanistan; $3.7 billion, offset by rescissions of $3.4 billion, was for other defense activities; $7.1 billion was for international affairs; $89.5 million was for Department of Energy counter-proliferation programs in Russia, North Korea, and elsewhere; $47 million was for Department of Justice national security related programs, including $30 million to implement executive orders for shutting down the Guantanamo Bay prison and for related expenses (an additional $50 million for moving prisoners out of Guantanamo Bay was in the request for the Department of Defense); $2.9 million was for operations of the National Security Council; $250 million was for the Forest Service and the Department of the Interior for fire fighting and rehabilitation of burned areas; and $71.9 million was for the Legislative Branch to purchase secure radios for the Capitol Police. Together with $65.9 billion that Congress had already provided, if approved by Congress, the April 9 request for the Department of Defense would have brought the total supplemental defense funding for FY2009 to $145 billion, partly offset by $3.4 billion of rescissions. The $7.1 billion supplemental request for international affairs included: $2.3 billion for State Department operations, including $261.5 million for Afghanistan Operations; $36.5 million for Pakistan Operations; $898.7 million for embassy security and construction; $836.9 million for international peacekeeping; $4.8 billion for foreign assistance programs, including $980.0 million for aid to Afghanistan; $482.0 million for aid to Iraq; $497.0 million for aid to Pakistan; $715.0 million for aid to West Bank/Gaza; $500.0 million for humanitarian assistance; and $448.0 million to developing countries affected by the global financial crisis. Together with $4.0 billion provided in June 2008, the additional amount requested for foreign affairs would have brought the total supplemental appropriations for FY2009 to just over $11 billion. In practice, however, there is often little to distinguish between what is being provided in the base budget and what has been funded with supplementals. Both regular and supplemental appropriations have been used to finance State Department operations in Iraq and Afghanistan and a wide range of foreign aid programs in Afghanistan and elsewhere. Of the $4.0 billion in FY2009 supplemental foreign affairs funding provided in June, 2008, $1.1 billion was for State Department accounts, of which $550.5 million was for operations in Iraq, and $2.9 billion was for country foreign aid allocations and international food assistance. On April 30, 2009, the White House requested an additional $1.5 billion in FY2009 supplemental appropriations for pandemic flu preparedness and response measures. All of the money was requested to be appropriated to the Executive Office of the President in a new account entitled "Unanticipated Needs for Influenza," available for transfer to other agencies. On May 12, the White House formally sent Congress a request for supplemental appropriations and for legislative language to support increases in borrowing authority for the International Monetary Fund. One part of the proposal was to support an increase of about $8 billion in the U.S. quota subscription to the IMF. A second part is to support an increase in U.S. support for the IMF's "New Arrangements to Borrow" (NAB). This proposal would increase the overall NAB from $50 billion to $500 billion of which the U.S. share would be limited to $100 billion. Since these amounts represent increases in amounts the IMF may borrow, the cost to the U.S. Treasury is nil if all the loans are repaid. Appropriations are required by congressional budget procedures governing credit and credit guarantees only to cover the amount of assumed risk to the Treasury of defaults on the loans. The Congressional Budget Office and the Office of Management and Budget have agreed to estimate the appropriations required at about $5 billion. In the past, U.S. payments to the IMF have been considered to have no budget impact—they have been treated as an exchange of assets, with equivalent assets being transferred to the United States. On June 2, the White House submitted an additional supplemental appropriations request for influenza preparedness and for aid to Pakistan. The OMB Director's cover letter to the President, submitted as usual to Congress along with the request, notes that the House approved $2.05 billion and the Senate $1.5 billion for influenza response in their respective versions of H.R. 2346 , the pending supplemental appropriations bill. The letter complained that neither the House nor the Senate provided the degree of flexibility in using the funds that is necessary. The letter said OMB will urge Congress to approve the House level with the flexibility originally requested. In addition, the Administration requested $2.0 billion more, appropriated as in the April 30 request to the Executive Office of the President in an account for Unanticipated Needs for Influenza for transfer to other agencies. The funding was proposed to be available, however, only "if the President determines that additional resources are required to address critical needs related to emerging influenza viruses." In addition to $2.0 billion requested in contingent appropriations, the proposal requested authority, also contingent on the President determining that additional resources are required, for the Director of OMB to transfer substantial amounts of funds appropriated for other purposes to meet influenza-related needs and to use balances of funds in the BioShield reserve fund for influenza countermeasures. The amounts available under these proposals included: Up to 1% of amounts appropriated in Division A of P.L. 110-5 , the American Recovery and Reinvestment Act (ARRA). In all, Division A would have appropriated $311.2 billion, so the supplemental request would have allowed transfers of as much as $3.1 billion. Up to 1% of discretionary funds available to the Department of Health and Human Services (HHS) in FY2009, including balances of funds provided in prior years. FY2009 discretionary budget authority for HHS totals $78.5 billion, not including $22.5 billion provided for HHS in ARRA. The supplemental request would have allowed transfer of at least $785 million plus 1% of unobligated balances of prior year appropriations. Remaining funds in the "Biodefense Countermeasures" account in the Department of Homeland Security (i.e., the BioShield Special Reserve Fund) for procurement of medical countermeasures for influenza (e.g., vaccines, antiviral drugs, and laboratory tests). The Special Reserve Fund, which the White House proposed for transfer to HHS in its budget request for FY2010, was estimated to have a balance of $2.76 billion at the end of FY2009. For Pakistan, the June 2 supplemental proposal asked for an additional $200 million in humanitarian assistance, including $40 million for migration and refugee assistance, $130 million in the Economic Support Fund account to assist displaced people, and $30 million in international disaster assistance. As has been the case for the past couple of years, Congress was under some pressure to act quickly on the Administration's supplemental request. In testimony on April 30, 2009, Secretary Gates suggested that "some operations funds will begin to run out in July," and that if the supplemental were not enacted by Memorial Day, DOD would "need to consider options to delay running out of funds," a dilemma that DOD has faced each year since 2004. In addition to using war funding enacted in the FY2009 bridge, the services temporarily tap their baseline funding in order to finance war costs longer, a practice known as cash flowing that has been used frequently in recent years. If necessary, DOD could also extend funding into early August by using its authority to transfer funds between accounts. In the past two years, congressional action on war-related supplemental funding has taken until the end of June, and this year's request came several weeks later than usual. While Iraq policy, the most contentious issue in recent years, was not in play this year, other issues such as the closing of Guantanamo, release of pictures of detainees, and funding for the IMF proved difficult to resolve. The bill was signed by the President on June 24, 2009 in advance of when Army funds were expected to run out. The Supplemental Appropriations Act, 2009 ( P.L. 111-32 ), includes a total of $105.9 billion in supplemental appropriations, including $5.8 billion for flu preparedness that is contingent on the President determining that the money is needed to respond to the illness. (For summary of funding by title, see Table 1 . For account-by-account funding, see Appendix G .) The supplemental provides: $79.9 billion for defense and intelligence activities in Iraq and Afghanistan; $10.4 billion for international affairs, including $700 million for P.L. 480; $5 billion for loans to the IMF; $7.7 billion for influenza preparedness and response, including $1.9 billion available immediately, and $5.8 billion contingent on the President determining that the funding is necessary to respond to the outbreak. Of amounts available immediately, $350 million is for state and local response measures, and $50 million is in the Global Health and Child Survival Fund for international measures; $250 million, as requested, for domestic fire fighting; $72 million, as requested, for Capitol Police radios; $847 million, as in the Senate bill, in unrequested funds for the Corps of Engineers for disaster-related flood control projects; and $1 billion as initial funding for the "Cash for Clunkers" program to provide vouchers of $3,500 or $4,500 for consumers who trade in inefficient vehicles for more efficient new ones. Defense funding in the enacted version totals $79.9 billion, $4 billion above the request and includes: $4.0 billion more than requested for procurement including $2.7 billion more for C-17 and C-130 cargo aircraft; $1.8 billion for additional light-weight Mine Resistant Ambush Protected (MRAP) vehicles for Afghanistan; $500 million for National Guard and reserve procurement; $200 million more for Stryker vehicles, partly offset by cuts for pricing, non-war requests, and unrealistic plans; $600 million, as requested, for 4 F-22 fighter aircraft but with a ban on using any of these funds to shut down the line; an additional $534 million to provide retroactive payments of $500 per month to all service members serving since 9/11 whose enlistments were extended by stop-loss orders, extending a benefit provided last year to those currently in the force; $1.1 billion in Coalition Support and lift and sustain funds for assistance to nations, mainly in the region, that have supported U.S. operations in Iraq and Afghanistan, $250 million below the request; $3.6 billion for training the Afghan Security Forces, and an extension of the availability of $1 billion previously appropriated for the Iraq security forces; $400 million, as requested, for Defense Department-administered counterinsurgency assistance to Pakistan, with direction to transfer responsibility to the State Department in FY2010, which is given $700 million for the following year; $1.1 billion for Defense Health including an additional $155 million for rehabilitation equipment ($20 million), psychological health and Traumatic Brain Injury ($75 million) and orthopedic research ($51 million) to address major war-related health problems; and $2.7 billion for military construction including not only funding for facilities in Afghanistan but also $276 million for childcare centers, $440 million for warrior transition centers in the United States, and $488 million in unrequested construction funds for military hospitals. For international affairs, the enacted supplemental provides $10.4 billion, about $3.3 billion above the request, including: $1.4 billion, $9 million above the request for assistance and diplomatic operations and facilities in Afghanistan; $1.3 billion, $1.2 billion above the request, for the Foreign Military Financing Program; $958 million, $326 million above the request for assistance and diplomatic operations and facilities in Iraq; $2.4 billion, $800 million above the request, for assistance and diplomatic operations and facilities in Pakistan, including $700 million for counterinsurgency training and assistance through the State Department to be available in FY2010; $660 million for aid to the West Bank and Gaza; $300 million in unrequested foreign aid to Jordan; $315 million in unrequested assistance to Egypt; $555 million for assistance to Israel, using the supplemental to provide part of the $2.8 billion requested in the regular FY2010 budget; $700 million, $400 million above the request, for P.L. 480 international food assistance; $288 million, $155 million above the request, for aid to Kenya, Somalia, Southern Sudan, and Zimbabwe; $420 million, $354 million above the request, for aid to Mexico; and $256 million, $192 million below the request, for aid to developing countries affected by the global financial crisis. The act also addresses a number of major policy issues, including: Guantanamo detainees. The act does not include $50 million requested for the Department of Defense and $30 million for the Department of Justice to facilitate closure of the Guantanamo Bay prison. Sec. 14103 also prohibits release or transfer of Guantanamo prisoners in the United States except for prosecution; requires a report to Congress 15 days in advance that assesses risks before the transfer or release of prisoners to another country; and requires a classified report to Congress on the disposition of each detainee before the facility can be closed. Policy toward Afghanistan and Pakistan . The enacted measure does not impose "benchmark-like" conditions on further U.S. government assistance to Afghanistan or Pakistan, but it does establish two new reporting requirements: 1) a one-time report by February 2010 or earlier assessing whether the governments of Afghanistan and Pakistan are demonstrating sufficient "commitment, capability, conduct and unit of purpose" to warrant continuing the President's March 2009 strategy for these two countries (see Section 1116, P.L. 111-32 ; for details, see final Congressional action section below); and 2) the act requires that, no later than 90 days after enactment or by late September 2009, the President submit a report listing U.S. objectives and the metrics for evaluating progress for Afghanistan and Pakistan, with updates every 180 days until the end of FY2011 (see Section 1117, P.L. 111-32 , and final Congressional action section below.) Prohibition on Permanent Bases in Iraq or Afghanistan . The sections 314 and 315 of the act prohibit establishment of permanent bases in either Iraq or Afghanistan. Controversy also developed over a provision proposed by Senators Graham, Lieberman and McCain that would have prohibited the release of additional photographs of detainee abuse because of concern that their release would endanger U.S. troops. In response to a Presidential letter and a June 11, 2009 ruling to stay their release issued by the U.S. Court of Appeals for the 2 nd Circuit, Congress dropped that provision. The President promised, if necessary, to pursue other measures to prevent the release of photographs. On May 7, the House Appropriations Committee marked up its version of a bill, H.R. 2346 , providing additional FY2009 supplemental appropriations of $96.3 billion. The House approved the bill by a vote of 368-60 on May 14 with a manager's amendment that was incorporated into the bill when the House approved the rule for floor consideration. The amount in the bill was $11.4 billion above the amended Administration request. As initially proposed by Appropriations Committee Chairman David Obey, the pre-markup version of the bill provided $94.2 billion. In its markup of the bill, the committee approved an amendment by Representative Murtha, Chairman of the Subcommittee on Defense, adding $2.0 billion to the Chairman's proposal for military personnel accounts. The effect of the Murtha amendment was to restore funds for military personnel to about the levels that the Defense Department had requested. The bill established funding levels for defense, international affairs, and influenza preparedness, and also addressed a number of key issues policy issues, including conditions on aid to Pakistan, assistance to North Korea, and the status of Administration plans to shut down the Guantanamo Bay prison. Highlights of the committee bill as of May 7 included the following: Defense . Provided a total of $84.5 billion for the Department of Defense, including military construction, an increase of $8.7 billion to the request of $75.8 billion (net of offsetting rescissions). Internation al affairs . Provided a total of $9.6 billion for international affairs programs (including P.L. 480 food assistance), an increase of $2.4 billion compared to the request. (Of the total in the bill, $9.0 billion was in Chapter 10, which provided foreign operations and State Department appropriations, and $500 million was for P.L. 480 food assistance included in Chapter 1, which provided agriculture appropriations.) Influenza preparedness . Provided $2.05 billion for influenza preparedness, an increase of $550 million over the $1.5 billion requested. Of the total in the bill, $1.85 billion was for the Department of Health and Human Services and $200 million was in the foreign affairs budget for Global Health and Child Survival. North Korea . Rejected a request for $34.5 million in Department of Energy non-proliferation funds to dismantle nuclear facilities in North Korea and rejected $95 million requested for energy assistance to North Korea in the foreign assistance accounts. Aid to Pakistan . Provided $400 million to the Department of Defense, as requested, for the Pakistan Counterinsurgency Fund to finance training and other assistance to the Pakistani military. The Chairman's mark of the bill originally transferred the funds to the Department of State, but Representative Obey offered a manager's amendment at the beginning of the committee markup that restored the funds to the Department of Defense. In the foreign assistance portion of the bill, the committee measure provided $897 million, $91 million above the request, for construction of facilities and for diplomatic operations in Pakistan, and $529 million of economic assistance. Conditions on assistance to Pakistan and Afghanistan . The apparently deteriorating security situation in Pakistan was the focus of extensive discussion in congressional hearings with Administration witnesses on the supplemental appropriations request. Administration officials strongly objected to legislated benchmarks on the performance of the Pakistani government, arguing that conditions on aid would not improve U.S. leverage but would more likely foster resistance to U.S. efforts. Instead of setting benchmarks tied to funding, the House Appropriations Committee bill included a requirement that the President submit a report to Congress no later than February 2010, when the FY2011 budget would be submitted, evaluating the conduct and commitment of the governments of Afghanistan and Pakistan. The report was to include assessments of each nation's level of political commitment to confront security challenges; level of corruption and efforts to counter it; performance of security forces in counterinsurgency operations and in establishing population security; intelligence cooperation with the United States; and the ability to effectively control its territories. House Appropriations Committee Chairman David Obey said that the White House did not object to the House provision. Closure of the Guantanamo Bay Prison . Rejected the Administration request for $50 million for the Department of Defense to transfer prisoners out of the Guantanamo Bay facility and also rejected $30 million requested for the Department of Justice for a task force to facilitate legal activities associated with the closure. The committee noted that the Administration had not presented a specific plan for shutting down the prison and said that funds could be reprogrammed when a plan was decided upon. Border security and counternarcotics assistance to Mexico . Approved $350 million requested for the Department of Defense for counternarcotics activities on the Mexican border, including up to $100 million for transfer to other federal agencies. In the foreign aid chapters of the bill, provided $160 million for Mexico in the International Narcotics Control And Law Enforcement (INCLE) account, $94 million above the request—$66 million was requested to purchase Blackhawk helicopters. The bill also added $310 million for Mexico in the Foreign Military Financing Program for surveillance planes, helicopters, other equipment, and support activities. On major issues in the defense portion of the bill, the House bill, Added $6.0 billion for weapons procurement, including the following: $2,245.2 million in unrequested funds for 8 C-17 cargo aircraft—the FY2010 defense budget request, released on May 7, proposes terminating the program, $904.2 million in unrequested funds for 11 C-130 cargo aircraft, $110.0 million for MQ-9 Reaper UAVs (the request included $195.8 million), $432.7 million for 24 additional upgraded Army AH-64 attack helicopters (the request included $354.3 million), $90.0 million for 3 additional Army CH-47 cargo helicopters (the request included $120.0 million), $338.4 million for additional Stryker wheeled combat vehicles (the request included $112.7 million), $500.0 million in unrequested funds for National Guard and Reserve Equipment, and $2,150 million for 800 additional lighter MRAP All Terrain Vehicles for Afghanistan (the request included $2,693.0 million for 1,000 vehicles). Provided $735 million for payments of $500 per month, including retroactive payments, to personnel who were prevented from leaving the service at the end of their enlistments because of "Stop Loss" orders; Added $100 million in the Defense Health Program for Brain Injury R&D and $68 million for orthopedic R&D; Cut $346 million in military personnel accounts for enlistment and reenlistment bonuses because of reduced accession requirements and improved recruiting and retention results; Cut $300 million in operation and maintenance funds to reflect the committee's direction to replace U.S. contractors providing contract support services and logistics support with Iraqis; Cut $240.0 million from the $1,050 billion requested in Coalition Support Funds for assistance to Pakistan, Jordan and other key cooperating nations, and cut $150 million in "Lift and Sustain" assistance to cooperating nations to deploy forces in Iraq and Afghanistan. Table 2 compares defense funding in the House bill with the Administration request by bill title. Other committee recommendations on international affairs included the following: $1.0 billion, $421.9 million above the Administration request, for State's Diplomatic and Consular Programs; of this, $404.0 million was for worldwide security, $448.9 for operations in Afghanistan, and $157.6 million along with authority for the Secretary of State to transfer funds to other U.S. government agencies for a civilian experts surge; $2.9 billion for the Economic Support Fund (ESF), of which $529.5 million was for Pakistan, $70.0 million for Afghanistan, and $556.0 million for the West Bank and Gaza. The committee reduced ESF funds requested for "Countries Impacted by the Global Financial Crisis" by $148.0 million from $448.0 million to $300.0 million, to be available for aid to Haiti, Liberia, Indonesia and other nations; $1.3 billion, $1.25 billion above the President's request for the Foreign Military Financing (FMF) Program. Of this amount, the Committee recommended $310.0 million for Mexico, $74.0 million for Lebanon; $150.0 million for Jordan, $260.0 million in FMF grants for Egypt; and $555.0 million in FMF grants for Israel. On May 21, by a vote of 86-3, the Senate approved its amended version of H.R. 2346 , providing supplemental appropriations for FY2009. The Senate-passed measure incorporated, with further amendments on the floor, the provisions of S. 1054 , a version reported by the Senate Appropriations Committee on May 14. In all, as reported by the committee and as passed by the Senate, the bill provided $91.3 billion in FY2009 supplemental appropriations, of which $5 billion was to support U.S. loans to the International Monetary Fund (IMF) that were not considered in the House bill. The remainder of the bill provided $86.3 billion, $1.3 billion above the amended Administration request. The bill provided $75.4 billion for the Department of Defense (including military construction), which was $561 million below the request. The reduction was mainly due to the committee's decision to allocate to other agencies, including the Department of Homeland Security and the Department of Justice, $350 million for Southwest border security that the Administration had requested be appropriated to the Department of Defense. The bill also added $240 million for additional border security measures and $843 million for Corps of Engineers disaster-related programs. In floor action on the bill, only a few amendments were agreed to and none affected the total amount of funding in the bill. In action on selected floor amendments the Senate— Approved by voice vote an amendment by Senator Lieberman to exempt photographs showing treatment of U.S. detainees from disclosure under the Freedom of Information Act; Approved by voice vote an amendment by Senator Corker to require the development of objectives for U.S. policy in Afghanistan and Pakistan; Approved by voice vote an amendment by Senator McCain to provide $42.5 million for the Republic of Georgia, out of other funds approved in Title XI – the State Department/Foreign Operations title of the bill; and By a vote of 30-64, rejected an amendment by Senator DeMint to eliminate funding provided in the bill for loans to the IMF. Highlights of the Senate-passed bill included the following: Department of Defense funding: Provided $75.4 billion for the Department of Defense, of which $73.0 billion was in regular defense appropriations, $518 million below the request, and $2.25 billion was for military construction, $44 million below the request. International affairs funding: Provided $7.6 billion for international affairs funding, $430 million above the request. Of the total $700 million was for P.L. 480 food assistance, $400 above the request, and $6.9 billion was for the State Department and foreign operations. Influenza preparedness and response: Provided $1.5 billion, the amount requested, for influenza preparedness. The committee agreed to appropriate the funds to an account in the Executive Office of the President, renamed "Pandemic Preparedness and Response." Rather than provide authority, as for the President to allocate funds to other agencies, the bill specified the amounts to be transferred to the Department of Health and Human Services, Department of Homeland Security, and other agencies. Guantanamo prison closure: Initially, unlike the House, the Senate committee agreed to provide $50 million requested for the Department of Defense and $30 million for the Department of Justice to facilitate closure of the Guantanamo Bay prison. The committee prohibited obligation of the defense funds, however, until 30 days after the Secretary of Defense provides Congress with a specific plan for their use. The provision also required that funds may be used only to transfer prisoners to locations outside the United States. In floor debate, the Senate adopted an amendment by 90-6 an amendment by Senators Inouye and Inhofe to eliminate the funds and to prohibit the use of funds in the supplemental or in prior legislation to transfer, release, or incarcerate detainees held at Guantanamo Bay to or within the United States. Defense Department Assistance to Pakistan: The committee approved $400 million requested for Pakistan Counterinsurgency Capabilities Fund in the Department of Defense for assistance to Pakistani security forces. The committee expressed concern about the role of the Defense Department, however, and directed the Administration to develop a plan to provide future assistance through the State Department and to report on the plan within 90 days. The committee also put a limit of $200 million on the amount of money in the fund that could be used for humanitarian purposes, saying it wished to limit the amount of overseas humanitarian aid being provided by DOD rather than State. Added funds for Corps of Engineers projects: The committee provided $843 million in unrequested funds for the Corps of Engineers, including $39 million to restore damaged navigation channels, $315 million to prepare for natural disaster, and $489 million for gulf coast barrier island restoration. North Korea counterproliferation assistance: As did the House, the Senate committee rejected $34.5 million requested to dismantle nuclear facilities in North Korea. Instead, the committee provided the same amount to the Department of Energy to analyze nuclear weapons intelligence. Southwest border security: The committee rejected the Administration request that $350 million to be appropriated to the Department of Defense for border security; instead it added $250 million and allocated the total to other agencies, including $140 million for additional Department of Homeland Security personnel for border enforcement support teams, $100 million for the Department of Justice for additional agents and investigators to cooperate with Mexican authorities, and $100 million for the Departments of Health and Human Services and Homeland Security for added shelter and transportation costs for unaccompanied alien children. On major issues in the defense portion of the bill, the Senate— In the military personnel accounts, added $489 million to fully fund increased Army and Marine Corps end-strength, added $1.4 billion to cover identified shortfalls in some FY2009 accounts, and cut $140 million in Army recruitment and retention bonuses to reflect easier recruiting due to changes in the economy. Provided an additional $1 billion for the Iraq Security Forces Fund, which pays for equipment and training of Iraqi forces. The Administration requested that Congress rescind and then reappropriate $1 billion that had previously been provided in order to extend the availability of the money, but the Senate committee rejected the rescission, with the effect of providing $1 billion in additional funding. Provided $21.9 billion for weapons procurement, about equal to the request, but with some changes. On major programs the committee— Added $1.55 billion to the $2.7 billion requested for Mine Resistant Ambush Protected (MRAP) Vehicles, as did the House; Added $500 million for National Guard and Reserve equipment, as did the House; Selectively scrubbed funding requests to eliminate money not required to replace combat losses or meet established equipment reset requirements—the committee rejected, for example, $354 million requested for AH-64 attack helicopter modifications,, $237 million requested for Improved Recovery Vehicle modifications, and $386 million requested for Family of Medium Tactical Vehicle trucks. Added $246 million for Navy P-3 aircraft wing modifications and $150 million for Air Force A-10 aircraft re-wing kits. Did not follow the House in adding funds for C-17 or C-130 cargo planes. Provided $498 million for F-22 fighter aircraft compared to $600 million requested—specifically rejected $147 million for shut-down funding and added $45 million to fully fund the aircraft request. Cut $350 million from the $1.5 billion requested for the Joint Improvised Device Defeat Organization (JIEDO) to reflect the pace of funding obligations. On international affairs, the Senate bill provided: $645.4 million, $51 million more than the Administration's request, for State's Diplomatic and Consular Programs; of this $410 million would be for operations in Afghanistan, including $10 million above the public diplomacy request to focus on radio broadcasts in the Afghan-Pakistan border region and programs focused on Arab youth, $45.5 million for operations in Pakistan, and $150 million for operations in Iraq. Operational funds for Afghanistan would also include $57 million for an embassy air capability to move diplomats and USAID staff around Afghanistan and $135.6 million for State to reimburse other federal agencies such as the Departments of Agriculture and Justice that contribute personnel for the civilian surge to help develop the country. $820.5 million for Embassy Security, Construction and Maintenance, $78.2 million below the Administration's request. Of this amount, $10 million would be allocated to Afghanistan and $805 million to Pakistan. $721 million for Contributions for International Peacekeeping, $115.9 million below the request to fund peacekeeping missions in the Democratic Republic of the Congo, Central Africa Republic and Chad. The bill does not support CIPA funds to support the African Union peacekeeping mission in Somalia (AMISOM), but includes funding for CIPA under Peacekeeping Operations account with transfer authority. $2.8 billion for the Economic Support Fund, $46.5 million below the requested level. Of the total, $866 million would be allocated to Afghanistan, $439 million to Pakistan, $439 million to Iraq, $556 million to the West Bank/Gaza, as well as funds going to Jordan, Burma, the Democratic Republic of the Congo, North Korea, Somalia, Yemen, and Zimbabwe. $345 million for Migration and Refugee Assistance, $52 million above the Administration request. Funding allocation of these funds would include $25 million for returning refugees in Afghanistan, $25 million for those needs in Africa, $5 million for refugees in Burma, $15 million for internally displaced persons (IDPs) in Sri Lanka, and $5 million for IDPs in Colombia. $172.9 million for Peacekeeping Operations, $122.9 million above the requested funding level. Of this amount, $155.9 million would support the African Union peacekeeping mission in Somalia via transfer to the State Department's Contributions for International Peacekeeping Account (CIPA). The bill placed prohibition on assistance to Hamas, placed limitations on certain assistance to Mexico, and required a report. The bill also authorized an Overseas Comparability Pay for the Foreign Service who are at the mid-level and lower ranks to receive, as salary, an income when posted abroad during 2009 that would be equivalent to being posted in Washington, D.C. With the new FY2009 request added to the $65.9 billion provided last June, total supplemental defense funding proposed for FY2009 amounted to $145 billion, offset by $3.4 billion of rescissions. Though Congress may well add to the request, this is substantially less than the amount of DOD supplemental funding provided in the past two years, which totaled $170 billion in FY2007 and $187 billion in FY2008. The decline is not due to the withdrawal of U.S. forces from Iraq, which has only begun, and which is offset by planned additions to U.S. forces in Afghanistan. Rather, the change is due almost entirely to a reduction in the amount requested for weapons procurement, which falls from $65 billion in FY2008 to $28 billion in FY2009. Table 3 shows the April 9 defense request, compared to amounts of supplemental defense appropriations in FY2007 and FY2008, and final Congressional action on the FY2009 Supplemental request. The decline in procurement in the FY2009 Supplemental request, in turn, was due in large part to a substantial reduction in acquisition of Mine Resistant Ambush-Protected (MRAP) vehicles, with the entire request at the time purchased in FY2007 and FY2008. MRAP funding in FY2008 totaled $16.8 billion. Congress provided $1.7 billion for MRAPs in FY2009 in the June 2008 supplemental appropriations act. In the new supplemental request, the Defense Department asked for $2.7 billion more, for a total of $4.4 billion in FY2009, $12.4 billion less than in FY2008. In addition, the FY2009 procurement total included substantially less than in FY2007 and FY2008 for what the Defense Department refers to as "reconstitution" of the force, much of which is funded in procurement accounts. DOD breaks down reconstitution into three elements: "Replenishment" of stocks, mainly of ammunition and missiles, consumed in military operations and in training for deployment; "Replacement" of equipment lost in battle or used to a point at which repair is uneconomical—in practice a substantial amount of new equipment has been purchased not only to replace losses, but also to upgrade capabilities; and "Repair" of equipment both in theater and at domestic depots, including overhaul of equipment at the end of an operation to a meet standards for the requirements of deploying units. Table 4 shows the Defense Department's breakdown of FY2007, FY2008, and FY2009 funding by functional category, including amounts for replenishment and other elements of supplemental funding. Total funding for replenishment, by DOD's accounting, increased from $36.3 billion in FY2007, to $50.4 billion in FY2008, then decreased to $23.2 billion in FY2009. Funding for force protection, which includes amounts for MRAPs, nearly doubled from $12.4 billion in FY2007 to $23.9 billion in FY2008, but then decreased to $14.3 billion in FY2009. Other significant decreases include a drop in the request for funding for Iraqi security forces from $5.5 billion in FY2007 and $3.0 billion in FY2008 to $1.0 billion in FY2009. This was partly offset by a doubling in funding for the Afghan security forces from a total of $2.7 billion in FY2008 to $5.6 billion in FY2009. In addition to amounts for ongoing operations in Iraq and Afghanistan, the defense request included funds for other programs, including the following: Accelerate Growth the Force . $2.2 billion was requested for increased personnel end-strength in the Army and Marine Corps. The Army is in the process of adding 65,000 active duty troops and the Marine Corps 27,000 to personnel levels compared to numbers at the end of FY2004. Most of the cost of added personnel is now being paid for in the base defense budget. Both services, however, have benefited from improved recruitment, mainly due to the poor economy, to achieve higher end-strength goals earlier than had been planned. Supplemental funding was requested to cover costs of the acceleration of Army and Marine Corps end-strength increases. Wounded Warrior, Family Support, and National Capital Region Base Realignment . $1.6 billion was requested for measures to improve health care for wounded personnel; for improved support to military families—mainly increases in child care facilities; and to accelerate closure of the Walter Reed Army Medical Center in Washington, D.C., and opening of the new Walter Reed National Military Medical Center in Maryland and the Fort Belvoir Army Community Hospital in Virginia. Border Security with Mexico . $350 million was requested for counternarcotics activities and related activities along the Mexican border. Measures could include assigning National Guard personnel to patrol the border. Up to $100 million was requested to be available for transfer to other Federal agencies. Army Personnel Funding Shortfall . $471 million, offset by an equivalent amount of rescissions in Army funds, was requested to correct some shortfalls in the Army base budget for military personnel. The shortfalls are due to a delay in redeployment of soldiers from Europe to the United States, which has increased costs of overseas housing allowances and cost of living allowances; to the use of the National Guard in support of the Presidential inauguration; and increased Army Reserve attendance rates. The Army could finance these adjustments by reprogramming funds, but the Defense Department would prefer not to use so much of its limited transfer authority for this purpose. As enacted, the FY2009 Supplemental ( H.R. 2346 / P.L. 111-32 ) included $79.942 billion for national defense, some $4 billion higher than the Administration's request, bringing the total for the year to $145.8 billion. The enacted version splits the difference between the $84.5 billion recommended by the House and $75.3 billion recommended by the Senate (see Table 3 ). The chief reasons for the higher amount in the enacted version of the FY2009 Supplemental include: an additional $2.1 billion for military personnel to cover unanticipated adjustments to rates for pay and benefits and higher strength levels reflecting better-than-anticipated recruiting and retention; an additional $534 million to extend eligibility for $500 per month payments for all active-duty and reserve personnel whose tours were extended using "stop loss" authority since the 9/11 attacks rather than only those members currently in the force. a $4 billion increase to procurement bringing the total in the act to $25.8 billion reflecting primarily Congressional adds for C-17 and C-130 transport planes, Stryker and Bradley fighting vehicles, higher funding for the new lighter MRAPs to be sent to Afghanistan; the total for FY2009 is still less than half of the FY2008 total reflecting a change in the definition of war-related procurement; a total of $80.5 billion including some $1.4 billion in savings in Operation and Maintenance funding from hiring Iraqis to provide support services as well as savings from assuming historical spending rates; higher funding to train Afghan Security Forces fund including the $3.6 billion requested in the supplemental, bringing the total for the year to $5.6 billion; a cut of $350 million to the Joint Improvised Explosive Device Defeat Fund (JIEDDF) based on slower than planned spending; Military Construction funding of $2.7 billion, $430 million more than requested primarily for military hospitals in the United States; $453 million as requested for Commanders Emergency Response Program (CERP) bringing the total for the year to $1.4 billion; and a $2 billion cap on transfers of funding within the bill rather than the $4 billion requested, and rejects a DOD request for an additional $1.5 billion in transfer authority applying to baseline funding in the regular FY2009 appropriations act. A number of issues arose as Congress considered the Administration request. Some were resolved by the House and Senate Appropriations Committees, but others remained potential matters of debate in House and Senate conference discussions. Issues included whether to approve congressional additions of funds for major weapons programs, whether the Department of Defense rather than the Department of State should be funded to provide security assistance to Pakistan; and whether less funding or more should be provided to the Defense Department for border security with Mexico. In preliminary discussions of the defense supplemental, Representative Murtha, the Chairman of the House Defense Appropriations Subcommittee, and Senator Inouye, the Chairman of the Senate panel, both stated their intention to add significant amounts to the request for several major weapon systems. Additions they and others mentioned include funding for a new mid-air refueling tanker for the Air Force, the multi-service F-35 Joint Strike Fighter, the Navy F/A-18E/F multirole fighter, the Navy E-2D radar plane, and Army Stryker wheeled armored vehicles. Additions to military personnel accounts were proposed to cover monthly stipends of up to $500 for service members prevented from leaving at the end of their enlistments by "stop loss" orders. Representative Murtha reportedly said that he might propose adding as much as $16-18 billion to the request. The Administration included funds for four Air Force F-22 fighter aircraft in the supplemental request, though Secretary of Defense Gates subsequently announced plans to terminate the program. Funding for the aerial tanker program was a matter of extensive debate, and there remain disagreements in Congress about proposals to require that purchases be split between competing bidders. The Air Force is preparing to recompete the contract, with bids expected from Boeing and a team of Northrop Grumman and EADS. The Northrop Grumman-EADS team won a competition last year only to have the award overturned by the Comptroller General after Boeing appealed. Several Members of Congress have urged splitting the contract between both bidders, but the Air Force and other legislators argue that a split will increase costs significantly. Neither the House nor the Senate Appropriations Committees added as much money to the Administration request as some had discussed. In the end, the House committee added $6 billion for weapons procurement, while the Senate committee shifted funds out of some programs and into others with no significant effect on the total. Notably, neither committee added funds for Air Force aerial tankers. House subcommittee Chairman Murtha said he tried to get agreement on a proposal to add funds and to require that funding be split between competing bidders, but could not do so and therefore agreed not to add money for the program. The House added $2.245 billion for 8 C-17 cargo aircraft and $904 million for 11 C-130 variants. The Senate did not provide funds for either program. Conferees provided $2.170 billion for eight C-17s and $504 million for seven C-130 variants. The House added $2.15 billion and the Senate added $1.55 billion to the $2.7 billion requested for variants of the Mine Resistant Ambush Protected (MRAP) vehicle to be used in Afghanistan. The conference agreement provided a total of $4.5 billion for MRAPs vehicles, and required that the funds be spent on a small version better suited to the Afghan terrain than the larger MRAPs used in Iraq. Conferees also provided the $600 million requested for four F-22 fighters and barred use of any of those funds to shut down the F-22 production line. In other action relating to weapons procurement and upgrades, the conferees, Added $500 million for equipment for National Guard and reserve units; Added $200 million for new Stryker armored combat vehicles and $243 million to refurbish Bradley troop carriers; Added $433 million to upgrade the "A" model Apache helicopters of one National Guard battalion to "D" model aircraft, with more sophisticated combat electronics; Rejected the request for $253 million to equip C-17 and C-130 cargo planes with equipment to jam anti-aircraft missiles aimed at the planes; conferees said the Air Force would be unable to install the equipment within the next year. Conferees also added to the bill $165 million to cover the cost of repairing three Navy ships damaged in collisions or groundings. The Administration request included $400 million in funding for the Defense Department in a new account called the Pakistan Counterinsurgency Capability Fund. The purpose of the funding is to provide equipment, support, and training to Pakistani security forces in combating insurgent forces on its territory. Traditionally, funding for such security assistance is provided through the State Department, while the Defense Security Cooperation Agency (DSCA), a part of the Defense Department, generally administers provision of the assistance. While Congress has supported the financing of similar activities in Iraq and Afghanistan through the Defense Department, many legislators have urged that other security assistance continue to be provided through the State Department, as in the past, in order to ensure that it is coordinated with overall foreign policy goals. The House Appropriations Committee has been particularly assertive recently, in urging that assistance to Africa and other areas now being provided through the Defense Department should be returned to the State Department. In congressional hearings on the supplemental, both Secretary of Defense Gates and Secretary of State Clinton argued that the State Department is currently not prepared to administer such a large amount of security assistance to Pakistan and urged that funding be provided through defense. The initial House Chairman's mark of the supplemental bill provided $400 million for the Pakistan Counterinsurgency Capabilities Fund through the State Department. At the start of the May 7 committee markup, however, Chairman Obey, offered a manager's amendment to shift the funds back to the Defense Department, and the committee approved the bill with that change. The Senate Appropriations Committee provided funding as requested through the Defense Department, but required a report by the Secretary of State on means of managing funding through the State Department in the future. The enacted conference agreement provided $400 million for Department of Defense counterinsurgency assistance to Pakistan. It also appropriated $700 million, to be available in FY2010, in the State Department for the Pakistan Counterinsurgency Capabilities Fund. Following the sentiment in both houses, the conference report required the Administration to move management of the Pakistan counterinsurgency funding to the Department of State in FY2010, relying on DOD only in the immediate future. Escalating drug-related violence in Mexico has emerged as a significant security issue for the United States, particularly along the U.S.-Mexico border where kidnapping and gun battles threaten to spill over into the United States. The supplemental appropriations request included $350 million for the Defense Department for counternarcotics and other activities on the border with Mexico, including assistance to other federal agencies. Up to $100 million may be transferred to other agencies. The international affairs supplemental requests included an additional $66 million in the International Narcotics Control and Law Enforcement (INCLE) account for assistance to Mexico under the Mérida initiative. Those funds were for the purchase of three Blackhawk military utility helicopters. In Congress, some argue that funding for counternarcotics assistance for Mexico should be provided through the State Department, as is the current Mérida Initiative, rather than through the Defense Department. There has also been some support, however, for a larger DOD role. The House-passed supplemental provided $350 million, as requested for the Department of Defense for counternarcotics and related activities on the Mexican border. In the foreign affairs accounts, it also provided $66 million, as requested, for narcotics control and added $310 million in Foreign Military Financing (FMF) funds for aviation support to Mexico, including funds for surveillance planes and medium lift helicopters. The Senate bill rejected the request for Defense Department funds and instead allocated the money to other agencies, along with $250 million in additional funding. The enacted conference agreement provided $420 million in foreign assistance funding to Mexico, $354 million above the request. It also added $140 million for Department of Justice programs that address violence and narcotics trafficking on the southwest border, and $158 million for Department of Homeland Security border security measures. While the FY2009 Supplemental largely endorses the Administration's policies to withdraw troops gradually from Iraq and increase troops in Afghanistan this year, P.L. 111-32 , the enacted version of H.R. 2346 , requires several reports to assess the effectiveness of the new policies. Sec. 316 requires a detailed report 90 days after enactment, or in late September 2009, and every 90 days thereafter through September 2010 on the status of the withdrawal including: a monthly description of the movement of U.S. troops, equipment, and contractors out of Iraq, and how these comply with the Administration's plans to withdraw all combat brigades by August 31, 2010 and all U.S forces by December 31, 2011; the roles and responsibilities of contractors including how many may remain after the 2010 and 2011 deadlines; and how the Iraqi government is dealing with reconciliation initiatives during the transition. This report is to be submitted either separately or along with the Iraq Metrics report required by Section 9204 of the FY2008 Supplemental ( P.L. 110-252 ). Two reports are required on Afghanistan and Pakistan. The first, based on a provision in H.R. 2346 , the agreement requires the President to submit a one-time report not later than February 2010, assessing whether the governments of Afghanistan and Pakistan are demonstrating sufficient "commitment, capability, conduct and unity of purpose" to warrant continuing the President's March 2009 strategy for those two countries. For each country, the report is to include: the level of political consensus; corruption and actions to eliminate it; counterinsurgency (COIN) efforts by their security forces; cooperation by local intelligence agencies on counterterrorism efforts; the effectiveness of government control; and the contribution of U.S. assistance to meeting these objectives. The second reporting requirement in Sec. 1117, based on the Senate-passed bill, requires that not later than 90 days after enactment, or by late September 2009, the President submit a report listing U.S. objectives for Afghanistan and Pakistan, together with the metrics to be used to evaluate progress toward each objective. Then, every 180 days thereafter until the end of FY2011, the enacted bill requires that the President submit a report assessing U.S. government progress toward each objective, together with a justification of any changes to the metrics themselves, and an estimate of additional resources or authorities needed. On April 9, the President requested $7.1 billion in FY2009 supplemental funds for the Department of State and USAID. The supplemental request for the Department of State totaled $2.3 billion, of which $594.3 million was for Diplomatic and Consular Programs (D&CP) for Iraq, Afghanistan, and Pakistan; $898.7 million for Embassy Security, Construction and Maintenance's (ESCM) improved, secure facilities in Afghanistan and Pakistan in order to accommodate the civilian surge proposal; $7.2 million for the Special Inspector General for Afghanistan Reconstruction (SIGAR); and $836.9 million for the Contributions to International Peacekeeping Account (CIPA). On June 2, the President requested $200 million of additional supplemental funds for Pakistan within the Migration and Refugee Assistance, Economic Support Fund, and International Disaster Assistance accounts. As the U.S. government continues to turn over responsibilities to the Government of Iraq, about 40% of the D&CP account for Iraq ($150 million) would pay for anticipated lease costs for facilities that have been occupied by the United States at no cost previously. Approximately 85% of the requested D&CP funds for Afghanistan ($261.5 million) was to accommodate the civilian staffing surge proposal by the State Department and other federal agencies to complement increased military operations in Afghanistan. In Pakistan, while funding was provided for increased U.S. staffing at the Embassy in Kabul, approximately 85% of the requested funding ($36.5 million) was for increased public diplomacy initiatives in that country. The total proposed FY2009 supplemental for USAID was $5.0 billion. The overall emphasis of the request included: supporting key frontline states—Afghanistan ($980.0 million), Pakistan ($697.0 million), and Iraq ($482.0 million); aid for urgent global needs—migration and refugee assistance ($333.0 million), P.L. 480 title II food aid ($300.0 million), international disaster assistance ($200.0 million), and aid to developing countries affected by the global financial crisis ($448.0 million). Regional priorities included: North Korea, support of phase III of the six party talks ($142.0 million); support to stabilize Georgia ($243.0 million); West Bank and Gaza ($715.0 million); and the Mérida program in Mexico ($66.0 million) to buy 3 Blackhawk helicopters. Reflecting the Obama Administration's focus on the war in Afghanistan and a new counter-insurgency strategy that raises the profile of non-military methods, the FY2009 supplemental request would significantly increase economic aid efforts in both Afghanistan and Pakistan provided under the 150 account, State, Foreign Operations appropriations portion of the proposed legislation. The newly requested funding for Afghanistan, totaling $980 million, was within three accounts—$839 million in the Economic Support Fund (ESF), $129 million in the International Narcotics Control and Law Enforcement (INCLE) account, and $12 million in the Non-proliferation, Anti-terrorism, Demining, and Related programs (NADR) account. More than a third of the new funding request was devoted to improving governance at all levels of the Afghan government, including anti-corruption measures and other efforts to strengthen the justice system. The request for aid to Pakistan would double the level of FY2008. The FY2009 supplemental request was $697 million—$429.5 million in ESF, $200 million for humanitarian assistance, $65.5 million in INCLE, and $2 million in NADR funds. Its emphasis was almost entirely devoted to supporting Pakistan's economic growth and stability, supplementing that government's IMF Standby Agreement with possible programs to strengthen its social safety net and provide budget support. The enacted FY2009 Supplemental Appropriation Act, 2009 ( P.L. 111-32 ) provides $10.4 billion for State Department, Foreign Operations, and P.L. 480 food aid. The funding level represents an increase of more than $3.0 billion, or 41% more for International Affairs (150 function) accounts than the $7.4 billion the Administration had requested. For the Department of State, Congress increased the funding level to $2.7 billion, 17% more than had been requested. For Foreign Operations, Congress increased funding to $7.0 billion, 49% more than requested. The enacted bill provides $700.0 million for P.L. 480 food aid, 133% more than the $300.0 million requested. Tables 5 and 6 show details of the international affairs supplemental funding provided in the Supplemental Appropriations Act, FY2009 ( P.L. 111-32 ). Out of 20 accounts for International Affairs, Congress boosted all but four above the Administration's supplemental request. Accounts with significant increases include State's D&CP account which is $997.9 million or $403.6 million above the request. The increase in D&CP reflects significant congressional increases for Iraq and Afghanistan operations and security, as well as added funding for worldwide security protection. Included within the Afghanistan operations is a $42.0 million to develop an air mobility for the Department of State and USAID, and $10 million above the request for enhanced public diplomacy. Security in the D&CP account for Afghanistan is also increased by $15 million. Funding for Iraq is $486.0 million, or $336.0 million above the $150.0 million requested by the Administration. The Appropriations Committee explains that this is for activities included in the Administration's regular FY2010 budget request to assist in the transition of U.S.-Iraqi diplomatic relations. Congress increased by $22.8 million the funding above the requested level of $898.7 million for the Embassy Security, Construction, and Maintenance account. This funding is to provide for land acquisition and development for the facility in Afghanistan to accommodate the planned civilian surge, as well as for facilities in Islamabad, Lahore, and Peshawar, Pakistan. The only State Department account that Congress did not increase supplemental funding over the Administration's request was for U.S. Contributions to International Peacekeeping. The Administration requested $836.9 million, but was provided $721.0 million, a 14% decrease amounting to $115.9 million. The conferees explained that additional funds were provided for peacekeeping in Somalia within the Foreign Operations Peacekeeping Operations (PKO) account. Within the Foreign Operations, Congress provided $150.0 million for Global Health and Child Survival for which the Administration had no request. Of that, $50 million is to support global pandemic preparedness and response and $100.0 million for additional U.S. contributions to the Global Fund to Fight AIDS, Tuberculosis, and Malaria. Congress increased funding by $1.2 billion for the Foreign Military Financing Program (FMF). The total amount of $1.3 billion expands aviation support for the Mexican Navy and provides $69.0 million for assistance to Lebanon. In addition, mindful of the FY2010 budget request for assistance to the following countries, the account is to provide $150.0 million for assistance to Jordan, $260.0 million in FMF grants to Egypt, and $555.0 million for FMF grants to Israel. Within the FY2009 supplemental act, funding of $700.0 million for the Pakistan Counterinsurgency Capability Fund (PCCF) is provided to the Department of State. It becomes available September 30, 2009 and remains available through FY2011. The conference report ( H.Rept. 111-151 , p. 135) states that the Secretary of State is the principal advisor to the President on foreign policy matters, and thus, the PCCF should be under the authority of the Department of State (DOS) working in close coordination with the Department of Defense (DOD). It should be noted that Congress also provided PCCF funding for FY2009 to the Department of Defense, and both Departments are to coordinate activities and plan for the transition from DOD to DOS. Supplemental funds for P.L. 480 Title II food aid grants, within the International Affairs 150 Function but appropriated in Title I Department of Agriculture, amounted to $700.0 million to remain available until expended, as proposed by the Senate. (The House had proposed $500.0 million.) This reflects a 133% increase as compared to the Administration's request of $300.0 million. The Economic Support Fund (ESF) is among the few international affairs accounts for which Congress provided less funding than was requested. Congress provided $2.9 billion, $30.9 million below the request, largely because of reduced funding within ESF to Pakistan, Iraq, and North Korea, as well as a reduction of $192.4 million in assistance to Developing Countries Affected by the Global Financial Crisis. In late April 2009, the Centers for Disease Control and Prevention (CDC) reported several cases of a new form of H1N1 human influenza, dubbed "swine flu," in California and Texas. Since then, health officials have tracked a global spread of the new pathogen. On June 11, the World Health Organization (WHO) declared that the outbreak was a flu pandemic. (The last flu pandemic occurred in 1968.) From the outset, the United States adopted a response posture to address the situation. The Department of Health and Human Services (HHS) has begun development of a vaccine, which could be available starting in the Fall of 2009. Congress considered FY2009 supplemental funding to address the situation. There are a number of recent precedents for providing funding for pandemic flu preparedness in supplemental appropriations bills. In 2005, facing fears of a flu pandemic due to a strain of avian influenza ("bird flu"), Congress provided $6.1 billion in FY2006 supplemental funds to several federal departments for preparedness efforts. Most of this funding went to HHS, which has received annual regular appropriations for continued pandemic planning since then. In FY2008 supplemental appropriations ( P.L. 110-252 ), Congress provided $75 million to USAID for avian and pandemic flu activities, to be available through FY2009. Pandemic planning funds were included in the House-passed version of the American Recovery and Reinvestment Act of 2009 (ARRA , P.L. 111-5 ), but were not provided in the enacted law. On April 30, President Obama sent a letter to House Speaker Nancy Pelosi formally requesting $1.5 billion for response efforts to the H1N1 flu outbreak. The request asked that Congress appropriate the funds to the Executive Office of the President in a new account entitled "Unanticipated Needs for Influenza." The funds would be made available until expended for transfer to other agencies by the Office of Management and Budget (OMB) subject to notification to Congress. In a letter to the President accompanying the request, OMB Director Peter Orszag said that this would provide "maximum flexibility ... to ... target responses and resources as this emerging and unpredictable situation evolves." Though the request did not specify accounts to which funds may be transferred, the White House mentioned activities such as bolstering antiviral stockpiles; developing a vaccine; supporting monitoring, diagnostic, and public health response capabilities; and assisting international efforts to stem this outbreak and to address related international needs. On June 2, while the House- and Senate-passed FY2009 supplemental spending bills (discussed below) were being reconciled in conference, the White House requested the higher amount of $2.05 billion provided in the House-passed bill, along with additional funding and transfer authorities, to address the current H1N1 flu outbreak and prepare for a possible pandemic. As with the April 30 request, the White House again asked that funds be provided to a new account for the Executive Office of the President, with provisions to allow spending flexibility. The June 2 request sought the following funds and transfer authorities, each of which would be used only upon notification to Congress, and only if the President were to determine that the additional resources were "required to address critical needs related to emerging influenza viruses.... " : An appropriation of $2 billion (in addition to the $2.05 billion included in the House supplemental bill) to the Executive Office of the President in a new account entitled "Unanticipated Needs for Influenza" (as per the April 30 request), to remain available until September 30, 2010, for transfer to other federal departments and agencies upon notice to Congress by the OMB Director. Authority to transfer up to 1% of amounts appropriated in Division A of the American Recovery and Reinvestment Act (ARRA ) to the "Unanticipated Needs for Influenza" account, to remain available until September 30, 2010, for subsequent transfer to other federal departments and agencies, upon notice to Congress by the OMB Director. (The Congressional Budget office estimated that ARRA Division A provided $311.2 billion in discretionary budget authority to several federal departments and agencies. ) Authority to transfer up to 1% of discretionary funds available to HHS in FY2009, including balances remaining from prior year appropriations, to other accounts within the department, upon notice to Congress by the Secretary of HHS. (HHS received $78.5 billion in discretionary budget authority in FY2009 Omnibus appropriations. The White House request did not state whether the discretionary HHS funds available for the 1% transfer are intended to include funds also provided through ARRA, which would then be potentially subject to both proposed transfer authorities.) Authority to use remaining funds in the "Biodefense Countermeasures" account the in the Department of Homeland Security (i.e., the BioShield Special Reserve Fund) for procurement of medical countermeasures for influenza (e.g., vaccines, antiviral drugs, and laboratory tests). (The Special Reserve Fund, which the White House proposed for transfer to HHS in its budget request for FY2010, is estimated to have a balance of $2.76 billion at the end of FY2009. ) The magnitude of funds that could be mobilized under the requested transfer authorities suggested that the Administration was looking for a means to purchase a large number of vaccines against H1N1 flu. Funds already available to HHS could support vaccine development and modest procurements, but would not have been adequate for procurements and related activities sufficient to support a mass-vaccination campaign, if one were needed. GAO has noted that the National Strategy for Pandemic Influenza: Implementation Plan (2006), which lays out 324 action items for federal agencies to prepare for and respond to a flu pandemic, contains no discussion of the possible costs of these actions, or how they would be financed. There has not been a Stafford Act declaration for the H1N1 pandemic, so disaster relief funds administered by the Federal Emergency Management Agency (FEMA) are not available for response efforts. Many relevant activities, such as vaccine purchase, may not be eligible for the use of these funds, even if such funds were available. On May 4, Representative Obey released a summary of his proposed supplemental appropriations bill, calling for more than $2 billion for the current outbreak, $550 million above the request. In a May 7 markup, the House Appropriations Committee approved the amount in Obey's May 4 proposal, and the committee bill that was reported on May 12, H.R. 2346 included this amount. On May 14, the House passed H.R. 2346 , including the amounts reported for influenza response, without amendment. H.R. 2346 would not have provided the funds to the new account requested by the White House, but would instead have provided transfer authority that allows flexibility in how the funds could be used to address the fluid situation. H.R. 2346 would have provided the following amounts and instructions: $1.85 billion to HHS for the Public Health and Social Services Emergency Fund, including no less than $200 million to CDC for several specified activities, and no less than $350 million to upgrade state and local public health response capacity. $200 million to the President for the Global Health and Child Survival account, to support global efforts to control the spread of the outbreak. Of the $1.3 billion to HHS not specifically designated, funds could be transferred to other HHS accounts and to other federal agencies, as the Secretary of HHS determined to be appropriate. All such transfers would require notification to the House and Senate Appropriations Committees. Transfers to other federal agencies would also require consultation with the OMB Director. Of the $1.3 billion to HHS not specifically designated, funds could be used for purchases for the Strategic National Stockpile, and for construction or renovation of privately owned vaccine production facilities. Funds could also be provided to the Covered Countermeasure Process Fund, to compensate individuals who may be harmed by vaccines or other countermeasures used to control the outbreak. The Secretary of HHS would have to report to the House and Senate Appropriations Committees on two matters. The Secretary would have to continue monthly reporting of funds obligated and actions taken using funds designated for pandemic flu preparedness. Also, in collaboration with the CDC Director, the Secretary would have to report within 90 days regarding the CDC's initial response to the outbreak in Mexico and the United States. If WHO were to announce that the H1N1 outbreak had progressed to a global flu pandemic (i.e., Phase 6), and upon the President's determination and notification to the House and Senate Appropriations Committees, available funds in four accounts from prior appropriations acts for the Department of State, Foreign Operations, and Related Programs—Global Health and Child Survival; Development Assistance; Economic Support Fund; and Millennium Challenge Corporation—could be used for pandemic response activities. On May 14, the Senate Committee on Appropriations marked up and reported S. 1054 , the Supplemental Appropriations Act, 2009, which would provide $1.5 billion for influenza activities, the amount requested by the Administration. The Committee recommended funding for the Executive Office of the President, as requested, but under a new account entitled ''Pandemic Preparedness and Response'' instead of the account entitled ''Unanticipated Needs for Influenza'' as proposed by the President. Amounts would be used to combat the current outbreak, and for pandemic flu preparedness in general. On May 21, the Senate passed an amended version of H.R. 2346 , including the flu provisions in S. 1054 . It would have provided the following amounts and instructions for flu activities: $900 million to HHS for the Public Health and Social Services Emergency Fund, for allocation by the Secretary for pandemic preparedness and response activities including vaccine development, purchase of antivirals and medical equipment, diagnostic and vaccine delivery equipment, antiviral research, and support for state and local preparedness; and an additional $50 million to the HHS Food and Drug Administration (FDA) for activities including vaccine and antiviral development, manufacturer assistance, approval reviews, and safety activities, including blood and consumer protection response. $190 million to the DHS Departmental Management and Operations account, for allocation by the Secretary, with emphasis on planning and coordination, and on purchasing personal protective equipment and antivirals for DHS personnel and state and local responders. $100 million to the Secretary of Agriculture, for the Agricultural Programs, Production, Processing and Marketing account, for activities including animal health surveillance and disease investigation, and impacts resulting from misinformation about flu transmission. $110 million for the Department of Veterans Affairs (VA), Veterans Health Administration, for pandemic preparedness, including purchasing protective equipment for high-risk populations and occupations, expanding its antiviral stockpile, and improving information technology capabilities. $150 million to the President for the Global Health and Child Survival account, to facilitate information sharing, limit the spread of the virus, reduce mortality and the social and economic impacts, and respond to emergency needs in affected countries. The enacted legislation includes the following to address the response to the H1N1 flu outbreak: As proposed by the House, $1.85 billion to HHS for the Public Health and Social Services Emergency Fund, to be available until expended, including no less than $200 million to CDC for a number of specified activities, and no less than $350 million to upgrade state and local public health capacity for responding to the outbreak. As proposed by the House, of the $1.3 billion to HHS not specifically designated, funds could be transferred to other HHS accounts and to other federal agencies, as the Secretary of HHS determined to be appropriate. All such transfers would require notification to the House and Senate Appropriations Committees. Transfers to other federal agencies would also require consultation with the OMB Director. As proposed by the House, of the $1.3 billion to HHS not specifically designated, funds could be used for purchases for the Strategic National Stockpile, for construction or renovation of privately owned vaccine production facilities, and for the Covered Countermeasure Process Fund. An additional contingent emergency appropriation of $5.8 billion to HHS for the Public Health and Social Services Emergency Fund, which would become available for obligation 15 days after the President provided a detailed written request to Congress to obligate specific amounts for specific purposes, and only if needed to address the emergency. If such requirements were met, funds could generally be made available and transferred as per the $1.3 billion in non-contingent funds provided as above, including for purchases for the Strategic National Stockpile and the Covered Countermeasure Process Fund. However, authority to use these contingent funds for construction or renovation of privately owned vaccine production facilities would not be not provided. As proposed by the House, the Secretary of HHS would have to report to the Appropriations Committees on two matters; (1) continued monthly reporting of funds obligated and actions taken using funds designated for pandemic flu preparedness; and (2) in collaboration with the CDC Director, within 90 days, a report regarding the CDC's initial response to the outbreak in Mexico and the United States. $50 million to the President for the Global Health and Child Survival account, to support global efforts to control the spread of the outbreak. If WHO announced that the current outbreak had progressed to a global flu pandemic (i.e., Phase 6), and upon the President's determination and notification to the House and Senate Appropriations Committees, available funds in four accounts from prior appropriations acts for the Department of State, Foreign Operations, and Related Programs— Global Health and Child Survival; Development Assistance; Economic Support Fund; and Millennium Challenge Corporation—could be used for pandemic response activities. If this authority were used, OMB must seek replenishments for any funds reprogrammed from these accounts. In addition to defense and foreign affairs funding, the Administration's original April 9 request proposed a relatively limited amount of funding for some other programs, including $89.5 million for Department of Energy counter-proliferation programs, of which $55 million is to finance new initiatives to safeguard nuclear materials in Russia and $34.5 million is to implement denuclearization programs in North Korea; $21.6 million in authority to use balances of funds in the Strategic Petroleum Reserve account to finance SPR site maintenance, with no net additional appropriations; $47 million for a number of Department of Justice national security-related programs, of which $30 million is to implement the Administration decision to shut down the Guantanamo Bay prison by supporting a task force to review detainee records and carry on prosecutions; $250 million for fighting wildfires and restoring burned areas of which $200 million is for the Department of Agriculture Forest Service and $50 million is for the Department of the Interior; $2.9 million in funds appropriated to the President for operations of the National Security Council; and $71.6 million for the Legislative Branch for a new encrypted radio system for the Capitol Police. The request for funds to support shutting down the Guantanamo Bay prison prompted a number of questions a the Senate Appropriations Committee hearing on the Administration request on April 30, at which Secretary of Defense Gates and Secretary of State Clinton testified. The House Appropriations Committee did not provide $50 million requested for the Department of Defense to support the relocation of detainees and to facilitate the closure of detainee facilities, nor did it agree to provide $30 million requested for the Department of Justice to implement executive orders to the shut down the prison and review of the U.S. detention and interrogation procedures. In its report on the bill, the committee said, Once a decision has been made, the Committee expects the Department to report on its plan for implementation and submit a reprogramming request for any funds it requires to relocate detainees from the Guantanamo Bay Naval Base, to relocate military and support forces associated with detainee operations, and to close detainee facilities. The Senate Appropriations Committee included both Defense Department and Department of Justice funding to close the prison in the bill it reported, but funding was the initial order of business when the bill was brought up on the floor on May 19. Senators Inouye and Inhofe immediately offered an amendment, S.Amdt. 1133 , deleting the funding and providing that none of the funds in the supplemental or in any prior act be used to relocate any detainee to the United States. The Senate approved the amendment by a vote of 90-6 on May 20; the funding was not in the final act ( P.L. 111-32 ). Appendix A. FY2009 Supplemental Appropriations for Iraq Reconstruction The FY2009 supplemental assistance request for Iraq reflected the Administration's intention to move toward a diminished U.S. presence in the country. The total non-humanitarian foreign operations aid request amounted to $482 million, which, with already appropriated amounts from the June 2008 FY2009 "bridge" supplemental ( P.L. 110-252 ) and the regular FY2009 appropriations approved in March 2009 ( P.L. 111-8 ), would bring total non-humanitarian foreign operations assistance to $605 million, basically the same amount as appropriated in FY2008. The equivalent amount in FY2007 was $2 billion, which would have been available through FY2008. Without a similar cushion of funds from the preceding year, the FY2009 request could have been seen as a notable decrease in economic assistance. The request for DOD assistance represented a more pronounced decline. The Administration asked that the $1 billion appropriated in the FY2009 "bridge" appropriation to the Iraq Security Forces Fund (ISFF), which was to support training and equipping of Iraqi security forces, be rescinded and re-appropriated in this new FY2009 supplemental bill. In essence, the request was made in order to extend availability of these funds. The "bridge" appropriation would have expired at end of September 2009; with this new appropriation it would be available until end of September 2010. If the request was approved—as largely turned out to be the case—the trend in ISFF totals would appear as follows: $5.5 billion in FY2007, $3 billion in FY2008, and $1 billion in FY2009. The Commander's Emergency Response Program (CERP) request, totaling $453 million, was, as for other years, to be shared by both Afghanistan and Iraq. The $482 million foreign operations request broke down as follows—$449 million in Economic Support Fund (ESF), $20 million in International Narcotics and Law Enforcement (INCLE), $2 million in International Military Education and Training (IMET), and $11 million in Narcotics, Anti-Terrorism, Demining and Related Programs (NADR) funds. Within these accounts, the largest amounts were requested for certain programs in ESF that well-characterize the Iraq assistance program at this stage. Of programs supporting improved governance, the Quick Response Fund ($45 million), a civilian equivalent of the CERP, is a key tool of the Provincial Reconstruction Teams (PRTs) that allow U.S. civilians, with security provided by the U.S. military, to maintain a presence in the provinces, deal directly with local leaders, and bolster local government. The Local Governance Program ($55 million), managed by USAID, helps build management and knowledge skills of provincial government personnel. The Community Action Program (CAP) ($35 million) funds projects identified by local representative associations. Ministerial Capacity Development ($60 million) seeks to enhance the capabilities of Iraqi central government personnel, especially focusing on helping them execute their budgets. Significant funding ($112 million) is being requested to support national elections scheduled for later this year. Key programs supporting economic growth in Iraq are Economic Reform ($50 million) activities to build a better regulatory system and in Agriculture ($43 million), which after oil production is Iraq's best hope for an improved economy. In addition to the security and economic aid-related requests for Iraq, the supplemental request contained a humanitarian aid component. The Migration and Refugee Assistance account (MRA) included $108 million to address the needs of the roughly 4.8 million Iraqi refugees and internally displaced persons (IDPs). House Action on Iraq Reconstruction The House-approved bill (H.R. 2346) matched the Administration request for most items associated with Iraq reconstruction aid. Bill language appropriated the request for the ISFF, and House Appropriations Committee explanatory language provided the request for the CERP, ESF, INCLE, NADR, and IMET accounts. Sufficient funds were provided to the overall MRA account to meet the Iraq request here. The most notable change from the Administration request came in operating expense accounts. The State Department Diplomatic and Consular Programs account which funds staff salaries, expenses, and security was increased in the case of Iraq by 224%, from a request of $150 million to a House allocation of $486 million. The Appropriations Committee took this action in order to fund the Iraq Mission through the first quarter of 2010 as it transitions "both to an annualized funding cycle and to a more regular diplomatic and development program." Funds are largely to lease facilities supporting the Mission and to provide for civilian security needs that, presumably, are expected to increase as U.S. troops draw down. Senate Action on Iraq Reconstruction The FY2009 supplemental approved by the Senate mostly followed the Administration request for Iraq reconstruction—matching the request for CERP, INCLE, NADR, and IMET accounts, and reducing by only $10 million the ESF level to $439 million. Sufficient funds were also provided to the overall MRA account to meet the Iraq request. On the ISFF, however, the Senate bill departed from the request. Instead of rescinding $1 billion from the FY2009 "bridge" supplemental and re-appropriating it in this bill, the Senate version left the "bridge" appropriation intact and still appropriated $1 billion in the new supplemental. Further, recognizing that responsibility to train Iraqi security forces will transition from DOD to the Department of State in August 2010, the Committee added language transferring unobligated balances, as of July 31, 2010, to State to use for this purpose. Unlike the House bill, the Senate bill matched the Administration's $150 million request for the State Diplomatic and Consular Programs account. Enacted Supplemental for Iraq Reconstruction H.R. 2346, as enacted (P.L. 111-32), closely follows the Administration request for Iraq reconstruction aid. The enacted supplemental for FY2009 matches the request and provides $439 million for ESF, $10 million less than the request; $20 million for INCLE, and $2 million for IMET. Congress essentially extended the ISFF appropriation from P.L. 110-252 for another year, by the rescission and reappropriation of its $1 billion. The act also provides $453 million in requested CERP funds (shared with Afghanistan). The act specifies that not less than $15 million of ESF be used for targeted development programs determined by the Ambassador. Explanatory language made special reference to the treatment of women in Iraq and encouraged the use of funds to incorporate women in the course of stabilizing the country and building government institutions. Congress adopted the $486 million House level for State Operating Expenses, addressing the FY2010 request early in order to assist the embassy transition to a more regular diplomatic and aid program. Appendix B. FY2009 Supplemental Appropriations for Assistance to Afghanistan Despite significant progress in Afghanistan during the past eight years—a new constitution and successful presidential elections in 2004, parliamentary elections in 2005, and increased personal freedom for Afghan citizens, especially the participation of women in economic and political life—insurgent threats to Afghanistan's government have escalated since 2006 to the point that some experts began questioning the success of U.S. stabilization efforts. An expanding militant presence in some areas previously considered secure, increased numbers of civilian and military deaths, growing disillusionment with corruption in the government of Afghan President Hamid Karzai, and Pakistan's inability to prevent Taliban and other militant infiltration into Afghanistan led the Obama Administration to conduct its own "strategic review," the results of which were announced on March 27, 2009. In part because of the many different causes of continued instability in Afghanistan, there reportedly was difficulty reaching consensus on a new strategy. The thrust of the new strategy is a focus not on adding U.S. troops—although at least 21,000 are being added in 2009—but rather on enhancing non-military steps such as economic development and coordination among international donors, building local governing structures, building capacity and reforming the Afghan government, expanding and reforming the Afghan security forces, and trying to improve Pakistan's efforts to curb militant activity on its soil. The FY2009 supplemental request reflects the Administration strategy by seeking to significantly increase economic aid to Afghanistan provided under the 150 account, State, Foreign Operations appropriations portion of the proposed legislation. If the requested level was approved—as is largely the case—total FY2009 non-humanitarian economic aid to Afghanistan would amount to $2.6 billion, an increase of 32% ($631 million) over the previous year's appropriations. The newly requested funding for Afghanistan, totaling $980 million, would come from three accounts—$839 million under the Economic Support Fund (ESF), $129 million under International Narcotics and Law Enforcement account (INCLE), and $12 million under the Nonproliferation, Anti-Terrorism, and Demining (NADR) account. More than a third of the new funding would be devoted to improving governance at all levels of the Afghan government, including anti-corruption and other efforts to strengthen the justice system. Substantively, according to the Administration, the request also "represents a major shift" from short and long-term reconstruction and development activities scattered throughout all of Afghanistan to programs "focused on countering the insurgency, primarily in the south and east." The $839 million ESF request consisted of five components. Security-related programs, including counternarcotics alternative development programs, stabilization projects targeting critical districts, construction of district centers where citizens can meet with local officials, and quick support projects delivered by Provincial Reconstruction Teams (PRTs) represented $214 million. Governance programs, accounting for $295 million, include building the capacity of the Afghan government at all levels, anti-corruption activities, election support, Ministry of Justice assistance, and U.S. contributions to the World Bank's Afghanistan Reconstruction Trust Fund. Providing basic services to vulnerable populations and creating short-term employment opportunities amounted to $135 million. Economic growth efforts, totaling $170 million, encompass projects in agriculture, monetary and fiscal policy reform, expansion of a central business registry, creation of a national land registry, and micro and small business credit activities. Funding of administration and oversight of these programs amounted to $25 million. The $129 million INCLE program in Afghanistan would focus on counternarcotics programs ($46 million), including special assistance to communities adopting anti-narcotics policies to tide them over until development efforts take effect and support to the Afghan Counternarcotics Advisory Team; rule of law efforts ($78 million), including legal education, support for women prisoners, and assistance to the Central Prison Directorate; and program administrative and oversight support ($5 million). The $12 million NADR program would bolster the capacities of the Afghan Presidential Protective Service. The State, Foreign Operations portion of the request also included $261.5 million in State Department Diplomatic and Consular Program account funds, most of which would support operational expenses of the proposed civilian staff surge from multiple agencies that would bring staff levels in Kabul up from 394 to 567 and expand PRT staff by 110 temporary posts. Similarly, there was a $140 million request for USAID Operating Expenses, most of which is meant to increase USAID staff in the PRTs. In addition, $101.5 million would go to security protection for U.S. facilities and personnel, and $87 million would go to embassy physical expansion to provide room for new housing. The Special Inspector General for Afghanistan Reconstruction (SIGAR) request was for $7.2 million. In all, these operational expense requests amounted to about $600 million. In addition to these economic efforts, the Administration request included $3.6 billion for the Afghan Security Forces Fund (ASFF), which supports the training and equipping of Afghan army and police. The Administration has also asked that $125 million previously appropriated to the ASFF in the FY2009 "bridge" legislation be rescinded and re-appropriated in this new FY2009 supplemental bill. In essence, the request was made in order to extend availability of these funds. The "bridge" appropriation would have expired at end of September 2009; with this new appropriation it would be available until end of September 2010. The Administration's $453 million request for the Commander's Emergency Response Program (CERP) was, as has been the case in the past, for both Iraq and Afghanistan. House Action on Afghanistan Assistance H.R. 2346 , approved by the House on May 14, 2009, largely matched the Administration request for economic assistance to Afghanistan. Bill language provided the requested $3.6 billion for the ASFF. Explanatory language in the Appropriations Committee report ( H.Rept. 111-105 ) provided the Administration request for the CERP ($453 million, shared with Iraq), NADR ($12 million), INCLE ($129 million), and ESF ($839 million) accounts. The report language broke out the ESF in slightly different amounts and categories than the request—$70 million for the National Solidarity Program, $159 million for the PRTs, $85 million for Agriculture, $55 million for Alternative Development, $200 million of Economic Growth, $25 million for Elections, $115 million for Governance and Civil Society, and $20 million for Rule of Law. The House bill would have provided more in the State Department operating expense account, the Diplomatic and Consular Program, than the Administration requested—$448.9 million instead of the $363 million request. Most of the difference is in staff expense allocations, as opposed to security costs. The House provided $327.4 million for State and other agency staff expenses, rather than the $261.5 million request. This is meant to support the proposed staff surge—170 U.S. Direct Hires in Kabul, 251 temporary PRT staff, and 106 local staff, as well as 59 existing staff from other agencies (Agriculture, Treasury, etc.) and up to 73 new staff from these agencies. The House bill matched the Administration request for USAID operating expenses at $140 million and for the Special Inspector General for Afghanistan Reconstruction at $7.2 million. Senate Action on Afghanistan Assistance The Senate-approved version of the FY2009 supplemental matched the Administration request for the NADR account ($12 million) and slightly altered the request for ESF ($866 million vs. a request of $839 million), and INCLE ($133 million vs. a request of $129 million). The Senate bill also provided $25 million for MRA assistance to internally displaced people and refugees versus a request of $7 million. The bill provided the requested amount for the CERP and the ASFF, but did not cancel and re-appropriate the $125 million in FY2009 "bridge" funds sought by the Administration. The Senate bill provided $308.6 million for State D&CP staff operating expenses (vs. $261.5 million request) and $100 million for USAID operating expenses (vs. $140 million request). It matched the $7.2 million request for the SIGAR. The Enacted FY2009 Supplemental The FY2009 Supplemental, as passed by Congress ( P.L. 111-32 ), closely follows the Administration request levels for most accounts with regard to Afghanistan assistance. It provides $861 million in ESF—$22 million above the request; $133 million in INCLE—$4 million above the request; and $3.6 billion for the ASFF and $453 million for the CERP (to be shared with Iraq), matching those requests. Afghanistan funding levels for NADR and MRA accounts were not specified in the conference report, but are likely to be allocated funds at the requested levels. Of special note, the act provides not less than $150 million of ESF and INCLE be used for programs addressing the needs of women and girls. It requires that 10% of INCLE funds be withheld until the Secretary of State reports that the Afghan government is taking steps to remove officials engaged in narcotics or human rights crimes. It provides $70 million for the National Solidarity Program. The enacted supplemental provides $413.2 million in State Diplomatic and Consular Program operating expenses vs. the $363 million requested. Half of the additional amount is an early response to the FY2010 budget request for air transport needs of the Embassy. The Embassy Security account, however, is allocated $67 million less than the request, due to concerns regarding the plan to acquire land adjacent to the Embassy to meet civilian expansion needs. The USAID Operating Expense account request of $140 million is met by the legislation. Appendix C. FY2009 Supplemental Appropriations for Assistance to Pakistan The President's request for supplemental FY2009 appropriations included a total of more than $900 million in proposed spending directly related to Pakistan, and another $1 billion in Coalition Support Funds (CSF), much of which is likely to be used to reimburse Pakistan for its support of U.S. military operations in the region. The Administration argued that $497 million in new foreign operations assistance was urgently needed "to help stem the rapidly deteriorating security and economic conditions confronting" Pakistan, and it emphasized that "failure to address these conditions could lead to a further opening for extremists" there. It further argued that ongoing CSF reimbursements are "critical to maintaining the viability" of U.S.-led military coalition efforts, and that establishment of a new Pakistan Counterinsurgency Capability Fund (PCCF) was necessary to bolster that country's security forces and make it a more effective partner in U.S. efforts to stabilize neighboring Afghanistan and the region. The DOD assistance request would continue CSF payments to reimburse Pakistan for its ongoing operational and logistical support of U.S. efforts in the region. Such funds have accounted for the bulk of U.S. financial transfers to Pakistan since 2001, and they have come under scrutiny as concerns grew in Congress and among independent analysts that standard accounting oversight procedures were not being employed. Pakistan has received approximately 80% of appropriated CSF funds since 2001 at an average rate of nearly $80 million per month. This ratio suggests that Pakistan could received approximately $800 million in supplemental CSF in FY2009 in addition to the $200 million already disbursed through the FY2009 "bridge" supplemental. Requested counterdrug funds in the DOD budget totaled $25.8 million. Moreover, the proposed PCCF funds would be used to 1) fund an existing, multi-year Security Development Plan for Pakistan; 2) assist Pakistani security forces to organize, train, equip, and operate as a counterinsurgency-capable force; and 3) provide humanitarian relief in post-combat/conflict areas. Secretary of Defense Robert Gates has favored funding the PCCF with up to $3 billion over a five-year period and folding into this single account many sometimes disparate Pentagon-funded security programs for Pakistan. There was debate in Congress about whether the PCCF should come under the authority of the Department of Defense or the Department of State. The $497 million foreign operations request broke down as follows: $430 million in Economic Support Fund (ESF), $65.5 million in International Narcotics and Law Enforcement (INCLE), and $2 million in Narcotics, Anti-Terrorism, Demining and Related Programs (NADR) funds. Within these accounts, the largest amounts ($400 million) are requested for ESF programs that would help address Pakistan's economic crisis and balance of payment deficit by supplementing Islamabad's $7.65 billion Standby Agreement with the International Monetary Fund. Another $21.5 million in ESF would be used to expand USAID's Community Rehabilitation Infrastructure Support Program (CRISP) in ongoing efforts to stimulate economic activity, create jobs and improve service delivery in Pakistan. Humanitarian assistance for persons internally displaced by instability in Pakistan's western border regions would total $8 million. These amounts would add to the "bridge" FY2009 supplemental providing $150 million and a base FY2009 request of $453 million, bringing the FY2009 ESF total for Pakistan to about $1.03 billion, a huge increase as compared to previous years. Requested INCLE funds include $35 million to continue train and equip programs for elite police forces and other law enforcement agencies in Pakistan's North West Frontier Province and Federally Administered Tribal Areas, and $22.5 million to expand the air wing of the paramilitary Frontier Corps to improve tactical counternarcotics, law enforcement, and border security capacities. The $2 million requested for NADR would fund four additional Crisis Response Team training courses for Pakistan's Federal Investigative Agency's anti-terrorist team, said to be a high priority of the Interior Ministry. State Department and USAID operations costs to be funded under the supplemental request include $806.2 million for security, construction and maintenance of several U.S. posts in Pakistan, the bulk of which would fund renovation or replacement of the existing chancery and construction of a new annex at the Islamabad post. Moreover, $45.6 million requested for costs related to diplomatic and consular activities of the U.S. Mission in Pakistan broke down as follows: $30.9 million to enhance U.S. public diplomacy efforts there; $9.1 million to provide increased security for U.S. facilities; and $5.5 million to fund a staffing surge. For USAID, $7.6 million to support significant increases in USAID staffing levels in Pakistan. These funds would pay for salaries, benefits, and related expenses for 81 approved new positions, including 16 new U.S. Direct-Hires. In a conference report on FY09 supplemental appropriations ( H.Rept. 111-151 ) subsequently approved by both chambers in mid-June ( P.L. 111-32 ), conferees resolved differences between the House and Senate versions and authorized the following: $1 billion for coalition support fund reimbursements to "key cooperating nations (Pakistan since 2001 has received roughly 80% of such funds); $896 million for embassy security, construction, and maintenance; $539 million in ESF; $65.5 million for INCLE; no less than $55 million for International Disaster Assistance for Pakistani IDPs; $45.6 million for diplomatic and consular activities; $10 million for public diplomacy broadcasting activities near the Pakistan-Afghanistan border; $10 million for Pentagon counterdrug activities; $7.6 million for USAID operating costs; and $3.5 million for Inspector General oversight of programs (in both Afghanistan and Pakistan). Congress also established two new funds to build Pakistan's counterinsurgency capabilities. The first, a Pakistan Counterinsurgency Fund (PCF), will receive $400 million for such purposes though FY2010. These funds will be overseen by the Secretary of Defense with the concurrence of the Secretary of State. The second, a Pakistan Counterinsurgency Capability Fund (PCCF) will receive $700 million for such purposes beginning on the final day of FY2009 and available through FY2011. These funds will be overseen by the Secretary of State with the concurrence of the Secretary of Defense. In their report, the conferees expressed concern about providing the Pentagon with oversight of an assistance program that would traditionally fall under the purview of the State Department and so directed the Secretary of Defense and Secretary of State to jointly develop a plan for transitioning the PCF from Defense to State by FY2010, fully executed by FY2011 ( H.Rept. 111-151 ). Appendix D. FY2009 Supplemental Appropriations for Other Humanitarian Assistance Although proposed aid packages for specific countries anticipate and identify some humanitarian needs, the Administration also seeks funding for what it describes as new FY2009 humanitarian requirements that stem from events unfolding in late 2008 and early 2009 that were not anticipated in the FY2009 regular budget request. Migration and Refugee Assistance (MRA) The Administration's FY2009 emergency supplemental request initially asked for $293 million for the Migration and Refugee Assistance (MRA) account for anticipated and unanticipated refugee and migration emergencies, of which: $108 million was requested for humanitarian assistance to Iraqi refugees, Internally Displaced Persons (IDPs) and conflict victims; $125 million was requested for the emergency needs of Palestinian refugees in West Bank and Gaza and $25 million for Palestinian refugees in Lebanon; $7 million was requested to support the work of international organizations in South Asia, including Afghanistan and Pakistan; $15 million was requested to assist with massive displacement and the provision of humanitarian assistance in several interconnected conflicts in Africa—in eastern Democratic Republic of Congo (DRC), Sudan, Uganda, and Rwanda; $10 million was requested for the global protection/emergency response requirements/food assistance worldwide, but primarily in Africa; and $3 million was requested for Burmese refugees in camps along the Thai-Burma border. On June 2, 2009, the Administration revised its request and asked for an additional $200 million to address humanitarian needs in Pakistan, $40 million of which was for MRA. The revised request for MRA thus totaled $333 million. House Action The House Appropriations Committee-reported bill included $343 million for the MRA account, which was $50 million above the Administration's initial request (and $10 million above its revised request.) The report cites urgent humanitarian requirements for refugees and IDPs in Iraq, Jordan, Syria, the West Bank and Gaza, Lebanon, Afghanistan, Pakistan, Africa (in addition to specific reference to food aid), and Burmese refugees in Asia. In explanatory language of its report, the Committee referred to ongoing concerns about whether the United Nations Relief and Works Agency (UNRWA) is operating with sufficient transparency and is doing all that is possible to prevent the inappropriate use of funds in the form of supporting terrorists and other extremists, specifically in the West Bank and Gaza. Section 21004 of the bill focuses on accountability measures for humanitarian and project assistance to the West Bank and Gaza: Section 21004(a) would limit the funds appropriated under MRA that may be made available to UNRWA to $119 million. Section 21004(b) would require the Secretary of State to submit to the Committees on Appropriations an accountability report assessing the status on eight accountability measures. Section 21004(c) would transfer $1,000,000 from funds made available under the Economic Support Fund (ESF) to the Inspector General of the Department of State and Broadcasting Board of Governors to conduct oversight of funding made available to the West Bank and Gaza and the region. Senate Action The Senate Committee on Appropriations provided $345 million for the MRA account (which would have increased the Administration's initial request by $52 million and its revised request by $12 million) to assist refugees and IDPs. Of this amount, explanatory language allocated $25 million for returning IDPs in Afghanistan, $25 million for "such needs" in Africa, $5 million for refugees from Burma, $15 million for IDPs in Sri Lanka, and $5 million for IDPs in Colombia. Enacted FY2009 Supplemental The enacted legislation ( H.R. 2346 , P.L. 111-32 ) provides $390 million for MRA, which is $57 million above the Administration's revised request and an increase over the amounts sought by both the House and Senate. The funding is to respond to urgent humanitarian needs of refugees and IDPs worldwide with specific reference to the Middle East, South and Central Asia (including Pakistan and Sri Lanka), Southeast Asia, Africa, Colombia. A "Refugee Programs and Oversight" heading in the legislation also states that of the MRA total, funding provided to the United Nations Relief and Works Agency (UNRWA) is limited to $119 million. Reporting requirements on seven issues related to accountability measures and transparency within UNRWA and the transfer of funds for oversight activities are similar to those proposed by the House. It is anticipated that $45 million of MRA funding is for humanitarian assistance in Pakistan. International Disaster Assistance (IDA) The Administration's initial FY2009 emergency supplemental request asked for $200 million for the International Disaster Assistance (IDA) account to respond to additional humanitarian requirements worldwide or to replenish costs incurred for these emergencies. The request did not specify how the $200 million would be allocated, but referred to specific complex emergencies—in East and Central Africa (Somalia Ethiopia, Sudan, Zimbabwe), and to assist IDPs in Pakistan. On June 2, 2009, the Administration revised its request and asked for an additional $200 million to address humanitarian needs in Pakistan, $30 million of which was for IDA. The revised request for IDA thus totaled $230 million. House Action The House Appropriations Committee bill matched the Administration's initial request for $200 million for the IDA account. Explanatory language referred specifically to increased insecurity, armed conflict, and weather complications in Africa (including in Somalia, Ethiopia, the Democratic Republic of the Congo, and Zimbabwe.) It also referred to needs in other regions and countries including the Middle East and Central and South Asia (in particular, Pakistan, Tajikistan, and Kyrgyzstan.) In addition, the Committee highlighted its concerns about limited humanitarian access in Somalia and urged the Administration to work with regional partners to promote safe access for humanitarian operations there. It also noted the loss of life and limited humanitarian assistance to civilians in Sri Lanka and urged the Secretary of State to continue to apply pressure to the Government of Sri Lanka to comply with international humanitarian law and to allow access on the part of humanitarian organizations and independent monitors; to press for the provision of humanitarian assistance to displaced populations; and to support programs—through other relevant accounts—that encourage the participation of ethnic Tamils in Sri Lanka and reconciliation between the Tamil and Sinhalese communities. Senate Action The Senate Appropriations Committee bill recommended $245 million for the IDA account, an increase of $15 million over the Administration's revised request to address basic needs of IDPs (in particular in Africa, the Middle East, and South and Central Asia) and to respond to humanitarian crises. Enacted FY2009 Supplemental The enacted legislation ( H.R. 2346 , P.L. 111-32 ) provides $270 million in IDA funding, a $40 million increase over the Administration's revised request and an increase over the amounts sought by both the House and Senate. The conferees directed that not less than $55 million to be for IDPs in Pakistan, and the balance for IDPs worldwide, including Africa, the Middle East, and South and Central Asia, and to respond to other humanitarian crises. The conferees also urged the Secretary of State and USAID to ensure humanitarian assistance is provided to IDPs in Sri Lanka, and further, similar to explanatory language in the House bill, to support programs—through other relevant accounts—that encourage the participation of ethnic Tamils in Sri Lanka and reconciliation between the Tamil and Sinhalese communities. P.L. 480, Title II The Administration's FY2009 emergency supplemental request asked for $300 million in additional P.L. 480 - Title II assistance to meet emergency food needs in Africa and elsewhere worldwide. House Action The House-approved bill ( H.R. 2346 ) provided $500 million for P.L. 480 Title II grants, an increase of $200 million over the Administration's request, for urgent humanitarian food assistance and to enhance available resources for unanticipated food aid emergencies. Senate Action The Senate-approved bill ( S. 1054 ) provided $700 million for P.L. 480 Title II grants, an increase of $400 million over the Administration's request, for humanitarian food assistance (with specific reference to Africa) and unanticipated emergency food aid needs. The explanatory language also stated that the recommended increase would enable the United States to continue its historical share of food aid contributions. Enacted FY2009 Supplemental The enacted legislation ( H.R. 2346 , P.L. 111-32 ) increases the amount requested in P.L. 480 – Title II assistance to $700 million for urgent humanitarian food assistance. This is an increase of $400 million above the Administration's request. The legislation makes note of the impact of the global financial crisis and recession on food emergencies in many countries and the corresponding decrease in global response. The increase in funding above 2008 levels is expected to enhance available resources for food aid emergencies. Economic Support Fund (ESF) Humanitarian Assistance In its initial request, the Administration asked for humanitarian assistance activities that would be appropriated under the Economic Support Fund (ESF), including Burma ($13 million), West Bank/Gaza ($168 million), and Pakistan ($8 million). Other aspects of proposed ESF appropriations are discussed elsewhere in the report. The Administration revised its initial request to include an additional $200 million to address humanitarian needs in Pakistan, $130 million of which was for ESF. Enacted FY2009 Supplemental Both House and Senate Appropriations Committees made specific reference to humanitarian assistance activities under ESF. The enacted legislation ( H.R. 2346 , P.L. 111-32 ) provides: Burma : $13 million for humanitarian assistance with explanatory language similar to the House bill (below.) The conferees also directed the Comptroller General of the United States to conduct an assessment of the U.S. and other donor assistance provided in response to Cyclone Nargis. It further directs the Secretary of State to submit a report detailing the review of U.S. policy toward Burma. Jordan : $150 million for assistance in part related to the impact of refugee populations hosted by Jordan. Pakistan : The conference report recommends that $125 million be made available for humanitarian assistance and the protection of vulnerable populations in Pakistan. West Bank and Gaza : The enacted legislation includes $5 million less than the Administration's overall request for $556 million in ESF funding, but it does not specify the amount to be used for humanitarian assistance. Other Humanitarian Assistance of Note Pakistan Counterinsurgency Fund The enacted legislation limits to $2 million funding drawn from the Pakistan Counterinsurgency Fund than can be used for urgent humanitarian assistance for the people of Pakistan. It further states that these funds can only be used as part of civil-military training exercises for Pakistani security forces and to assist the Government of Pakistan in setting up a mechanism (with Pakistan funding) that can be applied to humanitarian needs in support of counterinsurgency operations conducted inside Pakistan. The Senate Appropriations Committee recommended a statutory limit of $2 million to be used for humanitarian assistance from the Pakistan Counterinsurgency Capability Fund. The Committee noted that although humanitarian assistance can be of value to counterinsurgency operations, it is concerned about granting an additional authority within the Department of Defense (DOD) for funding humanitarian assistance projects. The Committee pointed to existing authorities—the Combatant Commander Initiative Fund and the Overseas, Humanitarian, Disaster and Civic Aid account—that support humanitarian projects. The Committee recommended that DOD work with the Pakistani Government to develop a mechanism beginning in FY2010 (using Pakistani funds) that can include funding for humanitarian needs in support of counterinsurgency operations conducted in Pakistan. Development Assistance The Administration requested $38 million for Development Assistance funding. The conferees did not include funding for Development Assistance as these needs were expected to be met through other accounts. The conferees did direct the Secretary of State to report to the Appropriations Committee not later than 45 days after the enactment of the supplemental legislation with detail on incidents that occurred during the conflict in Sri Lanka that may have been violations of international humanitarian law or crimes against humanity, and where possible, the parties responsible. Appendix E. FY2009 Supplemental Appropriations for Support of the International Monetary Fund On May 12, 2009, the White House formally requested that Congress consider increasing the U.S. contribution to the International Monetary Fund (IMF) based on commitments made by the U.S. government at an April G-20 meeting in London, England. G-20 nations agreed that the IMF's New Arrangements to Borrow (NAB), a supplemental fund to bolster IMF resources, should be increased by up to $500 billion from its present level of $50 billion. The Obama Administration has proposed a U.S. contribution of up to $100 billion. Pledges totaling $255 billion have been received from several countries and others are considering additional contributions. The G-20 also agreed that the IMF should create new Special Drawing Rights (SDRs) to a value of $250 billion and to allocate them to its members through its SDR Department. These new resources would expand world foreign exchange reserves by about 4% and provide needed resources to countries in crisis. Already pending at the time of the G-20 meeting was a proposal for a new increase in IMF quota resources. Negotiations on a package of reforms and a new quota increase had been completed in April 2008 and submitted to the House and Senate by the Bush Administration last November. The U.S. share, measured in Special Drawing Rights (SDR) pegged to a number of currencies, would be SDR 4.97 billion (about $8 billion). The package includes reforms in the IMF governance process, finances, and procedures. It also includes a proposal that the IMF sell 403 metric tons of gold to create a facility that would cover the costs of its country and global surveillance, technical assistance, research, and other non-lending operations. Also pending in 2008 was a proposed Fourth Amendment to the IMF Articles, originally proposed in 1997, that would create a new allocation of about SDR 21.4 billion. Some elements of the above require congressional approval and some do not. U.S. participation in the new IMF quota increase and a U.S. subscription of $100 billion for the NAB would require congressional approval. Likewise, amendments to the IMF Articles—including the prospective Fourth Amendment for a new SDR allocation—would require congressional approval. On the other hand, the proposed $250 billion allocation of SDRs (which is being made under a different provision of the IMF Articles) is too small to trigger the legal requirement that Congress give its assent. Any contributions to the IMF, to fund increases in the U.S. quota or to subscribe new resources to the NAB, must be authorized by Congress. In 1967, a Presidential Commission on Budget Concepts recommended that U.S. payments to the IMF should not be treated as budget outlay but rather they should be counted as an exchange of assets which is matched by transfers of equivalent value to the United States from the IMF. Since that time, payments to the IMF have been deemed to have no impact on the Federal budget or on the Federal budget deficit. In the spring of 2009, however, there was concern that the procedural aspects of the budget process may have an impact on congressional consideration of the proposed new U.S. subscriptions to the IMF. Some are concerned that Members of Congress may vote against providing budget authority for the proposed $100 billion line of credit to the IMF through the NAB on account of "bailout fatigue," even though the payment would have no outlay effect under then-existing congressional budget scorekeeping procedures. Peter Orszag, director of the Office of Management and Budget (OMB), was quoted in April 2009 as saying that he cannot see "any analytical rationale for why something would score zero as an outlay but then score as something in budget authority." He reportedly urged the Congressional Budget Office (CBO) and the House and Senate Budget Committees to use an alternative "exchange of assets" procedure (like that use for IMF payments in 1976 and 1977) in which no appropriations would be required to put the $100 billion line of credit through the NAB and U.S. participation in the IMF quota increase into effect. Others have been concerned, though, that changing the existing budgetary procedure for IMF subscriptions at the present moment might weaken their support because it might be seen as an effort to change the rules in the face of controversy or a signal that the Administration fears that it may not have the votes to approve the measure through the established process. By contrast, critics of the current scorekeeping system say that it would be unfortunate if bookkeeping procedures hindered Congress from considering the IMF proposals on their merits. On May 12, the White House and Congress reached an agreement to treat the U.S. subscription to the IMF as a line of credit for budgetary purposes, after which, the President made the formal request to include authorization and appropriations for the IMF in the defense supplemental. Reminiscent of the method used for the 1966 quota increase, Congress has been asked by the Administration to authorize the United States to extend a line of credit to the IMF for the NAB and quota subscriptions that total $108 billion. Unlike IMF quota increases since 1967 that were treated as an exchange of assets with no budgetary impact, under the new agreed framework, the U.S. contribution would be scored as a loan for budgetary purposes under the existing credit reform legislation. This legislation says that Congress need not appropriate the full face value but only the expected amount of loss for any loans made by the United States Government. When U.S. contributions to the IMF were treated as an exchange, there was considered to be no risk of default by the IMF in its obligations to the United States. Under credit reform, a small fraction of the total would be appropriated to cover possible losses. CBO has determined that the U.S. contributions to the IMF would require $5 billion to be appropriated. This re-calculation of the cost is expected by many to ease the prospects for enacting this legislation. Once agreement was reached between the budget committees and the Administration on how to account for U.S. contributions in the federal budget, Senate leadership agreed to include the Administration's IMF request in the defense supplemental. The final enacted supplemental ( P.L. 111-32 ) contains the IMF funding. Appendix F. FY2008 and FY2009 Defense Funding, Detail Table Appendix G. FY2009 Supplemental Request and Congressional Action
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On June 11, 2009, the House and Senate Appropriations Committees announced a conference agreement on H.R. 2346, a bill providing supplemental appropriations for the remainder of FY2009. The House passed the conference report (226 to 202) on June 16; the Senate passed it (91 to 5) on June 18. President Obama signed it into law (P.L. 111-32) on June 24. On key issues, the agreement includes: $5 billion, as in the Senate bill, to support U.S. loans to the International Monetary Fund, does not include a Senate provision allowing the Secretary of Defense to exempt photos of military detainees from release under the Freedom of Information Act; does not include $80 million requested for the Department of Defense and the Department of Justice to facilitate closure of the Guantanamo Bay prison; prohibits the release of Guantanamo detainees in the United States and prohibits transfers of prisoners except to be prosecuted; provides $1.9 billion for H1N1 pandemic flu preparedness (declared to be a pandemic by the World Health Organization on June 11), along with $5.8 billion more, contingent on the President determining it is needed; and $1 billion for the "Cash for Clunkers" program to provide payments to consumers who trade in their inefficient vehicles and purchase more fuel efficient ones. Including the contingent influenza funding, the bill provides a total of $105.9 billion in supplemental appropriations. The total includes $79.9 billion for defense and intelligence activities in Iraq and Afghanistan; $10.4 billion for international affairs (including food aid); $5 billion for IMF loans; $7.7 billion for influenza measures; $250 million, as requested, for domestic fire fighting; $847 million, as in the Senate bill, in unrequested funds for the Corps of Engineers for flood control projects; $72 million, as requested, for Capitol Police radios; and $1 billion for the "Cash for Clunkers" program. The decision to exclude the Senate provision on detainee photos was reportedly approved in the conference only after the President agreed in a letter to take steps to prevent release of photos or videos of prisoner abuse. Because the bill does not include that provision, Democratic leaders said they were able to get enough support from House Democrats who initially opposed the bill to overcome opposition from Republicans who objected to IMF funding. H.R. 2346 provides funds, with some adjustments, that the Administration requested in four supplemental appropriations proposals, including an April 9 request for $83.4 billion in supplemental funding for defense, international affairs, domestic fire fighting, and other purposes; an April 30 request for $1.5 billion for influenza preparedness and response; and a May 12 request for $5 billion to support International Monetary Fund borrowing authority. On June 2, the Administration submitted an additional request for $2.0 billion more for influenza response, for expanded authority to transfer funds from other appropriations for influenza measures, and for $200 million in additional humanitarian assistance to Pakistan.
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The Bush Administration's FY2004 budget request, released February 3, 2003, budgetedEnergy and Water Development Programs at $26.95 billion. The FY2003 ConsolidatedAppropriations Resolution ( H.J.Res. 2 , P.L. 108-7 ) and the Emergency WartimeSupplemental Appropriations Act, 2003 ( P.L. 108-11 ) funded these programs at $26.20 billion. OnJuly 15 the House Appropriations Committee reported a bill ( H.R. 2754 ) containingFY2004 appropriations of $27.08 billion, and the House passed the bill with the same funding onJuly 18. The Senate passed a $27.38 billion version of H.R. 2754 on September 16. The conference committee on the bill approved $27.33 billion on November 5, 2003 ( H.Rept.108-357 ), and both the House and the Senate agreed to the conference report on November 18. Thebill was signed December 1. On November 25 House and Senate conferees reported out H.R. 2673 , the omnibus Consolidated Appropriations Act, 2004 ( H.Rept. 108-401 ),which included seven of the 13 regularappropriations bills not yet passed. Although Energy and Water Development was not one of thoseincluded in the omnibus bill, several provisions affected Energy and Water programs. The Houseapproved the conference report on H.R. 2673 on December 8, and the Senate on January22, 2004. The President signed the bill January 23 ( P.L. 108-199 ). Table 1. Status of Energy and Water DevelopmentAppropriations, FY2004 The Energy and Water Development bill includes funding for civil worksprojects of the Army Corps of Engineers, the Department of the Interior's Bureau ofReclamation (BOR), most of the Department of Energy (DOE), and a number ofindependent agencies, including the Nuclear Regulatory Commission (NRC) and theAppalachian Regional Commission (ARC). The Bush Administration's request was$26.946 billion for these programs for FY2004, compared with $26.198 billionappropriated for FY2003. The House Appropriations Committee recommended$27.080 billion for FY2004 ( H.R. 2754 ), and the bill passed the Housewith that amount on July 18. The Senate bill, S. 1424 , reported out bythe Senate Appropriations Committee on July 17, contained funding of $27.378billion, and the Senate incorporated that bill in its version of H.R. 2754 with a number of noncontroversial amendments on September 16. The final bill,signed into law December 1, contained $27.328 billion. Although Energy and Water Development is not one of the seven regular appropriations bills included in H.R. 2673 ( P.L. 108-199 ), the omnibusConsolidated Appropriations Act, 2004, several provisions in that measure affectedEnergy and Water programs, including a 0.59% rescission for all non-defenseprograms. Except where specifically noted, the dollar amounts cited in this report donot reflect provisions included in P.L. 100-199 . For the Corps of Engineers in FY2004, the Administration requested $4.19 billion, almost 10% ($445 million) less than the amount originally appropriated forFY2003. The Administration's request focused funding on construction projects thatcould be completed in FY2004 and eight projects considered priorities by theAdministration, including the Florida Everglades. The House bill included $4.482billion, the Senate Appropriations Committee bill recommended $4.427 billion. Thisfunding was increased to $4.491 billion on the Senate floor. P.L. 108-137 provided$4.571 billion for the Corps. In the end, only one of the Administration's eightproject received the full amount requested; the other priority projects all received lessthan requested. The Administration asked for $891 million for FY2004 for the Department of the Interior programs included in the Energy and Water Development bill -- theBureau of Reclamation and the Central Utah Project. This would have been adecrease of $41 million from the FY2003 funding level. The House bill contained$916 million, the Senate bill $956 million, and the final bill $917 million. The FY2004 request for DOE programs in the bill was $21.689 billion, about $1.32 billion more than the previous year. The major activities in the DOE budget areenergy research and development, general science, environmental cleanup, andnuclear weapons programs. The House bill funded these programs at $21.542billion, and the Senate bill at $21.674 billion. The final bill includes $21.570 billion. (Funding of DOE's programs for fossil fuels, energy efficiency, and energy statisticsis included in the Interior and Related Agencies appropriations bill ( P.L. 108-108 ).The FY2004 net appropriations for these programs was $1.7 billion.) The request for funding the independent agencies in Title IV of the bill was $148 million, compared with $207 million in FY2003. The House bill contained$138 million for FY2004, the Senate bill $230 million. The final bill provides $229million. Table 2 includes budget totals for energy and water development appropriations enacted for FY1997 to FY2003 and the Administration's request for FY2004. Table 2. Energy and Water Development Appropriations, FY1997 to FY2004 (budget authority in billions of current dollars) a a These figures represent current dollars, exclude permanent budget authorities, andreflect rescissions. Tables 3-10 provide budget details for Title I (Corps of Engineers), Title II (Department of the Interior), Title III (Department of Energy), and Title IV(independent agencies) for FY2003-FY2004. The President's request for FY2004 for the civil works program of the U.S.Army Corps of Engineers was $4.19 billion, a decrease of $445 million from theoriginally enacted appropriation for FY2003. P.L. 108-137 provided totalappropriations for the Corps of $4.57 billion. The final amount represents anincrease in construction funding from the House and Senate versions of the bill. Theconference committee requested removing all funding for the Flood Control andCoastal Emergencies account in H.R. 2754 because the depleted accountwas recently replenished with $60 million through the Legislative BranchAppropriations Act for FY2004, P.L. 108-83 . The omnibus FY2004 ConsolidatedAppropriations bill, H.R. 2673 ( P.L. 108-199 ), includes severalprovisions related to the Army Corps, most notably $14 million in additionalappropriations for the Corps' construction account. Table 3. Energy and Water Development Appropriations Title I: Corps of Engineers ($ millions) a Includes $39 million appropriated in Emergency Wartime SupplementalAppropriations Act, 2003, P. L. 108-11. b "Formerly Utilized Sites Remedial Action Program" c Includes $60 million of appropriations provided in the Legislative BranchAppropriations for FY2004, Title III, Chapter 2 of P.L. 108-83 , enacted onSeptember 30, 2003. The President's budget request for FY2004 limited funding for the planning and design of new projects; however, it fully fund all projects whose construction couldbe completed in FY2004, and provided substantial funding for eight projectsconsidered by the Administration to be priorities. The Administration's budget wouldhave provided some support for 140 other projects, but construction would haveproceeded more slowly than originally planned by the Corps because these projectswould not have been fully funded. (1) TheAdministration's request includes fundingto complete design of 22 proposed projects, while deferring work on all other designefforts. P.L. 108-137 provided less than the requested amount for seven of the eightpriority projects. The final legislation spread the construction appropriations acrossa broader set of construction activities than the President's request. The President's request would have provided no funds for studies and "environmental infrastructure" projects in the following non-traditional missionareas: wastewater treatment, irrigation water supply, and municipal and industrialwater supply treatment and distribution. By not seeking funding for these activities,the Administration was reinforcing its interest in focusing available federal fundingon navigation, flood control, storm damage reduction, and ecosystem restorationprojects. The final legislation provided funding for several environmentalinfrastructure projects. The Administration's $70 million request for the Flood Control and Coastal Emergencies account was significantly higher than the FY2003 appropriation of $15million and the FY2003 request for $20 million. The actual expenditure for activitiesunder this account in previous years has averaged $70 million, with much of thefunding being provided through supplemental appropriations. This account financesresponse and recovery activities for flood and storm events, preparedness for theseevents, and the Corps' support of the Federal Emergency Management Agency(FEMA) through the Federal Response Plan. Because this is an emergencymanagement program, annual costs vary significantly based on actual events and/orchanging missions. P.L. 108-137 contained no funding for this account; theconference report language ( H.Rept. 108-357 ) cited the recent replenishment of thedepleted account with $60 million through P.L. 108-83 as the reason. TheConference report also directed the Secretary of the Army to consider changes to themanagement of the account and to report to the Appropriations Committees of theHouse and Senate within 180 days of enactment. Funding Level. Funding for the Corps' civil works program has often been a contentious issue between theAdministration and Congress, with final appropriations typically providing morefunding than requested, regardless of which political party controls the White Houseand Congress. For FY2001, for example, Congress added $480 million (12%) to the$4.08 billion requested by the Clinton Administration. Similarly, the FY2002 Housebill funded the Corps at almost 15% more than requested by the BushAdministration, and the final act appropriated slightly more than that. The FY2003appropriation followed suit; it was $466 million (11%) above the requested amount.The FY2004 budget request proposed a 10% cut from the initial appropriationamount enacted for FY2003. P.L. 108-137 restored appropriations to an amountcloser to the Corps' FY2003 budget. Savings and Slippage and Reprogramming. Since all work will not be accomplished asplanned, appropriations for the Corps include a reduction for Saving and Slippage (S&S) to account for the slip of spending on projects due to delays caused byweather, non-federal sponsor financing, or a decision not to proceed -- or to accountfor savings from a project costing less than estimated. The Administration proposesan S&S rate for the various accounts in the Corps budget in its budget estimate;Congress can maintain or modify the S&S rate during the appropriations process. Congress has since FY2002 increased the S&S rates from the rates proposed by theAdministration for the General Investigations and the Construction accounts. Forexample, the enacted S&S rate for FY2004 was 14% for the construction account,compared to the Administration's requested rate of 8%. The enacted S&S rates arenormally applied across the board to all projects in an account, except for thoseactivities specifically set forth in act language. Over the course of the fiscal year, theCorps reprograms funds within an account from the projects that are not proceedingas planned to those that are moving forward. S&S rates that exceed the actual savingand slippage experienced could contribute to appropriations constraints on theprogress of projects. There is no statutory language permitting or prohibiting reprogramming of funds; however, Congress has provided specific guidance in the past with regard toreprogramming of the construction account in report language. The conferencereport for the enacted appropriations for FY2004 identified numerous areas ofdissatisfaction with the Corps' reprogramming procedures. (2) Trust Fund Proposals. The Administration included in its request legislative proposals to fund more activitiesfrom several trust funds. The Administration proposed that for FY2004 thesechanges be made through the appropriations process. The two trust funds -- theInland Waterway Trust Fund (IWTF) and the Harbor Maintenance Trust Fund(HMTF) -- have built up substantial unused balances in recent years, causingconcern about why the funds were not being put to use and leading to interest inexpanding their use to decrease the federal monies spent on inland waterways andharbors. The enacted legislation dismissed the Administration's proposals related tothe HMTF and the IWTF. Proposed "Reforms" of Corps Processes and Procedures. During the 107th Congress, the Corps came undercriticism for the way it evaluates and undertakes projects. Although the issuereceived media attention, it was not directly addressed through legislation. (For moreinformation, see CRS Report RL30928, Army Corps of Engineers: Reform Issues forthe 107th Congress , and CRS Issue Brief IB10120, Army Corps of Engineers CivilWorks Program: Issues for Congress .) Corps officials gave testimony at FY2004budget hearings, and at a March 2003 hearing of the Subcommittee on WaterResources and Environment of the House Committee on Transportation andInfrastructure, on how the agency is "transforming" itself in response to thesecriticisms. In this testimony, Corps officials defended the integrity of the agency'sreview process and detailed efforts to further strengthen it, including the use ofindependent peer review panels for a few complex projects. (3) The Administration'sFY2004 budget request included $3 million for a peer review panel to examineselected projects and $2 million for ex post facto studies of 15 to 25 completedprojects to compare the estimated and actual project costs and benefits. P.L.108-137 funded neither of these efforts. Everglades. A significant addition to the Corps' mission in recent years is its growing role in largeenvironmental restoration programs, raising concerns that funding for these programscould displace the funding for other water resources activities. (See CRS Issue Brief IB10120, Army Corps of Engineers Civil Works Program: Issues for Congress, formore information.) The Corps plays a significant coordination role in the restorationof the Central and Southern Florida ecosystem. The Corps is particularly involved inthe planning, construction, and operation of facilities under the ComprehensiveEverglades Restoration Plan (CERP) that was authorized by Title VI of the WaterResources Development Act of 2000 ( P.L. 106-541 ). The annual Energy and WaterDevelopment Appropriations bill provides funding for the Corps' participation inthese efforts. (4) During 2003, the quality of waterentering the Everglades has receivedmuch attention and congressional concern because of the passage of a state law inFlorida that may affect phosphorous mitigation deadlines and goals. This concern isreflected in the Energy and Water appropriations bill for FY2004. (See CRS Report RL32131 , Phosphorus Mitigation in the Everglades , by [author name scrubbed] andBarbara Johnson.) The President's request for FY2004 included a total of $145 million for the Corps' construction projects in the region, compared to $151 million appropriatedfor FY2003. The FY2004 request for the Kissimmee River restoration project and theEverglades and South Florida ecosystem restoration project was $17.7 million and$14.8 million, respectively. For the Central and Southern Florida project, theAdministration requested $112.5 million (which included $39.0 million for CERPactivities). The enacted legislation provided $137.5 million for the Corps' constructionprojects in the Everglades, compared to $151 million appropriated for FY2003 and$145 million requested by the Administration. For FY2004, $105 million wasprovided for the Central and Southern Florida Project (it is unclear how much of thistotal will be directed toward CERP); this amount was $7.5 million lower than theAdministration's request. For the Kissimmee River restoration project and theEverglades and South Florida ecosystem restoration project, $17.7 million and $14.8million, respectively, were provided in the final legislation, which was the sameamount requested by the Administration. The final legislation included $0.5 millionfor the Florida Keys Water Quality Improvements project, which was not requestedby the Administration. The conference managers in their report requested that thisproject be considered in future funding requests and as a part of the larger Evergladesrestoration effort. P.L. 108-137 conditions funding for Everglades restoration on the quality of water entering the A.R.M. Loxahatchee National Wildlife Refuge (LNWR) andEverglades National Park (ENP). According to P.L. 108-137 , federal funding for thepreservation and restoration of the Florida Everglades will be available forexpenditure unless all four conditions apply: (1) the Secretary of the Army finds thatwater entering the LNWR and ENP do not meet water quality requirements in a 1992consent decree; (5) (2) the state fails to submit a planfor compliance within 45 days; (3)failure to submit the plan is reported; and (4) either the Senate or House Committeeson Appropriations disapprove further expenditure of funds. In the Interior andRelated Agencies Appropriations Act ( P.L. 108-108 ), similar conditions wereenacted for some of the Everglades-related funding provided by that bill. For the Department of the Interior, the Energy and Water Development billprovides funding for the Bureau of Reclamation (BOR) and the Central Utah ProjectCompletion Account. Table 4. Energy and Water Development Appropriations Title II: Central Utah Project CompletionAccount (in millions of dollars) Table 5. Energy and Water Development Appropriations Title II: Bureau of Reclamation (in millions ofdollars) a Includes $25 million appropriated in Emergency Wartime SupplementalAppropriations Act, 2003, P. L. 108-11. b In its request, the Bureau lists this as an "offset." For FY2004, the President requested $44.2 million for the Central Utah Project (CUP) Completion Account, an increase of $8 million over the FY2003 enactedamount. Of the increase, $6 million was a requested transfer to DOI from theWestern Area Power Administration (WAPA)in DOE of funding for the UtahReclamation Mitigation and Conservation Fund. This requested transfer was notincluded in either House and Senate bills, and the CUP amount was reduced to $38.2million. The Conference agreement provided that the payment continue to be madefrom WAPA for ten years. The FY2004 request for BOR totaled $878 million in gross current budget authority. (6) This amount was $37 million less thanenacted for FY2003 in P.L.108-7 . The Bureau received an additional $25 million in supplementalappropriations for FY2003 for homeland security purposes ( P.L. 108-11 ). The House-passed bill for FY2004 ( H.R. 2754 ) included $909.7 million for the BOR, an increase of $31.7 million above the FY2004 requestedamount and a decrease of $26.6 million from the FY2003 enacted level. The Senatebill included $949.2 million, $12.9 above the FY2003 enacted level and $71.2million above the FY2004 requested amount. The final bill included $948.3 millionfor FY2004. Included in the $878 million BOR request was $863 million in current appropriations for agency water resources management activities and $15 million forthe California Bay-Delta Restoration Account (CALFED). The House bill includedan increase of $51.2 million above the requested amount for water resourcesmanagement activities and no funds for the CALFED account, whereas the Senatebill included an increase of $86.8 million over the requested amount and no funds forCALFED. The FY2004 request included a $30.8 million "offset" for the CentralValley Project (CVP) Restoration Fund, yielding a "net" current authority of $847.2million for BOR. This offset, listed in the Conference Committee budget tables as"Central Valley project collections," was in both the House and Senate bills and thefinal appropriation. BOR's single largest account, Water and Related Resources, encompasses the agency's traditional programs and projects, including operations and maintenance,the Dam Safety Program, Water and Energy Management Development, and Fish andWildlife Management and Development, among others. BOR requested $771.2million for this account for FY2004, $37 million less than appropriated in P.L. 108-7 . The House bill included $817.9 million for Water and Related Resources, $46.7million above the FY2004 request and $9.7 million above the FY2003 enacted level. The Senate bill included $859.5 million, $88.3 million above the FY2004 requestedlevel and $27.3 above the FY2003 enacted level. The final bill, P.L. 108-137 ,included $857.5 million for FY2004. Background. Most of the large dams and water diversion structures in the West were built by, or with the assistanceof, the Bureau of Reclamation (BOR). Whereas the Army Corps of Engineers builthundreds of flood control and navigation projects, BOR's mission was to developwater supplies, primarily for irrigation to reclaim arid lands in the West. Today,BOR manages hundreds of dams and diversion projects, including 348 storagereservoirs in 17 western states. These projects provide water to approximately 10million acres of farmland and 31 million people. BOR is the largest supplier of waterin the 17 western states and the second largest hydroelectric power producer in thenation. BOR facilities also provide substantial flood control, recreation, and fish andwildlife benefits. At the same time, operations of BOR facilities are oftencontroversial, particularly for their effect on sensitive fish and wildlife species andconflicts among competing water users. CALFED. Funds have not been appropriated for the California Bay-Delta Restoration Account (Bay-Delta, orCALFED) since FY2000, when the authorization for appropriations expired. However, funds were provided for FY2002 and FY2003 for activities that supportthe CALFED program. The Administration has requested $15 million for thisaccount for FY2004. The House Appropriations Committee and the SenateAppropriations Committee recommended that no funds be appropriated forCALFED, since the program has not been authorized for appropriations -- a positionreiterated in the conference report for the final bill. (For more information onCALFED, see CRS Report RL31975 , CALFED Bay-Delta Program: Overview ofInstitutional and Water Use Issues .) However, �208 of the Senate-passed bill, andfinally �211 of P.L. 108-137 , permanently authorizes the Secretary of the Interior toundertake feasibility studies for Sites Reservoir, Los Vaqueros ReservoirEnlargement, and Upper San Joaquin Storage projects. Section 211 further notesthese studies "should be pursued along with ongoing environmental and otherprojects in a balanced manner." The three site-specific projects referenced above arerelated to the water supply and water management functions of the CALFEDprogram. The final FY2003 appropriation for BOR provided $23 million for CVP activities that support the goals of the CALFED program within the Water andRelated Resources Account. Several specific activities were identified in the finalbill, including $1.75 million for investigations of storage opportunities in the UpperSan Joaquin watershed (Friant Division); $9 million for the Environmental WaterAccount (under Miscellaneous Project Programs); $1.5 million to continue planningactivities related to the Sites Reservoir (Sacramento River Division); and $2.5million for evaluation of potential impacts of raising Shasta Dam (Shasta Division). Division D, Section 215, of the bill specifically authorized the Secretary, "in carryingout CALFED-related activities," to begin feasibility studies for Sites Reservoir,enlargement of Los Vaqueros Reservoir, and an Upper San Joaquin Storage project. The conference bill language for FY2004 now extends those feasibility studiesindefinitely. Security. BOR requested $28.6 million for continued heightened safety and security efforts at BOR facilities. Thebulk of the request is for facility operations/security. Funding covers such activitiesas administration of the security program, periodic security reviews, and employeetraining and awareness. An additional $1 million is being requested for nationalsecurity cyber systems, under the category of Critical Infrastructure Protection. (Formore information on terrorism and security issues involving the water infrastructuresector, see CRS Report RS21026, Terrorism and Security Issues Facing the WaterInfrastructure Sector .) The BOR received an additional $25 million for homelandsecurity expenses in P.L. 108-11 . Sumner-Peck Settlement. The federal government and the Westlands Water District, which receives CVP water,settled a long-standing lawsuit December 10, 2002. The lawsuit concerned theeffects of irrigation water buildup beneath private land and the government'sobligation to provide irrigation drainage service. The drainage problem has been anongoing problem within the San Luis Unit of the CVP, where toxins such asselenium have built up in the soil and rendered land unsuitable for farming. The$107 million settlement (federal share) has been quite controversial both for its initialsum and potential for additional suits from other nearby landowners, as well as forthe specific terms of the agreement and how it will be paid. While the land will beretired from farming, Westlands will hold title to the land and water rights, theplaintiffs reserve valuable commodity base acreage, and the federal governmentreceives certain easements and covenants guaranteeing the land will not be usedagain for farming. A proposal to pay for the first installment of the settlement usingappropriated funds from the Energy and Water annual appropriations bill wasblocked by a provision in the FY2003 omnibus appropriations bill (�212, DivisionD of P.L. 108-7 ), on the grounds that it would reduce funding for other programs. The action caused the Justice Department to reverse its earlier stance and allow thefirst $34 million to be paid from the federal government Judgment Fund. However,it is not clear how future settlement payments will be made. Yuma Desalting Plant. The conference committee's report for P.L. 108-137 directed the Bureau of Reclamationto expedite modifications to the Yuma Desalting Plant on the Colorado River nearthe U.S.-Mexico border and to accelerate the permitting and environmentalcompliance activities needed for its operation. The Bureau of Reclamation was alsodirected to report to the House and Senate Committee on Appropriations on the statusof those activities within 180 days. The Yuma Desalting Plant was built in order to treat saline agriculture water before it entered the Colorado River; the plant has not been operated since itscompletion in the early 1990s because of technical problems and high operationalcosts. Interest in operating the plant and using the treated water toward the U.S.treaty obligations has increased recently due to the region's drought condition, whichhas reduced storage levels in Colorado River reservoirs, and the growing competitionfor limited water resources. Preparing the Yuma Desalting Plant is controversial because of its expense and the possible environmental consequences. The modification to the plant are expectedto take 36 to 48 months to complete at a cost of $24 to $28 million; operating theplant is estimated to cost between $26 and $34 million annually. Maintaining theplant on standby status also has its cost ($5 million annually). Preparing the plant for full operational capacity has some environmental advocacy groups in the United States and Mexico concerned. They are worried about the impact on a wetland in Mexico as a result of plant operations. The salineagricultural water that is currently diverted around the desalting plant because it isnot operating is discharged into the Cienega de Santa Clara wetlands in Mexico. This diverted water supports 11,000 acres of wetlands that are a protected biosphereby the Mexican government and provide habitat for species designated as threatenedand endangered by the U.S. and Mexican governments. The water diverted to thesewetlands does not currently count toward the Colorado River water that the UnitedStates is required to deliver to Mexico under a 1944 treaty. If the plant were tobecome operational, the treated water would likely be discharged into the ColoradoRiver and the saline effluent stream discharged into the Cienega. The water reachingthe Cienega would likely be 4 to 5 times more saline, and the quantity reaching theCienega would be 30% of the current flow. Environmental groups supportalternatives to plant operation, such as short-term leases of water rights, whilesupporters of plant operations argue that the demand for the water in the UnitedStates is too high to allow for the water to continue flowing to the Cienega withoutit counting toward the treaty requirements. The Energy and Water Development bill includes funding for most of DOE'sprograms. Major DOE activities in the bill include research and development onrenewable energy and nuclear power, general science, environmental cleanup, andnuclear weapons programs. The Administration's FY2004 request for DOE programsin the Energy and Water Development bill was $21.67 billion, about $780 millionmore than the amount appropriated for FY2003. The House bill would haveappropriated $21.54 billion. The Senate bill included $22.15 billion. The final bill, P.L. 108-137 , appropriated $21.57 billion. (The FY2004 appropriation for DOE'sprograms for fossil fuels, energy efficiency, the Strategic Petroleum Reserve, andenergy statistics, included in the Interior and Related Agencies appropriations bill( P.L. 108-108 ), was $1.7 billion.) Table 6. Energy and Water Development Appropriations Title III: Department of Energy ($ millions) a Includes funding appropriated in the Emergency Wartime Supplemental Appropriations Act, 2003,P. L. 108-11. b New program structures proposed for FY2004. See "Environmental Management" section,below. c Budget Request and House bill transfers programs funded at $113.4 million from Energy Supply-- Nuclear Energy to Other Defense Activities. Senate Appropriations Committee bill did nottransfer these programs. In the final bill, the programs were transferred to Other Defense Activities. Renewable Energy. The Administration's FY2004 budget request for DOE found that hydrogen energy is the"most promising long-term revolution in energy use that can help the nation liberateitself from dependence on imported oil." Thus, the request for DOE's RenewableEnergy Program said that its aim was to "accelerate progress" and make hydrogentechnologies "cleaner, safer, and lower in cost." Also, it stressed that theAdministration's proposed National Climate Change Technology Initiative wouldcreate "competitive solicitations" in applied research that aim to reduce greenhousegas emissions and would "complement" existing R&D programs. The request for the Renewable Energy Program under DOE's Office of Energy Efficiency and Renewable Energy (EERE) sought $444.2 million, including $371.3million for Renewable Energy Technologies and $72.9 million for theElectric/Storage sub-program. This was $24.7 million more than the FY2003appropriation of $419.5 million, which included $335.0 million for RenewableEnergy Technologies and $84.4 million for the Electric/Storage sub-program. Therequest included $48.3 million more for Hydrogen (as part of the President'sHydrogen Fuel Initiative) and $15.0 million more for a National Climate ChangeTechnology Initiative. It would have terminated the Concentrating Solar PowerProgram and cut the Biomass and Biorefinery Program (which the FY2003appropriations bill, P.L. 108-7 , formed by combining the former biofuels andbiopower subprograms) by $19.7 million. Following from a major EEREreorganization, the request also presented a new budget structure. The House approved $407.5 million, including $330.1 million for Renewable Energy Technologies and $77.4 million for a new Office of Electricity Transmissionand Distribution (OETD) that replaces the former Electric/Storage sub-program. The Senate approved $458.9 million, including $358.5 million for Renewable Energy Technologies and $100.4 million for OETD. Three floor amendmentsaffecting renewable energy were approved. They did not propose funding changes,but had intended to qualify some funding uses. S.Amdt. 1697 specifiedthat $750,000 for a wind farm transmission study may be nonreimbursable. S.Amdt. 1709 directed that up to $400,000 may be made available forthe Clean Energy Technology Exports (CETE) Initiative. S.Amdt. 1717 provided that some of the funds made available to OETD may be used to providegrants to states and regional organizations for transmission system planning. The final bill appropriated $426.8 million, including $344.4 million for Renewable Energy Technologies and $82.4 million for OETD. The renewables totalincludes $75.0 million for biomass/biofuels and $85.0 million for solar energy. Theconference report for the final bill says the "agreement does not include languagespecifying funding allocations as contained in the House and Senate reports." However, the report says the agreement does "adopt the Senate proposal[ S.Amdt 1709 ] for the Clean Energy Technology Exports (CETE)Initiative," which requires DOE and other federal agency partners to provide a statusreport by January 15, 2004, on the implementation of the strategic plan and specificactions to engage non-governmental, private sector, and other international partners. Also, the overall conference agreement was $17.4 million, or 4%, less than the request. This includes $26.9 million, or 7%, less for renewables, and $9.5 million,or 13%, more for OETD. Compared to the FY2003 appropriation, the conferenceagreement has $7.3 million, or 2%, more. This includes $9.4 million, or 3%, morefor renewables and $2.1 million, or 2%, less for OETD. The renewables amountincludes an increase of $38.3 million for Hydrogen and reductions of $14.4 millionfor Biomass/Biofuels, $9.4 million for Solar Energy, $3.8 million for Geothermal,and $3.3 million for Program Direction. In addition to the funding in the regular FY2004 Appropriations Act ( P.L. 108-137 ), nearly $20 million for several additional funding earmarks for projectsunder DOE's Renewable Energy Program is included in the omnibus ConsolidatedAppropriations Act ( H.R. 2673 , P.L. 108-199 ). Section 132 provides$5.0 million, including $750,000 for the Energy Center of Wisconsin RenewableFuels Project; $500,000 for the Wind Energy Transmission Study; $250,000 for theWhite Pine County, Nevada, Public School System biomass conversion heatingproject; $250,000 for the Lead Animal Shelter Animal Campus renewable energydemonstration project; $3.0 million to establish a Hawaii Hydrogen Center forDevelopment and Deployment of Distributed Energy Systems; and $250,000 for theEastern Nevada Landscape Coalition for biomass restoration and science-basedrestoration. Further, Section 167 provides $14.9 million, including $12.4 million tothe Society for Energy and Environmental Research for facilities that produce fuelsfrom agricultural and animal wastes; and $2.5 million to the Enterprise Center for theChattanooga Fuel Cell Demonstration Project. Nuclear Energy. For nuclear energy research and development -- including advanced reactors, fuel cycletechnology, and nuclear hydrogen production -- the Administration requested $277.1million for FY2004, a $17.1 million increase from the FY2003 appropriation. Anadditional $113.4 million was requested for defense-related activities at the IdahoNational Engineering and Environmental Laboratory (INEEL), which is beingtransferred to the nuclear energy program from DOE's environmental managementprogram, for a total of $390.6 million. The House cut the nuclear energy request to $268.0 million, plus $112.3 million for INEEL provided under "other defense activities." The Senate boosted the requestto $437.4 million, without shifting any funds to "other defense activities." Theenacted measure provides $300.8 million for nuclear energy programs, plus $112.3million for INEEL under "other defense activities." "Nuclear energy, which is already a vital component of our balanced energy portfolio, presents some of our most promising solutions to the world's long-termenergy challenges," according to DOE's FY2004 budget justification. However,opponents have criticized DOE's nuclear research program as providing wastefulsubsidies to an industry that they believe should be phased out as unacceptablyhazardous and economically uncompetitive. Within the nuclear energy budget, the Administration requested $48 million for the nuclear energy technologies program, which focuses on development of newreactors. That request was $3.0 million above the FY2003 appropriation. Therequest included $35.0 million for an initiative to encourage construction of newcommercial reactors by 2010 ("Nuclear Power 2010") and $9.7 million for advanced("Generation IV") reactor designs that could be ready for deployment after 2010. The House voted to cut the request to $42.7 million, while the Senate provided anincrease to $55.7 million. The Senate shifted funds for gas reactor technologies fromNuclear Power 2010 to the Generation IV program, with the funding directed towarddevelopment of a hydrogen-producing reactor at INEEL. The conferees approved$44.0 million for nuclear energy technologies, with $20 million allocated to NuclearPower 2010 and $24 million to the Generation IV initiative. From the Generation IVfunding, $15 million is to be used for development of an INEEL hydrogen productionreactor. According to the DOE budget justification, the Nuclear Power 2010 program "will achieve near-term deployment of new power plants in the United States throughcost-shared demonstration of the new, untested regulatory processes and cost-shareddevelopment of advanced reactor technologies." The program seeks to deploy botha water-cooled reactor (similar to most existing commercial plants) and a gas-cooledreactor. The current phase of the initiative includes site approval, reactor designcertification, license applications, detailed design work, and development ofimproved construction techniques. DOE is soliciting proposals for jointDOE/industry teams in which DOE will pay up to half the cost of these activities. DOE's Generation IV program is focusing on six advanced designs that could be deployed after 2010: two gas-cooled, one water-cooled, two liquid-metal-cooled,and one molten-salt concept. Some of these reactors would use plutonium recoveredthrough reprocessing of spent nuclear fuel. The Administration's May 2001 NationalEnergy Policy report contends that plutonium recovery could reduce the long-termenvironmental impact of nuclear waste disposal and increase domestic energysupplies. However, opponents contend that the separation of plutonium from spentfuel poses unacceptable environmental risks and, because of plutonium's potentialuse in nuclear bombs, undermines U.S. policy on nuclear weapons proliferation. The development of plutonium-fueled reactors in the Generation IV program is closely related to the nuclear energy program's Advanced Fuel Cycle Initiative(AFCI), for which $63.0 million was requested for FY2004 -- about $5 millionabove the FY2003 appropriation. According to the budget justification, AFCI will"develop advanced proliferation-resistant fuel treatment and fabrication technologiesthat could be deployed by 2015," as well as technologies that could reduce thelong-term hazard of spent nuclear fuel. Such technologies would involve separationof plutonium, uranium, and other long-lived radioactive materials from spent fuel forre-use in a nuclear reactor or for transmutation in a particle accelerator. AFCIincludes a previously funded research program on accelerator transmutation calledAdvanced Accelerator Applications. The program also includes longstanding DOEwork on electrometallurgical treatment of spent fuel from the Experimental BreederReactor II (EBR-II) at INEEL. The House approved $58.5 million for the program,while the Senate provided $78.0 million, and the conferees approved $68.0 million. In support of President Bush's program to develop hydrogen-fueled vehicles, DOE requested $4.0 million in FY2004 for a new "Nuclear Hydrogen Initiative." According to DOE's budget justification, the program would investigate the use ofhigh-temperature nuclear reactors to make hydrogen from water in a thermo-chemicalprocess. According to DOE, "preliminary estimates indicate that hydrogen producedusing nuclear-driven thermo-chemical processes would be only slightly moreexpensive than gasoline" and result in far less air pollution. Activities planned inFY2004 include development of a "roadmap" for developing nuclear hydrogentechnologies and laboratory testing of thermo-chemical processes and relatedresearch. Even if the technology is successful, however, DOE officials havepredicted that significant quantities of nuclear-produced hydrogen would not becomeavailable until 2020-2030. (7) The House voted to cutthe request to $2.5 million, whilethe Senate approved $8.0 million, including support for the INEEL hydrogenproduction reactor. The conference committee voted to provide $6.5 million for theNuclear Hydrogen Initiative in addition to the $15 million provided under nucleartechnologies for the INEEL hydrogen reactor. The Nuclear Energy Research Initiative (NERI) provides grants for research on innovative nuclear energy technologies. DOE requested $12.0 million for NERI inFY2004, about half of the FY2003 appropriation. According to the budgetjustification, no new grants will be awarded in FY2003 and FY2004, with newprogram funding to be used only for completing previously initiated projects. TheHouse voted to cut NERI to $10.0 million, while the Senate approved the fullrequest, and the conferees provided $11.0 million. DOE proposed no new funding in FY2004 for the Nuclear Energy Plant Optimization program (NEPO), which received $5.0 million in FY2003. Theprogram supports cost-shared research by the nuclear power industry on ways toimprove the productivity of existing nuclear plants. The House rejected the proposedelimination of NEPO, voting to provide $4.0 million for the program. The Senatesupported the Administration position, and the conferees provided $3.0 million. Science. The DOE Office of Science conducts basic research in six program areas: basic energy sciences,high-energy physics, biological and environmental research, nuclear physics, fusionenergy sciences, and advanced scientific computing research. Through theseprograms, DOE is the third-largest federal supporter of basic research and the largestfederal supporter of research in the physical sciences. For FY2004, DOE requested $3.311 billion for Science. After adjusting for rescissions and the transfer of two programs from the Office of Science to the newDepartment of Homeland Security, the comparable FY2003 appropriation was$3.261 billion. On this basis, the FY2004 request was a net increase of 1.5%. TheHouse bill provided $3.480 billion. The Senate bill provided $3.360 billion. The finalappropriation was $3.452 billion, a net increase of 5.9%. The requested funding for the largest program, basic energy sciences, was $1.009 billion, a decrease of $15 million below the comparable FY2003appropriation. A growth area in basic energy sciences is nanoscience, for which theFY2004 budget requested $193 million, including $85 million for construction ofthree Nanoscale Science Research Centers. The House bill increased funding forbasic energy sciences by $8 million above the administration request. The Senate billincluded funding at the requested level. The conference report provided an increaseof $8 million above the request and specified that the increase should supportnanoscience. In all cases, these funding levels included the full request of $125million for continuing construction of the Spallation Neutron Source, a large facilityat Oak Ridge National Laboratory for research in physics, materials science, andother fields. The FY2004 request for high-energy physics was $738 million, an increase of $20 million above the comparable FY2003 appropriation. The House bill funded theprogram at $748 million. The Senate bill included the requested amount. The finalbill provided the requested amount. The requested funding for biological and environmental research was $500 million, a decrease of $7 million below the comparable FY2003 appropriation.Activities within this program relating to microbial pathogens, with FY2003 fundingof $20 million, were transferred to the Department of Homeland Security on March1, 2003. The House bill included $562 million for biological and environmentalresearch. The Senate bill included $534 million. The final appropriation was $592million, including increases of $5 million for the Genomes to Life program, $2million for the Environmental Molecular Sciences Laboratory, and $5 million todevelop new molecular imaging probes, along with $88 million in directed fundingfor 90 specific projects. The request for nuclear physics was $389 million, an increase of $8 million above the comparable FY2003 appropriation. The House bill provided $399 million.The Senate bill provided the requested amount. The final appropriation was $392million. The request for fusion energy sciences was $257 million, a $9 million increase above the comparable FY2003 appropriation. In early 2003, the United Statesrejoined negotiations on construction of the International ThermonuclearExperimental Reactor (ITER), a fusion facility whose other participants includeCanada, China, the European Union, Japan, and Russia. About $12 million of therequested FY2004 budget for fusion energy sciences would be devoted to ITER. Thebudget impact of ITER in future years, once construction actually begins, dependson the outcome of the ongoing negotiations; the U.S. share is generally expected tobe in the range of $50 million to $100 million per year. The House bill provided$268 million for fusion programs. The Senate bill provided the amount requested.The final bill provided $264 million, but limited ITER activities to $8 million andcautioned DOE not to submit "any future budget requests for ITER that are fundedat the expense of domestic research." The smallest Science program, advanced scientific computing research, was funded at $173 million in the FY2004 request, an increase of $5 million above thecomparable FY2003 appropriation. The portion of this program that was located atLawrence Livermore National Laboratory, with FY2003 funding of approximately$3 million, was transferred to the Department of Homeland Security on March 1,2003. The House bill provided $213 million for this program. The Senate billprovided $183 million. The final bill provided $203 million. In addition to the funds appropriated in P.L. 108-137 , the FY2004 omnibus Consolidated Appropriations bill ( H.R. 2673 , P.L. 108-199 ) includesseveral appropriations for the Science account. The largest item is $50 million for theIowa Environmental/ Education Project (Div. H, Sec. 130). Four other items total$3.25 million (Div. H, Secs. 131 and 167). Nuclear Weapons Stockpile Stewardship. Congress established the Stockpile StewardshipProgram in the FY1994 National Defense Authorization Act ( P.L. 103-160 ) "toensure the preservation of the core intellectual and technical competencies of theUnited States in nuclear weapons." The program is operated by the National NuclearSecurity Administration (NNSA), a semiautonomous agency established by Congressin the FY2000 National Defense Authorization Act ( P.L. 106-65 , Title XXXII)within DOE. It seeks to maintain the safety and reliability of the U.S. nuclearstockpile. Stockpile stewardship consists of all activities in NNSA's Weapons Activities account. Appropriations were $4,908.7 million for FY2001 and $5,560.2 million forFY2002; Table 7 provides FY2003 and FY2004 data. The three main elements ofstockpile stewardship, described next, are Directed Stockpile Work, Campaigns, andReadiness in Technical Base and Facilities. NNSA manages two major programsoutside of Weapons Activities: Defense Nuclear Nonproliferation, discussed in asubsequent section of this report, and Naval Reactors. Table 7 presents the mainelements of the Weapons Activities program. Table 7. Funding for Weapons Activities ($ millions) a Includes Facilities and Infrastructure Recapitalization Program, Secure Transportation Asset, Safeguards and Security, use of prior year balances, and otheradjustments. The FY2004 conference reduction in the "Other" category from therequest is accounted for by a reduction in Facilities and InfrastructureRecapitalization Program ($261.4 million requested, $236.4 million provided) andby use of prior year balances (none in the request, -$94.8 million for SecureTransportation Asset and for Weapons Activities generally in the conference bill.) Details may not add to totals due to rounding. On July 18, 2003, the House passed H.R. 2754 , the FY2004 Energy and Water Development Appropriations Bill, 377-26, without amending theWeapons Activities section. Thus, the amounts listed below that were recommendedby the House Appropriations Committee were accepted by the House. Similarly, theSenate passed its version of H.R. 2754 , 92-0, on September 16; itadopted no amendments to the Senate Appropriations Committee's bill that changedWeapons Activities funding levels. The conference report, H.Rept. 108-357 , wasordered to be printed on November 7. On November 18, the House agreed to theconference report, 387-36, and the Senate agreed to it by unanimous consent. ThePresident signed the measure into law ( P.L. 108-137 ) on December 1. Most stewardship activities take place at the nuclear weapons complex, which consists of three laboratories (Los Alamos National Laboratory, NM; LawrenceLivermore National Laboratory, CA; and Sandia National Laboratories, NM andCA), four production sites (Kansas City Plant, MO; Pantex Plant, TX; SavannahRiver Site, SC; and Y-12 Plant, TN), and the Nevada Test Site. NNSA manages andsets policy for the complex; contractors to NNSA operate the eight sites. Directed Stockpile Work (DSW). This program involves work directly on nuclear weapons in the stockpile, such asmonitoring their condition, maintaining them through repairs, refurbishment, lifeextension, and modifications; R&D in support of specific warheads; anddismantlement. The FY2004 DSW request would support life extension programsfor four nuclear warheads: B61 (gravity bomb), W76 (for Trident I and IIsubmarine-launched ballistic missiles), W80 (for cruise missiles), and W87 (forMinuteman III and MX/Peacekeeper intercontinental ballistic missiles). Robust Nuclear Earth Penetrator (RNEP). Within DSW, NNSA plans to conduct a study for the RNEP, for which $15.0 million wasappropriated for FY2003; another $15.0 million was requested for FY2004.Warheads of this type would burrow into the ground before detonating in order todestroy underground targets with less explosive yield than a surface-burst weaponwould require. This warhead is controversial. Supporters argue that it is needed toattack hard and deeply buried targets (such as leadership bunkers or chemicalweapons production facilities) in countries of concern, thereby deterring or defeatingsuch nations; critics reply that RNEP would lower the threshold for use of nuclearweapons and prompt other nations to develop nuclear weapons to deter U.S. attack. (See CRS Report RL32130 , Nuclear Weapon Initiatives: Low-Yield R&D, AdvancedConcepts, Earth Penetrators, Test Readiness ; and CRS Report RL31805 , Authorization and Appropriations for FY2004: Defense . ) The FY2003 NationalDefense Authorization Act, P.L. 107-314 , fully funded the $15.0 million request butbarred obligation of FY2003 funds for the NNSA study until 30 days after theDepartment of Defense submits a study on RNEP, including military requirements,employment policy, targets, and conventional weapon alternatives. (The study wassent to Congress on March 19, 2003.) The Consolidated Appropriations Resolutionfor FY2003, P.L. 108-7 , provided the amount requested. RNEP is part of theAdvanced Concepts Initiative (ACI), which was established to explore futureweapons concepts and technologies. For FY2004, $6.0 million was requested (inaddition to RNEP) for additional and exploratory studies under ACI. In its FY2004 report, the House Appropriations Committee stated that the schedule for the first production unit of the refurbished W80 warhead had slipped toFY2008 or FY2009, yet the baseline of FY2006 drove the FY2004 budget request. Further, "the Committee has yet to receive an acceptable military justification forsupporting such an aggressive W80 LEP [life extension project] program.... As aresult, the committee has reduced the weapons activity budget for the W80 LEP."The committee expected NNSA to maintain the level of effort on this program thatit had in FY2003, and reduced DSW by $13.0 million to slow W80 LEP activity. The committee recommended reducing RNEP funding from $15.0 million requested to $5.0 million, and eliminating the $6.0 million requested for ACI. "TheCommittee is concerned the NNSA is being tasked to start new activities withsignificant outyear budget impacts before the Administration has articulated thespecific requirements to support the President's announced stockpile modifications." Further, the committee felt that the Administration was acting prematurely inrequesting funds for a range of new nuclear programs and preparing for expandedmissions for nuclear weapons before NNSA has demonstrated that it can maintain theexisting nuclear stockpile. Accordingly, "this Committee will not support redirectingthe management resources and attention to a series of new initiatives." The Senate Appropriations Committee, in its FY2004 report, recommended increasing DSW by $3.0 million - increasing one element (Stockpile Maintenance)by $10.0 million and reducing another (Production Support) by $7.0 million. Thecommittee recommended providing the full request, $21.0 million, for ACI. In floordebate, Senator Feinstein offered an amendment ( S.Amdt. 1655 ) onSeptember 15 to eliminate all funds for RNEP and the Advanced Concepts Initiative,and for related purposes discussed below. The amendment was tabled, 53-41, onSeptember 16. Also on the latter date, the Senate adopted on voice vote anamendment by Senator Reed ( S.Amdt. 1659 ) that barred use of fundsprovided by H.R. 2754 for development engineering (a stage in theweapons development process beyond what the Administration plans for FY2004)of advanced nuclear weapon concepts including RNEP. It also agreed to severalamendments en bloc, including one by Senator Reid ( S.Amdt. 1710 ) thatbarred spending funds provided by the bill on additional and exploratory studies (acategory that excludes RNEP) under the Advanced Concepts Initiative until 30 daysafter NNSA gives Congress a detailed report on activities planned in that categoryfor FY2004. The conference bill provided $7.5 million for RNEP. It provided $6.0 million for Advanced Concepts (excluding RNEP), but made $4.0 million available forobligation only after the Secretaries of Energy and Defense deliver to Congress arevised Nuclear Weapons Stockpile plan detailing a plan and schedule for achievingthe President's proposed adjustments to the strategic weapons stockpile (includinga reduction in operationally deployed weapons to 1,700-2,200 by 2012), and 90 dayselapse for review by the Armed Services and Appropriations Committees. Campaigns. These are "multi-year, multi-functional efforts" that "provide specialized scientific knowledge and technicalsupport to the directed stockpile work on the nuclear weapons stockpile." ForFY2004, there are 16 campaigns. Examples are: Enhanced Surveillance ($74.9million appropriated for FY2003, $91.8 million appropriated for FY2004), whichseeks to assess lifetimes of weapons components and predict defects resulting fromaging; Advanced Design and Production Technologies ($72.0 million appropriatedfor FY2003, $77.9 million appropriated for FY2004), which seeks to develop newtechnologies and processes to improve manufacturing in the nuclear weaponscomplex; Advanced Simulation and Computing ($683.9 million appropriated forFY2003, $725.6 million appropriated for FY2004), which aims to advance the stateof the art of nuclear weapon simulation, apply these advances to current stockpiletasks, and deliver by FY2008 "a high fidelity, full-system physics characterizationof a nuclear weapon"; and Tritium Readiness ($124.8 million appropriated forFY2003, $134.9 million appropriated for FY2004), which is making preparations touse a commercial light water reactor to produce tritium, an isotope of hydrogen thatis a key ingredient in nuclear weapons. The House Appropriations Committee recommended reducing funding for Campaigns by $127.0 million. It expressed concern about delays in some projectsand unwarranted acceleration of others, and made some reductions consistent withits desire to slow the W80 LEP. Decreases were spread across many projects withinCampaigns. The Senate Appropriations Committee recommended a net reductionof $24.8 million for Campaigns. The largest increase, $43.2 million, was toaccelerate construction of the Microsystem and Engineering Science Applicationsfacility at Sandia National Laboratories; the largest reductions were to InertialConfinement Fusion, $34.0 million, and Advanced Simulation and Computing, $25.0million. Conferees reduced funding for Campaigns by $12.0 million. Details ofappropriations actions on two campaigns are discussed next. Pits. Pits are the fissile cores of nuclear warheads that trigger the thermonuclear secondary stage. DOE has had no facility to produce pitsfor use in stockpiled weapons since it suspended pit production at the Rocky FlatsPlant (CO) in 1989. As a result, the United States has been unable to make all-newnuclear warheads of existing or advanced new designs. The Pit Manufacturing andCertification Campaign supports two pit projects: installation of a low-capacity pitproduction facility, and supporting R&D, at Los Alamos National Laboratory; andplanning for a higher-capacity Modern Pit Facility. (See CRS Report RL31993 , Nuclear Warhead 'Pit' Production: Background and Issues for Congress. ) This campaign has attracted much congressional interest. For FY2002, the House Appropriations Committee recommended the requested amount, $128.5million, but asserted that DOE cannot show "that it has a viable plan to manufactureand certify pits on the schedule dictated by national security needs," criticized theproject as "years behind schedule and hundreds of millions of dollars over theoriginal cost estimate," and stated that it would judge NNSA's success on how wellthe pit project succeeds ( H.Rept. 107-112 ). The Senate Appropriations Committeefor FY2002 recommended increasing funding substantially to "fully fund" allrelevant activities, viewing the then-current schedule, which would not certify a pitfor use in the stockpile until FY2009, as "unacceptable" ( S.Rept. 107-39 ). In itsFY2003 request, NNSA stated its plans to "certify a W88 pit built at [Los AlamosNational Laboratory] without underground nuclear testing by FY 2009, with a goalof achieving an earlier date of FY 2007." Further, NNSA planned to defer detaileddesign of a Modern Pit Facility until FY2004, "with FY 2003 funding used tocontinue manufacturing concepts." The FY2002 appropriation for this campaign was$219 million. The FY2003 request was $194.5 million. The request included $112.5 million for manufacturing the pit for the W88 warhead, one of the two types of warheadsused on the Trident II missile, $78.0 million for W88 pit certification, $2.0 millionfor pit activities not specifically supporting the W88, and $2.0 million for planningfor the Modern Pit Facility. In its FY2003 report, the Senate Appropriations Committee recommended $246.0 million for pit manufacturing and certification, an increase of $51.5 millionover the request. The sum includes the requested $2.0 million for pit activities and$2.0 million for the Modern Pit Facility. The committee, however, "remains greatlyconcerned about the NNSA's refusal to request funds consistent with its own projectplan submitted less than 1 year ago." Because this was not done, which would haveresulted in a lower request for this important project, "the Committee has been forcedto reduce other items in the budget." For pit manufacturing and certification, theHouse Appropriations Committee provided $194.5 million, the requested amount,while the final appropriation provided $220.6 million. According to the jointexplanatory statement of the Committee of Conference, "The increase will ensurethat the NNSA maintains its commitment to produce a certifiable W88 pit by 2003and a certified W88 pit by 2007." For FY2004, the Administration requested a substantial increase to items in this campaign: $126.8 million for manufacturing the pit for the W88 warhead, $108.6million for W88 pit certification, $19.7 million for Pit Manufacturing Capability (pitactivities not specifically supporting the W88), and $22.8 million for planning for theModern Pit Facility. In addition, it requested $42.4 million for "subcriticalexperiments [at the Nevada Test Site] which support the certification of the W88pit." For FY2004, this funding element was transferred into the Pit Manufacturingand Certification Campaign from Directed Stockpile Work; its FY2003 request was$41.5 million. Thus the total request for FY2004 is $320.2 million, an increase of35.7% over the FY2003 request of $236.0 million (with both figures includingsubcritical experiments supporting W88 pit certification). The House Appropriations Committee saw the pit campaign as proceeding too quickly. It recommended reducing the request for this campaign by $47.0 million,still an increase of $12.2 million over the FY2003 budget. The committee praisedNNSA and Los Alamos National Laboratory for "turning around" this campaign, buturged NNSA to reduce costs. It stated that the current plan would "aggressivelypursue a multi-billion dollar Modern Pit Facility before the first production pit haseven been successfully certified for use in the stockpile." In reducing MPF to $10.8million from the requested $22.8 million, it recommended that NNSA should lookhard at better ways to use the pit production facility at Los Alamos for near-termrequirements and "take a less aggressive planning approach" to MPF. It felt that itwas premature to spend $19.7 million to develop technologies for manufacturing pitsother than for the W88 when MPF was at least 15 years from operating, and sorecommended reducing this part of the request, Pit Manufacturing Capability, to $4.7million. The Senate Appropriations Committee recommended the amount requestedfor this campaign. The Feinstein amendment ( S.Amdt. 1655 ) discussedunder DSW, which was tabled, would have barred use of funds provided by H.R. 2754 for MPF site selection. Conferees provided the full amount requested for manufacturing and certifying the W88 pit, and provided $10.0 million for Pit Manufacturing Capability. Theyreduced MPF funding to $10.8 million: "The conferees agree with the House Reportthat until the Congress reviews the revised future Stockpile plan it is premature topursue further decisions regarding the Modern Pit Facility." National Ignition Facility (NIF). This facility, under construction at Lawrence Livermore National Laboratory, is to be the world's largestlaser. It is a key project for the stockpile stewardship program. NIF is intended tohelp solve weapons problems, attract top physicists to the nuclear weapons program,and advance the quest for fusion power. A top priority of the facility is to achieve"ignition," in which nuclear fusion of deuterium and tritium (isotopes of hydrogen)would release more energy than was provided by the laser to achieve fusion. Over the years, various reports have been highly critical of NIF on such grounds as technical problems, delays, and cost overruns. (8) In 1999, the NIF Project identifiedseveral problems with the original cost estimates and notified DOE that NIF couldnot be completed for the original estimated cost. The project was rebaselined andrevalidated in 2000, adding approximately $1 billion to the cost and several years tothe schedule. Since mid-2001, criticism of NIF has fallen sharply; for example, theNatural Resources Defense Council's NIF resources page was last updated February7, 2000, and the most recent General Accounting Office report on NIF was datedJune 1, 2001. (9) The NIF Project Office stated in 2002that the project was on theschedule and budget set forth in the new baseline, and that no technical obstaclesremained. The FY2004 budget document shows the total project cost of NIF toremain at $2,248.1 million, plus $1,200.0 million in other related costs, with physicalconstruction to be completed in the fourth quarter of 2008; these dates and costs arethe same as the FY2001 amended budget request. The document further states thatthe NIF project "continues to meet all major milestones on or ahead of schedule,"and that the first stockpile stewardship experiments on NIF are planned for 2004. In its FY2003 report, the Senate Appropriations Committee expressed concern that the project's scope seemed to be shifting "from a focus on achieving the specificgoal of ignition to a generalized physics research program." In response, "[t]heCommittee rejects this re-prioritization and down-scoping. Ignition is now and willremain the primary objective" for NIF. In part because of concern that theAdministration did not request certain funds for equipment and technology essentialfor ignition, the committee added $35.0 million to the FY2003 request for inertialconfinement fusion, for a total of $487.3 million ( S.Rept. 107-220 ). The HouseAppropriations Committee provided $498.8 million, and also expressed concern thatNNSA was changing the focus "from the specific goal of ignition to a generalizedphysics research program." Accordingly, it "direct[ed] NNSA to re-establish ignitionas the primary objective and justification for the NIF." ( H.Rept. 107-681 .) The finalfigure for FY2003 was $489.7 million for inertial confinement fusion, including$214.0 million, the same as the request, for continued construction of NIF. Theconferees' statement did not provide further guidance on the focus of the inertialconfinement fusion program. For FY2004, the Administration requested $466.8 million for the Inertial Confinement Fusion Ignition and High Yield Campaign, including $150.0 million forNIF construction. The title of the campaign reflected congressional concerns. Further, Everet Beckner, Deputy NNSA Administrator for Defense Programs,testified to the House Armed Services Committee on March 6, 2003, that NIF's"mission is to obtain fusion ignition." (10) The House Appropriations Committee recommended $511.8 million for this campaign for FY2004, an increase of $45.0 million; included in the total was the$150.0 million for construction, as requested. In marked contrast to concernsexpressed in past years, the FY2004 House report stated, "The Committee recognizesthe recent successes on the NIF project and expects NNSA to focus on the core NIFproject to maintain cost and schedule performance." The Senate AppropriationsCommittee recommended $432.8 million, a reduction of $34.0 million from therequest; the total included $150.0 million for construction. The committee expressedconcern over "dramatic growth in other NIF-related activities funded elsewhere inthe inertial confinement fusion campaign and specifically rejects that portion of thebudget request." Conferees provided $517.3 million for this campaign, an increaseof $50.5 million over the request. They expressed concern that the request fundedvarious NIF-related projects within the overall NIF program, and noted that whilethey support these projects, future requests should fund these activities as separateline items. Readiness in Technical Base and Facilities (RTBF). This program provides infrastructure and operationsat the nuclear weapons complex sites. The request includes seven subprograms. Byfar the largest is Operations of Facilities ($1,001.0 million appropriated for FY2003,$1,027.8 million appropriated for FY2004). Others include Program Readiness,which supports activities occurring at multiple sites or in multiple programs ($213.6million appropriated for FY2003, $131.1 million appropriated for FY2004), andMaterial Recycle and Recovery, which recovers plutonium, enriched uranium, andtritium from weapons production and disassembly ($100.8 million appropriated forFY2003, $76.2 million appropriated for FY2004). Construction is a separatecategory within RTBF; the appropriation was $310.9 million for FY2003 and $260.4million for FY2004. For FY2004, the House Appropriations Committee recommended a reduction of $102.4 million from the request. Details include: $997.8 million for Operationsof Facilities, with an increase of $20.0 million for Pantex Plant (TX) and $5.0 millionfor Y-12 Plant (TN); $106.2 million for Program Readiness, reflecting theelimination of funds for Enhanced Test Readiness (discussed below); $76.2 million,as requested, for Material Recycle and Recovery; and $178.9 million forconstruction, with almost all the reduction resulting from eliminating funds requestedfor three projects ($20.0 million, exterior communications infrastructuremodernization, Sandia National Laboratories; $50.0 million, national securitysciences building, and $20.5 million, chemistry and metallurgy facility replacementproject, both at Los Alamos National Laboratory). The Senate Appropriations Committee recommended adding $118.1 million to RTBF. Of the increase, $117.0 million went to Operations of Facilities, including$25.0 million for the National Center for Combating Terrorism, $10.0 million forPantex Plant, $10.0 million for Y-12 Plant, $20.0 million for Kansas City Plant(MO), $15.0 million for Lawrence Livermore National Laboratory, $20.0 million forLos Alamos National Laboratory, and $8.0 million for Sandia National Laboratories. Conferees provided $1,664.2 million for RTBF, an increase of $50.8 million over the request. The main items of difference between the conference bill and therequest were Operations of Facilities (+$30.0 million), Special Projects (+$8.7million), and Chemistry and Metallurgy Facility Replacement Project, Los AlamosNational Laboratory (-$10.5 million). The increase in funding for Operations ofFacilities was distributed as follows: $5.0 million apiece to Pantex Plant, Y-12 Plant,Kansas City Plant, and Nevada Test Site, and $10.0 million to Los Alamos. The RTBF element Nuclear Weapons Incident Response provides for a technical response to a nuclear or radiological emergency within DOE, in the UnitedStates, or abroad; $88.4 million was appropriated for FY2003 and $89.7 million wasrequested and appropriated for FY2004. In addition, the RTBF element Operationsof Facilities included $32.5 million appropriated for FY2003 for the National Centerfor Combating Terrorism. The FY2004 request contained no funds for the center"due to the uncertainty about the ultimate sponsor, scope, and size of the mission forthis facility." The Senate Appropriations Committee added $25.0 million for thecenter as part of its RTBF increase, and conferees provided that amount. Nuclear Testing and Enhanced Test Readiness. A key issue is whether the United States can and should continue to maintain its weapons throughthe Stockpile Stewardship Program without nuclear testing. While that program hassought to do so, statements in early 2002 implied a reduced commitment to thatapproach. Secretary of Defense Donald Rumsfeld reportedly said that nations withnuclear weapons have "a responsibility to see that they are safe and reliable. To theextent that can be done without testing, clearly that is the preference. And that is whythe President has concluded that, thus far, that is the case." (11) J. D. Crouch, AssistantSecretary of Defense for International Security Policy, stated that there is "no changein the Administration's policy at this point on nuclear testing. We continue to opposeCTBT [Comprehensive Test Ban Treaty] ratification. We also continue to adhere toa testing moratorium." (12) The FY2004 budget request contained $303.5 million for Weapons Activities at the Nevada Site Office, vs. $292.5 million for FY2003. (13) Much of this was foroperation of the site, safeguards and security, and operation and maintenance ofexperimental facilities at NTS. Of particular interest regarding testing is Test Readiness, a component of the Program Readiness element of RTBF. Since FY1996, U.S. policy has been thatNNSA (or DOE prior to NNSA's establishment) should be ready to conduct a nucleartest within 24 to 36 months from the time the order is given. Several studiesidentified work needed to reduce this time to 18 months. These studies were fundedby "Enhanced Test Readiness." The FY2004 budget document stated, "The DoD andthe NNSA agreed to transition to an 18-month test readiness posture while continuingto review the optimum posture. The actions necessary for moving toward an18-month posture are expected to begin upon completion of the final FY 2003appropriation." The Senate Armed Services Committee's bill for FY2004 nationaldefense authorizations, S. 1050 , section 3132, required an 18-monthposture unless the Secretary of Energy determined that a different posture waspreferable. NNSA, however, prepared a study in April 2003 that concluded that an18-month posture was preferable. (14) Meanwhile,through FY2003, funds in the"Nevada Site Readiness" account maintained the 24- to 36-month posture withongoing work at the Nevada Test Site. Because no policy decision had been reachedon reducing the time needed to test, the Enhanced Test Readiness and Nevada SiteReadiness accounts had to be kept separated. With the move to an 18-month testreadiness posture, the enhanced posture was expected to become the current posture,which would have made this separation unnecessary. Accordingly, the two accountswere expected to be merged into "Test Readiness" beginning in FY2004, dependingon congressional language, though the FY2004 NNSA budget request level did notreflect that merger. The FY2003 appropriation for enhanced test readiness was $15.0 million. Conferees on the Consolidated Appropriations Resolution for FY2003 directed DOEto notify the Appropriations Committees before obligating any of these funds inFY2003. ( H.Rept. 108-10 .) The FY2004 request for Test Readiness was $24.9million, and for Nevada Site Readiness was $39.6 million. In its FY2004 report, the House Appropriations Committee sharply criticized the plan for enhanced test readiness and recommended eliminating FY2004 funds forit. The committee expressed its concern over an "open-ended commitment" toenhanced test readiness "without any budget analysis or program plan to evaluate theefficiency or effectiveness of this funding increase," argued that the proposal "doesnot address the fundamental difficulties in maintaining test readiness during a testingmoratorium," and noted that it took 18-24 months to conduct a fully-instrumentedtest during the era of routine testing so that a proposal to maintain indefinitely an18-month posture during the testing moratorium "reflects a disturbing 'cost is noobject' perspective." Finally, even though NNSA and DOD decided to move to an18-month test readiness posture, "The Committee does not recognize the NNSAdeclaring a revised test readiness posture as a new requirement nor is it convincedthat the decision can be successfully implemented based on the planning informationprovided to date." The Senate Appropriations Committee made no reference tonuclear test readiness, and provided the amount requested for Program Readiness, thecomponent of RTBF containing test readiness funds. The Feinstein amendment( S.Amdt. 1655 ) discussed under DSW, which was tabled, would havebarred use of funds provided by H.R. 2754 for modifying the testreadiness posture to a posture of less than 24 months. Conferees provided $24.9million for test readiness, as requested, on grounds that test readiness had atrophied. "However, the conferees expect the NNSA to focus on restoring a rigorous testreadiness program that is capable of meeting the current 24-month requirementbefore requesting significant additional funds to pursue a more aggressive goal of an18-month readiness posture." Budget Process Issues. NNSA issued its first Future Years Nuclear Security Program (FYNSP) in March 2002. The HouseAppropriations Committee criticized that effort. The committee, in its FY2003report on Energy and Water Development Appropriations ( H.Rept. 107-681 ), stated, the FYNSP has several fundamental weaknesses that limit its usefulness for Congressional oversight. ... The NNSA budget and the FYNSP arebuilt around activities rather than programs and products. ... The FYNSPincludes a laundry list of performance targets -- few of which are the sameas an identifiable program -- and there is no specific funding associatedwith any of the performance targets. Thus, it is impossible to determinehow a specific resource allocation will impact performance. ... It is difficultfor the Congress to determine what NNSA proposes to accomplish withthese funds. ... [Accordingly, the] Committee directs the Department toconduct an independent assessment of the NNSA's PPBS [planning,programming, and budgeting system] process and structure, including itscomparability to that of the Department of Defense. Conferees agreed with the House language and "direct[ed] the NNSA to contract for an independent assessment of the NNSA's planning, programming, and budgetingsystem, including its comparability to that of the Department of Defense." In its FY2003 budget request document, NNSA stated, "We are implementing a new PPBE [program planning, budgeting and evaluation] process that offers thepotential for significant improvements in our resource management and decisionmaking while still meeting all of the DOE's and Congress' requirements forinformation ... [beginning] with the FY 2004 budget cycle" and noted that DOE "isconsidering a parallel PPBES process." Accordingly, the FY2004 request documentprovided a five-year projection for NNSA's budget (Table 8): Table 8. NNSA 5-Year Budget Projection ($ millions) In its FY2004 report, the House Appropriations Committee commendedNNSA's efforts to implement a PPBE structure and a process to budget by weapontype. More generally, the committee found the process for budgeting and for settingpriorities in nuclear weapons to be flawed, with DOD setting requirements forweapons without having to pay for them, and with DOE treating the WeaponsActivities budget as untouchable because the requirements were set by DOD.Accordingly, "this Committee will not assume that all of the proposed nuclearweapons requests are legitimate requirements." The Senate AppropriationsCommittee directed DOE to retain the Institute for Defense Analyses to assess theprocess and structure of NNSA's planning, programming, and budgeting system.Conferees did not comment on these topics. Nonproliferation and National Security Programs. DOE's nonproliferation and national security programsprovide technical capabilities to support U.S. efforts to prevent, detect, and counterthe spread of nuclear weapons worldwide. These nonproliferation and nationalsecurity programs are included in the National Nuclear Security Administration. Funding for these programs in FY2003 was provided in the Consolidated Appropriations Resolution ( H.J.Res. 2 , P.L. 108-7 ), which appropriatedthe amount requested by the Administration, $1.1136 billion. An additional $148million was appropriated in the Emergency Wartime Supplemental AppropriationsAct, 2003, P. L. 108-11 For FY2004, the Administration requested $1.3402 billion. The House bill contained $1.2802 billion, and the Senate bill included the requestedamount. The final bill appropriated $1.328 billion. Table 9. DOE Defense Nuclear Nonproliferation Programs ($ millions) a Includes $148 million total appropriated in Emergency Wartime SupplementalAppropriations Act, 2003, P. L. 108-11: $20 million in R&D, $22 million inNonproliferation and International Security, and $106 million in MPC&A. In particular, the Nonproliferation and Verification R&D program, which received a total of $283 million for FY2003 (less $79 million for programstransferred to the Department of Homeland Security, for a total of $204 million),would have been funded at $204 million in the Administration FY2004 request. Nonproliferation and International Security programs, formerly called "ArmsControl," would have received $102 million in the request, compared with $93million in FY2003. These programs include international safeguards, exportcontrols, and treaties and agreements. The House bill funded the R&D program atthe requested level, and boosted the Nonproliferation and International Securityprogram to $105.7 million. The Senate bill included $234.9 million for R&D and$121.7 million for Nonproliferation and International Security. The final billappropriated $233.4 million for R&D and $110.7 million for Nonproliferation andInternational Security. International Materials Protection, Control and Accounting (MPC&A), which is concerned with reducing the threat posed by unsecured Russian weapons andweapons-usable material, would have received $226 million under the President'srequest, compared to $233 million (less $4 million transferred to DHS) appropriatedfor FY2003. The House bill increased MPC&A to $255 million, including anadditional $28 million for the "Megaports initiative," which is intended to installradiation detection equipment at the top 20 major overseas seaports to interdictnuclear material before it arrives in the United States. The Emergency WartimeSupplemental Appropriations Act, 2003, P. L. 108-11, included $84 million for thisnew program for FY2003. The Senate bill included the requested amount, $226million, for MPC&A. The final bill appropriated $260 million, including $28 millionfor the Megaports initiative. Two programs in the former Soviet Union, Initiatives for Proliferation Prevention (IPP) and the Nuclear Cities Initiatives (NCI), which comprise the"Russian Transition Initiative," would have received $40 million under thePresident's request, compared to the FY2003 appropriation of $39.3 million. Requested funding for the Fissile Materials Disposition program for FY2004 was$656.5 million, compared with $448 million in FY2003. The increased funding isfor disposal of U.S. surplus weapons plutonium by converting it into fuel forcommercial power reactors, including construction of a facility to convert theplutonium to reactor fuel at Savannah River, SC. The House bill funded theseprograms at the requested level. The Senate bill included $50 million for the RussianTransition Initiative and the requested amount, $656.5 million, for Fissile MaterialsDisposition. The final bill appropriated requested amounts for these programs. (For details on these programs, see CRS Issue Brief IB10091, Nuclear Nonproliferation Issues .) Environmental Management. The amount of time and money needed to clean up environmental contaminationresulting from the production of nuclear weapons during the Cold War has been alongstanding issue. Since the beginning of the U.S. atomic energy program, DOEand its predecessors have been responsible for administering the production ofnuclear weapons and managing radioactive and other hazardous waste. In later years,DOE expanded its efforts to include the environmental restoration of radioactive sitesand those with other hazardous contamination in buildings, soil, and water to ensuretheir safety for future uses. In 1989, the George H. W. Bush Administrationestablished an Environmental Management Program within DOE to consolidate theagency's efforts in cleaning up contamination from defense nuclear waste, as well aswaste from civilian nuclear energy research. DOE is responsible for complying withnumerous federal environmental laws and regulations in administering the program,and is subject to fines and penalties for violations of these requirements. Consequently, DOE has signed numerous legally binding compliance agreementswith the Environmental Protection Agency (EPA) and the states to perform cleanupactivities and dispose of waste according to specific deadlines. DOE reports that there are 114 geographic sites in 31 states and one U.S. territory where the production of nuclear weapons, and civilian nuclear energyresearch and development activities, resulted in radioactive and other hazardouscontamination. Together, these sites occupy approximately 2 million acres, whichis equivalent to the land area of Rhode Island and Delaware combined. DOE reportsthat all response actions were complete at 75 sites as of the end of FY2002 at a costof over $60 billion, and expected that cleanup would be complete at two additionalsites by the end of FY2003. However, the sites that have been cleaned up arerelatively small and are among the least hazardous, and the sites where cleanupremains underway contain some of the most severely contaminated areas. DOE hasestimated that, if program reforms are not initiated, cleanup at the remaining sitesmay take 70 years to complete, and that total cleanup costs may range from $220billion to as high as $300 billion. DOE has been working on a cleanup reform initiative that would accelerate cleanup and lower costs. The Department estimates that its initiative could savebetween $50 billion and $100 billion in total cleanup costs over the long term, andthat the time frame for total site cleanup could be moved from 2070 to 2035. Thesegoals would be accomplished by assessing the risk of exposure to determine whichcleanup remedies are selected. Risk is currently one of many factors that DOE usesto select cleanup remedies. Altering the current process to use risk as the primaryfactor could result in decisions to contain waste on site as a means of preventingexposure, rather than removing it. While containment can often be accomplishedmore quickly and at less cost, the possibility of future exposure remains if the methodof containment fails over time. While there has been widespread concern about the amount of time and money needed to clean up nuclear waste sites, questions have been raised as to how DOEwould use a risk-based approach to accomplish its goals of faster and less costlycleanups without weakening environmental protection. Some have drawn attentionto the possibility that basing the selection of cleanup remedies on risk alone mightresult in more contamination being left on site, rather than it being removed. Because of the substantial amount of time required for radioactive decay to occur,arguments have been raised that contamination left in place may migrate inunexpected ways over the long term, and result in pathways of exposure that couldnot have been predicted when the remedy was originally selected. Others counterthat completely removing radioactive contamination from all sites to permitunrestricted future land use, and eliminate all future pathways of exposure, would notbe economically feasible, and in some cases would be beyond the capabilities ofcurrent cleanup technologies. DOE first proposed a risk-based cleanup reform strategy as part of its FY2003 budget request. In the 107th Congress, numerous questions were presented during theFY2003 appropriations debate as to whether the use of risk-based approaches wouldprovide adequate environmental protection. Prior to final action on FY2003appropriations, DOE signed letters of intent with EPA and the states to acceleratecleanup at most of its sites. Some Members criticized DOE's attempt to implementits cleanup reform strategy prior to the appropriation of funds as premature. WhileCongress did appropriate funding to honor these agreements, it provided the fundsunder the existing account structure rather than under a separate cleanup reformaccount that DOE had proposed. Some Members expressed concern about how thefunds would have been distributed among the sites if DOE had been given anunallocated lump sum under a new account. For FY2004, DOE requested a total of $7.24 billion for its Environmental Management Program, $290 million more than the FY2003 enacted level of $6.95billion. The budget request proposed a new appropriations account structure for theprogram in order to focus funding on DOE's reform initiative to accelerate cleanupschedules and lower costs. The proposed accounts were structured according to thepurposes of "Site Acceleration Completion" and "Environmental Services," and therewere separate "Defense" and "Non-defense" accounts for each category. The SiteAcceleration Completion accounts represented nearly $6.0 billion of the total request,and focused funding on efforts to complete cleanup and close contaminated facilitiesat a faster pace than previously scheduled. The Environmental Services accountsfocused funding on activities that indirectly support the mission of acceleratedcleanup and closure, such as policy development and coordination, and theintegration of mission activities across the complex of sites. The budget request alsoproposed a Uranium Decontamination and Decommissioning Fund Account tosupport the cleanup of uranium and thorium processing sites, for which there hadbeen a similar account entitled Uranium Facilities Maintenance and Remediation. The conference agreement on H.R. 2754 approved the Administration's proposed account structure. However, it provided $130 million lessthan requested for the program overall, reducing the President's budget from $7.24billion to $7.11 billion. However, funding was not reduced for all activities. Thereduction was directed at defense sites, for which the conference agreement provided$6.64 billion, $168 million less than the request of $6.81 billion, whereas the requestfor non-defense sites was increased by $40 million, from $463 million to $503million. Conference report language indicated that less funding was appropriatedthan requested for defense sites, primarily due to concern that DOE had not madesufficient progress in negotiating all of its cleanup agreements to the satisfaction ofEPA and the states, which had been expressed in the House bill. Negotiations torevise these agreements would be necessary to allow the selection of cleanupremedies to be altered according to a risk-based approach. The conference report also reiterated concerns expressed by the House and Senate about inaccurate estimates of cleanup costs and scheduling of certain projects,particularly the Hanford Waste Treatment and Immobilization Plant. DOE hadrecently understated the estimated cost of this project by 33%. The House and Senatehad expressed concerns that this sharp increase may be an indicator that costestimates of cleanup acceleration projects at other sites also could be understated. In response, the conference agreement directed DOE to transfer $2.5 million of itsEnvironmental Management funds to the Office of Management, Budget, andEvaluation for increased oversight of accelerated cleanup projects. The Senate hadrecommended $5 million for this purpose. Another issue noted in the conference agreement is the possible need for amendments to existing law to allow certain cleanup acceleration projects to proceed. To examine this need, DOE is directed to prepare a report to Congress within 60 daysof enactment on potential statutory restrictions that may delay or prohibit cleanupacceleration projects that are currently planned. The conference agreement alsodirects DOE to submit a legislative proposal requesting these changes as part of theAdministration's FY2005 budget submission to Congress. In addition to the conference report language discussed above, the House raised questions about long-term stewardship needs once cleanup is complete at each site,and directed DOE to consider these needs when implementing accelerated cleanupplans "to ensure that long-term stewardship is not used as a substitute for completeand effective site cleanup." As discussed earlier, some have expressed concern thatDOE's cleanup acceleration strategy may result in more waste being left on site thanwould be allowed under original cleanup agreements. If more waste were permittedto remain, rather than being removed, the stewardship costs at such sites would likelyrise as a result of the need for additional measures to ensure that the waste continuesto be safely contained in future years to prevent exposure. In response to this issue,the House report indicated that the Performance Management Plan for each cleanupsite should identify the resources that would be necessary for fulfilling DOE'sresponsibilities to manage the legacy of contained waste that is left behind aftercleanup response actions are complete. Civilian Nuclear Waste. The Bush Administration requested $591 million for the DOE civilian nuclear wastedisposal program for FY2004, a 30% boost over FY2003. The increased budget wasintended primarily to pay for preparing a construction permit application for anational nuclear waste repository at Yucca Mountain, Nevada. The additional fundsare also needed for detailed repository design work, repository performance studies,and transportation planning, according to DOE. The Department contended that itcould not meet its 2010 target date for shipping nuclear waste to Yucca Mountainwithout receiving its entire FY2004 budget request for the program. The House Appropriations Committee, contending that the nuclear waste program had suffered "chronic funding shortfalls," voted to provide an additional$174 million for the program in FY2004, for a total of $765 million, to which theHouse concurred. The Appropriations Committee report stressed that the additionalfunding should ensure that DOE could submit a license application for the repositoryto the Nuclear Regulatory Commission (NRC) by December 31, 2004. TheCommittee also directed DOE to prepare any plans and legislation necessary to allowshipments of spent nuclear fuel to Yucca Mountain to begin in 2007 -- three yearsbefore the repository is scheduled to open. However, House Energy and WaterSubcommittee Chairman Hobson promised in a floor colloquy to remove the reportlanguage about early shipments to Yucca Mountain, and that provision was notincluded in the conference agreement. The Senate voted to cut the Administration's request to $425 million, setting up a difficult confrontation with the House over the controversial program. Aftermonths of deliberation on the issue, the conference committee agreed to provide$580 million for the nuclear waste program -- $11 million below the request but$123 million above the FY2003 level. Between FY2005 and FY2010, nuclear waste funding will have to further increase to an average of $1.3 billion per year to keep the repository on schedule,according to the DOE budget justification. The Administration proposed thatdiscretionary spending caps be adjusted to accommodate higher future funding forthe program, although specific legislation was not submitted. The Nuclear Waste Policy Act of 1982 (NWPA, P.L. 97-425 ) as amended, names Yucca Mountain as the sole candidate site for a national geologic repository. Following the recommendation of Energy Secretary Abraham, President Bush onFebruary 15, 2002, recommended to Congress that DOE submit an application toNRC to construct the Yucca Mountain repository. Nevada Governor Guinn thenexercised his right under NWPA to submit a "notice of disapproval" (or "state veto")to Congress. Under NWPA, the state disapproval would have blocked the YuccaMountain site if a congressional approval resolution had not been signed into lawwithin 90 days of continuous session. The approval resolution was signed July 23,2000 ( H.J.Res. 87 , P.L. 107-200 ), allowing the Yucca Mountain projectto proceed to the licensing phase. Funding for the nuclear waste program comes from two sources. Under the FY2004 budget request, $161.0 million would have been provided from the NuclearWaste Fund, which consists of fees paid by nuclear utilities, and $430.0 million fromthe defense nuclear waste disposal account, which pays for disposing of high-levelwaste from the nuclear weapons program in the planned civilian repository. TheHouse boosted the Nuclear Waste Fund portion of the request to $335 million. TheSenate cut the Waste Fund portion to $140 million and the defense portion to $285million, while the conference committee provided $190 million from the Waste Fundand $390 million in the defense account. The 2010 target for opening a permanent repository is 12 years later than the Nuclear Waste Policy Act deadline of January 31, 1998, for DOE to begin takingwaste from nuclear plant sites. Nuclear utilities and state utility regulators, upsetover DOE's failure to meet the 1998 disposal deadline, have won two federal courtdecisions upholding the department's obligation to meet the deadline and tocompensate utilities for any resulting damages. Utilities have also won several casesin the U.S. Court of Federal Claims, although specific damages have not yet beendetermined. (For details, see CRS Issue Brief IB92059, Civilian Nuclear WasteDisposal. ) The State of Nevada has filed a variety of lawsuits to block the Yucca Mountain project, including a contention that the federal government lacks authority under theConstitution to force Nevada to accept the nation's nuclear waste. Power Marketing Administrations. DOE's four Power Marketing Administrations (PMAs) developed during the 1930sout of the construction of dams and multi-purpose water projects that are operatedby the Bureau of Reclamation and the Army Corps of Engineers. The originalintention behind many of these projects was conservation and management of waterresources, including irrigation, flood control, recreation and other objectives. However, many of these facilities generated electricity for project needs. The PMAswere established to market the excess power; they are the Bonneville PowerAdministration (BPA), Southeastern Power Administration (SEPA), SouthwesternPower Administration (SWPA), and Western Area Power Administration (WAPA). The power is sold at wholesale to electric utilities and federal agencies "at the lowest possible rates ... consistent with sound business practice," and priority onPMA power is extended to "preference customers," which include municipal utilities,co-ops and other "public" bodies. The PMAs do not own the generating facilities,but they generally do own transmission facilities, except for Southeastern. ThePMAs are responsible for covering their expenses and repaying debt and the federalinvestment in the generating facilities. The 104th Congress debated sale of the PMAs and did, in 1995, authorize divestiture of one PMA (the Alaska Power Administration Act, P.L. 104-58 ). Therehas been no press to dispose of the remaining PMAs, and none seems likely given thebroader uncertainties governing electric utility restructuring. Congress enacted a funding level of $203.5 million in the FY2003 Consolidated Appropriations Resolution ( P.L. 108-7 ), including an additional $6.1 million forWAPA above the Administration's FY2003 request. The request for FY2004 was$207.3 million -- $5.1 million for SEPA, $28.6 million for SWPA, $171 million forWAPA, and $2.6 million for operation of hydroelectric facilities at the Falcon &Amistad Dams located on the Rio Grande River between Texas and Mexico. Theincrease in the FY2004 request over the enacted FY2003 spending level wasattributable to an increase of nearly $10 million for Program Direction at WAPA. Workload requirements attributed to certain orders from the Federal EnergyRegulatory Commission (FERC), and additional hires are cited as the justification foran increase of nearly 10% in higher salaries and benefits for WAPA in FY2004. TheHouse bill funded the PMAs at the requested level. The Senate bill added $6.95million to the appropriation for Western Area Power Administration, including $6.2million to be deposited to the Utah Reclamation Mitigation and ConservationAccount. The Senate bill also provided $750,000 for a transmission study on placing500 megawatts of wind energy in North and South Dakota. The conferees adoptedthe Senate provisions and funding level, and these are the levels in the enactedlegislation. BPA receives no annual appropriation, but funds some of its activities from permanent borrowing authority, which was increased in FY2003 from $3.75 billionto $4.45 billion (a $700 million increase). BPA is not requesting additionalborrowing authority in FY2004. BPA intends to borrow $528 million in FY2004,down from $630.8 million in FY2003, to be used for generation and transmissionservices, conservation, energy efficiency, fish and wildlife, and capital equipmentprograms. Independent agencies that receive funding from the Energy and WaterDevelopment bill include the Nuclear Regulatory Commission (NRC), the Appalachian Regional Commission (ARC), and the Denali Commission. Table 10. Energy and Water Development Appropriations Title IV: Independent Agencies (in millions of dollars) Nuclear Regulatory Commission. The Nuclear Regulatory Commission (NRC) requested a total budget of $626.1million for FY2003, including $7.3 million for the NRC inspector general's office. The funding request was 8.3% above the FY2003 level. Major activities conductedby NRC include safety regulation and licensing of commercial nuclear reactors,licensing of nuclear waste facilities, and oversight of nuclear materials users. TheHouse and Senate approved the full NRC request, as did the enacted bill. In the wake of the September 11, 2001, terrorist attacks against the United States, NRC has focused additional attention on the security of nuclear power plantsand other users of radioactive material. NRC's FY2004 budget request included$53.1 million for activities related to homeland security, a 50% increase overFY2003. In FY2004, NRC intends to begin conducting "full security performancereviews, including force-on-force exercises, at each nuclear power plant on a 3-yearcycle instead of the 8-year cycle that the agency used before September 11, 2001." (For more information on protecting licensed nuclear facilities, see CRS Report RS21131 , Nuclear Power Plants: Vulnerability to Terrorist Attack .) The conferencereport directs NRC to contract with the National Academy of Sciences for a study ofthe safety and security of spent fuel storage at commercial reactor sites. NRC proposed to spend $33.5 million on licensing activities for possible new commercial reactors, which are being encouraged by DOE's Nuclear Power 2010program. The FY2003 appropriation provided about $25 million for new reactorlicensing, up from $10 million in FY2002. According to the NRC budgetjustification, the funding will be used for early site permits (sites approved for futurereactors), reactor pre-licensing and licensing reviews, and updating the nuclearlicensing infrastructure. For the decade before FY2001, NRC's budget was offset 100% by fees on nuclear power plants and payments by other licensed activities, such as the DOEnuclear waste program. The nuclear power industry had long contended that the feestructure required nuclear reactor owners to pay for a number of NRC programs, suchas foreign nuclear safety efforts, from which they did not directly benefit. To accountfor that concern, the FY2001 Energy and Water Development Appropriations Act( P.L. 106-377 ) included an NRC proposal to phase down the agency's fee recoveryto 90% during the subsequent 5 years -- two percentage points per year. As a result,92% of the FY2004 NRC budget -- minus $33.1 million transferred from theNuclear Waste Fund to pay for waste repository licensing -- will be offset by feeson licensees. CRS Issue Brief IB88090. Nuclear Energy Policy . CRS Issue Brief IB92059. Civilian Nuclear Waste Disposal . CRS Issue Brief IB10041. Renewable Energy: Tax Credit, Budget, and Electricity Production Issues CRS Issue Brief IB10072. Endangered Species: Difficult Choices . CRS Issue Brief IB10091. Nuclear Nonproliferation Issues . CRS Report RS20702 . South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan . CRS Report RL30928. Army Corps of Engineers: Reform Issues for the 107th Congress . CRS Report RS20569 . Water Resource Issues in the 107th Congress . CRS Report RS20866 . The Civil Works Program of the Army Corps of Engineers: A Primer . CRS Report RL31116 . Water Infrastructure Funding: Review and Analysis of Current Issues . CRS Report RL30478 . Federally Supported Water Supply and Wastewater Treatment Programs . CRS Report RS21026. Terrorism and Security Issues Facing the Water Infrastructure Sector . CRS Report RS21131 . Nuclear Power Plants: Vulnerability to Terrorist Attack . CRS Report RL31098(pdf) . Klamath River Basin Issues: An Overview of Water Use Conflicts .
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The Energy and Water Development appropriations bill includes funding for civil works projects of the Army Corps of Engineers, the Department of the Interior's Bureau of Reclamation(BOR), most of the Department of Energy (DOE), and a number of independent agencies. The BushAdministration requested $26.95 billion for these programs for FY2004 compared with $26.20billion appropriated for FY2003. On July 18 the House passed a bill, H.R. 2754 , containing appropriations of $27.08 billion. On September 16 the Senate passed its version of H.R.2754, funding energy and water development programs at $27.38 billion. The conferencecommittee on the bill approved $27.33 billion on November 5, 2003. Both the House and the Senateagreed to the conference report on November 18, and the President signed the bill December 1 ( P.L.108-137 ). Key issues involving Energy and Water Development appropriations programs include: funding and progress of Corps projects not considered priorities by the Administration; funding for major water/ecosystem restoration initiatives such as Florida Everglades and California "Bay-Delta"; funding for the proposed national nuclear waste repository at Yucca Mountain, Nevada; funding for developing a new nuclear warhead, the Robust Nuclear Earth Penetrator; and DOE's "Nuclear Power 2010" initiative, to "identify the technical, institutional and regulatory barriers to the deployment of new nuclear power plants by2010." This report will be updated as events warrant. Key Policy Staff Division abbreviations: RSI = Resources, Science, and Industry; FDT= Foreign Affairs, Defense,and Trade.
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This report describes changes to the Medicare program made in H.R. 3962 , the Affordable Health Care for America Act, as passed by the House on November 7, 2009. H.R. 3962 contains numerous provisions affecting Medicare payments, payment rules, and covered benefits, and treats the Medicare program as both a funding source for health reform and a tool to shape future changes in the way that health services are delivered. Estimates from the Congressional Budget Office (CBO) on the bill indicate that, absent interaction effects, net reductions in Medicare direct spending may approach $128.1 billion from 2010 to 2014 and $460.8 billion from 2010 to 2019. The legislation includes four divisions; Division B contains the changes to the Medicare and Medicaid programs. This report discusses all of the proposed changes included in Titles I, III, and VI and selected provisions in Titles II and IX of Division B in H.R. 3962 concerning payment and program modifications to Medicare's fee-for-service program, its prescription drug benefit, and the Medicare Advantage (MA) program; efforts to reform Medicare's payment methods, program integrity changes to address fraud waste and abuse, and other miscellaneous Medicare changes. Provisions that would modify Medicare's graduate medical education payments to teaching hospitals, its preventive care benefits, its quality measurement efforts, and other public health initiatives are not covered. The body of this report includes a discussion of the financial impact on the Medicare program by H.R. 3962 that the CBO established (the CBO score), then provides an overview of Medicare changes by provider type and program, followed by a brief discussion of the program integrity changes. The Appendix provides a brief current law description, explanation of the proposed change, and, where possible, the CBO score for most of the Medicare-related provisions in H.R. 3962 . On November 6, 2009, the CBO issued an analysis of H.R. 3962 , as introduced on October 29, 2009, incorporating the November 3, 2009 manager's amendment. Similarly, the Joint Committee on Taxation issued its analysis of H.R. 3962 , including the manager's amendment, on November 7, 2009. Their analyses provide estimates of the direct spending and revenue effects of H.R. 3962 . The estimates do not, however, include certain administrative costs that would be incurred by the government to implement the changes or H.R. 3962 's impact on other federal programs. CBO estimates that the provisions in H.R. 3962 that would affect the Medicare, Medicaid, Children's Health Insurance and other federal programs would reduce direct spending by $427 billion over the FY2010-FY2019 period. Of this total, Medicare (absent interaction affects) accounts for approximately $460.8 billion of the reduction; however, these spending reductions are offset by spending increases in Medicare, Medicaid, and other federal health care programs. Medicare reductions in direct spending over the 10-year period are estimated to be $501.7 billion, offset by Medicare payment increases of $40.9 billion. CBO estimated that Medicare spending under the bill would increase more slowly over the next 20 years compared to the past 20 years—a 6% average annual rate compared to the prior 8%. As noted by CBO, the provisions that would result in the largest savings are as follows: Permanent reductions in the annual updates to Medicare's fee-for-service payment rates (other than physicians' services) would account for an estimated budgetary savings of $228 billion over 10 years. Using per-capita spending in fee-for-service Medicare to set rates for MA plans and changing the way MA payments are adjusted to account for health status would account for an estimated $170 billion in savings (before interactions) over 10 years. Changes in Medicare's prescription drug program (Medicare Part D) that would reduce the cost of drugs, expand coverage, and increase efficiencies would account for an estimated $50 billion in savings over the same period. There are differing views about whether (and to what extent) Medicare savings should be considered as offsets to fund the expansion of health care coverage or, alternatively, should be used to secure the financial solvency of the Medicare program. The latter position is captured in a July 16 letter sent by 36 Republican Senators to the Senate Majority Leader discussing the need to use potential monies resulting from Medicare reform to ensure its future financial stability. The alternative position that health insurance reform and the attendant changes to Medicare would bolster the program's solvency (and improve beneficiaries' access to care) is asserted in an eight-page report released by the Department of Health and Human Services (HHS) on August 27. Medicare is a federal program that pays for covered health services for most persons 65 years of age and older and for most permanently disabled individuals under the age of 65. It consists of four parts, each responsible for paying for different benefits, subject to different eligibility criteria and financing mechanisms. Under traditional Medicare, Part A and Part B services are typically paid on a fee-for-service basis (each service or group of services provided to a patient is reimbursed through a separate payment) using different prospective payment systems (PPS) or fee schedules. Certain other services are paid on the basis of reasonable costs or reasonable charges. In general, each year, regulatory decisions (some of which are mandated by Congress) are implemented by the Centers for Medicare and Medicaid Services (CMS), which affect Medicare's payments to specific providers, physicians, practitioners, and suppliers. For instance, the program provides for annual updates of the program payments to reflect inflation and other factors. In some cases, these updates are linked to the consumer price index for all urban consumers (CPI-U) or to a provider-specific market basket (MB) index, which measures the change in the price of goods and services purchased by the provider to produce a unit of output. In March of each year, the Medicare Payment Advisory Commission (MedPAC) makes payment update recommendations concerning Medicare's different fee-for-service payment systems to Congress. To do so, MedPAC staff first examines the adequacy of the Medicare payments for efficient providers in the current year and then assesses how provider costs are likely to change in the upcoming year, including scheduled policy changes that will affect Medicare's payment rates. As stated by MedPAC, Medicare's payment systems should encourage efficiency and that providers can achieve efficiency gains similar to the economy at large. This policy target links Medicare's expectations for efficiency improvements to the productivity gains achieved by firms and workers who pay taxes that fund Medicare. The amount, if any, of MedPAC's update recommendations will depend on its overall assessment of the circumstances of a given set of providers in any year. In June of each year, MedPAC issues another report to Congress examining more systemic issues affecting the Medicare program and making recommendations to increase Medicare's value, to promote its efficiency or payment accuracy, or to realign Medicare's payment incentives. Most recently, for example, MedPAC has stated that Medicare's payment systems do not provide incentives to produce appropriate, high-quality care at an efficient price. Rather, Medicare's incentives, particularly in its fee-for-service program, reward excessive care and do not encourage service coordination or quality care. Often considered as part of regulatory and legislative changes to the program, MedPAC's recommendations concerning Medicare are not binding and are not automatically implemented. To differing extents, their analyses and recommendations have shaped provisions in H.R. 3962 ; where possible, that influence will be noted, particularly in the appendix to this report. Part A provides coverage for inpatient hospital services, post-hospital skilled nursing facility (SNF) services, post-hospital home health services, and hospice care, subject to certain conditions and limitations. Approximately 20% of beneficiaries enrolled in Part A use these services during any year. CBO estimates that about $223 billion was spent on Part A benefits in 2008, an amount that is projected to increase to $435.2 billion in 2019. In part because of its sheer size, provisions reducing Part A spending comprise a significant proportion of the savings attributed to this legislation either through constraining payment updates or by other payment changes. Generally, the provisions of H.R. 3962 affecting Medicare's payments to acute care hospitals would constrain payment increases to these hospitals, restructure payments to address treatment inefficiencies, and then reshape Medicare's disproportionate share hospital (DSH) hospital subsidies. Also, the exception that permits physicians with ownership interests in a hospital to refer Medicare and Medicaid patients to that hospital would be eliminated for new physician-owed hospitals or those that did not meet certain criteria. Specifically, H.R. 3962 would adjust Medicare's annual payment updates to Part A providers to account for economy-wide productivity increases for cost savings estimated to be $102 billion (of the $228 billion total savings attributed to limits on all Medicare's fee-for-service payment updates mentioned earlier) over 10 years. Under current law, the market basket component of the physician update or the Medicare economic index (MEI) is adjusted to exclude productivity gains. This provision uses the same measure of productivity improvement, the 10-year moving average of all-factory productivity, that is included in the MEI. Savings from extending this policy to acute care hospitals was not separately identified. Under Medicare's current inpatient prospective payment system (IPPS), acute care hospitals receive a full payment for patient admissions even if the readmission is preventable and related to the initial admission, the result of inadequate discharge planning at the treating hospital, or results from inadequate post-discharge care coordination. MedPAC estimated that readmissions resulted in $15 billion in additional Medicare expenditures in FY2007; however, this estimate includes readmissions that may not have been related to the initial diagnosis, those that may not have been preventable, where patients experienced complications or those caused by factors beyond the hospitals' control. As explained in the Appendix , this provision would reduce payments for acute care hospitals, which would reduce payments for acute care hospitals with excessive readmission rates relative to their expected readmission rate for selected conditions. CBO has estimated this provision as saving $9.3 billion over a 10-year period. Since 1986, an increasing number of hospitals have received additional Medicare payments because they serve a disproportionate share of low-income patients. The justification for this subsidy has changed over time. Originally, the DSH adjustment was intended to compensate hospitals for their higher Medicare costs associated with the provision of services to a large proportion of low-income patients. Now, the adjustment is considered as a way to protect access to care for Medicare beneficiaries. H.R. 3962 would reduce hospitals' DSH payments starting in FY2017 contingent upon a reduction in the number of uninsured individuals of eight percentage points from 2012 to 2014. A hospital with higher levels of uncompensated care would receive additional payments. CBO has estimated that this policy would save $10.3 billion from FY2017 to FY2019. Medicare covers nursing home services for beneficiaries who require skilled nursing care and/or rehabilitation services following a hospitalization of at least three consecutive days. The Balanced Budget Act of 1997 (BBA 97, P.L. 105-33 ) required the Secretary to establish a PPS for SNF care to be phased in over three years, beginning in 1998. Under the PPS, SNFs receive a daily payment that covers all the services provided that day, including room and board, nursing, therapy, and drugs, as well as an estimate of capital-related costs. Any profits are retained by the SNF, and any losses must be absorbed by the SNF. The daily base payment is based on 1995 costs that have been increased for inflation and vary by urban or rural location. A portion of these daily payments is further adjusted for variations in area wages, using the hospital wage index, to account for geographic variation in wages. SNF per diem PPS payments are also adjusted to include a temporary 128% increase for any SNF residents who are HIV-positive or have Acquired Immune Deficiency Syndrome. Section 1888(e) of the Social Security Act requires that the base payments be adjusted each year by the SNF MB update—that is, the measure of inflation of goods and services used by SNFs. In the final rule FY2010 rule, CMS describes its proposal to recalibrate the case mix indexes to better account for the resources used in the care of the medically complex and to improve upon its payment refinements made in 2006. According to CMS, the total impact of these changes for FY2010, accounting for a MB increase of 2.2 percentage points, would be a decrease in Medicare payments for FY2010 to SNFs of 1.1% (or $360 million) below FY2009 payments. Some individual providers could experience larger decreases in payments than others due to case-mix utilization. The proposed PPS and Consolidated Billing SNF payment regulation for FY2010 describes how the Secretary would recalibrate the case-mix indexes (CMIs) for 2010 to more accurately match the service needs of beneficiaries. Although MedPAC finds that Medicare payments to SNFs overall are adequate, it has raised concerns about the efficiency of the payment categories pertaining to nontherapy ancillary (NTA) services (e.g., prescription drugs, medical equipment and supplies, IV therapy) and therapy services. To better account for SNF stays with exceptionally high ancillary care needs, MedPAC recommends, in a June 2009 letter to the Secretary and its March 2009 Report , that the Secretary revise the PPS by separating payments for NTA from the bundled PPS rate and by establishing an outlier policy for stays with exceptionally high NTA costs. In addition, MedPAC explains that the current reimbursement system for therapy costs encourages the under provision of therapy services to patients. To improve payments for therapy, MedPAC recommends that the Secretary recalibrate the payment category for therapy costs so as to better match such payments to the actual amount of therapy services needed by patients. MedPAC also recommends that the market basket update for 2010 be eliminated. The provisions contained in H.R. 3962 are consistent with MedPAC's recommendations. Specifically, the bill would eliminate the SNF MB update for 2010 and make all subsequent MB annual updates subject to a productivity adjustment. Under the bill, the rate of growth in payments to SNFs would likely slow but it would never fall below zero. H.R. 3962 would also require that budget neutral changes be made to the SNF payment categories pertaining to NTA and therapy services. The bill would also require that an addition or adjustment to the SNF payment be made to account for outliers in SNF costs. H.R. 3962 also contains provisions that would pay reduced Medicare payments to SNFs on claims associated with certain persons who are readmitted to a hospital from a SNF within 30 days of an initial hospital discharge. Finally, certain Medicare-certified SNFs would also be part of detailed plan for a Post-Acute Care Demonstration expansion to be developed by the Secretary. Such a demonstration would test the use of bundled payments for hospitals and post-acute care providers for improving the coordination, quality, and efficiency of post-acute care services and for reducing the need for readmission to hospitals from providers, among other outcomes. Home health agencies (HHAs) are paid under a prospective payment system (PPS), which covers skilled nursing, therapy, medical social services, aide visits, medical supplies, and others. Durable medical equipment is not included in the home health PPS. The base payment amount, or national standardized 60-day episode rate, is increased annually by an update factor that is determined, in part, by the projected increase in the home health market basket (MB) index. This index measures the changes in the costs of goods and services purchased by HHAs. HHAs are required to submit to the Secretary health care quality data. A HHA that does not submit the required quality data will receive an update of the MB minus two percentage points for that fiscal year. The proposed rule for calendar year (CY) 2010 reports that the HH MB will increase by 2.2% for that year. In addition, in an effort to address potential fraud and abuse in the use of HH outlier payments, CMS proposes to cap outlier payments at 10% of total HH PPS payments and to target outlier payments to be no greater than 2.5% of total HH PPS payments, among other things. In CY2008, CMS made refinements to the home health (HH) PPS to try to improve payment efficiencies. Specifically, this regulation established changes to the home health agency (HHA) case-mix index to account for the relative resource utilization of different patients. These changes modified the coding or classification of different units of service that do not reflect real changes in case-mix. As a result, the national prospective 60-day episode payment rate was adjusted downward by 2.75% for CY2008, by 2.75% for each year of CY2009 and CY2010, and by 2.71% for CY2011. In its March 2009 Report , MedPAC explains that payments to HHAs have exceeded costs by a wide margin since the PPS was implemented in 2000. As a result, MedPAC recommends that the MB increase for 2010 be eliminated and that the payment coding changes scheduled by the Secretary be accelerated. Further, MedPAC recommends that HHA rates be rebased to better reflect the average costs of care. H.R. 3962 would slow payment growth to HHAs, as is consistent with MedPAC's recommendations. Specifically, the bill would eliminate the MB update for 2010 and make all subsequent MB annual updates subject to a productivity adjustment. Under the bill, the rate of growth in payments to HHAs would likely slow but it would never fall below zero. H.R. 3962 would also require that the case-mix adjustments planned by the Secretary for CY2010 and CY2011 be fully implemented in 2010, resulting in a total downward adjustment of payments by 5.46% in 2010. Under the provision, the Secretary would also adjust HHA payments by a uniform percentage, ensuring that payments would be equal to payments of the previous year and then updated by the HH MB for that year. If the Secretary is unable to make these changes for 2011, then the Secretary would be required to pay 95% of what the prospective payment amount would have been had the provision not applied, among other things. H.R. 3962 would also require the Secretary to develop a detailed plan for a Post-Acute Care Demonstration expansion, which would include HHAs. Such a demonstration would test the use of bundled payments for hospitals and post-acute care providers for improving the coordination, quality, and efficiency of post-acute care services and for reducing the need for readmission to hospitals from providers, among other outcomes. The bill would make a number of changes to how Medicare physician payments are calculated under the fee schedule and modify reporting and bonus programs for physicians. The Secretary (through CMS) would have additional flexibility to be able to review and adjust potentially misvalued codes under the physician fee schedule, make adjustments to Medicare payment localities in California to address imbalances created by uneven economic growth, extend the floor for the index representing geographic variation in physician work used in determining payments, create a new 5% bonus payment for physicians who practice in areas where total Medicare per capita spending falls in the lowest 5% of all counties or equivalent areas, extend the payment for the technical component of certain pathology services, and modify the payment for imaging services to more closely reflect the actual use of the equipment. The bill would also modify the physician quality reporting initiative program (PQRI) to include a feedback program, integrate PQRI, and extend the years of the bonus payments. In addition, the bill would modify the existing resource-based feedback program for physicians by specifying in more detail the types of information that would be reported under the program and how CMS could use the information. H.R. 3962 would reduce the maximum amount Medicare would pay private health plans in some areas of the country, in addition to other payment and administrative changes. Payments to private plans are determined by comparing a plan's cost of providing required Medicare benefits ( bid ) to the maximum amount Medicare will pay for those benefits in each area ( benchmark ). Historically, Congress has increased the benchmark amounts, in part, to encourage plan participation in all areas of the country. As a result, the benchmark amounts in some areas are higher than the average cost of original fee-for-service (FFS) Medicare. Benchmarks exceed average spending in original Medicare by an estimated 17% in 2009. As a result, Medicare is projected to pay private plans an average of 14% more per beneficiary in 2009 than it does for beneficiaries in the original Medicare program. Starting in 2011, H.R. 3962 would phase in MA benchmarks equal to per capita FFS spending in each county. Starting in 2013, MA benchmarks would be equal to per capita FFS spending in each county. This may result in reductions in access to private plan options, or the supplemental benefits and reduced cost-sharing that some private plans provide. Starting in 2011, H.R. 3962 would also increase benchmarks for MA plans that provide quality health care in qualifying areas. Currently, MA plans are required to have quality improvement programs before January 1, 2010; however, payments to MA plans are not contingent on the quality of care provided to plan enrollees. Taken together, the provision to reduce benchmarks to the level of per capita FFS spending in original Medicare and the provision to increase benchmarks for plans that provide quality care in qualifying areas are estimated to save $47.5 billion over the FY2010-2014 period and $154.3 billion over the FY2010-2019 period. H.R. 3962 would extend the Secretary's authority to adjust payments to plans for differences in the way diagnosis coding of patients differs between MA plans and original Medicare. In general, MA plan payments are risk-adjusted to account for the variation in the cost of providing care. Risk adjustment is designed to compensate plans for the increased cost of treating older and sicker beneficiaries, and thus discourage plans from preferential enrollment of healthier individuals. The Medicare risk adjustment models take into account the variation in expected medical expenditures of the Medicare population associated with demographic characteristics (age, sex, current Medicaid eligibility, original Medicare eligibility due to a disability), as well as medical diagnoses. The Deficit Reduction Act of 2005 ( P.L. 109-171 , DRA) required the Secretary, when risk adjusting payments to MA plans during 2008, 2009, and 2010, to adjust for patterns of diagnosis coding differences between MA plans and providers under parts A and B of Medicare, to the extent that the Secretary identified such differences based on an analysis of data submitted for 2004 and subsequent years. It is estimated that this provision would save $2.9 billion over the 2010-2014 period and $15.5 billion over the 2010-2019 period. H.R. 3962 makes additional changes to the Medicare Advantage program that would result in costs or savings of less than $0.5 billion over the 10-year period (2010-2019), as estimated by CBO. Each of these provisions is explained in detail in the Appendix . In January 2009, the Medicare prescription drug program began its fourth year of operation. The Medicare Prescription Drug, Improvement, and Modernization Act of 2003 (MMA, P.L. 108-173 ) created this voluntary outpatient prescription drug benefit under a new Medicare Part D, effective January 1, 2006. At that time, Medicare replaced Medicaid as the primary source of drug coverage for beneficiaries covered under both programs (called dual eligibles ). Prescription drug coverage is provided through private prescription drug plans (PDPs), which offer only prescription drug coverage, or through Medicare Advantage prescription drug plans (MA-PDs), which offer prescription drug coverage that is integrated with the health care coverage they provide to Medicare beneficiaries under Part C. Medicare law sets out a defined standard benefit structure under the Part D benefit. In 2009, the standard benefit includes a $295 deductible and a 25% coinsurance until the enrollee reaches $2,700 in total covered drug spending. After this initial coverage limit is reached, there is a gap in coverage in which the enrollee is responsible for the full cost of the drugs (often called the doughnut hole ) until total costs hit the catastrophic threshold, $6,153.75 in 2009. A major focus of the drug benefit is the enhanced coverage provided to low-income individuals who enroll in Part D. Individuals with incomes below 150% of the federal poverty limit and with limited assets are eligible for the low-income subsidy (LIS). The LIS reduces beneficiaries' out-of-pocket spending by paying for all or some of the Part D monthly premium and annual deductible, and limits drug copayments to a nominal price. H.R. 3962 would make several changes to the Medicare Part D program to expand coverage and reduce costs to the program. Specifically, the bill would gradually phase out the coverage gap and completely eliminate it by 2019. During the coverage gap, consistent with a voluntary agreement with the pharmaceutical industry, Part D enrollees would be provided discounts of 50% for brand-name drugs. However, the full drug price (the amount paid by the beneficiary plus the discount) would be used to calculate a beneficiary's out-of-pocket costs, thus enabling beneficiaries to reach the catastrophic level more quickly, at which time most of the drug costs would be paid for by Medicare. The bill would also establish a new prescription drug rebate program under which drug manufacturers would provide Medicare with rebates for the cost of drugs dispensed to certain low-income beneficiaries. CBO estimates that the combined savings from the discounts and the rebates would more than offset the cost of reducing the coverage gap and reduce Medicare expenditures approximately $42.3 billion for the 10-year period FY2010-2019. Additionally, because enrollees pay for about 25% of the cost of coverage through their premiums and the value of the prescription drug benefit would increase as the doughnut hole is phased out, CBO estimated, in an analysis of similar provisions in H.R. 3200 , that premiums would increase faster than they would under current law. However, CBO also estimates that, on average, the reduction in beneficiary cost sharing would outweigh the increase in premiums. H.R. 3962 would also require the Secretary to negotiate prices with manufacturers. While some believe that the government would have greater leverage in negotiations and would be better able to obtain lower prices than the plan sponsors, CBO scored this requirement as having no effect on federal expenditures. The bill also contains several provisions that would make it easier for beneficiaries to apply and qualify for the low-income subsidy and would help to improve access to LIS plans. For example, self-certification of income and assets would be allowed when applying for the subsidy, the asset test for the low-income subsidy would be raised, and cost sharing would be eliminated for individuals receiving care under a home and community-based waiver who would otherwise require care in a facility for the mentally retarded. Additionally, HHS would be given the authority to auto-enroll subsidy-eligible individuals into plans using an "intelligent assignment" process instead of the random process currently used. The new process would be designed to better insure that beneficiaries are enrolled in plans that are low cost and that cover the drugs the beneficiaries are currently taking. The bill would also change the methodology used to determine which plans are eligible to enroll low-income beneficiaries. This change may enable more plans to qualify as low-income plans and help reduce the number of low-income beneficiaries who need to change plans from year to year. CBO has scored the changes to the low-income subsidy program at a combined cost to the Medicare and Medicaid programs of $13.5 billion over 10 years. H.R. 3962 also includes a number of provisions aimed at expanding consumer protections for Part D enrollees. For example, Part D plans would be generally prohibited from making changes to their formularies during the plan year that would reduce coverage of needed drugs or increase cost-sharing. Additionally, the bill would enhance oversight to better ensure that low-income beneficiaries receive retroactive reimbursement payments owed to them by their drug plans (for cost sharing expenditures made by the beneficiary after the date the beneficiary became eligible for the subsidy). As noted by MedPAC, the Medicare program must overcome limitations with its existing fee-for-service payment systems, by addressing its strong incentives to increase service volume and broadening the scope of Medicare's payment to encompass services provided by different entities during a patient's episode of care. The wide geographic variation in Medicare's spending per beneficiary that is not explained by measurable differences in health status adds layers of complexity to any contemplated payment or health delivery reform proposal. Certain provisions included in H.R. 3962 to establish pilot program to bundle payments for physician and hospital as well as post-acute care services represent a starting point with these payment reforms. Other pilot programs will establish accountable care organizations and medical homes in an effort to provide incentives to better manage the quality and cost-efficiency of health care delivered to a population of chronically sick patients over an extended period of time. These pilot programs would build on existing demonstration programs; unlike the existing efforts, if assessed as successfully accomplishing care coordination while maintaining budget neutrality, the pilot programs could be implemented on a permanent basis without further congressional action. H.R. 3962 includes a variety of measures aimed at reducing fraud, waste, and abuse in Medicare, Medicaid, and federal health care programs generally. These provisions target the Centers for Medicare and Medicaid's program integrity activities, funding for anti-fraud activities, and penalties for fraud. As the agency responsible for administering Medicare and Medicaid, CMS conducts a variety of activities designed to prevent, detect, and investigate health care fraud. These activities are often referred to as program integrity activities. CMS shares responsibility for combating fraud with three federal agencies: the Department of Health and Human Services Office of the Inspector General (OIG), the Department of Justice (DOJ), and the Federal Bureau of Investigation (FBI). The OIG is an independent unit within HHS that has the primary responsibility for detecting health care fraud and abuse in federal health care programs. The FBI conducts complex fraud investigations related to both private and public health care programs, and the OIG, FBI, and CMS refer suspected cases of fraud to the DOJ for prosecution. Medicare program integrity and anti-fraud activities are funded through the Health Care Fraud and Abuse Control (HCFAC) program. HCFAC was established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191 ), which sought to increase and stabilize federal funding for anti-fraud activities. Specifically, HCFAC funds are directed to the enforcement and prosecution of health care fraud, whereas MIP funding supports the program integrity activities undertaken by CMS contractors. HIPAA appropriated funds to HHS, the OIG, the DOJ, and the FBI for activities undertaken for fiscal years 1997 through 2003. In December 2006, Congress passed the Tax Relief and Health Care Act (TRHCA) which extended the mandatory annual appropriation for HCFAC to 2010. Total funding for health care fraud activities for FY2009 amounted to approximately $1.4 billion. In the area of program integrity, the bill would require that the Secretary develop enhanced screening procedures for providers enrolling in Medicare, Medicaid, and to CHIP. The level and type of screening would be determined by the Secretary according to risk. Under this legislation, providers could be subject to background checks, unannounced site visits, enhanced claims reviews, and moratoriums on enrollment. Other program integrity measures include requiring providers and certain suppliers to implement compliance programs, establishing sanctions for hospices that do not meet federal health and safety standards, mandating that providers and suppliers submit claims for payment within 12 months, and requiring home health and durable medical equipment (DME) providers to have face-to-face encounters with beneficiaries prior to reimbursement. The bill would also prohibit payment to any Medicare provider or supplier that does not accept payment electronically. In the area of enforcement, the legislation introduces Civil Monetary Penalties (CMPs) for certain types of infractions, including falsifying information on enrollment applications and delaying investigations and audits by the OIG. The legislation would also enhance the Secretary's authority to impose penalties on MA plans for violating the terms of their contract. Certain practices such as enrolling beneficiaries into MA plans without their consent or inappropriately transferring beneficiaries between plans would be subject to penalties. The bill would also mandate that the Secretary establish a Self-Referral Disclosure Protocol for providers and suppliers to disclose violations of the Stark law. To support these additional program integrity and enforcement efforts, H.R. 3962 would increase funding for the Health Care Fraud and Abuse Control Program (HCFAC) by $100 million annually beginning in 2011. Under H.R. 3962 , Medicare serves as both a funding source for health insurance reform and a tool to shape future changes in the way that health services are paid for and delivered. Policy makers are debating whether Medicare savings should be used to offset broader reform efforts or whether these funds are more appropriately directed at strengthening the program's future financial standing. Industry representatives are debating the extent to which the Medicare program can be viewed as a funding source without compromising beneficiaries' access to quality care. Proponents of health insurance reform argue that the Medicare program and care provided to beneficiaries would be strengthened by payment reforms included in the bill and not harmed by the payment reductions. How (and whether) these different discussions will be resolved remains an open question. This appendix contains the majority of provisions in H.R. 3962 , as passed by the House on November 7, 2009, that affect the Medicare program. For each provision, a brief current law, a simplified provision description and, where possible, the associated CBO score is provided. The section number and title of Medicare provisions that have been omitted from the appendix are included in footnotes to the immediately preceding provision. Sec. 1101. Skilled Nursing Facility Payment Update. Skilled nursing facilities (SNFs) are paid through a prospective payment system (PPS) which is composed of a daily ("per-diem") urban or rural base payment amount that is then adjusted for case mix and area wages. Each year, the SNF payment rate is increased by an update factor that is determined, in part, by the projected increase in the SNF market basket (MB) index. Without changes to current law, the SNF MB update for FY2010 is 2.2%. The provision would eliminate the MB update for SNFs between January 1, 2010 and September 30, 2010. Subject to another provision regarding a productivity adjustment, the rate would be increased by the skilled nursing facility MB percentage change for the fiscal year involved for each subsequent fiscal year. The CBO score (with interaction with Section 1103) is -$6.0 billion for FY2010-FY2014 and -$23. 9 billion for FY2010-FY2019 Sec. 1102. Inpatient Rehabilitation Facility Payment Update . Starting January 1, 2002, Medicare payments to inpatient rehabilitation facilities (IRFs) are made under a discharge-based prospective payment system where one payment covers capital and operating costs. Typically, the per discharge payment amount is increased each fiscal year by an update factor based on the increase in the applicable market basket index. However, in FY2008 and FY2009, the update factor has been set at zero percent, starting for discharges as of April 1, 2008. The provision would extend the zero percent update factor until September 30, 2010 (the end of FY2010) but would not apply to payment units occurring before January 1, 2010. The CBO s core (with interaction with Section 1103) is -$1.4 billion for FY2010-FY2014 and -$5.3 billion for FY2010-FY20 19 . Sec. 1103 . Incorporating Productivity Improvements into Market Basket Updates That Do Not Already Incorporate Such Improvements . Currently, most providers in fee-for-service (or traditional) Medicare, including acute care hospitals, SNFs, long term care hospitals (LTCHs), IRFs, inpatient psychiatric facilities (IPFs), and hospice care receive predetermined payment amounts established under different, unique prospective payment systems. Each year, the base payment amounts in the different Medicare payment systems are increased by an update factor to reflect the increase in the unit costs associated with providing health care services. Generally, Medicare's annual updates are linked to projected changes in specific market basket (MB) indices which are designed to measure the change in the price of goods and services purchased by the provider. Annual updates to the Medicare physician fee schedule are determined by a separate method that includes the sustainable growth rate (SGR) formula, which already incorporates adjustments for gains in physician productivity. The update factors for certain providers would include a productivity adjustment which would equal the percentage change in 10-year moving average of annual economy-wide private nonfarm business multi-factor productivity. The adjustment would be included for IPPS hospitals for fiscal years beginning FY2010 for discharges after January 1, 2010. The component of the IPPS update that is reduced when the acute care hospital does not submit quality data would not be reduced below zero. Similarly, the component of the IPPS update that is reduced for the acute care hospital is not a meaningful electronic health record (EHR) user would not be reduced below zero. The update reduction for those IPPS hospitals that are not meaningful EHR users would apply only with respect to the fiscal year involved and would not include the productivity adjustment; the Secretary would not be able to take into account the reduction in computing the applicable MB increase in subsequent years. Updates for SNFs and IRFs would include the productivity adjustment starting FY2011. Hospice care increases would include the adjustment in FY2010 for days of care starting January 1, 2010. To the extent that the base rate for LTCHs would be subject to an annual update, the update factor would be subject to a productivity adjustment for discharges on or after January 1, 2010, during the rate year ending in 2010. To the extent that the base rate for IPFs would be subject to an annual update, the update factor would be subject to a productivity adjustment starting for rate year 2011. T he CBO s core (with interaction with Sections 1101 and 1102) is -$2 4 .2 billion for FY2010-FY2014 and -$10 2 . 0 billion for FY2010-FY20 19 . Sec. 1111. Payments to Skilled Nursing Facilities. SNFs are paid through a PPS which is composed of a daily ("per-diem") urban or rural base payment amount that is then adjusted for case mix and area wages. The base payment is adjusted for treatment type and care needs of the beneficiary based on 53 payment-adjusted resource utilization groups (RUGs). In January 2006, CMS implemented a refined SNF PPS (using FY2001 claims data), including a parity adjustment to ensure that estimated total payments under the 53-group RUG model would maintain parity to the formerly used 44-group RUG model in a budget neutral manner. CMS also applied an adjustment to account for the variability in the use of nontherapy ancillary (NTA) services (e.g., prescription drugs, medical equipment and supplies, IV therapy). After noting that actual utilization patterns differed from CMS projections, CMS used actual CY 2006 claims data to update its calibrations and its parity adjustment so as to re-establish budget neutrality and its NTA adjustment component. In the final rule published on August 11, 2009, CMS describes its proposal to recalibrate the case mix indexes to better account for the resources uses in the care of the medically complex. According to CMS, the total impact of this recalibration for FY2010, accounting for a MB increase of 2.2 percentage points, would be a decrease in Medicare payments to SNFs of 1.1% (or $360 million) below FY2009 payments. Some individual providers could experience larger decreases in payments than others due to case-mix utilization. The proposed PPS and Consolidated Billing SNF payment regulation for FY2010, describes how the Secretary would recalibrate the case-mix indexes (CMIs) for 2010 to more accurately match the service needs of beneficiaries. The provision would require the Secretary to adjust the case mix indexes for FY2010, using CY2006 claims data, by the appropriate recalibration factor, as described in the SNF final rule issued by the Secretary on August 11, 2009. It would also require the Secretary to increase payments for non-therapy ancillary services by 10% and decrease payments for the therapy case mix component of such rates by 5.5%. Such payment changes would be required to apply for days on or after April 1, 2010, and until the Secretary implements an alternative case mix classification system for the SNF PPS. The Secretary would also be required to conduct an analysis so as to ensure the accuracy of payments for NTA services furnished during a fiscal year beginning with FY2011, within certain specifications. The Secretary would be required to implement changes to payments for NTA such that they would be budget neutral for estimated expenditures under such future SNF services classification system for a FY beginning with 2011. Beginning with October 1, 2010, The Secretary would be required to provide for an addition or adjustment to the outlier payment amounts with respect to NTA and therapy services. Such outlier adjustments or additional payments would be required to be based on aggregate costs during a SNF stay on not on the number of days in such stay. These changes to the outlier component of the payment would be required to reduce estimated payments that would otherwise be made under the PPS with respect to a FY by 2 percent. The total amount of additional payments or payment adjustments for these outliers with respect to a FY could not exceed 2% of total payments projected or estimated based on the SNF PPS. The CBO Score is $0.0 billion for FY2010 -FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1112. Medicare DSH Report and Payment Adjustments in Response to Coverage Expansions . Since 1986, an increasing number of acute care hospitals have received additional Medicare payments because they serve a disproportionate share of low-income patients. The policy justification for Medicare's disproportionate share hospital (DSH) spending has changed over time. Originally, the DSH adjustment was intended to compensate hospitals for their higher Medicare costs associated with their providing services to a large proportion of low-income patients. Now, the adjustment is considered as a way to protect access to care. The provision would require the Secretary to submit no later than July 1, 2016 a Medicare DSH report including recommendations on the appropriate targeting of DSH funds that would be consistent with its original intent and consider any reduction in the number of uninsured individuals as well as hospitals' remaining uncompensated care costs. If H.R. 3962 decreases the national rate of uninsurance among the under 65-population by 8 or more percentage points from 2012 to 2014, the Medicare DSH adjustment would be reduced starting in FY2017. Additional payments (not to exceed 50% of the aggregate DSH reduction) would be made based on the estimated amount of uncompensated care, excluding bad debt, provided by a hospital; hospitals with higher levels of uncompensated care would receive higher uncompensated care payments. The CBO s core is $0 .0 for FY2010-FY2014 and -10. 3 billion for FY2010-FY20 19 . Sec. 1113. Extension of Hospice Regulation Moratorium. The prospective payment system (PPS) for hospices attempts to adjust for geographic differences through a wage index adjustment. When the data source used to adjust hospice payments for differences in the cost of labor across geographic area was changed in 1997 from the 1983 Bureau of Labor Statistics data to the hospital wage data, a budget neutrality adjustment factor (BNAF) was instituted by the Secretary to prevent participating hospices from experiencing reductions in total payments as a result of the change. This BNAF increases payments to certain hospices that would otherwise experience a payment reduction by boosting hospice payments to these providers by amounts that would make overall payments budget neutral to the levels that they would have received had the Secretary used the 1983 Bureau of Labor Statistics wage adjustment. According to the final rule, published by HHS in the Federal Register on August 8, 2008, the BNAF would be phased out over three years, beginning with a 25% reduction in FY2009, an additional 50% reduction (totaling 75%) in FY2010, and a final 100%, or elimination, in FY2011. The American Recovery and Reinvestment Act of 2009 ( P.L. 111-5 ) included a provision that delayed the implementation of the phase-out of the budget neutrality adjustment factor during FY2009. Consequently, Medicare payments to hospice during FY2009 contain budget neutrality adjustments similar to those in previous years. The revised final rule for FY2010 specifies that the hospice wage index BNAF would not be phased out over seven years, with a 10% reduction in FY2010, and a 15% reduction for each year from FY2011 through FY2016. The provision would extend the delay on the implementation of the phase-out of the budget neutrality adjustment factor through October 1, 2010. The CBO Score is $0.1 billion for FY2010 -FY2014 and $0.1 billion for FY2010-FY2019. Sec. 1114. Permitting Physician Assistants to Order Post-Hospital Extended Care Services and to Provide for Recognition of Attending Physician Assistants as Attending Physicians to Serve Hospice Patients. In a skilled nursing facility (SNF), Medicare law allows physicians, as well as nurse practitioners and clinical nurse specialists who do not have a direct or indirect employment relationship with a SNF, but who are working in collaboration with a physician, to certify the need for post-hospital extended care services for purposes of Medicare payment. Post-hospital extended care services are generally defined as services initiated within 30 days after discharge from a 3-day medically necessary inpatient hospital stay. The provision would allow a physician assistant [who is legally authorized by the state in which the services are being furnished] who does not have a direct or indirect employment relationship with a SNF, but who is working in collaboration with a physician, to certify the need for post-hospital extended care services for Medicare payment purposes. Under the Medicare program, hospice services may only be provided to terminally ill individuals under a written plan of care established and periodically reviewed by the individual's attending physician and the medical director (and by the interdisciplinary group of the hospice program). For an individual to be eligible for Medicare-covered hospice services, the individual's attending physician (not including a nurse practitioner) and the medical director (or physician member of the interdisciplinary group of the hospice program) must each certify in writing that the individual is terminally ill at the beginning of the first 90-day period of hospice. For purposes of a hospice written plan of care, the provision would include a physician assistant who is [legally authorized by the state in which the care is being delivered and acting under the supervision of a physician] in the definition of an attending physician. The provision would continue to exclude physician assistants from the authority to certify an individual as terminally ill. The CBO score is between minus 50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1121. Resource-Based Feedback Program For Physicians In Medicare. Both MedPAC and GAO have suggested that CMS provide information to physicians on their resource use with the expectation that physicians who are outliers would alter their practice patterns as a result. Providing this information to physicians would enable them to assess their practice styles, evaluate whether they tend to use more resources than their peers or what evidence-based research (if available) recommends, and to revise practice styles as appropriate. Section 131(c) of MIPPA established such a physician feedback program, which CMS implemented by January 1, 2009. CMS initially called this effort the Physician Resource Use Feedback Program, but has renamed this initiative the "Physician Resource Use Measurement and Reporting Program." MIPPA also requires the GAO to conduct a study of the Physician Feedback Program as described above, including the implementation of the Program, and to submit a report to Congress by March 1, 2011 containing the results of the study, together with recommendations for such legislation and administrative action as the Comptroller General determines appropriate. The bill would modify the existing physician feedback program and establish a feedback implementation plan for providing information to providers about their practice patterns. The Secretary would develop and specify the nature of the reports, based on results and findings from the Medicare program as in existence before the date of the enactment of this act. These reports could be based on a per capita basis, an episode basis that combines separate but clinically related physicians' services and other items and services furnished or ordered by a physician into an episode of care, as appropriate, or both. The nature of the reports would be developed by January 1, 2012. During 2011, the Secretary would establish methodologies as appropriate to (i) attribute items and services to physicians, (ii) identify appropriate physicians for purposes of comparison, and (iii) aggregate items and services attributed to a physician into a composite measure per individual. The Secretary would evaluate the methods with regard to their efficacy in changing practice patterns to improve quality and decrease costs. The Secretary would develop a plan to disseminate these reports in a significant manner in the regions and cities of the country with the highest utilization of Medicare services. To the extent practicable, the reports would be disseminated to increasing numbers of physicians each year; during 2014 and in subsequent years, the reports would be disseminated at least to physicians with utilization rates among the highest 5% of the nation. The Secretary could disseminate the reports via: direct meetings between contracted physicians, though contracts with local, non-profit entities engaged in quality improvement efforts at the community level, in mailings or other methods of communication that facilitate large-scale dissemination., or by other methods specified by the Secretary. The CBO Score is $0.0 billion for FY2010 -FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1122. Misvalued Codes Under the Physician Fee Schedule. The Medicare physician fee schedule is based on assigning relative weights to each of the approximately 7,500 physician service codes used to bill Medicare. The relative value for a service compares the relative work involved in performing one service with the work involved in providing other physicians' services. The scale used to compare the value of one service with another is known as a resource-based relative value scale (RBRVS). CMS, which is responsible for maintaining and updating the fee schedule, continually modifies and refines the methodology for estimating relative value units (RVUs). CMS relies on advice and recommendations from the American Medical Association/Specialty Society Relative Value Scale Update Committee (RUC) in its assessments. In general, as currently implemented, increases in RVUs for a service or number of services lowers the resultant fees for other physician services. One consequence has been that the payments for evaluation and management codes, whose RVUs typically are not increased over time, have fallen relative to other codes whose RVUs have increased and as a consequence of new technologies that have been introduced into coverage with relatively high RVUs. CMS is required to review the RVUs no less than every five years. Under this proposal, the Secretary would periodically identify and make appropriate adjustments to the relative values for the services identified as being potentially misvalued. The Secretary would examine the following, as appropriate: (1) codes (and families of codes as appropriate) for which there has been the fastest growth; (2) codes (and families of codes as appropriate) that have experienced substantial changes in practice expenses; (3) codes for new technologies or services within an appropriate period (such as three years) after the relative values are initially established for such codes; (4) multiple codes that are frequently billed in conjunction with furnishing a single service; (5) codes with low relative values, particularly those that are often billed multiple times for a single treatment; (6) codes that have not been subject to review since the implementation of the RBRVS (the so-called 'Harvard-valued codes'); and (7) such other codes determined to be appropriate by the Secretary. According to CBO, this provision would increase outlays by approximately $100 million over the next five years (2010-2014) and $200 million over the next ten (2010-2019) . Sec. 1123. Payments for Efficient Areas. In certain circumstances, physicians receive an additional payment in addition to the Medicare fee schedule amount to encourage targeted activities. These bonuses, typically a percentage increase above the Medicare fee schedule amounts, can be awarded for a number of activities including reporting on quality measures, participating in electronic prescribing, or practicing in underserved areas. The bill would create a new incentive payment for physicians; providers delivering services in counties or equivalent areas in the United States that fall in the lowest 5% based on per capita spending for Medicare part A and part B services would receive an additional 5% payment for the Medicare Part B services. The Secretary would standardize per capita spending to eliminate the effect of geographic adjustments in payment rates. CBO estimates that an additional $ 4 00 million in outlays would be required by this provision, with all the spending occurring from 2011 to 2013. Sec. 1124. Modifications to the Physician Quality Reporting Initiative (PQRI). The Tax Relief and Health Care Act of 2006 (TRHCA, P.L. 109-432 ) required the establishment of a physician quality reporting system (the Physician Quality Reporting Initiative, PQRI) that would include an incentive payment to eligible professionals who satisfactorily report data on quality measures. MIPPA made this program permanent and extended the bonuses through 2010; the incentive payment was increased from 1.5% of total allowable charges under the physician fee schedule in 2007 and 2008 to 2% in 2009 and 2010. The bill would modify the PQRI to include a feedback program for physicians, integrate PQRI and electronic health record (EHR) reporting, and extend the years of bonus payments. Not later than January 1, 2011, the Secretary would develop and implement a mechanism to provide timely feedback to eligible professionals on the performance of the eligible professional with respect to satisfactorily submitting data on quality measures under the PQRI program. The bill would integrate physician quality reporting under the PQRI and EHR reporting relating to the meaningful use of EHR. The integration would consist of the following (1) the development of measures that would both demonstrate meaningful use of an electronic health record for purposes of EHR reporting and provide information on the clinical quality of the care furnished to an individual; ( 2) the collection of health data to identify deficiencies in the quality and coordination of care for Medicare beneficiaries; and (3) other activities as specified by the Secretary. The Secretary would develop such a plan no later than January 1, 2012. Incentive payments under the PQRI program would be extended through 2012; for each of the years 2009 through 2012, the bonus would be 2% of Part B payments. According to the CBO, this provision would require an additional $ 500 million in 2012 and $800 m illion in 2013. Sec. 1125. Adjustment to Medicare Payment Localities. The Medicare fee schedule pays providers differently according to the geographic location, known as a Medicare physician payment locality, in which the provider practices. By construction, the costs of providing physician services were relatively consistent within each payment locality at the time when they were defined; sub-regions of a state were designated as separate payment localities only if the data showed a marked difference between the costs in that area compared with the rest of the state. Economic conditions have affected parts of the country differently in the years since the payment localities were created. If localities were to be created based on data from recent years using the original methodology, the resulting number and composition of the payment localities might not be the same as the ones that currently exist. The bill would alter the payment localities in the state of California used as the basis for the geographic adjustment of Medicare physician payments. Under the proposal, payments to California physicians would transition from a system based on the current localities to one based on Metropolitan Statistical Areas (MSAs) for services furnished on or after January 1, 2011. The provision includes a hold harmless condition that would require that no geographic adjustments be reduced below the index in effect on Dec. 31, 2010 during the first five years of the transition from the former county-based payment localities to the MSA-based fee schedule areas. The new fee schedule areas would be subject to periodic review and adjustments. CBO estimates that these changes would require an additional $200 million over the next five years (2010-2014) and $300 over the next ten (2010-2019). Sec. 1131 . Incorporating Productivity Improvements into Market Basket Updates That Do Not Already Incorporate Such Improvements . Payments for certain durable medical equipment (DME) in specific areas may be established by competitive bidding, but generally, Medicare pays for certain medical services and supplies using different prospective payment systems or fee schedules. Each year, the Medicare program, often directed by Congress, addresses the issue of whether or how much to increase payments. Under this provision, starting in CY2010, Medicare's annual updates for hospital outpatient department services, ambulance services, ambulatory surgical center services, clinical laboratory services would be subject to the productivity adjustment established earlier in the legislation The productivity adjustment would apply to DME payments starting June 2013. The CBO s core is -$ 9 . 2 billion for FY2010-FY2014 and -$4 2.1 billion for FY2010-FY20 19 . Sec. 1141. Rental and Purchase of Power-driven Wheelchairs. Medicare pays for new or replacement power-driven wheelchairs in one of two ways: either Medicare will pay the supplier a monthly rental amount during the beneficiary's period of medical need (not to exceed 13 continuous months), or, payment is made on a lump-sum basis at the time the supplier furnishes the chair. Power wheelchairs are classified into 3 broad groups based on their reported performance in categories such as speed, range of travel and the height of the vertical obstruction they can climb. This provision would restrict the 'lump-sum' payment provision for new and replacement power-driven wheelchairs to those recognized by the Secretary as classified within group 3 or higher. The provision would be effective for chairs furnished on or after January 1, 2010, but would not apply to areas where the payments for Medicare DMEPOS are based on the competitive bids of suppliers where bids had been submitted before October 1, 2010. The CBO score is -$0.6 billion for FY2010-FY2014 and -$0.8 billion for FY2010-FY2019. Sec. 1141A. Election to Take Ownership, or to Decline Ownership, of a Certain Item of Complex Durable Medical Equipment After the 13-Month Capped Rental Period Ends. Pressure reducing support surfaces are used for the care or prevention of pressure ulcers or bedsores and are a covered Medicare Part B DME benefit. For beneficiaries that fulfill coverage criteria for a pressure reducing support surface, Medicare will pay the supplier a monthly rental amount during the beneficiary's period of medical need (though payments are not to exceed 13 continuous months). On the first day after the 13 th continuous month of rental payments, the supplier of the item is required to transfer title of the item to the beneficiary. After the supplier transfers title to the beneficiary, Medicare pays for maintenance and servicing for parts and labor not otherwise covered under a manufacturer's warranty if the Secretary determines that payments are reasonable and necessary. Payment amounts for such maintenance and services are determined by the Secretary. Support surfaces come in different categories. A group 3 support surface is a complete bed system known as air-fluidized beds. It simulates the movement of fluid by circulating filtered air through silicone-coated ceramic beads. This provision would eliminate the automatic transfer of title of group 3 support surfaces to beneficiaries after 13 months of continuous use. Effective upon enactment, this provision would require DME suppliers, during the 10 th continuous month of rental, to offer the beneficiary the option to accept or reject the transfer of title to a group 3 support surface after the 13 th month of rental. The beneficiary would be deemed to reject the title, unless it was accepted within one month of the offer. If the individual accepted the title, it would be transferred on the first day that begins after the 13 th month of continuous rental. If on the effective date of this legislation, the individual's rental period has exceeded 10 continuous months, but has not reached the first day after the 13 th month of continuous rental, the supplier would be required to offer the beneficiary the option to reject or accept title to the group three support surface. The supplier would be required to do so within 1 month of the effective date. The beneficiary has one month to accept or reject the title. The beneficiary is deemed to reject the title unless it is accepts the title. The provision would require the supplier to continue to supply the support surface for the reasonable useful lifetime of the surface without charge if the beneficiary rejects the transfer of title but continues to require the support surface. Reasonable and necessary maintenance and servicing not otherwise covered by a manufacturer's warranty would be covered by Medicare, as under current law. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1142 . Extension of Payment Rule for Brachytherapy . As required by MMA, Medicare's outpatient prospective payment system make separate payments for specified brachytherapy sources. As mandated by TRHCA, this separate payment will be made using hospitals' charges adjusted to their costs until January 1, 2008. MMSEA extended cost reimbursement for brachytherapy services until July 1, 2008. MMSEA also specified that therapeutic radiopharmaceuticals will be paid using this methodology for services provided on or after January 1, 2008, and before July 1, 2008. MIPPA extended cost reimbursement for brachytherapy and therapeutic radiopharmaceuticals until January 1, 2010. The provision would extend cost reimbursement for brachytherapy and therapeutic radiopharmaceuticals until January 1, 2012. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1143. Home Infusion Therapy Report to Congress. Infusion therapy involves the administration of medication through a needle or a catheter. If a physician determines that it is medically appropriate for a particular patient, some infusion therapies may be provided in a patient's home. Infusion drugs administered in a patient's home are covered under the Medicare Part D drug benefit. Medicare Part D does not, however, cover supplies, equipment or professional services associated with home infusion therapy. The provision would require MedPAC to analyze the scope of infusion therapy services provided under specified programs, the benefits and costs of providing coverage under Medicare, and analysis of how payment for such services could be structured. MedPAC is to submit a report to Congress not later than July 1, 2011. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1144 . Require Ambulatory Surgical Centers (ASCs) to Submit Cost Data and Other Data . Ambulatory surgery centers (ASCs) must meet certain health, safety, and other specified standards in order to participate in Medicare. ASCs have never been required to submit cost reports. In March 2009, MedPAC recommended that Congress require ASCs to submit cost data and quality data that would allow for an effective evaluation of the adequacy of Medicare's payment rates. The provision would require ASCs to submit information on their facility costs as a condition for agreeing to participate in Medicare beginning 18 months after the date the Secretary develops the cost reporting form. No later than three years from enactment, an ASC cost reporting form would be developed taking into account the hospital cost reporting requirements. The ASC cost reports would be periodically audited. The requirements would apply to agreements applicable to cost reporting periods. Starting 2012, ASCs would be required to report quality data, including data on health care associated infections. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY20 19 . Sec. 1145 . Treatment of Certain Cancer Hospitals . Eleven cancer hospitals are exempt from the IPPS used to pay inpatient hospital services provided by acute care hospitals. Historically, they have been paid on a reasonable cost basis, subject to certain payment limitations and incentives. These hospitals are also held harmless under the outpatient prospective payment system (OPPS) and will not receive less from Medicare under this payment system than under the prior outpatient payment system. Under OPPS, Medicare pays for outpatient services using ambulatory payment classification (APC) groups. The Secretary would be required to determine if the costs incurred by cancer hospitals with respect to APCs exceed those costs incurred by other hospitals reimbursed under OPPS. If so, cancer hospitals would receive APC payments with an appropriate adjustment for outpatient services furnished starting January 1, 2011. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY20 19 . Sec. 1146 . Payment for Imaging Services. Under the Medicare fee schedule, some services have separate payments for the technical component and the professional component. Medicare pays for each of these components separately when the technical component is furnished by one provider and the professional component by another. When both components are furnished by one provider, Medicare makes a single global payment that is equal to the sum of the payment for each of the components. Imaging procedures generally have two parts: the actual taking of the image (the technical component), and the interpretation of the image (the professional component). CMS's method for calculating the Medicare fee schedule reimbursement rate for advanced imaging services assumes that imaging machines are operated 25 hours per week, or 50% of the time that practices are open for business. Setting the equipment use factor at a lower—rather than at a higher—rate has led to higher payment for these services. Citing evidence showing that the utilization rate is 90%, rather than the 50% previously assumed, MedPAC is urging CMS to use the higher utilization rate in the calculation of fee schedule payments for advanced imaging services. The bill proposes to increase the utilization rate for calculating the payment for advanced diagnostic imaging equipment from 50% to 75%; this would result in a decrease in the payment. In addition, for single session imaging involving continuous body parts, the proposal would reduce the technical component fees for additional imaging services to 50% to reflect efficiency. These modifications would apply to services furnished on or after January 1, 2011. The CBO score is -$1.3 billion for FY2010-FY2014 and -$3.4 billion for FY2010-FY2019. Sec. 1147. Durable Medical Equipment Program Improvements. This provision modified requirements for surety bonds, oxygen equipment and accreditation. The CBO score for Section 1147 is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Surety Bond : The Secretary can not issue or renew a Medicare provider number for payment of Medicare durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) claims unless the supplier provides the Secretary with a surety bond of not less than $50,000. The final regulation exempts certain individuals from the requirement, including certain physicians and non-physician practitioners, physical and occupational therapists, state-licensed orthotic and prosthetic personnel, and government-owned suppliers. This provision would waive the surety bond requirement for a pharmacy or supplier that exclusively furnishes eyeglasses or contact lenses, or a pharmacy or supplier that (1) supplies durable medical equipment, prosthetics, orthotics, and supplies, (2) has been issued a provider number for at least five years, and (3) has not received an adverse action. Oxygen Equipment : Medicare makes rental payments for oxygen equipment. The monthly payments are made for the period of medical need, not to 36-months. The statute requires suppliers to continue furnishing the equipment during any period of medical need for the remainder of the reasonable useful lifetime of the equipment, which is defined by the Secretary as five years (or 60 months). This provision would modify the time period during which the supplier would be required to furnish medically necessary oxygen and oxygen equipment. As of the 27 th month of the 36 month rental period, the supplier furnishing the equipment would be required to continue furnishing the equipment (either directly or through arrangements with other suppliers) during any subsequent period of medical need for the remainder of the reasonable useful lifetime of the equipment regardless of the location of the individual, unless another supplier accepted the responsibility to furnish equipment during the remainder of the period. This provision would apply to equipment furnished to individuals for whom the 27 th month of a continuous period of use occurred on or after July 1, 2010. This provision would also allow a beneficiary to begin a new 36 month rental period if the supplier who had been furnishing oxygen and oxygen equipment to the beneficiary was declared bankrupt and its assets were liquidated and at the time of the declaration and liquidation more than 24 months of rental payments had been made. Accreditation: MMA required the Secretary to establish and implement quality and accreditation requirements for Medicare suppliers of DMEPOS. MIPPA exempted a group of health care professionals from having to become accredited unless the Secretary determined the standards were designed specifically to be applied to those professionals. The Secretary was given authority to exempt other professionals from the accreditation. This provision would exempt pharmacies enrolled as Medicare DMEPOS suppliers from the accreditation requirement for the purposes of supplying diabetic testing supplies, canes, and crutches. Any supplier that had submitted an application for accreditation before August 1, 2009 would retain their Medicare provider or supplier number until an accreditation organization had determined compliance with the accreditation requirement. Section 114 8 . MedPAC Study and Report on Bone Mass Measurement. The Medicare Payment Advisory Commission would conduct a study regarding bone mass measurement, including computed tomography, duel-energy x-ray absorptriometry, and vertebral fracture assessment. The study would focus on the following: (1) an assessment of the adequacy of Medicare payment rates for such services, taking into account costs of acquiring the necessary equipment, professional work time, and practice expense costs; (2) the impact of Medicare payment changes since 2006 on beneficiary access to bone mass measurement benefits in general and in rural and minority communities specifically; (3) a review of the clinically appropriate and recommended use among Medicare beneficiaries and how usage rates among such beneficiaries compares to such recommendations; and (4) in conjunction with the findings under (3), recommendations, if necessary, regarding methods for reaching appropriate use of bone mass measurement studies among Medicare beneficiaries. Not later than 9 months after enactment, the Commission would submit a report to the Congress containing a description of the results of the aforementioned study and the conclusions and recommendations, if any, regarding each of the issues described above . The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1149. Timely Access to Post-Mastectomy Items. A breast prosthesis is covered by Medicare Part B for a patient who has had a mastectomy. An external breast prosthesis garment, with mastectomy form is covered for use in the postoperative period prior to a permanent breast prosthesis or as an alternative to a mastectomy bra and breast prosthesis. The breast prosthesis and garment are not covered by Medicare prior to the mastectomy or breast cancer surgery as there is no medical need for the items. By not later than January 1, 2011, the provision would specify that payment for post-mastectomy external breast prosthesis garments would be made regardless of whether the items are supplied to the beneficiary prior to or after the mastectomy procedure or other breast cancer surgical procedure. The Secretary would be required to develop policies to ensure appropriate beneficiary access and utilization safeguards. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1149A. Payment for Biosimilar Biological Products. A biologic is a preparation, such as a therapeutic product or a vaccine, that is made from living organisms. Medicare Part B pays for a limited number of drugs and therapeutic products, including biologics, administered to patients in physician offices and hospital outpatient departments, or those administered through durable medical equipment (DME) and billed by pharmacy suppliers. CMS assigns a Healthcare Common Procedure Coding System (HCPCS) code to each drug, and Medicare payments for Part B drugs are based on the average sales price (ASP) for each HCPCS code. CMS uses the same HCPCS code for all drug products listed as therapeutically equivalent in FDA's Orange Book . Therefore, a brand-name drug and any generic versions of the same drug would have the same HCPCS code and the prices would be averaged together for ASP determinations. Under this provision interchangeable biological products and their reference biological product would be included in the same billing and payment code and reimbursed at ASP, determined using the methodology for multiple source Part B drugs, plus 6% of this ASP. A biosimilar product would be reimbursed at ASP, using the methodology applied to single source drugs, plus 6% of this ASP or 6% of the ASP for the reference biological product. If a biological product is the reference product for both an interchangeable biological product and a biosimilar product, its reimbursement would be based on the ASP methodology (plus 6%) used for multiple source drugs. An interchangeable biological product would mean a biologicial product licensed as an interchangeable biological product under the Public Health Service Act (PHSA), and a biosimilar biological product would be defined as a biological product licensed as a biosimilar biological product under the PHSA. The term "reference biological product" would mean the licensed biological product that is referred to in the application for the biosimilar or interchangeable biological product. This provision assumes enactment of Section 2575 of the Act which would expand the regulatory activities of FDA by opening a licensure pathway for the approval of biosimilars. The CBO score (combined with Section 2575) is -$0.1 billion for FY2010-FY2014 and -$6.2 billion for FY2010-FY2019. Sec. 1149B. Study and Report on DME Competitive Bidding Process. Medicare Part B covers a wide variety of durable medical equipment, prosthetics, orthotics, and other medical supplies (DMEPOS) if they are medically necessary and are prescribed by a physician. Medicare pays for most DME on the basis of a fee schedule. The Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA, 108-173) required the Secretary to establish a competitive acquisition program for specified durable medical equipment; the competitive acquisition program is to use payments based on suppliers ' bids to replace the Medicare fee schedule payments. The program is to be phased-in, starting in nine of the largest metropolitan statistical areas (MSAs) in 2009 (round 1); expanding to an additional 70 of the largest MSAs in 2011 (round two) and remaining areas after 2011. This provision would require the Comptroller General of the United States to conduct a study to evaluate the potential establishment of a program under Medicare to acquire DMEPOS through a competitive bidding process among manufacturers of medical equipment and supplies. The study would be required to address (1) identification of appropriate types of DME for the program, (2) recommendations of the structure of an acquisition program to promote fiscal responsibility and beneficiary access, (3) recommendations on how to phase-in a program and on what geographic level, (4) recommendations on criteria (in addition to price) that could be factored into the bidding, (5) recommendations on how suppliers could be compensated for furnishing and servicing equipment and supplies acquired in the program, (6) comparison of such program to the current Medicare DMEPOS competitive acquisition program, as well as other federal acquisition programs, and (7) other relevant considerations. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019 . Sec. 1151. Reducing Potentially Preventable Hospital Readmissions. Medicare pays for most acute care hospital stays using a prospectively determined payment for each discharge. Payment also depends on the relative resource use associated with a patient classification group, referred to as the Medicare Severity diagnosis related groups (MS-DRGs), to which the patient is assigned. Medicare's IPPS includes adjustments that reflect certain characteristics of the hospital, such as the wage index of the area where the hospital is located or where it has been reassigned, its teaching hospital status and DSH status. Hospitals in Maryland are not paid using IPPS; rather they receive Medicare payments based on a state-specific Medicare reimbursement system. Critical Access Hospitals (CAHs) are limited-service facilities that are located more than 35 miles from another hospital (15 miles in certain circumstances) or designated by the state as a necessary provider of health care; offer 24-hour emergency care; have no more than 25 acute care inpatient beds; and have a 96-hour average length of stay. Medicare pays CAHs on the basis of 101% of the reasonable costs of the facility for inpatient and outpatient services. Certain aspects of the CAH payment system are not subject to administrative or judicial review. According to MedPAC's analysis of 2005 Medicare data, 6.2% of hospitalizations of Medicare beneficiaries resulted in readmission within 7 days and 17.6% of hospitalizations resulted in readmission within 30 days. The 17.6% of hospital readmission accounts for $15 billion in Medicare spending. These readmission rates reflect the total number of readmissions, including those that may not have been related to the initial diagnosis and may not have been preventable. MedPAC, CMS, and others have expressed concern that providers do not have financial incentives to reduce potentially preventable readmissions. In addition, MedPAC, in its June 2008 report, recommended that Medicare's payments to hospitals with relatively high readmission rates for select conditions be reduced. Penalties for Hospitals IPPS hospitals and acute care hospitals in Maryland would receive reduced payments for potentially preventable hospital readmissions occurring on or after October 1, 2011. Reduced hospital payments for readmissions would be calculated by multiplying the base operating DRG payment amount by an adjustment amount. The base operating DRG payment amount is the base amount that would have been paid under IPPS reduced by payments associated with indirect medical education and DSH payments. In the case of hospitals in Maryland, the base amount would be the payment amount under their state system. The adjustment factor for a hospital in a fiscal year would be the greater of (1) a floor adjustment factor equal to a reduced percentage of the discharge payment or (2) the excess readmissions ratio for the applicable fiscal year. The floor adjustment factor would be 0.99 of the discharge payments in FY2012, 0.98 of the discharge in FY2013, 0.97 in FY2014; or 0.95 in subsequent fiscal years. The excess readmissions ratio would equal 1 minus the ratio of the aggregate payments for excess readmissions for the hospital divided by the aggregate payments for all discharges. (Each component of this formula is specified in the provision.) Beginning with discharges for FY2014, the Secretary would be able to provide additional incentives for hospitals to reduce their potentially preventable readmission rates (by ranking hospitals by readmission ratios from lower to higher readmissions and establishing a benchmark that is lower than the 50 th percentile). An applicable condition would be defined as a condition or procedure that represents high volume (above a minimum threshold) or high expenditures for Medicare or meets other specified criteria that also satisfies certain measures of readmissions (that have been endorsed by a consensus-based entity). Readmissions would be defined as an admission to the hospital of an individual who had been discharged from either the same or another applicable hospital within a specified time period from the date of discharge. Starting in FY2012, the Secretary would select 3 applicable conditions that have been endorsed by the consensus based entity as of the date of enactment. Beginning with FY2013, the Secretary would be required to expand the list of applicable conditions to include 4 conditions identified by the MedPAC in its June 2007 Report to Congress . The Secretary would also be able to extend it to other conditions including an appropriate all-condition measure of readmissions. In expanding the list of conditions, the Secretary would be required to seek the endorsement by a consensus-based entity, but would be able to apply such conditions without such endorsement. Hospital activities would be monitored to determine if the hospitals took the steps to avoid patients at risk for readmissions. Such activities could be sanctioned, after appropriate notice and opportunity for the hospital to redress these actions. Starting in FY2011, targeted hospitals that had at least a 30% disproportionate share patient percentage using the latest available data could receive increased payments for activities designed to address patient noncompliance issues including transitional care activities. Transitional care services would be defined as activities furnished by a qualified provider, who meets relevant experience and training requirements, that support a beneficiary beginning at admission and ending no later than 90 days from discharge. Services would include assessments and development of an evidence based transitional care plan with such other activities as: care coordination services; hiring translators and interpreters; increasing discharge planning services among other actions. The payment increase would be subject to aggregate and hospital-specific caps. In the aggregate, payment increases would not exceed 5% of the estimated savings attributed to the hospital readmission policy in a fiscal year. A specific hospital would not receive more than the estimated difference attributed to the excess readmissions policy. The Secretary would make these additional payments on a lump sum basis, a periodic basis, a claim by claim basis or in any other form deemed appropriate. Not later than three years after funds are first made available, GAO would be required to submit a report on the use of such funds. No administrative or judicial review could be conducted of the determination of the base operating DRG amounts; the methodology for determining the excess readmission adjustment factor and its various components (excess readmissions ratio, aggregate payments for excess readmissions and aggregate payments for all discharges, applicable conditions, and applicable periods); measures of readmissions; the determination of a targeted hospital for additional payments, the increase in payments, the aggregate cap, the hospital-specific limit, and the form of the additional payment. Application to Critical Access Hospitals (CAHs) . Starting for cost reporting periods beginning in FY2012, CAHs would receive reduced payments for preventable hospital readmissions. The adjustment factor for acute care hospitals would be applied. The methodology for determining the adjustment factor, including the determination of aggregate payments for actual and expected readmissions, applicable periods, applicable conditions and measures of readmission would not be subject to administrative or judicial review. Application to Post - Acute Care Providers. The proposal would also reduce Medicare payments on claims from post-acute care providers (SNFs, IRFs, HHA, and LTCHs) for patients readmitted to an applicable hospital or a CAH within 30 days of an initial discharge from a hospital or a CAH. The day of admission or first day of post-acute care would not be included. Payments to post-acute providers would be reduced by 0.996 for the fiscal year or rate year 2012; 0.993 for the fiscal or rate year 2013; and 0.99 for fiscal or rate year 2014. This policy would apply to the discharges or services starting the first day of the fiscal or rate year starting October 1, 2011, depending upon the providers' Medicare rate setting schedule. The Secretary would be required to develop appropriate measures of readmissions rates for post-acute care providers and to submit such measures for endorsement through a consensus-based entity. The Secretary would be required to adopt, expand and apply such measures, in the same manner as for applicable hospitals established earlier in the legislation. To the extent such measures would be adopted, the Secretary would adopt similar payment policies for post-acute providers on or after October 1, 2013 that have been established for applicable hospitals and CAHs earlier in this proposed legislation. Post-acute providers would also be subject to the monitoring and penalties established for applicable hospitals and CAHs earlier in this proposed legislation. Physicians . The Secretary would be required to conduct a study to determine how this readmissions policy could be applied to physicians and issue a public report no later than one year after enactment. Such approaches would be required to be considered: (1) creating a code (or codes) and budget neutral payment amount(s) under the fee schedule for services furnished by an appropriate physicians who sees an individual within the first week after discharge from a hospital or CAH.; (2) developing measures of readmissions rates for individuals treated by physicians; (3) applying a payment reduction for physicians who treat the patient during the initial admissions that results in a readmission; and (4) methods for attributing payments or payment reductions to the appropriate physician or physicians. Funding . In addition to funds otherwise available, $25 million for each fiscal year beginning with 2010 would be appropriated to the CMS Program Management Account; the amounts appropriated for a fiscal year would be available until expended. The CBO score is -$ 2 . 0 billion for FY2010-FY2014 and -$ 9 . 3 billion for FY2010-FY20 19 . Sec. 1152. Post- Acute Care Services Payment Reform Plan and Bundling Pilot Program. Medicare pays for most post-acute care (PAC) services, including skilled nursing facilities (SNF), long-term care hospitals (LTCH), inpatient rehabilitation facilities (IRF), and home health, under prospective payment systems (PPS) established for each type of provider. Payments across PAC settings may differ considerably even though the clinical characteristics of the patient and the services delivered may be very similar. The Deficit Reduction Act of 2005 ( P.L. 109-171 ) required the Centers for Medicare and Medicaid Services (CMS) to develop a Post Acute Care Payment Reform Demonstration (PAC demonstration) to standardize patient assessment information from PAC settings and to use these data to guide payment policy in the Medicare program. This demonstration began in 2008 and a report is expected to be submitted to Congress by the Secretary in 2011. CMS has also established a three-year Acute Care Episode (ACE) Demonstration to test the effects of using a bundled payment for hospital and physician services for a set of 9 orthopedic and 28 cardiovascular conditions. There are five participants in the ACE demonstration which began early in 2009. The provision would require the Secretary to develop a detailed plan for bundling payments for Medicare's PAC services (SNFs, IRFs, LTCHs, hospital based outpatient rehabilitation facilities, and home health agencies services) provided after discharge from a hospital and as determined appropriate by the Secretary. The goals of this payment reform would be to improve the coordination, quality and efficiency of PAC services and improve outcomes for individuals such as reducing the need for readmission to hospitals from providers. In addition to funds otherwise available, out of any funds in the Treasury not otherwise appropriated, there would be appropriated to the Secretary, $15 million for each of FYs 2010 through 2012. Such amounts would be required to be available until expended. In addition to issuing interim public reports, The Secretary would be required to issue a final public report on this plan no later than three years after this Act's enactment. This provision would also require the Secretary, by no later than January 1, 2011 to convert the acute care episode demonstration into a pilot program and expand it to include post-acute services and such other services the Secretary determines to be appropriate. Under this pilot program, the Secretary could apply bundled payments to: (i) hospitals and physicians; (ii) hospitals and post-acute-care providers; (iii) hospitals, physicians, and post-acute care providers; or (iv) combinations of post-acute providers. Bundled payments would be applied in manner as to include collaborative care networks and continuing care hospitals, as defined by the legislation. The Secretary could expand the demonstration program if it increases quality of care and reduces program expenditures. Secretary would also be required to provide a study of and development of a plan, that could be implemented by the Secretary in a demonstration, to test additional ways to increase bundling of payments for physicians in connection with an episode of care. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1153. Home Health Payment Update for 2010. HHAs are paid under a PPS in which payments are based on 60-day episodes of care for beneficiaries, subject to several adjustments, with unlimited episodes of care in a year. The payment covers skilled nursing, therapy, medical social services, aide visits, medical supplies, and others. Durable medical equipment is not included in the home health PPS. The base payment amount, or national standardized 60-day episode rate, is increased annually by an update factor that is determined, in part, by the projected increase in the home health market basket (MB) index. This index measures changes in the costs of goods and services purchased by HHAs. For CY 2010, the HH MB is expected to be 2.2%. Starting in 2007, HHAs were required to submit to the Secretary health care quality data. A HHA that does not submit the required quality data now receives an update of the MB minus two percentage points. This reduction only applies to the fiscal year in question. The provision would eliminate the MB update for home health payments for 2010. Home health agencies would still be subject to the requirement to submit required quality data in subsequent years. Subject to another provision regarding a productivity adjustment, payments for HHAs would be increased by the HH MB percentage change for the fiscal year involved for each subsequent fiscal year. For home health provisions 1153 through 1155, the CBO score is -$16.7 billion for FY2010 -FY2014 and -$56.7 billion for FY2010-FY2019. Sec. 1154. Payment Adjustments for Home Health Care. HHAs are paid under a PPS. Payment is based on 60-day episodes of care for beneficiaries, subject to several adjustments, with unlimited episodes of care in a year. In calendar year (CY) 2008, CMS made refinements to the PPS that resulted in payment reductions established in 42 CFR §484.220 as described in the Federal Register issued on August 29, 2007 (72 FR 49879). This regulation established changes to the HHA case-mix index to account for the relative resource utilization of different patients. These changes modified the coding or classification of different units of service that do not reflect real changes in case-mix. As a result, the national prospective 60-day episode payment rate was adjusted downward by 2.75% for CY2008; by 2.75% for each calendar year 2009 and 2010, and by 2.71% for CY2011. The proposed rule for CY 2010 would continue with the previously promulgated 2.75% reduction to the HH PPS rates in CY 2010. It would also cap outlier payments at 10% of total HH PPS payments, update the fixed dollar loss ratio to 0.67, and target outlier payments to be no more than 2.5% of total HH PPS payments. The provision would accelerate the case-mix adjustments by implementing both the planned CY2011 adjustment of 2.71% and the planned CY2010 of 2.75% at the same time in CY2010, for a total CY2010 downward adjustment of 5.46%. These adjustment amounts would not be limited if more recent data were to indicate that a greater adjustment would be appropriate. Starting in 2011, PPS amounts would be adjusted by a uniform percentage determined appropriate by the Secretary and based on analysis of certain factors. After 2011, such amounts would be required to be equal to the amount paid for the previous year updated by the HH MB. If the Secretary is not able to compute the changed prospective payment amounts for 2011 on a timely basis, then the Secretary would be required to pay 95% of what the prospective payment amount would have been had this provision not applied and to compare, before July 1, 2011, amounts paid to amounts that would have been paid had the Secretary been able to compute the adjustment on a timely basis. For 2012, the Secretary would be required to decrease or increase the prospective payment amount (or at the Secretary's discretion, over a period of several years beginning with 2012), by the amount (if any) by which the amount applied is greater or less, respectively, than the amount that should have been applied. For home health provisions 1153 through 1155, th e CBO score is -$16.7 billion for FY2010 -FY2014 and -$56.7 billion for FY2010-FY2019. Sec. 1155. Incorporating Productivity Improvements Into Market Basket Update For Home Health Services. Home health agencies (HHAs) are paid under a prospective payment system (PPS). The base payment amount, or national standardized 60-day episode rate, is increased annually by an update factor that is determined, in part, by the projected increase in the home health MB index. This index measures changes in the costs of goods and services purchased by HHAs. HHAs are required to submit to the Secretary health care quality data. A HHA that does not submit the required quality data will receive an update of the MB minus two percentage points. The provision would make annual updates by the HH MB, beginning with 2011, subject to a productivity adjustment as long as the annual update would not be less than zero. The productivity adjustment would equal the 10-year moving average of changes in annual economy-wide private non-farm business multi-factor productivity. For home health provisions 1153 through 1155, t he CBO score is -$16. 0 billion for FY2010 -FY2014 and -$5 4 .7 billion for FY2010-FY2019. Sec. 1155A. MedPAC Study on Variation in Home Health Margins. In its March 2009 report, MedPAC reported that home health agencies experienced margins of 16.6 % in 2007, about equal to the average of 16.5% for 2002–2007. In its view, HHA margins (generally the difference between the cost of providing the services and Medicare payments received for those services) provide an indication of whether payment rates have been established and updated at an appropriate level for efficient providers to provide necessary services. Sustained substantial positive margins might indicate that the rates are excessive in the aggregate or for particular subgroups of providers. As a result, MedPAC concluded that home health payments should be significantly reduced in 2010 and payments rebased and revised in 2011 to ensure that Medicare does not continue to overpay home health providers. The provision would require MedPAC to conduct a study regarding variation in performance of HHAs to explain variation in Medicare margins across agencies. No later than June 1, 2011, the Commission would be required to submit a report to Congress on the results of the study, among other things. The CBO score is $0.0 billion for FY2010 -FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1155B. Permitting Home Health Agencies to Assign the Most Appropriate Skilled Service to Make the Initial Assessment Visit under A Medicare Home Health Plan of Care for Rehabilitation Cases. With some exceptions, Medicare regulations require a registered nurse to conduct an initial assessment visit of a HHA beneficiary to determine the immediate care and support needs of the patient, and, for Medicare patients, to determine eligibility for Medicare home health benefits, including whether the individual meets Medicare's requirement that he or she is homebound. One exception to this rule is applied when rehabilitation therapy services (speech, language pathology, physical therapy, or occupation therapy) is the only service ordered by the physician, and if the need for that service establishes program eligibility. In this case, the initial assessment visit may be made by the appropriate rehabilitation professional. The provision would allow HHAs to determine the most appropriate skilled therapist to make the initial assessment visit for an individual who is referred (and may be eligible) for home health services, but who does not require skilled nursing care as long as the skilled service (for which the therapist is qualified to provide) is included as part of the home health care plan. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1156. Limitation on Medicare Exception to the Prohibition on Certain Physician Referrals for Hospitals. Physicians are generally prohibited from referring Medicare patients for certain services to facilities in which they (or their immediate family members) have financial interests. However, among other exceptions, physicians are not prohibited from referring patients to whole hospitals in which they have ownership or investment interests. Providers that furnish substantially all of its designated health services to individuals residing in rural areas are exempt as well. Entities receiving Medicare payment for covered items and services are required to provide the information on the entities' ownership, investment, and compensation arrangements. This information includes the covered items and services provided by the entity, and the names and unique physician identification numbers of all physicians (or those whose immediate relatives) who have an ownership or investment interest, or certain compensation arrangements. Under this provision, only hospitals that met certain requirements would be exempt from the prohibition on self-referral. Hospitals (including rural providers) that have physician ownership and a provider agreement in operation on January 1, 2009 and that met other specified reporting and public disclosure requirements would be exempt from this self-referral ban. The percentage of the total ownership or investment held in the hospital (or in an entity whose assets include the hospital) by physician owners or investors in the aggregate would not be able to exceed such percentage as of the date of enactment. With certain exceptions, the number of operating rooms, procedure rooms, or beds of the hospital would not be able to increase after the enactment date. The hospital could not have converted from an ambulatory surgical center to a hospital after enactment. Information provided by hospitals would be published and periodically updated on the Internet website of the Centers for Medicare and Medicaid Services (CMS). Any person who fails to meet required reporting and disclosure requirements would be subject to a civil monetary penalty of not more than $10,000 for each day for which reporting is required to have been made or for each case in which disclosure is required to have been made. Exempt hospitals would ensure bona fide ownership and investment by meeting certain requirements. Generally, any ownership or investment interest offered to a physician could not be offered on more favorable terms than those offered to a person who is not in a position to refer patients or otherwise generate hospital business. Other restrictions would apply. To ensure patient safety, those exempt hospitals that do not offer emergency services would have to have the capacity to provide assessment and initial treatment for medical emergencies as well as the ability refer and transfer the patient with the medical emergency to an appropriate hospitals. Hospitals that do not have any physician available on the premises 24 hours per day, 7 days a week must disclose such a fact to the patient before admitting the patient and receive a signed acknowledgement from the patient. The Secretary would retain the ability to terminate a hospital's provider agreement if the hospital is not in compliance with Medicare's conditions of participation. With certain exceptions, exempt hospitals would not be permitted to increase the number of operating rooms, procedure rooms or beds after the date of enactment. A process would be established to allow certain hospitals meeting specific requirements to expand. Fewer requirements would apply to those hospitals that had the highest percentage of Medicaid admissions in comparison to any other hospital in the county. Any capacity increase would be limited to facilities on the main campus of the hospital and could not exceed 200% of the number of operating rooms, procedure rooms and beds at the time of enactment. The Secretary would be required to promulgate regulations establishing the appeal process no later than the first day of the month beginning 18 months after the date of enactment, The appeal process would be implemented one month after the date of regulations are promulgated. The final decision regarding an expansion request will be posted on the CMS website of no later than 120 days after a complete application is received. There shall be no administrative or judicial review of this process. The Secretary would be required to establish policies and procedures to ensure compliance with these requirements. The enforcement efforts would be able to include unannounced site reviews of hospitals. Starting in FY2010, $5 million would be appropriated in each fiscal year to carry out this section. Appropriated funds would be available until expended. The CBO score is -$ 0 . 3 billion for FY2010-FY2014 and -$1. 0 billion for FY2010-FY20 19 . Sec. 1157. Institute of Medicine Study of Geographic Adjustment Factors Under Medicare. Generally, Medicare's payment systems include adjustment factors to account for the geographic differences in the costs of providing health care services. For example, Medicare's physician fee schedule (which with modifications is used to reimburse other health care practitioners) uses the geographic practice cost index (GPCI) for this purpose; Medicare's IPPS uses a hospital wage index to adjust payments for acute care hospitals. With modifications, the IPPS wage index is used to calculate payments for inpatient rehabilitation hospitals, inpatient psychiatric hospitals, long term care hospitals, skilled nursing facilities, and home health agencies. Under this provision, the Secretary would enter into a contract with the Institutes of Medicine of the National Academy of Sciences (IOM) to conduct an empirical study with appropriate recommendations on the accuracy of the geographic adjustment factors established for Medicare's physician fee schedule and for Medicare's IPPS The study would also examine the effect of the adjustment factors on the level and distribution of the health workforce within the United States as well as the effect of the adjustment factors on population health, quality of care, and the ability of providers to furnish efficient, high value care. The IOM report would be submitted to the Secretary and to Congress no later than one year from enactment. Necessary funds would be authorized to be appropriated to carry out this study. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY20 19 . Sec. 1158 . Revision of Medicare Payment Systems to Address Geographic Inequities. Generally, Medicare's payment systems include adjustment factors to account for the geographic differences in the costs of providing health care services. In the previous section, IOM was required to conduct a study of the GPC used to adjust Medicare's physician fee schedule and the hospital wage index used in Medicare's IPPS. With modifications, Medicare's physician fee schedule and the hospital wage index are used to reimburse other practitioners and providers. Generally, the CMS promulgates changes to Medicare's physician fee schedule and IPPS through an annual rulemaking process where proposed changes and a notice of a public comment period are published in Federal Register with the final rule establishing the payment polices and responding to the public comments issued subsequently in the Federal Register. Medicare's IPPS and physician payments are on different payment years and therefore rulemaking schedules. Generally the new IPPS payment rates are effective October 1 st of each year and new physician fee schedule is effective as of January 1 st of each year. Under this provision, the Secretary would be required to take into account the IOM recommendations and include appropriate proposals to revise the respective geographic adjustments in the physician fee schedule and IPPS proposed rules. The proposals would be included in the next applicable rulemaking cycle after submission of the IOM report to the Secretary. The Secretary would be able to change the geographic adjustments accordingly. For payment years before 2014, the geographic adjustment would not be below that which applied in the payment system in the prior year. For payment years starting in 2014, the geographic adjustment would not be implemented in a way that would otherwise increase Medicare expenditures. Amounts in the Medicare Improvement Fund (MIF) would be available to fund these changes in the geographic factors for services before January 1, 2014; no more than half of the available funds would be spent in any one payment year. MIF would have $8 billion authorized for FY2011 to FY2019. Starting in FY2014, monies not used for the geographic adjustment would be returned to the MIF. The CBO score is $8. 7 billion for FY2010-FY2014 and $ 14.3 billion for FY2010-FY20 19 . Sec. 1159. Ins t itute of Medicine Study of Geographic Variation in Health Care Spending and Promoting High-Value Health Care. This provision would require the Secretary to enter into an agreement with the Institute of Medicine (IOM) of the National Academies to conduct a study on geographic variation and growth in volume and intensity of services in per capita health care spending among the Medicare, Medicaid, privately insured and uninsured populations. The IOM would then make recommendations for improving payments under fee-for-service Medicare, private insurance, and other programs by promoting "high value care," defined as the efficient delivery of high quality, evidence-based, patient-centered care. The IOM study would include evaluations or assessments of many variables pertinent to geographic variation, including (1) the extent of the geographic variation, (2) how much the geographic variation can be attributed to differences in input prices, health status, practice patterns, access to and supply of medical services, or to other factors, (3) the correlation between variations in spending and patient access to care, insurance status, distribution of health care resources, health care outcomes, and consensus-based measures of health care quality, (4) how much the variation can be attributed to physician and practitioner discretion in making treatment decisions, (5) the extent to which variation can be attributed to patient preferences and patient compliance with treatment protocols, (6) the degree to which variation cannot be explained by empirical evidence, (7) the extent to which variations in spending for Medicare beneficiaries are correlated with various indicators of insurance status, and (8) other factors as the IOM would deem to be appropriate. The IOM would take into account the study findings as well as the changes to the payment systems made by this Act and recommend changes to fee-for-service Medicare payments to address variation in Medicare per capita spending (not including add-ons for graduate medical education, disproportionate share payments, and health information technology). These recommendations would promote high value care with particular attention to high-volume, high-cost conditions. In making the recommendations, the IOM would specifically address whether Medicare payment systems for physicians and hospitals should be further modified to incentivize high-value care. In so doing, the IOM would consider the adoption of a value index based on a composite of appropriate measures of quality and cost that would adjust provider payments on a regional or provider-level basis. If the Institute were to find that application of such a value index would significantly incentivize providers to furnish high-value care, it would make specific recommendations on how such an index would be designed and implemented. In so doing, it would identify specific measures of quality and cost appropriate for use in such an index, and include a thorough analysis (including on a geographic basis) of how Medicare payments and spending would be affected by such an index. The IOM would submit a report containing findings and recommendations of the study to the Secretary and to each House of Congress not later than April 15, 2011. Following submission of the above report, the IOM would use the data collected and analyzed to issue a subsequent report, or series of reports, on how best to address geographic variation or efforts to promote high-value care for items and services reimbursed by private insurance or other programs. These reports would include a comparison to the IOM's findings and recommendations regarding the Medicare program. These reports, and any recommendations, would not be subject to the procedures outlined in section 1160. To carry out this section, $10 million would be authorized to be appropriated from the general fund of the Treasury. This amount would remain available until expended. The CBO score is minimal (less than $50 million) over the first five years and $0 over the second five years of the budget window. Sec. 1160 Implementation, and Congressional Review, of Proposal to Revise Medicare Payments to Promote High-Value Health Care. Section 1160 requires the Secretary of Health and Human Services to submit to each House of Congress a "Final Implementation Plan," proposing changes in payments for services under Medicare Parts A and B which are designed to promote "high value healthcare." The Secretary is further directed to promulgate regulations implementing these changes in the first rulemaking cycle beginning after a "congressional action deadline," unless a joint resolution of disapproval is enacted halting the process. The measure defines "congressional action deadline," as May 31, 2012, or, if later, the date that is 145 days after the date of receipt of the final implementation plan by each chamber of Congress. This section also establishes "fast track" parliamentary procedures governing House and Senate consideration of such a joint resolution of disapproval. These procedures are different from the parliamentary mechanisms the House and Senate normally use to consider most legislation, and are designed to ensure that Congress can act promptly to stop the regulations should it choose to do so. Section 1160 also includes provisions which are intended to facilitate the exchange of legislation between the House and Senate. If, before voting upon its own joint resolution of disapproval, one chamber receives a disapproval resolution passed by the other chamber, that engrossed legislation will automatically become the one which the receiving chamber acts on in lieu of its own. The CBO score is $0.0 billion for FY2010 -FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1161. Phase-in of Payment Based on Fee-for-Service Costs; Quality Bonus Payments. This provision modifies the calculation of Medicare Advantage benchmarks by reducing them to the level of per capita spending in original Medicare and increasing them for qualifying MA plans based on plan quality. The CBO score for Section 1161 is - $47.5 billion for FY2010-FY2014 and -$154.3 billion for FY2010-FY2019. Phase-in payment based on fee-for-service costs: Medicare Advantage (MA) is an alternative way for Medicare beneficiaries to receive covered benefits. Under MA, private health plans are paid a per-person amount to provide all Medicare-covered benefits (except hospice) to beneficiaries who enroll in their plan. Payments to MA plans are determined by comparing plan bids to a benchmark . Each bid represents the plan's estimated revenue requirement for providing required Medicare services to an average Medicare beneficiary. The benchmark is the maximum amount Medicare will pay a plan. If the plan bid is below the benchmark, the plan payment is the bid plus 75% of the difference between the bid and the benchmark. If the bid is above the benchmark, the plan payment is equal to the benchmark and each plan enrollee must pay a premium equal to the difference between the bid and the benchmark. MA benchmarks are based, in part, on historical Medicare private plan payment rates. BBA 97 increased payments to private plans above rates of per capita FFS costs in some areas. Subsequent legislation also increased payment rates to private plans. The historical payment rates were used as the basis for the benchmark amounts. As a result, current MA benchmarks exceed per capita FFS costs in some areas. This provision would phase-in MA benchmarks equal to per capita FFS spending in each county starting in 2011. Starting 2013, MA benchmarks would be equal to per capita FFS spending in each county. Benchmarks could not be less than per capita FFS spending. The provision would not apply to Programs of All-Inclusive Care for the Elderly (PACE). Quality bonus payment: Though all MA organizations are required to have a quality improvement program by January 1, 2010, under current law, payments to MA plans are not contingent on the quality of care provided to plan enrollees. Under this provision, starting in 2011, MA plans could receive an increase in their benchmark if they were a qualifying plan in a qualifying county. The benchmark increases would equal 1.5% in 2011, 3.0% in 2012 and 5.0% in subsequent years. A qualifying plan would have had a quality ranking (based on a quality ranking system to be established by the Secretary) of four stars or higher during a specified previous year. A qualifying county would be one, for a year, (1) that was within the lowest third of counties with respect to per capita spending in original Medicare, and (2) within which at least 20% of individuals were enrolled in MA. A plan could lose its quality bonus payment for non-compliance with MA rules. Sec. 1162. Extension of Secretarial Coding Intensity Adjustment Authority. Medicare payments to MA plans are risk-adjusted to account for the variation in the cost of providing care. DRA required the Secretary to adjust for patterns of diagnosis coding differences between MA plans and providers under parts A and B of Medicare for plan payments in 2008, 2009, and 2010, to the extent that the Secretary identified such differences. The Secretary did not make adjustments in 2008 and 2009, due to ongoing analyses, but is to adjust rates in 2010. The provision would extend the requirement that MA plan payments be adjusted for differences in coding patterns beyond 2010. The provision would require the Secretary to conduct analyses of coding differences periodically and incorporate the findings on a timely basis. The CBO score is -$2.9 billion for FY2010-FY2014 and -$15.5 billion for FY2010-FY2019. Sec. 1163. Simplification of Annual Beneficiary Election Periods. Medicare beneficiaries may enroll in or change their enrollment in MA from November 15 to December 31 each year (the annual, coordinated election period). Changes go into effect January 1 st of the next year. During the first three months of the year, beneficiaries can enroll in an MA plan, and individuals enrolled in an MA plan can either switch to a different MA plan or return to original Medicare. This period is known as the continuous open enrollment and disenrollment period. The provision would move the annual, coordinated election period to 15 days earlier in the year—November 1 st to December 15 th , rather than from November 15 th to December 30 th . The provision would eliminate the continuous open enrollment and disenrollment period (during the first three months of the year.) The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1164. Extension of Reasonable Cost Contracts. Reasonable cost plans are MA plans that are reimbursed by Medicare for the actual cost of providing services to enrollees. Cost plans were created in the Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA, P.L. 97-248 ). BBA 97 included a provision to phase-out the reasonable cost contracts, however, the phase-out has been delayed over the years through congressional action. These plans are allowed to operate indefinitely, unless two other plans of the same type (i.e., either 2 local or 2 regional plans) offered by different organizations operate for the entire year in the cost contract's service area. After January 1, 2010, the Secretary may not extend or renew a reasonable cost contract for a service area if (1) during the entire previous year there were either two or more MA regional plans or two or more MA local plans in the service area offered by different MA organizations; and (2) these regional or local plans meet minimum enrollment requirements. This provision would extend for two years—from January 1, 2010, to January 1, 2012—the length of time reasonable cost plans could continue operating regardless of any other MA plans serving the area. The provision would modify the minimum enrollment requirement used as one of the criteria the Secretary considers when determining whether to renew or extend a reasonable cost plan. The enrollment criteria would apply to the portion of the MA regional or local plan's service area for the year that it was within the service area of the reasonable cost contract (and not the total service area of the MA regional or local plan). The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1165. Limitation of Waiver Authority for Employer Group Plans. The Secretary has the authority to waive or modify requirements that hinder the design of, the offering of, or the enrollment in employer or union sponsored MA plans. Such plans can be offered either under contracts between the union or employer group and a MA organization, or directly by the employer or union group. For all employer or union group MA plans, the Secretary would only have authority to waive or modify MA requirements for the plan if 90% of eligible individuals enrolled in the plan live in a county in which the MA organization offers an MA local plan. This provision would apply to plan years on or after January 1, 2011, and would not apply to plans in effect as of December 31, 2010. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1166. Improving Risk Adjustment for MA Payments. In general, Medicare payments to MA plans are risk adjusted to account for the variation in the cost of providing care. Risk adjustment is designed to compensate plans for the increased cost of treating older and sicker beneficiaries, and thus discourage plans from preferential enrollment of healthier individuals. The Medicare risk adjustment models take into account the variation in expected medical expenditures associated with demographic characteristics (age, sex, current Medicaid eligibility, original Medicare eligibility due to a disability), as well as medical diagnoses, and differences in coding practices between MA and providers under Medicare Part A and B. The provision would require the Secretary to evaluate and report on the adequacy of MA risk adjustments at predicting costs for beneficiaries with chronic or co-morbid conditions, beneficiaries dually-eligible for Medicare and Medicaid, and non-Medicaid eligible low-income beneficiaries. The report would also address the need and feasibility of including further gradations of diseases or conditions and multiple years of beneficiary data. Taking this report into account, not later than January 1, 2012, the Secretary would be required to implement necessary improvements to the MA risk adjustment system. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1167. Elimination of the MA Regional Plan Stabilization Fund. MMA created the MA Regional Program and established the MA Regional Plan Stabilization Fund to encourage plans to enter into and/or remain in the MA Regional Program. The fund was originally set at $10 billion with additional money added to the fund from savings in the bidding process. Funds were to be available from 2007 through the end of 2013. Subsequent legislation decreased the amount of funds available and delayed their availability. Most recently, MIPPA reduced the initial funding of the program to one dollar. Money from the regional plan bidding process continues to flow into the Fund, but availability is delayed until 2014. The provision would eliminate the Fund and transfer amounts in the Fund to the Part B Trust Fund. The CBO score is -$0.2 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1168. Study Regarding the Effects of Calculating Medicare Advantage Payment Rates on a Regional Average of Medicare Fee for Service Rates. The provision would require CMS to conduct a study to determine the potential effects of calculating MA rates on a more aggregated geographic basis, rather than using county boundaries. The study would consider whether the alternatives would effect (a) plan quality, (b) plan networks including implications for provider contracting, and (c) the predictability of benchmark amounts. CMS would be required to consult with certain experts and stakeholders. CMS would be required to submit a report to Congress, including recommendations, no later than one year after the date of enactment. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1171. Limitation on Cost-Sharing for Individual Health Services. Each MA plan must provide all required Part A and B Medicare benefits (other than hospice) to individuals entitled to Medicare Part A and enrolled in Part B. Beginning January 2011, MA plans would be prohibited from offering benefits with cost sharing requirements that are greater than the cost sharing requirements imposed under the traditional Medicare program. This provision would also prohibit plans from imposing cost-sharing for dual-eligible individuals or qualified Medicare beneficiaries that exceeds the cost-sharing amounts permitted under the Medicare and Medicaid statutes. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY20 19 . Sec. 1172. Continuous Open Enrollment for Enrollees in Plans with Enrollment Suspension. Special Election Periods (SEPs) allow beneficiaries the option to discontinue or change their enrollment in a MA plan outside of the annual coordinated election period. The circumstances in which an enrollee can exercise this option include (1) an MA plan terminates its participation in the MA program or in a specific area, (2) an individual's place of residence changes, (3) the MA plan violates a provision of its contract or misrepresents the plan's provisions in marketing the plan, or (4) other exceptional conditions as provided by the Secretary. This provision would expand the categories of beneficiaries eligible to participate in a SEP to include beneficiaries enrolled in private plans that have been suspended for not meeting the terms of their contract. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY20 19 . Sec. 1173. Information for Beneficiaries on MA Plan Administrative Costs. This provision would require the publication of administrative cost information, including the medical loss ratio (MLR), for MA plans. The Secretary would be required to develop and implement standardized elements and definitions for reporting the data necessary to calculate a MLR. Plans that fail to meet a minimum MLR would be subject to sanctions. Beginning in 2014, if the Secretary determines that a MA plan failed to have a MLR of at least 0.85, the Secretary would be required to mandate that the MA plan provide enrollees with a rebate of their Part C premiums (or Part B or D, if applicable) by the amount necessary to meet the 0.85 requirement. The Secretary would also be required to restrict enrollment in the MA plan for 3 consecutive years and terminate the plan's contract if the plan failed to meet the MLR requirements for 5 consecutive years. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY20 19 . Sec. 1174. Strengthening Audit Authority. The Secretary is required to provide for the annual auditing of the financial records of at least 1/3 of MA plans. Beginning January 2011, each contract with a MA plan would be required to include a provision that the Secretary have the authority to take necessary action, including the pursuit of financial recoveries, to address deficiencies identified during an annual audit. The provision would apply to Part D Prescription Drug Plans (PDPs) in the same manner as certain other MA contract provisions apply to PDP plans. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY20 19 . Sec. 1175. Authority to Deny Plan Bids. By the first Monday in June, each local MA plan must submit to the Secretary an aggregate monthly bid amount (which includes separate bids for required services, any offered supplemental benefits, and any offered drug benefits) for each MA plan it intends to offer in the upcoming calendar year. The Secretary has the authority to evaluate and negotiate the plan's bid amounts and its proposed benefit packages. Beginning January 2011, the Secretary would not be required to accept any or every bid submitted by a MA or PDP plan. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY20 19 . Sec. 1175A. State Authority to Enforce Standardized Marketing Requirements. Federal standards preempt state laws except in the areas of licensing and solvency. Under this provision, States would have the authority to conduct market examinations or impose CMPs against MA and PDP plans or their agents for violating federal marketing requirements. States would also have the authority to recommend sanctions to the Secretary, and the Secretary would be required to respond to the State within 30 days on the status of their recommendation. MA and PDP plans could not be subject to enforcement actions taken by both the Secretary and the States. The Secretary would retain its authority to impose sanctions other than CMPs and States would retain their authority to regulate MA or PDP plan brokers. Sec. 1176. Limitation on Enrollment Outside Open Enrollment Period of Individuals into Chronic Care Specialized MA Plans for Special Need Individuals. MMA established a new type of Medicare Advantage (MA) coordinated care plan focused on individuals with special needs. Special needs plans (SNPs) are allowed to target enrollment to one or more types of special needs individuals including (1) institutionalized; (2) dually eligible; and/or (3) individuals with severe or disabling chronic conditions. Subsequent legislation has extended the effective date of SNPs (which was set to expire December 31, 2008). MMSEA authorized the SNP program through December 31, 2009, but also established a limited moratorium on the creation of SNPs after January 1, 2008 (existing plans could continue to enroll qualified individuals). More recently, MIPPA, among other changes, authorized the SNP program and extended the moratorium on designation of new SNPs until January 1, 2011. The number of SNPs has increased dramatically since 2004, the first year of operation. In 2004, CMS approved 11 SNPs, but by January 2008, CMS had approved 787 SNPs, including 442 dual-eligible SNPs, 256 chronic care SNPs, and 89 institutional SNPs. In September 2008, there were 1.2 million beneficiaries in SNPs. Medicare beneficiaries may enroll in or change their enrollment in Medicare Advantage from November 15 th to December 31 st each year. Changes would go into effect January 1 st of the next year. H.R. 3962 would require that beginning on January 1, 2011, SNPs serving beneficiaries with severe or disabling conditions could only enroll eligible individuals during an annual, coordinated open enrollment period or at the time of diagnosis of the disease or condition that would qualify an individual for a chronic care SNP. The CBO score for Sections 1176 — 1178 is +$0.2 billion for FY2010-FY2014 and $0.1 billion for FY2010-FY2019. Sec. 1177. Extension of Authority of Special Needs Plans to Restrict Enrollment. Prior to January 1, 2011, SNPs may restrict enrollment to those who are in one or more classes of special needs individuals. Starting January 1, 2010, new SNP enrollment must be limited exclusively to individuals that meet the criteria for which the SNP is designated: dual eligible, chronic care, and institutional care. Further, MIPPA required that dual eligible SNPs contract with state Medicaid agencies to provide medical assistance services (Medicaid), which may include long-term care services. If SNPs do not have contracts with Medicaid agencies by January 1, 2010, then they can continue to operate, but are prohibited from expanding their service areas. However, state Medicaid agencies are not required to enter into contracts with SNPs. This provision would extend the time period, from January 1, 2011 to January 1, 2013, during which SNPs may restrict current enrollment to individuals who meet the definition of the respective SNP. In addition, selected SNPs that had contracts with states that had a state program to operate an integrated Medicaid-Medicare program that was approved by CMS as of January 1, 2004, would be allowed to restrict enrollment to beneficiaries who meet the definition of special needs individuals through January 1, 2016. The Secretary would be required to provide an analysis of the SNPs that were approved by CMS as of January 1, 2004. The analysis of these grandfathered SNPs would include the impact of such plans on cost, quality of care, patient satisfaction, and other subjects as specified by the Secretary. By December 31, 2011, the Secretary would be required to submit a report to Congress including recommendations on how the appropriate treatment of these plans. The CBO score for Sections 1176—1178 is +$0.2 billion for FY2010-FY2014 and $0.1 billion for FY2010-FY2019. Sec. 1178. Extension of Medicare Senior Housing. In general, Medicare Advantage plans are required to serve an area no smaller than a county, which prevents plans from targeting smaller areas of healthier, low-cost enrollees. However, it is possible for an MA plan to receive a waiver of this requirement to be able to restrict enrollment to residents of a retirement community. Prior to December 31, 2012, H.R. 3962 would create a new type of Medicare Advantage plan called a Medicare Advantage Senior Housing Facility Plan, which would be allowed to limit its service area to a senior housing facility within a geographic area. An MA Senior Housing Facility Plan would be an MA plan that serves beneficiaries who reside in a continuing care retirement community, has a sufficient number of on-site primary care providers as determined by the Secretary, supplies transportation benefits to other providers, and was in existence under a demonstration for at least one year prior to January 1, 2010. The CBO score for Sections 1176—1178 is +$0.2 billion for FY2010-FY2014 and $0.1 billion for FY2010-FY2019. Sec. 1181. Elimination of Coverage Gap. Medicare law sets out a defined standard benefit structure under the Part D prescription drug benefit that includes a gap in coverage (the doughnut hole ) during which enrollees, who are not eligible for the low-income subsidy, are responsible for paying 100% of the cost of their drugs. Federal assistance is provided to certain low-income persons to help them meet Medicare Part D premium and cost-sharing charges. In general, beneficiaries may qualify for a subsidy if they have an annual income below 150% of the FPL and if their resources do not exceed a certain limit (in 2009, $12,510 for individuals or $25,010 if married). Prior to the implementation of the Medicare Part D outpatient prescription drug benefit in 2006, Medicaid was the primary payer for drugs for beneficiaries eligible for both Medicare and Medicaid (dual-eligible) beneficiaries. Drug manufacturers who wish to have their drugs available for Medicaid enrollees must provide state Medicaid programs with rebates on drugs paid on behalf of Medicaid beneficiaries. This provision would gradually phase out the coverage gap until it is completely eliminated in 2019. Drug manufacturers would be required to provide the Secretary rebates for drugs dispensed to "rebate eligible" Part D plan enrollees, and the funds would be used to pay for all or part of the elimination of the coverage gap. Rebate eligible enrollees would initially include only full-benefit dual eligibles; beginning in 2015, the definition would be expanded to include all Part D subsidy eligible enrollees. The CBO score (with interaction with Section 1182) is –$21.1 billion for FY2010 -FY2014 and -$42.3 billion for FY2010- FY2019 . In a separate analysis of a similar provision under H.R. 3200 , CBO estimated that beneficiary premiums would increase faster than they would under current law; however, on average, the reduction in beneficiary cost sharing would outweigh the increase in premiums. Sec. 1182. Discounts for Certain Part D Drugs in Original Coverage Gap . This provision incorporates a voluntary PhRMA agreement to provide discounts of 50% for brand-name drugs used by Part D enrollees in the Part D coverage gap. Manufacturers of prescription drugs would enter into agreements with Medicare Part D drug plan sponsors to provide discounts on drugs provided to plan enrollees in the coverage gap period. The amount of the discount, in addition to the amount actually paid by the enrollee, would count toward costs incurred by the plan enrollee. Plan enrollees receiving the low income subsidy would not be eligible for the discount. This provision would be applicable to drugs dispensed after December 31, 2010. The CBO score (with interaction with Section 1181) is –$21.1 billion for FY2010 -FY2014 and -$42.3 billion for FY2010- FY2019 . Sec. 1183. Repeal of Provision Relating To Submission Of Claims By Pharmacies Located In Or Contracting With Long-Term Care Facilities . Section 172 of MIPPA provided for a new set of requirements for contracts between Part D drug plan sponsors and pharmacies located in or contracting with long-term care facilities for plan years beginning on or after January 1, 2010. Each contract entered into with a PDP sponsor or MA-PD plan is required to provide that a pharmacy located in or having a contract with a long-term care facility would have between 30 and 90 days to submit claims for reimbursement. H.R. 3962 would repeal Section 172 of MIPPA and eliminate these deadlines for long-term care pharmacists to file Part D claims to allow more time for coordination with state Medicaid programs. The CBO score is $0.0 billion for FY2010-FY2014 an d $0.0 billion for FY2010-FY20 19 . Sec. 1184. Including Costs Incurred By AIDS Drug Assistance Programs And Indian Health Service In Providing Prescription Drugs Toward The Annual Out Of Pocket Threshold Under Part D . Under a standard Medicare Part D plan design, beneficiaries must incur a certain level of out-of-pocket costs ($4,350 in 2009) before catastrophic protection begins. These include costs that are incurred for the deductible, cost-sharing, or benefits not paid because they fall in the coverage gap. Costs are counted as incurred, and thus treated as true out-of-pocket (TrOOP) costs only if they are paid by the individual (or by another family member on behalf of the individual), paid on behalf of a low-income individual under the subsidy provisions, or paid under a State Pharmaceutical Assistance Program. Additional payments that do not count toward TrOOP include Part D premiums and coverage by other insurance, including group health plans, workers' compensation, Part D plans' supplemental or enhanced benefits, or other third parties. This provision would allow costs paid by the Indian Health Service or under an AIDS Drug Assistance Program to count toward the out-of-pocket threshold for costs incurred on or after January 1, 2011. The CBO s core is +$0.3 billion for FY2010 -FY2014 and+$0.8 billion for FY2010- FY2019 . Sec. 1185. No Mid-Year Formulary Changes Permitted. Part D plans are permitted to operate formularies—lists of drugs that a plan chooses to cover and the terms under which they are covered. By law, Part D plans may not change the therapeutic categories and classes in a formulary other than at the beginning of each plan year except as the Secretary may permit to take into account new therapeutic uses and newly approved covered part D drugs. Drug plans are also allowed to apply various utilization management restrictions to drugs on their formularies. These restrictions may include assignment of drugs to tiers that correspond to different levels of cost sharing; prior authorization, in which the beneficiary must obtain a plan's approval before it will cover a particular drug; and step therapy, in which a beneficiary must first try a generic or less expensive drug; and quantity limits. If a plan removes a covered part D drug from a formulary or makes any change in the preferred or tiered cost-sharing status of a drug, appropriate notice must be provided to the Secretary, affected enrollees, physicians, pharmacies, and pharmacists. Under this provision, beginning in 2011, Part D sponsors would not be allowed to remove a covered drug from a plan formulary, or make any other material change to the formulary that would have the effect of reducing coverage or of increasing cost-sharing for the drug, after the start of marketing activities for the plan year. The provision would allow for exceptions if the change is in regard to a brand name drug for which a generic drug was approved during the plan year, or if a recall or a withdrawal of a drug was issued by the Food and Drug Administration (FDA). The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1186. Negotiation of Lower Covered Part D Drug Prices on Behalf of Medicare Beneficiaries. Part D plan sponsors (or the pharmacy benefit managers they have contracted with) negotiate prices with drug manufacturers, wholesalers, and pharmacies and are required to provide enrollees with access to these negotiated prices for covered Part D drugs. The law specifically states that the Secretary may not interfere with the negotiations between drug manufacturers and pharmacies and PDP sponsors. Further, the Secretary may not require a particular formulary or institute a price structure for the reimbursement of covered Part D drugs. This is known as the "non-interference provision" (SSA § 1860D-11(i)). Section 1186 would strike SSA § 1860D-11(i), and in its place, add language that would require the Secretary to negotiate prescription drug prices (including discounts, rebates and other price concessions) that may be charged to PDP sponsors and MA organizations, but would still allow prescription drug plans to obtain discounts or price reductions below those negotiated by the Secretary. The provision would also maintain the prohibition against the establishment of a formulary by the Secretary; however, there would no longer be an explicit prohibition of the institution of a price structure. The provision would take effect on the date of enactment and would first apply to negotiations and prices for plan years beginning on January 1, 2011. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1187. Accurate Dispensing in Long-Term Care Facilities. Part D plans are required to offer a contract to any pharmacy wiling to participate in its long-term care (LTC) pharmacy network so long as the pharmacy is capable of meeting certain minimum performance and service criteria and any other standard terms and conditions established by the plan for its network pharmacies. Each LTC facility selects at least one eligible LTC pharmacy to provide Medicare drug benefits to its residents. Plan formularies must be structured so that they meet the needs of long-term care residents and provide coverage for all medically necessary medications at all levels of care. Both physician prescribing patterns and pharmacy benefit manager (PBM) payment practices result in prescriptions commonly being dispensed in 30- or 90-day quantities. In situations when the full amount dispensed is not utilized by the patient, for example, due to discharge, death, adverse reactions, the remaining medication may become waste. This provision would require Part D sponsors, starting January 1, 2012, to employ utilization management techniques as determined by the Secretary, such as weekly, daily, or automated dose dispensing, to reduce the quantity dispensed per fill when dispensing medications to beneficiaries who reside in long-term care facilities in order to reduce waste associated with 30-day fills. The CBO score is -$1.0 billion for FY2010-FY2014 and -$5.7 billion for FY2010-FY2019. Section 1188. Free Generic Refill. Section 1128A(a) of the Social Security Act authorizes the imposition of civil monetary penalties and assessments on a person, including an organization, agency, or other entity, who engages in various types of improper conduct with respect to federal health care programs. One form of prohibited conduct, described in section 1128A(a)(5), occurs when a person offers or transfers remuneration to a Medicare or Medicaid beneficiary when such person knows or should know the remuneration is likely to influence the beneficiary's ordering or receiving items or services (payable by Medicare or Medicaid) from a particular provider, practitioner, or supplier. This conduct may be subject to penalties of up to $10,000 for each item received. Section 1128A(i)(6) of the Act defines "remuneration" to include waivers of copayments and deductible amounts (or any part thereof) and transfers of items or services for free or for other than fair market value, subject to certain exceptions. This section would amend section 1128A(i)(6) of the Social Security Act to exclude from the definition of remuneration a reduction in or waiver of the copayment amount (under a prescription drug plan offered by a PDP sponsor or an MA-PD plan offered by an MA organization) that is given to an individual to induce the individual to switch to a generic, bioequivalent drug, or biosimilar. This provision would apply to remuneration offered, paid, solicited, or received on or after January 1, 2011. The CBO score is -$1.1 billion for FY2010-FY2014 and -$3.0 billion for FY2010-FY2019. Sec. 118 9 State Certification Prior to Waiver of Licensure Requirements Under Medicare Prescription Drug Program. Medicare Part D participants must obtain coverage through a Part D sponsor—a private insurer or other entity that has contracted with Medicare to provide prescription drug benefits. According to Section 1860D-12 of the SSA, a sponsor of a prescription drug plan is required to be organized and licensed under state law as a risk-bearing entity eligible to offer health insurance or health benefits coverage in each state it offers a prescription drug plan. Under certain circumstances, a sponsor may apply to CMS for a waiver of this requirement. The National Association of Insurance Commissioners (NAIC) has noted instances in which PDP sponsors have been granted waivers from state licensure requirements but did not have fully completed applications for licensure pending at the time the waiver had been granted. The provision would amend Section 1860D-12 of the SSA to require that CMS may only grant a waiver of licensure for a particular state if it has received a certification from the State Insurance Commissioner that the prescription drug plan has a substantially complete application pending in that state. Additionally, the waiver could be revoked if the State Insurance Commissioner submits a certification to CMS that the sponsor committed fraud with respect to the waiver, did not make a good faith effort to satisfy state licensing requirements, or was determined by the state to be ineligible for licensure. The requirements would be effective for plan years beginning January 1, 2010. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1191. Telehealth Expansion and Enhancements. Medicare covers certain services including professional consultations, office and other outpatient visits, individual psychotherapy, pharmacological management, psychiatric diagnostic interview examinations, neurobehavioral status exams, and end stage renal disease related services delivered via an eligible telecommunications system. An interactive telecommunications system is required as a condition of payment. The originating site (the location of the beneficiary receiving the telehealth service) can be a physician or practitioner's office, a critical access hospital, a rural health clinic, a federally qualified health center, a hospital-based renal dialysis center, a skilled nursing facility, a community mental health center or a hospital. The originating site must be in a rural health professional shortage area or in a county that is not in a metropolitan statistical area or at an entity that participates in a specified federal telemedicine demonstration project. Under this provision, a renal dialysis facility would be included as a covered originating site for telehealth services effective for services starting January 1, 2011. The Secretary would appoint a Telehealth Advisory Committee to make policy recommendations regarding telehealth services including the appropriate addition or deletion of covered services and procedure codes for authorized payments. In making determinations with respect to covered services, the Secretary would be required to take into account the recommendations of the Committee. If the Secretary does not implement a recommendation, the Secretary would publish a statement providing the reason for such decision in the Federal Register. The Secretary would issue hospital guidance to simplify practitioner credentialing for medical staff privileging decisions with respect to telehealth services no later than 60 days from enactment. As such a hospital would be able, but not required, to accept a credentialing package compiled by another Medicare participating hospital. A hospital that did accept such a package would not be required to exercise oversight over the other hospital's process for compiling and verifying credentials. This provision would apply only to credentialing and does not apply to applicable privileging requirements. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1192. Extension of Outpatient Hold Harmless Provision. Small rural hospitals (with no more than 100 beds) that are not sole community hospitals (SCHs) can receive additional Medicare payments if their outpatient payments under the prospective payment system are less than under the prior reimbursement system. For calendar year (CY) 2006, these hospitals received 95% of the difference between payments under the prospective payment system and those that would have been made under the prior reimbursement system. The hospitals received 90% of the difference in CY2007 and 85% of the difference in CY2008. The payment is set at 85% for CY2009. Sole community hospitals with not more than 100 beds receive 85% of the payment difference for covered HOPD services furnished on or after January 1, 2009, and before January 1, 2010. Under this provision, small rural hospitals and sole community hospitals with not more than 100 beds would receive 85% of the payment difference for covered HOPD services furnished until January 1, 2012. The CBO score is $0. 2 billion for FY2010-FY2014 and $0 .2 billion for FY2010-FY2019. Sec. 1193. Extension of Section 508 Hospital Reclassifications. Section 508 of MMA provided $900 million for a one-time, three-year geographic reclassification of certain hospitals that were otherwise unable to qualify for administrative reclassification to areas with higher wage index values. These reclassifications were extended from March 31, 2006 to September 30, 2007 by the Tax Relief and Health Care Act of 2006 ( P.L. 109-432 ). MMSEA extended the reclassifications to September 30, 2008. MIPPA extended the reclassifications until September 30, 2009. These extensions are exempt from any budget neutrality requirements. Under this provision, Section 508 reclassifications would be extended until September 30, 2011. These payments would be based on the FY2010 wage index. The CBO score is $0.5 billion for FY2010-FY2014 and $0.5 billion for FY2010-FY2019. Sec. 1194. Extension of Geographic Floor for Work. The Medicare fee schedule is adjusted geographically for three factors to reflect differences in the cost of resources needed to produce physician services: physician work, practice expense, and medical malpractice insurance. The geographic adjustments are indices that reflect how each area compares to the national average in a "market basket" of goods. A geographic practice cost index (GPCI) with a value of 1.00 represents an average across all areas. A series of bills set a temporary floor value of 1.00 on the physician work index beginning January 2004; most recently, Section 134 of the MIPPA extended the application of this floor when calculating Medicare physician reimbursement through December, 2009. The other geographic indices (for practice expense and medical malpractice) were not modified by these Acts. The proposal would extend the 1.00 floor for the geographic index for physician work for an additional three years through December 2012 . CBO estimates that this provision would increase outlays by $1. 1 billion with all the outlays occurring in the next three years (2010-2012). Sec. 1195. Extension of Payment for Technical Component of Certain Physician Pathology Services. Legislation enacted in 1997 specified that independent labs that had agreements with hospitals on July 22, 1999 to bill directly for the technical component of pathology services could continue to do so in 2001 and 2002. The provision has been periodically extended, most recently through December 31, 2009 by MIPPA. This provision would extend this payment through 2011 . CBO estimates that this would increase outlays by roughly $100 million in each of the next two years (2010 and 2011). Sec. 1196. Extension of Ambulance Add-Ons. Ground ambulance services are paid on the basis of a phased in national fee schedule. In 2010 and subsequently, the payments in all areas will be based on the national fee schedule amount. The fee schedule payment for an ambulance service equals a base rate for the level of service plus payment for mileage. Geographic adjustments are made to a portion of the base rate. For the period July 2004 to December 2009, mileage payments are increased for ground ambulance services originating in rural low population density areas. For the period July 1, 2004 until December 31, 2008, there is a 25% bonus on the mileage rate for trips of 51 miles and more. Payments for ground transports originating in rural areas or rural census tracts are increased by 3% for the period of October 1, 2008 through December 31, 2009. MIPPA specifies that any area designated as rural for the purposes of making payments for air ambulance services on December 31, 2006, will be treated as rural for the purpose of making air ambulance payments during the period July 1, 2008 until December 31, 2009. The provision would maintain the 3% higher payments for ground transports originating in rural areas or rural census tracts until December 31, 2012. The MIPPA provision maintaining the designation of certain areas as rural for the purposes of Medicare's payments for air ambulance services would be maintained until December 31, 2011. The CBO score is $0 . 2 billion for FY2010-FY2014 and $0 .2 billion for FY2010-FY2019. Sec. 1201. Improving Assets Tests for Medicare Savings Program and Low-income Subsidy Program . Federal assistance is provided to certain low-income persons to help them meet Medicare Part D premium and cost-sharing charges. To qualify for the Part D low-income subsidy, Medicare beneficiaries must have resources no greater than the income and resource limits established by MMA. In general, beneficiaries may qualify for a subsidy if they have an annual income below 150% of the FPL and if their resources do not exceed a certain limit (in 2009, $12,510 for individuals or $25,010 if married). Under this provision, the asset test used to determine eligibility for the low income subsidy and Medicare Savings programs would be increased. In 2012, the level would be $17,000 for an individual and $34,000 for a couple and would be indexed annually by the CPI. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicare spending is +$3.2 billion for FY2010-2014 and +$11.8 billion for FY2010-2019. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicaid spending is +$0.4 billion for FY2010-2014 and +$1.7 billion for FY2010-2019. Sec. 1202. Elimination of Part D Cost-sharing for Certain Non-institutionalized Full-benefit Dual Eligible Individuals . Cost-sharing subsides for LIS enrollees are linked to the standard Part D prescription drug coverage. Full-subsidy eligibles have no deductible, minimal cost sharing during the initial coverage period and coverage gap, and no cost-sharing over the catastrophic threshold. Full-benefit dual eligibles who are residents of medical institutions or nursing facilities have no cost-sharing. This provision would eliminate cost sharing for people receiving care under a home and community based waiver who would otherwise require institutional care in a facility for the mentally retarded for drugs dispensed on or after January 1, 2011. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicare spending is +$3.2 billion for FY2010-2014 and +$11.8 billion for FY2010-2019. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicaid spending is +$0.4 billion for FY2010-2014 and +$1.7 billion for FY2010-2019. Sec. 1203. Eliminating Barriers to Enrollment . Under the Medicare Part D low-income subsidy program, dual eligibles, those receiving assistance through Medicare Savings Programs, and recipients of SSI are deemed subsidy-eligible individuals for up to one year; other persons, or their personal representatives, have to apply for assistance either at state Medicaid offices or Social Security offices. Applicants are required to provide information from financial institutions as requested to support information in the application, and to certify as to the accuracy of the information provided. Under this provision, individuals applying for the low-income subsidy under the prescription drug program would be permitted to qualify on the basis of self-certification of income and resources beginning January 1, 2010 . The CBO score (the combined score for Sections 1201-1207) for the effects on Medicare spending is +$3.2 billion for FY2010-2014 and +$11.8 billion for FY2010-2019. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicaid spending is +$0.4 billion for FY2010-2014 and +$1.7 billion for FY2010-2019. Sec. 1204. Enhanced Oversight Relating to Reimbursements for Retroactive Low Income Subsidy Enrollment . Individuals who qualify for Medicaid, a Medicare Savings Program, or SSI are automatically deemed eligible for the low-income subsidy, while other individuals with limited income and resources may apply for the low-income subsidy and have their eligibility determined by either the SSA or their state Medicaid agency. As eligibility is effective the month the application was submitted, LIS status is often applied retroactively. If a beneficiary is already enrolled in a Part D plan, the Part D sponsor must take steps to ensure that the beneficiary has been reimbursed for any premiums or cost-sharing the member had paid that should have been covered by the subsidy. This provision would enhance oversight to make sure that low-income beneficiaries who are owed retroactive reimbursement payments from their drug plans receive them. The reimbursement would be made automatically by the Part D sponsor upon appropriate notice that the beneficiary is eligible for assistance and no further information would need to be submitted to the plan by the beneficiary. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicare spending is +$3.2 billion for FY2010-2014 and +$11.8 billion for FY2010-2019. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicaid spending is +$0.4 billion for FY2010-2014 and +$1.7 billion for FY2010-2019. Sec. 1205. Intelligent Assignment in Enrollment . Generally, there is a two-step process for low-income persons to gain Part D coverage. First, a determination must be made that they qualify for the assistance; second, they must enroll, or be enrolled, in a specific Part D plan. Full-benefit dual-eligible individuals who have not elected a Part D plan are auto-enrolled into one by CMS using a random assignment process. Because of the random nature of the process, some dual eligibles may be enrolled in plans that may not best meet their needs; for example, necessary drugs may not be covered by the new plan. Under this provision, for contract years beginning with 2012, the Secretary would be given the option to use an "intelligent assignment" process as an alternative to the random assignment process which would take into account the quality, cost, and formularies of plans The CBO score (the combined score for Sections 1201-1207) for the effects on Medicare spending is +$3.2 billion for FY2010-2014 and +$11.8 billion for FY2010-2019. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicaid spending is +$0.4 billion for FY2010-2014 and +$1.7 billion for FY2010-2019. Sec. 1206. Special Enrollment Period and Automatic Enrollment Process for Certain Subsidy Eligible Individuals . In general, a Medicare beneficiary who does not enroll in Part D during his or her initial enrollment period may enroll only during the annual open enrollment period, which occurs from November 15 to December 31 each year. Beneficiaries already enrolled in a Part D plan may change their plans during the annual open enrollment period. There are a few additional, limited occasions when an individual may enroll in or disenroll from a Part D plan or switch from one Part D plan to another, called special enrollment periods. The provision would establish a new special enrollment period for persons deemed to be low-income subsidy eligible individuals for subsidy determination made for months beginning with January 2011. HHS would be given the authority to enroll subsidy-eligible beneficiaries into plans using a process that accounts for the quality, cost and/or formulary of plans, while also giving beneficiaries the option of choosing another plan. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicare spending is +$3.2 billion for FY2010-2014 and +$11.8 billion for FY2010-2019. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicaid spending is +$0.4 billion for FY2010-2014 and +$1.7 billion for FY2010-2019. Sec. 1207. Application of MA Premiums Prior to Rebate and Quality Bonus Payments in Calculation of Low Income Subsidy Benchmark. The federal government pays up to 100% of the Part D premiums for LIS beneficiaries who are enrolled in "benchmark" plans. A Part D plan qualifies as a benchmark plan if it offers basic Part D coverage with premiums equal to or lower than the regional low-income premium subsidy amount. MA plans offering prescription drug coverage submit a separate bid for the Part D portion. Payment for the portion of the premium attributable to basic prescription drug benefits is calculated in the same way as that for stand-alone PDPs, however the MA plan may choose to apply some of its Part C rebate payments to lower the Part D premium. MedPAC has noted that the number of plans that qualify as low-income benchmark plans has been decreasing in recent years, resulting in fewer options for LIS enrollees. For the 2009 plan year, approximately 2.3 million LIS enrollees were affected by the decrease in the number of qualifying plans and needed to enroll, or be enrolled, in new plans. This provision would exclude the Medicare Advantage rebate amounts and MA quality bonus payments, as defined in Section 1161 of this Act, from the MA-PDP premium bids when calculating the low-income regional benchmark for subsidy determinations made for months beginning with January 2011. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicare spending is +$3.2 billion for FY2010-2014 and +$11.8 billion for FY2010-2019. The CBO score (the combined score for Sections 1201-1207) for the effects on Medicaid spending is +$0.4 billion for FY2010-2014 and +$1.7 billion for FY2010-2019. Sec. 1231. Extension Of Therapy Caps Exceptions Process. Current law places two annual per beneficiary payment limits for all outpatient therapy services provided by non-hospital providers. For 2009, the annual limit on the allowed amount for outpatient physical therapy and speech-language pathology combined is $1,840, and there is a separate limit for occupational therapy of $1,840. The Secretary was required to implement an exceptions process for 2006, 2007, and the first half of 2008 for cases in which the provision of additional therapy services was determined to be medically necessary. Section 141 of MIPPA extended the exceptions process for therapy caps through December 31, 2009. The provision would extend the exceptions process for therapy caps for two years, through December 31, 2011 . CBO estimates that this provision would increase outlays by $ 0 . 9 billion for 2010-2012 . Sec. 1232. Extended Months of Coverage of Immunosuppressive Drugs for Kidney Transplant Patients and Other Renal Dialysis Provisions . Medicare coverage for beneficiaries with end-stage renal disease (ESRD) generally begins in the fourth month of dialysis treatments or the month of a kidney transplant. After receiving a kidney transplant, individuals are prescribed immunosuppressive drugs to reduce the risk of their immune system rejecting the new organ. If a beneficiary already had Medicare because of age or disability before the onset of end-stage renal disease, or if an individual became eligible for Medicare because of age or disability after receiving a transplant paid for by Medicare, Medicare will continue to pay for immunosuppressive drugs with no time limit. However, if a beneficiary qualifies for Medicare only because of kidney failure, Medicare, together with coverage of the immunosuppressive drugs, ends 36 months after the month of the successful transplant. This provision would eliminate the current 36-month limitation on Medicare coverage of immunosuppressive drugs for kidney transplant patients who would otherwise lose this coverage on or after January 1, 2012. It would also make technical changes to the Medicare ESRD bundled payment system. The CBO s core is between +$50 million and -$50 million for FY2010 -2014 and - $0. 1 billion for FY2010 -20 19 . Sec. 1233. Voluntary Advance Care Planning Consultation. The Medicare Improvements for Patients and Providers Act of 2008 (MIPPA) added "end-of-life planning" to the initial preventive physical exam that Medicare beneficiaries receive upon enrollment. MIPPA also defines "end-of-life planning" to mean verbal or written information regarding: an individual's ability to prepare an advance directive in the case that an injury or illness causes the individual to be unable to make health care decisions; and whether or not the physician is willing to follow the individual's wishes as expressed in an advance directive. The provision would amend Medicare law to add a voluntary advance care planning consultation as a new covered service for eligible Medicare beneficiaries under Part B and would provide payment to physicians for such consultations. A voluntary advance care planning consultation would mean an optional consultation between the individual and a practitioner regarding advance care planning if the individual involved has not had such consultation within the last five years. Such consultation could be conducted more frequently if there is a significant change in an individual's health. A consultation may include an explanation by the practitioner of advance care planning; advance directives and their uses; role and responsibilities of a health care proxy; the continuum of end-of-life care services and supports available, including palliative and hospice, and related services covered by Medicare; and orders regarding life sustaining treatment or similar orders as specified. Nothing in this section would require the individual to complete an advance directive, an order for life sustaining treatment, or other advance care planning document; require an individual to consent to restrictions on the amount, duration, or scope of medical benefits an individual is entitled to receive under Medicare; or encourage the promotion of suicide or assisted suicide. The CBO score is $0. 7 bi llion for FY2010-FY2014 and $2.0 billion for FY2010-FY2019. Sec. 1234. Part B Special Enrollment Period and Waiver of Limited Enrollment Penalty for T RICARE Beneficiaries . Starting in 2001, military retirees and their eligible dependents become eligible for Tricare for Life at the same time they become eligible for Medicare. Tricare for Life essentially functions as a Medicare supplement and provides coverage for authorized services not covered by Medicare. Enrollment in Medicare Part B is required for access to Tricare for Life. Prior to the legislation creating Tricare for Life, many retirees had not enrolled in Part B, believing that they would always have access to military medical facilities. With the establishment of Tricare for Life and the concomitant need to enroll in Medicare Part B, there was concern over the potential imposition of significant penalties for late enrollment in Part B. Subsequent legislation–Section 625 of MMA–waived the Part B enrollment penalty for eligible retirees who enrolled in Part B prior to December 31, 2004. This provision would create a special 12-month enrollment period in which military retirees (or their eligible dependents) who have not yet enrolled in Medicare Part B can enroll in Part B, thus becoming eligible for Tricare for Life, without incurring a late enrollment penalty. This provision would also require the Secretary of HHS to establish a method for providing rebates for late enrollment penalties that were charged to certain disabled and end-stage renal disease (ESRD) beneficiaries who enrolled during or after January 2005 and before the month of enactment of this Act. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1235. Exception for Use of More Recent Tax Year in Case of Gains From Sale of Primary Residence in Computing Part B Income-Related Premium. Medicare beneficiaries have out-of-pocket cost-sharing requirements that differ according to the services they receive. Physician and outpatient services provided under Part B are financed through a combination of beneficiary premiums, deductibles, and federal general revenues. In general, Part B beneficiary premiums equal 25% of estimated program costs for the aged, with federal general revenues accounting for the remaining 75%. Beginning in 2007, higher-income enrollees pay a higher percentage of Part B costs. The provision would exclude income from the gains attributable to the sale of a primary residence from the beneficiary's modified adjusted gross income in determining the Part B income-related premium. This modification would apply to premiums and payments for years beginning with 2011 . The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1236. Demonstration Program on Use of Patient Decisions Aids. Current law does not explicitly address patient decision aids, which are information tools to help patients understand health care options, and make informed choices that take into account their lifestyle, preferences, and beliefs. This provision would require the Secretary to conduct a Medicare demonstration program to determine if using patient decision aids would improve beneficiaries' understanding of their medical treatment options. The program would enroll not more than 30 eligible providers, with preference given to providers that have documented experience, and the necessary information technology infrastructure and training, in using patient decision aids. Eligible providers would be required to provide follow-up counseling visits after beneficiaries have viewed decision aids, to address questions about subsequent medical care and the beneficiary's preferences. The Secretary would have to provide for the development of a code(s) and reimbursement for the follow-up counseling. Eligible providers would be responsible for the costs of selecting, purchasing, and delivering patient decision aids, and reporting data on quality and outcome measures. The program would be funded through the Supplementary Medical Insurance Trust Fund. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1301. Accountable Care Organization Pilot Program. No current provision. In April 2005, CMS initiated the Physician Group Practice demonstration, which offers 10 large practices the opportunity to earn performance payments for improving the quality and cost-efficiency of health care delivered to Medicare fee-for-service beneficiaries. This provision would add a new section 1866D to the Social Security Act (SSA) to establish the accountable care organization pilot program to test different payment incentive models. Specific payment incentive models to be tested include the performance target model, the partial capitation model, and other payment models. A qualifying accountable care organization (qualifying ACO) would be a group of physicians or other physician organizational models which is organized, at least in part, for the purpose of providing physician services and meet other specified standards. A qualifying ACO could include a hospital or any other provider or supplier (furnishing Medicare covered services) that is affiliated with the ACO under an arrangement structured so that the provider or supplier participates in the pilot program and shares in any incentive payments. The pilot program would begin no later than January 1, 2012. An agreement with a qualifying ACO under this pilot would cover a multi-year period of between three and five years. Certain requirements with respect to the computation of performance targets, adjustment factors and incentive payments would be established. The Secretary would also be required to establish annual quality targets that qualifying ACOs must meet in order to receive incentive payments, operate at financial risk, or participate in the alternative financing models. The Secretary would evaluate the payment incentive model for each qualifying ACO to assess the pilot's impact on beneficiaries, providers of services, suppliers and the program. The evaluation would be publicly available within 60 days of the date of completion of such report. The OIG would be responsible for monitoring of the operation of ACOs under the pilot program with regard to violations of the Stark self referral prohibition (Section 1877 of the SSA). No later than two years after the date the first pilot agreement is established, and every two years thereafter for six years, the Secretary would report to Congress on the use of authorities under the pilot program and its impact on expenditures, access, and quality. The Secretary would be able issue regulations to implement on a permanent basis 1 or more models of the pilot program that are beneficial to Medicare. However, to do so, the Chief Actuary of CMS would be required to certify that the expansion of the program's components would result in estimated spending that would be less than what spending would otherwise be estimated to be in the absence of such expansion. The program management account of CMS would be appropriated $25 million for FY2010 through FY2014 and $20 million in FY2015 for the purposes of administering and carrying out the pilot program, but not for payments for Medicare covered items and services or for incentive payments. The CBO score is - $0. 2 billion for FY2010-FY2014 and - $ 2 . 6 billion for FY2010-FY2019. Sec. 1302. Medical Home Pilot Program. TRHCA, as modified by MIPPA, requires the Secretary to establish a three-year demonstration in up to 8 states with urban, rural and underserved areas, to redesign the health care delivery system to provide targeted, accessible, continuous, and coordinated family-centered care to high need Medicare populations with chronic or prolonged illnesses requiring regular medical monitoring, advising or treatment. This provision would add a new section 1866F to the SSA to establish the medical home pilot program for the purpose of evaluating the Medicare payments to qualified patient-centered medical homes for furnishing medical home services to high need beneficiaries in urban, rural, and underserved areas. New subsection 1866F(a) would require the Secretary to establish pilot programs to evaluate two medical home models: (1) the independent patient-centered medical home model; and (2) the community-based medical home model. Nothing in this provision would prevent a nurse practitioner or physician assistant from leading a patient centered medical home so long as all of the pilot program requirements are met and the nurse practitioner or physician assistant is acting consistently with State law. The independent patient-centered medical home pilot program would begin within 6 months of enactment. The Secretary would be required to pay independent patient-centered medical homes a monthly fee, paid prospectively, for each targeted high need beneficiary who consents to receive services. This pilot program would have to be designed to include the participation of physicians in practices with fewer than 10 full-time equivalent physicians, as well as physicians in larger practices, particularly in underserved and rural areas, as well as federally qualified community health centers, and rural health centers. The Secretary would be required to make payments for medical home services provided by a community based medical home (CBMH) to a high need beneficiary. A CBMH would employ community health workers, including nurses or other non-physician practitioners, lay health workers, or other appropriate persons who assist the primary or principal care physician or nurse practitioner in chronic care management activities. The Secretary would be required to start the CBMH pilot program within 12 months of enactment. Demonstration sites under the pilot program would operate for five years. The Secretary would be required to establish a methodology for payment for medical home services furnished under the CBMH model, to include two separate prospective monthly payments for each high need beneficiary: one to a community-based or State-based organization, and one to the primary or principal care practice. The Secretary would be required, within 60 days of completion of the pilot program, to submit a report to Congress on the evaluation. Subject to the evaluation, the Secretary would be authorized to issue regulations to implement one or more models on a permanent basis, to the extent that such models are beneficial to Medicare, but only if the Chief Actuary of CMS were to first certify that the expansion would not result in higher estimated Medicare spending. Six million dollars for each of fiscal years 2010 through 2014 would be transferred from the Federal Supplementary Medical Insurance Trust Fund (Part B Trust Fund) to the CMS Program Management Account to carry out this section. $200 million for each of fiscal years 2010 through 2014 for payments for independent patient-centered medical home services, and $125 million for each of fiscal years 2012 through 2016 for CBMH services would be available for CMS from the Part B Trust Fund. In addition to funds otherwise available, $2.5 million for each of fiscal years 2010 through 2012 would be available to CMS from the Part B Trust Fund for initial implementation costs. Any amounts made available under this subsection for a fiscal year would be available until expended. The authority for the Medicare Medical Home Demonstration project would be repealed. The $100 million established by the TRHCA for the existing Medicare Medical Home Demonstration would be made available to the independent patient-centered medical home pilot program. The CBO score is $1.5 billion for FY2010-FY2014 and $1.8 billion for FY2010-FY2019. Sec. 130 3 . Payment Incentive for Selected Primary Care Services. Section 1833(m) of the Social Security Act provides bonus payments (10% of what would otherwise be paid under the fee schedule) for physicians who furnish medical care services in geographic areas that are designated by the Health Resources and Services Administration (HRSA) as primary medical care health professional shortage areas (HPSAs) under section 332 (a)(1)(A) of the Public Health Service (PHS) Act. In addition, for claims with dates of service on or after July 1, 2004, psychiatrists furnishing services in mental health HPSAs are also eligible to receive bonus payments. The provision would establish payment incentives for primary care services furnished on or after January 1, 2011 by a primary care practitioner. The amount of the payment incentive would be 5% (or 10% if the practitioner provides the services predominately in an area that is designated as a primary care health professional shortage area) and would be paid from the Part B Trust Fund. Primary care services would be defined as evaluation and management services and preventive services, regardless of the specialty of the physician providing the service. The primary care services incentive payments would not be taken into account in determining the additional payments for physicians in health professions shortage areas or in physician scarcity areas. The CBO score is $1.8 billion for FY2010-FY2014 and $ 4.7 billion for FY2010-FY2019. Sec. 130 4 . Increased Reimbursement Rate for Certified Nurse-Midwives. In general, Medicare pays 80% of the reasonable charges (the lesser of the actual charge for the services or the amount determined by the fee schedule) for provider services covered under Medicare Part B. However, Medicare payments for services performed by certified nurse–midwives to Medicare beneficiaries are currently limited to no more than 65% of the fee schedule amount for the same service performed by a physician. The proposal would remove the 65% restriction for Medicare payments to certified nurse-midwives. The modification would apply to services furnished on or after January 1, 2011. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019 . Sec. 1307. Excluding Clinical Social Worker Services From Coverage Under the Medicare Skilled Nursing Facility Prospective Payment System and Consolidated Payment. The majority of services provided to beneficiaries in a Medicare covered SNF stay are included in the bundled prospective payment made to the SNF. Certain services have been specifically excluded from SNF consolidated billing. In these instances, Medicare will pay the entity providing the service directly. Currently, the items and services provided by a clinical social worker are included in the SNF consolidated billing. The provision would exclude items and services provided by clinical social workers to Medicare beneficiaries in a SNF from SNF consolidated billing and would establish a separate Medicare payment on or after October 1, 2010. The CBO score is $0.0 billion for FY2010 -FY2014 and $0.0 billion for FY2010-FY2019. Sec. 130 8 . Coverage of Marriage and Family Therapist Services and Mental Health Counselor Services. Section 1861(s)(2) of the SSA defines "medical and other health services" as including medical supplies, hospital services, diagnostic services, outpatient physical therapy services, rural health clinic services, home dialysis services and supplies, antigens and physician assistant and nurse practitioner services. Marriage and family therapists and mental health counselors are not included under current law. The provision would add two subcategories of medical and health services: marriage and family therapists, and mental health counselors. Required qualifications for a marriage and family therapist, and mental health counselor would be established. Medicare would pay 80% of the lesser of the actual charge for services or 75% of the amount that would be paid for a psychologist's services. The Secretary would be required to consider confidentiality issues while developing criteria to allow direct payment of the therapist and medical information sharing with the patient's primary care physician or nurse practitioner. Services provided by marriage and family therapists and mental health counselors would be excluded from consolidated billing by SNFs; marriage and family therapists and mental health counselors would be providers in rural health clinics and federally qualified health centers. Marriage and family therapists and mental health counselors would be one of the practitioner categories who can file claims for services provided . The CBO score is $0. 1 billion for FY2010-FY2014 and $0. 4 billion for FY2010-FY2019. Sec. 1309 . Extension of Physician Fee Schedule Mental Health Add-on. By law, every five years CMS examines Medicare billing codes under the physician fee schedule to determine whether they are overvalued or undervalued. Subsequent to the most recent evaluation, Medicare increased the rates for the codes used by physicians to bill for "evaluation and management" (E/M) services (face-to-face visits with patients), effective January 1, 2007. To maintain budget neutrality, rates for certain other codes, including some used to bill for psychotherapy services, were reduced. MIPPA increased Medicare payments under the fee-schedule for psychotherapy services by 5% beginning on July 1, 2008 and ending on December 31, 2009. The provision would extend the increase payments for psychotherapy services for an additional two years (ending December 31, 2011). The CBO score is $0.1 billion for FY2010-FY2014 and $0.1 billion for FY2010-FY2019. Sec. 1310. Expanding Access to Vaccines Under Medicare. This section would provide Medicare Part B coverage for all federally recommended vaccines, defined as any approved vaccine that is recommended by the CDC upon advice from the Advisory Committee on Immunization Practices. The CBO score is $0.2 billion for FY2010-FY2014 and $1. 5 billion for FY2010-FY2019. Sec. 1312. Independence at Home Demonstration Program. The Secretary would be required to conduct a Medicare demonstration program, beginning no later than January 1, 2012, to test a payment incentive and service delivery model that uses physician and nurse practitioner directed home-based primary care teams designed to reduce expenditures and improve health outcomes in the provision of items and services to certain chronically ill Medicare beneficiaries. The Secretary would enter into agreements with qualifying independence at home medical practices, legal entities comprised of an individual physician or nurse practitioner or group of physicians and nurse practitioners that provide care as part of a team that includes physicians, nurses, physician assistants, pharmacists, and other health and social services staff, as appropriate. These practice staff would have experience providing home-based primary care services to applicable beneficiaries. Practice staff would, among other requirements, make in-home visits to applicable beneficiaries and be available 24 hours per day, 7 days per week to implement care plans tailored to the individual beneficiary's chronic conditions and designed to reduce expenditures and improve health outcomes. Applicable beneficiaries, limited to 10,000 in the demonstration, would be determined by a practice to have at least 2 or more chronic illnesses, a nonelective hospital admission in the past 12 months, and 2 or more functional dependencies requiring assistance, among others. The Secretary would be required to establish a methodology for sharing savings with independence at home medical practices for annual expenditures less than a target spending level for items and services covered under parts A and B. Target spending levels, which would account for normal variation in expenditures for items and services covered under parts A and B, could be set for either all qualifying practices or for groups of practices or a single practice. Practices with annual aggregate expenditures for applicable beneficiaries less than the target spending level would be eligible for an incentive payment. The Secretary would determine how savings beyond the first 5% (relative to set target spending levels) are to be apportioned among practices, taking into account the number of beneficiaries served by each practice, the characteristics of the individuals enrolled in each practice, the practices' performance on quality performance measures, and other factors as the Secretary determines appropriate. The Secretary must limit payments for shared savings to each practice so that aggregate expenditures for applicable beneficiaries would not exceed the amount that the Secretary estimates, less 5 percent, would be expended for such services for such beneficiaries enrolled in an independence at home medical practice if the demonstration program had not been implemented. Agreements with practices under the program could cover no more than a three-year period. The Secretary would be required to submit to Congress a final report on the demonstration's best practices and the impact of the demonstration program on coordination of care, expenditures under this title, beneficiary access to services, and the quality of health care services provided to applicable beneficiaries. The Secretary is required to ensure that an entity entering into an agreement under the demonstration project guarantees it will not deny, limit, or condition the coverage or provision of benefits that a participating beneficiary would have otherwise been entitled to on the basis of health status if not included in this program. The provision would appropriate to the CMS Program Management Account $5 million for each of fiscal years 2010 through 2015 to administer the demonstration program. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1313. Certified Diabetes Educators as Certified Medicare Providers. This section would amend SSA Sec. 1861 to designate certain certified diabetes educators as Medicare-certified providers of covered diabetes self-management training (DSMT) services. A "certified diabetes educator" would be defined as an individual who meets specified criteria, including certification by a "recognized certifying body," which also would be defined. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1601. Increased Funding and Flexibility to Fight Fraud and Abuse. The Health Care Fraud and Abuse Control (HCFAC) account funds activities to fight health care fraud. The HCFAC program along with the Medicare Integrity Program (MIP) were both established by the Health Insurance Portability and Accountability Act of 1996 (HIPAA, P.L. 104-191 ) which sought to increase and stabilize federal funding for health care anti-fraud activities. Specifically, HCFAC funds are directed to the enforcement and prosecution of health care fraud whereas MIP funding supports the program integrity activities undertaken by CMS contractors. This provision would increase funding for HCFAC and MIP by $100 million annually beginning with FY2011. Total mandatory and discretionary funding for health care fraud activities in FY2009 amounted to $1.4 billion. The CBO score is $0.4 billion for FY2010-FY2014 and $0.9 billion for FY2010-FY2019. Sec. 1611. Enhanced Penalties for False Statements on Provider or Supplier Enrollment Applications. In Medicare, providers and suppliers are required to submit an application to enroll in the program in order to receive payment. Beginning January 2010, this provision would provide that a provider, supplier, or health care entity who knowingly makes or causes to be made any false statement, omission, or misrepresentation on an application, agreement, bid, or contract to participate in a federal health program be subject to a civil monetary penalty (CMP) of $50,000. In addition to providers and suppliers participating in Medicare, entities such as Medicaid managed care organizations, Medicare Advantage (MA) organizations, and Part D Prescription Drug Plans (PDPs) would be subject to this provision. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1612. Enhanced Penalties for Submission of False Statements Material to a False Claim. The CMP authority in the SSA requires the imposition of CMPs on any person, including an organization, agency, or other entity, who engages in various types of improper conduct with respect to federal health care programs, including presenting false or fraudulent claims to a federal agency. Beginning January 2010, persons who knowingly make, use, or cause to be made a false record or statement material to a false claim would be subject to a CMP of $50,000 for each false record or statement. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1613. Enhanced Penalties for Delaying Investigations. Beginning January 2010, this provision would provide that persons who fail to grant timely access, upon reasonable request, to the Office of the Inspector General (OIG) for the purpose of audits, investigations, and evaluations be subject to CMPs of $15,000 per day. The provision would also modify the contractual requirements for MA plans to allow the Secretary to conduct timely audits and inspections of MA plans. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1614. Enhanced Hospice Program Safeguards. Medicare statute mandates the establishment of health and safety standards that providers must meet in order to participate in the Medicare and Medicaid programs (i.e. hospitals, hospices, nursing homes, and home health agencies). These standards are often referred to as Conditions of Participation (CoPs). Generally, state agencies, under contract with CMS, survey providers to determine compliance with CoPs. This provision would require the Secretary, by July 1, 2012, to develop and implement intermediate sanctions and appeals procedures for hospices that fail to meet federal health and safety standards. The sanctions may include CMPs of up to $10,000 for each day of non-compliance or $25,000 per violation, denial of payment, the appointment of temporary managers to oversee the hospice, correction plans, and staff training. The provision would apply to hospice's participating in Medicare, Medicaid, and CHIP. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1615. Enhanced Penalties for Individuals Excluded from Program Participation. The Secretary (and through delegation, the OIG) has the authority to exclude individuals and entities from participation in federal health care programs under a variety of circumstances. Payment is prohibited by any Federal health care program for any items or services furnished, ordered, or prescribed by an excluded individual or entity. Beginning January 2010, this provision would provide that any excluded person who knowingly orders or prescribes an item or service, including home health care, lab tests, prescription drugs, durable medical equipment (DME), ambulance services, or physical and occupational therapy, be subject to a CMP of $50,000 for each order or prescription. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1616. Enhanced Penalties for Provision of False Information by Medicare Advantage and Part D Plans. The Secretary has the authority to impose intermediate sanctions and CMPs ranging from $25,000 to $100,000 on MA plans that violate the terms of their contract. Among the types of violations are failing to provide medically necessary care, imposing excess beneficiary premiums, expelling or refusing to re-enroll beneficiaries, or misrepresenting or falsifying information. Beginning January 2010, this provision would add an additional penalty for MA and Part D plans to include an assessment of up to three times the amount claimed by the plan based on the misrepresentation or falsified information. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1617. Enhanced Penalties for Medicare Advantage and Part D Marketing Violations. The Secretary has the authority to impose intermediate sanctions and CMPs ranging from $25,000 to $100,000 on MA plans that violate the terms of their contract. This provision would increase the number of violations that would be subject to the imposition of sanctions and CMPs by the Secretary. Beginning January 2010, employees, agents, or participating providers of MA plans that 1) enroll beneficiaries in a MA or Part D plan without their consent, 2) transfer an individual from one plan to another for the purpose of earning a commission, 3) or fail to comply with CMS marketing requirements could be subject to sanctions imposed by the Secretary. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1618. Enhanced Penalties for Obstruction of Program Audits. The OIG has permissive authority (i.e. discretion) to exclude an entity or individual from a federal health program for a conviction related to the obstruction of a health care fraud investigation. Beginning January 2010, this provision would expand the OIG's permissive exclusion authority to include a conviction related to the obstruction of an audit related to the use of federal funds. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1619. Exclusion of Certain Individuals and Entities from Participation in Medicare and State Health Care Programs. The Secretary (and through delegation, the OIG) has the authority to exclude individuals and entities from participation in federal health care programs under a variety of circumstances. Payment is prohibited by any Federal health care program for any items or services furnished, ordered, or prescribed by an excluded individual or entity. This provision would clarify the effect of an exclusion on payment made under a federal health care program. Subject to certain exceptions, payment could not be made from any federal health care program with respect to an item or service furnished (1) by an excluded individual or entity, or (2) at the medical direction, or on the prescription of an authorized individual (e.g., a physician) when the person submitting a claim for the item or service knew or had reason to know of an individual's exclusion. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1620. OIG Authority to Exclude from Federal Health Care Programs Officers and Owners of Entities Convicted of Fraud. The Secretary (and through delegation, the OIG) has the authority to exclude individuals and entities from participation in federal health care programs under a variety of circumstances. Payment is prohibited by any Federal health care program for any items or services furnished, ordered, or prescribed by an excluded individual or entity. For instance, the Secretary may exclude persons with a direct or indirect ownership or control interest in an entity that has been sanctioned, provided the individual knows or should know of the basis for the sanction, as well as officers and managing employees. This provision would clarify that this authority would apply only to those officers, managing employees, or persons that had a direct or indirect ownership or control interest in the entity at the time the entity had been sanctioned. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1621. Self-Referral Disclosure Protocol. Section 1877 of the Social Security Act, commonly referred to as the Stark law, provides that if a physician or a physician's immediate family member has a "financial relationship" with an entity, the physician may not make a referral to the entity for certain health services, and the entity may not present (or cause to be presented) a claim to the federal health care program for these services. Violators of the physician self-referral law may be subject to sanctions including a denial of payment, civil monetary penalties, and exclusion from participation in the Medicare and Medicaid programs. In 1998, the OIG issued a Self-Disclosure Protocol (SDP) that includes a process under which a health care provider can voluntarily self-disclose evidence of potential fraud to avoid the costs or disruptions that may be associated with an investigation or litigation. OIG has also indicated that health care providers who utilize the self-disclosure protocol may be subject to penalties "on the lower end of the continuum." On March 24, 2009, OIG issued an "Open Letter to Health Care Providers" that makes refinements to the SDP. In the Open Letter, OIG announced that it would no longer accept disclosure of a matter that involves only liability under the physician self-referral law in "the absence of a colorable anti-kickback statute violation." This change has led to some confusion for health care providers seeking to disclose potential Stark law violations. This section would require the Secretary, in cooperation with the OIG, to establish a protocol for allowing health care providers and suppliers to disclose actual and potential violations of the Stark law. The protocol must include information regarding the person, official, or office to whom such disclosures may be made, as well as the implication of the protocol on corporate integrity agreements and corporate compliance agreements. The Secretary would be required to post information on the CMS website regarding how to disclose these violations. In addition, the Secretary would also have the authority to reduce the amount that would be paid for a violation of the Stark law. This section provides factors that the Secretary may consider in reducing this amount. The aggregate CBO score for Sections 1611-1621 is -$0.1 billion for FY2010-FY2014 and -$0.2 billion for FY2010-FY2019. Sec. 1631. Enhanced CMS Program Protection Authority. Beginning January 2011, this provision would authorize the Secretary to subject Medicare, Medicaid, and CHIP providers and suppliers to enhanced screening, oversight, or a moratorium on enrollment in instances where there is a significant risk of fraud. The provisions would apply to both new enrollees as well as providers and suppliers renewing their enrollment. Determinations of what constitutes a significant risk of fraud would be made by the Secretary with respect to a category of providers or suppliers, including a category within a specific geographic area. The Secretary would be required to establish procedures for screening and enhanced oversight which could include licensing checks, screening against the list of excluded providers, background checks, and unannounced site visits. In instances of serious ongoing fraud, the Secretary would have the authority to impose a moratorium on enrolling providers within a certain category of providers or specific geographic area. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1632. Enhanced Medicare, Medicaid, and CHIP Program Disclosure Requirements Relating to Previous Affiliations. In order to receive payment from Medicare, providers must enroll in the Medicare program. CMS regulations mandate that Medicare enrollment applications contain information to uniquely identify the provider (i.e. proof of business name, social security number, or Tax ID number) and include documentation necessary to verify licensure. State Medicaid agencies determine whether a provider or supplier is eligible to participate in the Medicaid program by providing for written agreements with providers and suppliers. Beginning January 2011, this provision would require that providers or suppliers enrolling or re-enrolling in Medicare, Medicaid, or CHIP be required to disclose information on any current or previous affiliation (within the last 10 years) with a provider or supplier that has uncollected debt, that has been suspended or excluded, or has had their billing privileges revoked. The Secretary would have the authority to apply enhanced safeguards as well as deny enrollment in instances when an affiliation poses a risk of fraud. The aggregate CBO score for Sections 1631-1647 is -$0.8 billion for FY2010-FY2014 and -$2.3 billion for FY2010-FY2019. Sec. 1633. Required Inclusion of Payment Modifier for Certain Evaluation and Management Services. Evaluation and management services include certain primary care services, hospital inpatient medical services, preventive medicine visits, and others. This provision would require the Secretary to establish a payment modifier for evaluation and management services that result in the ordering of additional services (i.e. lab tests, prescription drugs, DME, or other services) determined by the Secretary to be at high risk of fraud The aggregate CBO score for Sections 1631-1647 is -$0.8 billion for FY2010-FY2014 and -$2.3 billion for FY2010-FY2019. Sec. 1634. Evaluations and Reports Required Under Medicare Integrity Program. The MIP program requires the Secretary to enter into contracts with private entities to conduct a variety of program integrity activities for the Medicare program including auditing providers, reviewing claims for medical necessity, and identifying and investigating alleged fraud. Beginning in 2011, this provision would require MIP contractors to assure the Secretary that they will conduct periodic evaluations of the effectiveness of their activities and submit annual reports to the Secretary. The aggregate CBO score for Sections 1631-1647 is -$0.8 billion for FY2010-FY2014 and -$2.3 billion for FY2010-FY2019. Sec. 1635. Require Providers and Suppliers to Adopt Programs to Reduce Waste, Fraud, and Abuse. There are no statutory requirements for Medicare participating providers to develop compliance programs to protect themselves from fraud, waste, and abuse. This provision would prohibit the Secretary from enrolling or re-enrolling providers and suppliers in Medicare that have not established such programs. The Secretary, in consultation with the OIG, would be required to establish the core components for these programs and create a timeline for their implementation. Prior to implementation, the Secretary would be authorized to conduct a pilot for certain high-risk providers. Physicians and skilled nursing facilities would be exempt from this provision. The aggregate CBO score for Sections 1631-1647 is -$0.8 billion for FY2010-FY2014 and -$2.3 billion for FY2010-FY2019. Sec. 1636. Maximum Period for Submission of Medicare Claims Reduced to Not More Than 12 Months. Medicare statute requires that payments be made only to Medicare eligible providers and only if a written request for payment is filed within three calendar years after the year in which the services were provided. The Secretary is authorized to reduce this period to no less than one year if necessary. Beginning January 2011, this provision would reduce the time period for filing a claim from three calendar years to one calendar year. The provision would also require contracts with MA and PDP plans to require providers to submit claims for payment within one year. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1637. Physicians Who Order DME or Home Health Services Required to be Medicare Enrolled Physicians or Eligible Professionals. In order to receive payment from Medicare, physicians are required to certify that specified services (i.e. inpatient psychiatric services, post-hospital extended care services, and home health services) meet certain conditions. For example, physicians must certify that home health care services are necessary because the patient is confined to his/her home and needs skilled nursing care. In the case of DME, payment may only be made if the physician has communicated to the supplier a written order for the item. Beginning January 2010, this provision would require that physicians who order DME or home health services be a Medicare eligible professional or enrolled in the Medicare program. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1638. Requirement for Physicians to Provide Documentation on Referrals to Programs at High Risk of Waste and Abuse. Beginning January 2010, the Secretary would have the authority to disenroll, for no more than one year, a Medicare enrolled physician or supplier that fails to maintain and provide access to written orders or requests for payment for DME, home health services, or referrals for other items and services to the Secretary. The provision would also extend the OIG's permissive exclusion authority to include individuals or entities that order, refer, or certify the need for health care services that fail to provide adequate documentation to the Secretary. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1639. Face to Face Encounter with Patient Required Before Physicians May Certify Eligibility for Home Health Services or DME. In order to receive payment from Medicare, physicians are required to certify that specified services (i.e. inpatient psychiatric services, post-hospital extended care services, and home health services) meet certain conditions. For example, physicians must certify that home health care services are necessary because the patient is confined to his/her home and needs skilled nursing care. In the case of DME, payment may only be made if the physician has communicated to the supplier a written order for the item. Beginning in January 2010, this provision would require that physicians have a face-to-face encounter (including through telehealth) with the patient sometime in the previous six months prior to issuing a certification or re-certification. The Secretary would have the authority to apply this face-to-face requirement to other Medicare services as well.The provision would apply to physicians participating in Medicare, Medicaid, and CHIP. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1640. Extension of Testimonial Subpoena Authority to Program Exclusion Investigations. The Secretary has the authority to exclude individuals and entities from participation in federal health care programs under a variety of circumstances. Beginning January 2010, this provision would apply the Secretary's testimonial subpoena authority to program exclusion investigations. Thus, the Secretary would be able to issue subpoenas and require the attendance and testimony of witnesses and the production of any other evidence relating to matters under investigation or in question by the Secretary. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1641. Required Repayments of Medicare and Medicaid Overpayments. This provision would require Medicare and Medicaid providers and suppliers, including Medicaid managed care plans, MA plans, and Part D plans, that know of an overpayment to report and return the overpayment within 60 days. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1642. Expanded Application of Hardship Waivers for OIG Exclusions to Beneficiaries of any Federal Health Care Program. The Secretary has the authority to exclude individuals and entities from participation in federal health care programs under a variety of circumstances. However, if a federal health care program administrator determines that the exclusion would impose a hardship, the Secretary may, after consultation with the OIG, waive the exclusion under certain circumstances. This provision would clarify that the "hardship waiver" for exclusions applies to beneficiaries enrolled in that federal health care program. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1643. Access to Certain Information on Renal Dialysis Facilities. This provision would require End State Renal Disease Facilities to provide the Secretary with access to information relating to any ownership or compensation arrangement between the facility and the medical director of such facility or between the facility and any physician for the purposes of an audit or evaluation. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1644. Billing Agents, Clearinghouses, or Other Alternate Payees Required to Register Under Medicare. CMS has implemented regulations requiring Medicare providers and suppliers to submit an application to enroll in the Medicare program in order to receive billing privileges. The enrollment application requires that providers and suppliers include the names, addresses, and tax ID numbers for billing agencies on their applications. Beginning January 2012, this provision would require billing agencies, clearinghouses, or other payees that submit claims on behalf of a health care provider to register with the Secretary. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1645. Conforming CMPs to False Claims Act (FCA) Amendments. The federal False Claims Act (FCA), codified at 31 U.S.C. §§ 3729-3733, provides for the imposition of CMPs and damages for the knowing submission of false claims to the United States government. The recently enacted Fraud Enforcement and Recovery Act of 2009 (FERA, P.L. 111-21 ), made several amendments to the FCA, which essentially expanded the types of conduct that could lead to FCA liability. The CMP authority in the SSA requires the imposition of CMPs on any person, including an organization, agency, or other entity, who engages in various types of improper conduct with respect to federal health care programs. Similar to the FERA amendments to the FCA, this provision would amend the CMP statute by expanding the types of conduct that could lead to CMPs. For example, the provision would remove the requirement that a claim be presented to a government officer, employee, agent, or agency in order to be liable for CMPs. In addition, the bill would create a new section 1128A(a)(12), which would impose CMPs on a person who conspires to commit a violation of the CMP statute. The aggregate CBO score for Sections 1631-1647 is -$0.8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1646. Requiring provider and supplier payments under Medicare to be made through direct deposit or electronic funds transfer (EFT) at insured depository institutions. There is no statutory requirement for EFT under Medicare, however CMS manual instructions require that all new providers and suppliers entering the Medicare program enroll in EFT. Beginning July 2012, this provision would prohibit payment to any provider or supplier billing Medicare unless the payment is made through EFT or direct deposit. The aggregate CBO score for Sections 1631-1647 is -$0. 8 billion for FY2010-FY2014 and -$2. 3 billion for FY2010-FY2019. Sec. 1651. Access to Information Necessary to Identify Waste and Abuse. Medicare statute requires that Part C and D plans furnish information necessary for determining payments to the Secretary. This information may be accessed by officers, employees, and HHS contractors and only for the purposes of determining payment. This provision would expand access to this information, as well as other financial information, to the OIG, the CMS administrator, and the Attorney General for anti-fraud purposes. This provision would also ensure that the GAO have access to any information disclosed to or obtained by the Secretary under Medicare Parts C and D. The aggregate CBO score for Sections 1631-1647 is $0.0 billion for FY2010-FY2014 and -$0.0 billion for FY2010-FY2019. Sec. 1652. Elimination of Duplication Between the Healthcare Integrity and Protection Databank and the National Practitioner Databank . Medicare statute requires the Secretary to develop and maintain a national health care fraud and abuse data collection program, the Health Care Integrity and Protection Data Bank (HIPDB), for the reporting of adverse actions taken against health care providers or suppliers. The Health Care Quality Improvement Act of 1986 established the National Practitioner Data Bank (NPDB). The NPDB collects and releases data on the professional competence of physicians, dentists, and certain healthcare practitioners. This provision would require the Secretary to establish a process to phase out the HIPDB. The transition would be funded from the fees collected to access the database and from the annual HCFAC appropriation. The aggregate CBO score for Sections 1631-1647 is $0.0 billion for FY2010-FY2014 and -$0.0 billion for FY2010-FY2019. Sec. 1653. Compliance with HIPAA Privacy and Security Standards . The Privacy Act of 1974 generally prohibits disclosures of records contained in a system of records maintained by a federal agency without the written request or consent of the individual to whom the record pertains. HIPAA Privacy and Security Rules establish national standards for the privacy and security of protected health information. This provision would clarify that the privacy and security regulations promulgated under the HIPAA and the Privacy Act of 1974 apply to all fraud, waste, and abuse provisions in this bill. The aggregate CBO score for Sections 1631-1647 is $0.0 billion for FY2010-FY2014 and -$0.0 billion for FY2010-FY2019. Sec. 1654. Disclosure of Medicare Fraud and Abuse Hotline Number on Explanation of Benefits. The Secretary is required to provide Medicare beneficiaries with a clear and simple explanation of benefits on an annual basis. In addition to information on Medicare benefits and cost-sharing, the notice is required to include a statement indicating that beneficiaries should review their explanation of benefits for accuracy and report questionable charges by calling the OIG's fraud hotline. Beginning July 1, 2011, this provision would transfer the toll-free fraud hotline from the OIG to the Secretary and require that the explanation of benefits include the new hotline number. This provision was not scored by CBO. Sec. 1801 . Disclosures to Facilitate Identification of Individuals Likely to Be Ine ligible for the Low-Income Assistance Under the Medicare Prescription Drug Program to Assist Social Security Administration's Outreach to Eligible Individuals . Under Medicare Part D, beneficiaries with incomes and assets below certain levels may be eligible for low-income subsidy benefits. Section 1144 of the SSA requires the Commissioner of Social Security to conduct outreach efforts to inform potential LIS beneficiaries about the additional premium and cost-sharing subsidies. The Social Security Administration, from its own records, and other available non-tax records is able to determine a potential pool of LIS beneficiaries, but such pool may be over-inclusive and include persons ineligible for the LIS benefits. It is believed that the IRS possesses additional income information, and, through imputation, some asset information, that could narrow the pool of potentially eligible LIS beneficiaries thereby reducing outreach costs. Under this provision IRS would be authorized to disclose to the Social Security Administration certain taxpayer return information to assist in identifying individuals likely to be eligible for the low-income subsidy and help focus outreach efforts . The Joint Committee on Taxation scored this provision as having no revenue effect. Sec. 19 01. Repeal of the Trigger Provision . The Hospital Insurance (HI) and Supplementary Medical Insurance (SMI) trust funds are overseen by a board of trustees that reports annually to Congress on Medicare expenditures and revenues. As part of their analysis, as required MMA, the trustees must determine whether or not general revenue financing will exceed 45% of total Medicare outlays within the next seven years. MMA requires that if an excess general revenue funding determination is made for two successive years, the President must submit a legislative proposal to respond to the warning and Congress is required to consider the proposals on an expedited basis. On January 6, 2009, the House approved a rules package ( H.Res. 5 ) that nullifies the trigger provision in the House for the 111 th Congress. This provision would repeal the 45% trigger . The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY20 19 . Sec. 19 02. Repeal of Comparative Cost Adjustment Program . The requirement for a six-year program that will begin in 2010 to examine comparative cost adjustment (CCA) in designated CCA areas would be repealed. Specifically this program requires that payments to local MA plans in CCA areas would, in part, be based on competitive bids (similar to payments for regional MA plans), and Part B premiums for individuals enrolled in traditional Medicare may be adjusted, either up of down. This program would be phased-in and there is also a 5% annual limit on the adjustment, so that the amount of the adjustment to the beneficiary's premium for a year can not exceed 5% of the amount of the monthly Part B premium, in non-CCA areas. The CBO score is -$0.1 billion for FY2010-FY2014 and -$0.1 billion for FY2010-FY20 19 . Sec. 19 03. Extension of Gainsharing Demonstration. Section 5007 of DRA authorizes a gainsharing demonstration to evaluate arrangements between hospitals and physicians designed to improve the quality and the efficiency of care provided to beneficiaries. In the absence of this DRA authority, gainsharing arrangements are restricted by the Civil Monetary Penalty law. CMS is operating two projects, each consisting of one hospital in New York and West Virginia. Although authorized to begin on January 1, 2007, the project began on October 1, 2008 and will end as mandated on December 31, 2009. The Secretary was required to submit a report on quality improvement and achieved savings as a result of the demonstration no later than December 1, 2008. The final report on these issues was due on May 1, 2010. The project was appropriated $6 million in FY2006 to be available for expenditure through FY2010. The provision would extend the gainsharing demonstration until September 30, 2011. The due date of the quality improvement and achieved savings report would be extended from December 1, 2008, to March 31, 2011. The final report would be due March 31, 2013, instead of May 1, 2010. An additional $1.6 million would be appropriated in FY2010. All appropriations would be available for expenditure through FY2014. The CBO score is between -$50 million and $50 million for both FY2010-FY2014 and FY2010-FY2019. Sec. 1906. Assessment Of Medicare Cost-Intensive Diseases And Conditions. The Secretary would conduct an assessment of the diseases and conditions that are the most cost-intensive for the Medicare program or that could become so in the future. In conducting the assessment, the Secretary would include the input of relevant research agencies, including the National Institutes of Health, the Agency for Healthcare Research and Quality, the Food and Drug Administration, and the Centers for Medicare and Medicaid Services. The Secretary would issue a report that would (1) include the assessment of current and future trends of cost-intensive diseases and conditions, (2) address whether current research priorities are appropriately addressing current and future cost-intensive conditions; and (3) include recommendations concerning research in the Department of Health and Human Services that should be funded to improve the prevention, treatment, or cure of such cost-intensive diseases and conditions. The Secretary would transmit this report to the Committees on Energy and Commerce, Ways and Means, and Appropriations of the House of Representatives and the Committees on Health, Education, Labor and Pensions, Finance, and Appropriations of Senate by January 1, 2011. Not later than January 1, 2013, and biennially thereafter, the Secretary would review and update the assessment and recommendations and submit a report to the Committees on the updated assessment and recommendations. The CBO score is $0.0 billion for FY2010-FY2014 and $0.0 billion for FY2010-FY2019. Sec. 1907. Establishment of Center for Medicare and Medicaid Innovation Within CMS. This section would create a new SSA Sec.1115A requiring the establishment of the Center for Medicare and Medicaid Innovation (the CMI) within CMS. The purpose of the CMI would be to test innovative payment and service delivery models to improve the coordination, quality, and efficiency of health care services provided to Medicare and Medicaid beneficiaries and to expand such models that are successful. This section sets forth requirements for both the testing of these models (PHASE I) and the expansion of these models (PHASE II). Specifically, the CMI would test models to determine their effect on program expenditures and on the quality of care. In selecting models for testing, the Secretary would be required to give preference to models that address a defined population for which there are deficits in care leading to poor clinical outcomes. All models would be terminated unless the Secretary determines that the model is expected to (1) improve the quality of patient care without increasing spending; (2) reduce spending without reducing the quality of care; or (3) improve quality and reduce spending. This section would allow the Secretary to expand the duration and the scope of a model that is being tested under this section, to the extent determined appropriate by the Secretary, if the Secretary determines that such expansion would be expected to meet the spending and/or quality criteria above. This section would also require the Secretary to submit to Congress reports on activities under this section, as specified. This section would require to be available, equally divided between the Part A and Part B Trust Funds, $350 million for FY2010, $440 million for FY2011, $550 million for FY2012, and, according to a specified formula, for a subsequent fiscal year. These monies would be authorized to be used for payments for additional benefits for items and services under tested models not otherwise covered and for researching, designing, implementing and evaluating such models. This section would appropriate from the Treasury $25 million for each fiscal year beginning with FY2010, to the Secretary for the Centers for Medicare and Medicaid Services Program Management Account, for administrative costs associated with administering this section with respect to the Medicaid program. The net CBO score for funding the center and the effect on Medicare spending is $0. 8 billion for FY2010-FY2014 and -$ 1.7 billion for FY2010-FY2019.
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Containing scores of provisions affecting Medicare payments, payment rules, and covered benefits, H.R. 3962, as passed by the House on November 7, 2009, treats the Medicare program as both a funding source for health insurance reform and a tool to shape future changes in the way that health services are paid for and delivered. Estimates from CBO on the bill indicate that, absent interaction effects, net reductions in Medicare direct spending may approach $128.1 billion from 2010 to 2014 and $460.8 billion from 2010 to 2019. Major savings are expected from constraining Medicare's annual payment increases, linking payments for Medicare Advantage plans to fee-for-service payments, and requiring drug manufacturers to provide drug rebates for certain low-income Medicare beneficiaries. These savings would be offset by increases related to payment incentives for primary care services, expanded assistance for low-income beneficiaries enrolled in the Medicare prescription drug program, expanded coverage of preventive care services, and higher payments for various types of providers in rural areas. With respect to reshaping health care delivery, H.R. 3962 would provide financial incentives to acute care and critical access hospitals to reduce potentially preventable readmissions and to improve care coordination starting in FY2012. These policies would be extended to post-acute care providers starting in FY2015. Another provision would require the Secretary to develop a detailed plan to bundle payments for post-acute care services within three years of enactment. Also, by January 1, 2011, the existing physician-hospital bundled payment demonstration would be converted to a pilot program and expanded to include post-acute services. H.R. 3962 would also alter Medicare payments to a range of providers, physicians, practitioners, and suppliers. Certain provisions address more systemic issues, such as increasing physician payments for preventive services. Other provisions are time-limited extensions of existing payment policies, such as two-year extensions to Section 508 hospital reclassifications, the physician geographic floor, and rural ambulance add-ons. H.R. 3962 would also change the regulation of providers. For instance, Medicare providers would be subject to enhanced screening and oversight in areas designated as high risk for fraud and abuse. Additionally, the Stark whole hospital and rural exceptions for physician-owned hospitals would be eliminated, except for those existing physician-owned hospitals that qualify for an exception. Finally, provisions in H.R. 3962 would improve Medicare benefits provided to individuals. For instance, the Medicare Part D coverage gap for prescription drugs (the "doughnut hole") would be eliminated, certain low-income subsidies would be amended by changing Medicare's asset test, and copayments would no longer be required for certain preventive care services.
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On February 11, 2011, the Full-Year Continuing Appropriations Act, 2011 ( H.R. 1 ) was introduced in the House. The bill passed the House on February 19, 2011. The House-passed version of H.R. 1 would have provided a total of $60.065 billion agencies and bureaus funded as a part of the annual appropriation for Commerce, Justice, Science, and Related Agencies (CJS). This included $7.38 billion for the Department of Commerce, $27.123 billion for the Department of Justice, $24.697 billion for the Science Agencies, and $864.8 million for the related agencies. On April 15, 2011, President Obama signed into law the Department of Defense and Full-Year Continuing Appropriations Act, 2011 ( P.L. 112-10 , hereafter "the act"). The act provides a total of $61.202 billion for agencies and bureaus funded as a part of the annual appropriation for CJS. The $61.202 provided by the act includes $7.581 billion for the Department of Commerce, $27.389 billion for the Department of Justice, $25.314 billion for the Science Agencies, and $917.9 million for the related agencies. This report provides an overview of actions taken by Congress to provide FY2011 appropriations for Commerce, Justice, Science, and Related Agencies. It also provides an overview of FY2010 appropriations for agencies and bureaus funded as a part of the annual appropriation for CJS. The source for the FY2010-enacted and FY2011 requested amounts is S.Rept. 111-229 . Amounts for H.R. 1 were taken from the text of the bill. The FY2011-enacted amounts were taken from H.Rept. 112-169 . The Consolidated Appropriations Act, 2010 ( P.L. 111-117 ), included a total of $68.705 billion in new budget authority for the agencies and bureaus funded by the annual Commerce, Justice, Science and Related Agencies (CJS) appropriations bill. Of the $68.835 billion appropriated for FY2010, $14.164 billion was for the Department of Commerce, $28.078 billion was for the Department of Justice, $25.658 billion was for the Science Agencies, and $934.8 million was for the related agencies. For FY2011, the Administration requested a total of $66.109 billion for CJS, an approximately 4.0% decrease in budget authority compared with FY2010 appropriations. The FY2011 request included $8.968 billion for the Department of Commerce, $29.737 billion for the Department of Justice, $26.431 billion for the Science Agencies, and $973.4 million for the related agencies. H.R. 1 would have provided a total of $60.065 billion for CJS, 12.7% less than the FY2010-enacted amount and 9.1% less than the FY2011 request. H.R. 1 included $7.38 billion for the Department of Commerce, $27.123 billion for the Department of Justice, $24.697 billion for the Science Agencies, and $864.8 million for the related agencies. P.L. 112-10 provides a total of $61.202 billion for CJS, an amount that is 10.9% less than the FY2010-enacted amount and 7.4% below the Administration's FY2011 request. However, the amount provided in the act is 1.9% more than what would have been provided in H.R. 1 . The act includes $7.581 billion for the Department of Commerce, $27.389 billion for the Department of Justice, $25.314 billion for the Science Agencies, and $917.9 million for the related agencies. The amounts in this report reflect only new budget authority. Therefore, the amounts do not include any rescissions of unobligated or de-obligated balances that may be counted as offsets to newly enacted budget authority. Table 1 shows the FY2010 appropriation, FY2011 request, H.R. 1 amounts, and the FY2011 appropriations for the Department of Commerce, the Department of Justice, the Science Agencies, and the related agencies. Congress might have considered the following issues as part of the Department of Commerce FY2011 appropriations process: whether to accept the Administration's proposal to transfer funds from public works to economic adjustment and technical assistance programs under the Economic Development Administration to help distressed areas affected by unemployment as a result of the recession; whether to fund the Administration's proposed 19.6% increase in funding for the International Trade Administration for FY2011 that included a National Export Initiative expected to help increase U.S. exports and the competitiveness of U.S. companies in the global marketplace; whether to provide the U.S. Patent and Trademark Office with the authority to use all the fees it collects in a fiscal year; and whether to support the Administration's proposal to increase support of National Oceanic and Atmospheric Administration's satellite programs to ensure continuity of satellite operations and to provide coverage for weather forecasts and climate measurements. Some issues Congress might have considered while determining funding levels for DOJ accounts include the following: limitations on the use of funds for anticipated DOJ administrative costs related to transferring and prosecuting Guantánamo detainees; whether to accept the Administration's proposed increase in funding to improve law enforcement's capacity to combat the trafficking of illicit drugs and firearms along the Southwest border; continued oversight of the Federal Bureau of Investigation's (FBI's) transformation and the redirection of a share of its resources away from traditional crime and toward combating domestic and international terrorism; permanent funding for FBI positions for white collar crime (financial and mortgage fraud) that were previously funded through supplemental appropriations; enhancement of FBI weapons of mass destruction response and render safe capabilities; increased protection of the U.S. information infrastructure from computer intrusions through additional FBI resources devoted to cyber threat investigations and intelligence analysis; whether to increase FBI's funding for investigating mortgage and financial fraud; whether to approve the Administration's request for funding for the Bureau of Prisons to acquire, renovate, and operate a high-security facility in Thomson, IL; increased funding for grant programs that either seek to divert offenders from the criminal justice system or reduce recidivism; and whether to accept the Administration's proposal to cease funding for the Weed and Seed Program. Among the issues facing Science Agencies that Congress may have opted to address in the FY2011 appropriations process are: whether to provide funding increases for research and related activities at the National Science Foundation (NSF), National Institute of Standards and Technology (NIST), and Department of Energy Office of Science (DOE SC) at levels consistent with President Obama's goal of doubling aggregate funding for these agencies by FY2016, from their FY2006 aggregate funding level, or at levels consistent with the America COMPETES Act ( P.L. 110-69 ), which authorized funding for FY2008, FY2009, and FY2010 that set a seven-year doubling path; whether to fund climate change and clean energy research that has been requested in the NSF FY2011 budget request; whether to fund NSF's work under the National Nanotechnology Initiative directed at understanding and exploiting the unique properties of matter that can emerge at the nanoscale, as well as toward understanding and addressing nanotechnology-related environmental, health, and safety concerns; and whether the future direction of the National Aeronautics and Space Administration's (NASA's) human spaceflight program will be determined in FY2011. Some issues Congress might have considered while debating FY2011 funding level for related agencies include the following: whether to provide additional funding for the Equal Employment Opportunity Commission to hire investigators, mediators, attorneys, and support staff to address a growing backlog of private sector cases; whether to eliminate the Legal Services Corporation restrictions on class action suits and attorneys' fees; and whether to increase funding for the State Justice Institute so it can award grants to support programs that might not be funded due the budget constraints most state courts are currently facing. The origin of the Department of Commerce (Commerce Department) dates to 1903 with the establishment of the Department of Commerce and Labor. The separate Commerce Department was established on March 4, 1913. The department's responsibilities are numerous and quite varied; its activities center on five basic missions: (1) promoting the development of U.S. business and increasing foreign trade; (2) improving the nation's technological competitiveness; (3) encouraging economic development; (4) fostering environmental stewardship and assessment; and (5) compiling, analyzing, and disseminating statistical information on the U.S. economy and population. The following agencies within the Commerce Department carry out these missions: International Trade Administration (ITA) seeks to develop the export potential of U.S. firms and to improve the trade performance of U.S. industry; Bureau of Industry and Security (BIS) enforces U.S. export laws consistent with national security, foreign policy, and short-supply objectives; Economic Development Administration (EDA) provides grants for economic development projects in economically distressed communities and regions; Minority Business Development Agency (MBDA) seeks to promote private and public sector investment in minority businesses; Economic and Statistics Administration (ESA) , excluding the Bureau of the Census, provides (1) information on the state of the economy through preparation, development, and interpretation of economic data, and (2) analytical support to department officials in meeting their policy responsibilities; Bureau of the Census , a component of ESA, collects, compiles, and publishes a broad range of economic, demographic, and social data; National Telecommunications and Information Administration (NTIA) advises the President on domestic and international communications policy, manages the federal government's use of the radio frequency spectrum, and performs research in telecommunications sciences; United States Patent and Trademark Office (USPTO) examines and approves applications for patents for claimed inventions and registration of trademarks; National Institute of Standards and Technology (NIST) assists industry in developing technology to improve product quality, modernize manufacturing processes, ensure product reliability, and facilitate rapid commercialization of products on the basis of new scientific discoveries; and National Oceanic and Atmospheric Administration (NOAA) provides scientific, technical, and management expertise to (1) promote safe and efficient marine and air navigation; (2) assess the health of coastal and marine resources; (3) monitor and predict the coastal, ocean, and global environments (including weather forecasting); and (4) protect and manage the nation's coastal resources. Table 2 presents the following funding information for the Department of Commerce as a whole and each of its bureaus or agencies: the FY2010-enacted funding amount, the Administration's FY2011 request, the funding level proposed in H.R. 1 , and the amount enacted in P.L. 112-10 ( H.R. 1473 ). The Administration requested an FY2011 total of $8.968 billion for the Commerce Department, a $5.197 billion (36.7%) decrease from the $14.164 billion that was enacted for FY2010. Most of the reduction was due to a large decrease in the FY2011 request for the Census Bureau, $1.267 billion compared with the $7.325 billion the Bureau received in FY2010, largely for the 2010 decennial census. H.R. 1 included a total of $7.380 billion for the Commerce Department, 47.9% less than the FY2010-enacted appropriation and 17.7% less than the Administration's FY2011 request. A large part of the reduction in the department's funding under H.R. 1 was the result of a proposed $6.232 billion decrease in the Census Bureau's Periodic Censuses and Programs account. Under P.L. 112-10 , the department's funding level is $7.581 billion, $6.454 billion (46.0%) less than the FY2010-enacted amount, $1.387 billion (15.5%) less than requested for FY2011, and $201.1 million (2.7%) more than proposed in H.R. 1 . ITA provides export promotion services, works to ensure compliance with trade agreements, administers trade remedies such as antidumping and countervailing duties, and provides analytical support for ongoing trade negotiations. ITA's mission is to improve U.S. prosperity by strengthening the competitiveness of U.S. industry, promoting trade and investment, and ensuring fair trade and compliance with trade laws and agreements. ITA strives to accomplish this through the following organizational units: (1) the Manufacturing and Services Unit, which is responsible for certain industry analysis functions and promoting the competitiveness and expansion of the U.S. manufacturing sector; (2) the Market Access and Compliance Unit, which is responsible for monitoring foreign country compliance with trade agreements, identifying compliance problems and market access obstacles, and informing U.S. firms of foreign business practices and opportunities; (3) the Import Administration Unit, which is responsible for administering the trade remedy laws of the United States; (4) the Trade Promotion/U.S. Foreign Commercial Service program, which is responsible for conducting trade promotion programs, providing U.S. companies with export assistance services, and leading interagency advocacy efforts for major overseas projects; and (5) the Executive and Administrative Directorate, which is responsible for providing policy leadership, information technology support, and administration services for all of ITA. The FY2011-requested amount for ITA was $534.3 million, $87.5 million (19.6%) more than the FY2010-enacted amount of $446.8 million. The request anticipated the collection of $9.4 million in fees, the same as the FY2010-enacted amount, which would have raised available FY2011 funds to $543.7 million. H.R. 1 would have provided a total of $441.6 million for ITA, 1.2% less than the FY2010-enacted amount and 17.4% less than the Administration's FY2011 request. The FY2011-enacted amount is $440.7 million, 17.5% less than the Administration's request and 0.2% less than H.R. 1 would have provided. The increase in the FY2011 request was part of the Obama Administration's multiyear plan to stimulate the economy. The Administration requested $78.5 million for a National Export Initiative (NEI) to promote growth in the U.S. economy and create jobs by increasing the volume of U.S. exports and the number of U.S. firms that export. The Administration expected that the initiative would help U.S. companies be more competitive in the global market and that jobs created through export growth would be associated with higher wages. BIS administers export controls on dual-use goods and technology through its licensing and enforcement functions. It cooperates with other nations on export control policy and provides assistance to the U.S. business community to comply with U.S. and multilateral export controls. BIS also administers U.S. anti-boycott statutes and is charged with monitoring the U.S. defense industrial base. Authorization for the activities of BIS, the Export Administration Act (50 U.S.C. 2401, et seq.), last expired in August 2001. On August 17, 2001, President Bush invoked the authorities granted by the International Economic Emergency Powers Act (50 U.S.C. 1703(b)) to continue in effect the system of controls contained in the act and in the Export Administration Regulations (15 C.F.R., Parts 730-799), and these authorities have been renewed yearly. The President's FY2011 request for BIS was $113.1 million, a $12.8 million (12.7%) increase from the FY2010-enacted funding level of $100.3 million. The FY2011 funding request for BIS was divided among licensing activity ($55.6 million), enforcement activities ($51.3 million), and management and policy coordination ($6.2 million). Of these amounts, $14.8 million was requested for Chemical Weapons Convention (CWC) enforcement. H.R. 1 would have provided $100.3 million for BIS, the same as FY2010-enacted funding for the bureau. This amount would have been 11.3% less than the requested FY2011 funding. The FY2011-enacted amount ( H.R. 1473 ) is $100.1 million, 11.5% less than the Administration's request and 0.2% less than H.R. 1 would have provided. EDA was created by the enactment of the Public Works and Economic Development Act (PWEDA) of 1965, with the objective of fostering growth in economically distressed areas characterized by high levels of unemployment and low per-capita income levels. Federally designated disaster areas and areas affected by military base realignment or closure (BRAC) are also eligible for EDA assistance. For FY2011, the Administration requested $286.2 million for EDA, $6.8 million (2.3%) less than the FY2010-enacted amount of $293.0 million. H.R. 1 would have provided $293.0 million for EDA, the same amount as enacted for FY2010. The proposed amount in H.R. 1 would have represented an increase of 2.4% compared to the Administration's FY2011 request. The FY2011-enacted amount for EDA is $283.4 million, which is 3.3% less than the FY2010-enacted amount, 1.0% less than the Administration's request, and 3.3% less than H.R. 1 would have provided. One of EDA's policy priorities is to assist distressed areas affected by unemployment as a result of the recession, in particular funding for regional planning and matching grants for regional innovation clusters, and the launch of a national network of public-private business incubators, to be funded under economic adjustment assistance grants. P.L. 112-10 does not provide additional guidance on the level of funding for these two initiatives, the Administration's FY2011 request for a 3.5% reduction in economic development programs, and the reallocation of funds from public works to economic adjustment and technical assistance. MBDA, established by Executive Order 11625 on October 13, 1971, is charged with the lead role in coordinating all of the federal government's minority business programs. As part of its strategic plan, MBDA seeks to develop an industry-focused, data-driven, technical assistance approach to give minority business owners the tools essential for becoming first- or second-tier suppliers to private corporations and the federal government in the new procurement environment. Progress is measured in increased gross receipts, number of employees, and size and scale of firms associated with minority business enterprise. The Administration's request for this account for FY2011 was $32.3 million, an increase of approximately $0.8 million (2.6%) over the FY2010-enacted amount of $31.5 million. H.R. 1 included $30.4 million for MBDA. This amount would have represented a 3.5% decrease in funding compared to the FY2010-enacted level and 5.9% less than the Administration's FY2011 request. The FY2011-enacted amount for MBDA is $30.3 million, which is 3.7% less than the FY2010-enacted amount, 6.1% less than the Administration's request, and 0.2% less than H.R. 1 would have provided. The ESA provides economic data, analysis, and forecasts to government agencies and, where appropriate, to the public. The ESA includes the Bureau of the Census (discussed separately), the Bureau of Economic Analysis (BEA), and STAT-USA. The ESA has three core missions: to compile a system of economic data, to interpret and communicate information about the forces at work in the economy, and to support the information and analytical needs of the executive branch. For FY2011, the Administration requested $113.2 million for the ESA, an increase of $15.9 million (16.4%) over the FY2010-enacted amount of $97.3 million. H.R. 1 would have provided $97.3 million for the ESA, the same as the FY2010-enacted amount, but this amount would have been 14.1% less than the Administration's FY2011 request. The FY2011-enacted amount for the ESA is $97.1 million, which is 0.2% less than the FY2010-enacted amount, 14.3% less than the Administration's request, and 0.2% less than H.R. 1 would have provided. Funding for the ESA in FY2011 includes two primary accounts: the ESA headquarters and the BEA. The ESA headquarters staff provides economic research and policy analysis in support of the Secretary of Commerce and the Administration. The BEA account funds the National Income and Product Accounts (NIPAs), which include estimates of national gross domestic product and related measures. The U.S. Constitution requires a population census every 10 years, to serve as the basis for apportioning seats in the House of Representatives. Decennial census data also are used for within-state redistricting and in certain formulas that determine the annual distribution of more than $400 billion in federal and state funds. The Bureau of the Census (Census Bureau), established as a permanent office on March 6, 1902, conducts the decennial census under Title 13 of the U.S. Code, which also authorizes the Census Bureau to collect and compile a wide variety of other demographic, economic, housing, and governmental data. The Administration's FY2011 request for the Census Bureau was $1.267 billion, $6.058 billion (82.7%) less than the FY2010-enacted amount of $7.325 billion. The FY2011 request included $280.4 million for the Bureau's salaries and expenses account—$21.3 million (8.2%) above the $259.0 million FY2010-enacted level—and $986.4 million for the periodic censuses and programs account—$6.079 billion (86.0%) lower than the $7.066 billion for FY2010. The request also included $256,000 for acquisition workforce capacity and capabilities. The periodics account funds the Bureau's most expensive program, the decennial census. The large decrease in the FY2011 periodics request reflected the fact that the Bureau completed its most costly 2010 census operations by the end of FY2010. Among other major activities during FY2011, the Bureau released the House apportionment data on December 21, 2010; completed the delivery of redistricting data to the states on March 24, 2011; began providing new census data for federal funds distribution; and completed the fieldwork for the coverage measurement program, to assess 2010 census accuracy. Although the 2010 census collected only basic population data, the American Community Survey (ACS)—another part of the decennial program funded under the periodics account—gathers more extensive socioeconomic and housing information. The ACS samples almost 250,000 housing units every month, or 2.9 million a year. The data are aggregated to produce annual, three-year, or five-year averages for places according to their population sizes. The ACS replaced the decennial census long form, which used to collect data from a sample of the population (about 17.0% in 2000) in the census year. The FY2011 request included $44.0 million for, among other purposes, increasing the yearly ACS sample size to 3.5 million housing units and thereby improving the reliability of the census-tract-level (small-area) estimates. P.L. 112-10 provides a total of $1.150 billion for the Census Bureau in FY2011, a $6.175 billion (84.3%) reduction compared with the FY2010-enacted amount of $7.325 billion, $117.3 million (9.3%) less than the $1.267 billion requested for FY2011, and $57.0 million (5.2%) more than the $1.093 billion in H.R. 1 . P.L. 112-10 funds the salaries and expenses account at $258.5 million, $518,048 (0.2%) less than the $259.0 million enacted for FY2010 and included in H.R. 1 , and $21.9 million (7.8%) below the $280.4 million requested for FY2011. Funding for the periodic censuses and programs account under P.L. 112-10 is $891.2 million, $6.174 billion (87.4%) less than the $7.066 billion FY2010-enacted amount, $95.1 million (9.6%) below the $986.4 million FY2011 request, and $57.5 million (6.9%) above the $833.7 million in H.R. 1 . P.L. 112-10 does not refer to the ACS funding level, but this level could be addressed in the spending plan that the law requires the Commerce Department, among other agencies, to submit to the House and Senate Appropriations Committees within 60 days of enactment. NTIA is the executive branch's principal advisory office on domestic and international telecommunications and information technology policies. Its mandate is to provide greater access for all Americans to telecommunications services, support U.S. attempts to open foreign markets, advise on international telecommunications negotiations, fund research grants for new technologies and their applications, and assist nonprofit organizations converting to digital transmission in the 21 st century. NTIA manages the distribution of funds for several key grant programs. Its role in federal spectrum management includes acting as a facilitator and mediator in negotiations among the various federal agencies regarding usage, priority access, causes of interference, and other radio spectrum questions. In recent years, one of the responsibilities of the NTIA has been to oversee the transfer of some radio frequencies from the federal domain to the commercial domain. Many of these frequencies have subsequently been auctioned to the commercial sector and the proceeds paid into the U.S. Treasury. For FY2011, the Administration requested $21.8 million for Salaries and Expenses, a 9.1% increase over the $20.0 million appropriated for that category in FY2010. Approximately $1.0 million of the requested increase is to bolster research in spectrum-sharing technologies that would improve the efficiency of radio frequency spectrum. Other program efforts will seek to increase the availability of spectrum for wireless broadband, in support of the Administration's goals for national broadband, and to work with the Federal Communications Commission on developing a plan for spectrum availability over the next 10 years. The appropriations request announced the intention of discontinuing the Public Telecommunications and Facilities Planning and Construction (PTFPC) program, a separate budget category. The PTFPC funds grants for public broadcasting activities; the appropriations request reports that funds are available for this purpose from other sources. In FY2010, Congress appropriated $20.0 million for PTFPC. H.R. 1 would have provided a total of $40.6 million for NTIA, a proposed increase of 1.6% compared to the FY2010-enacted appropriation, but 10.7% less than the Administration's FY2011 request. The FY2011-enacted amount is $40.6 million. The USPTO (the Office) examines and approves applications for patents on claimed inventions and administers the registration of trademarks. It also helps other federal departments and agencies protect American intellectual property in the international marketplace. The USPTO is funded by user fees paid by customers that are designated as "offsetting collections" and subject to spending limits established by Congress. The President's FY2011 budget would have provided the USPTO with the budget authority to spend $2.322 billion in fees collected, 15.2% above the FY2010-enacted amount of $2.016 billion (including the $1.887 billion in P.L. 111-117 and the $129.0 million provided in supplemental funding legislation, P.L. 111-224 ). Up to $100.0 million in additional collections above the $2.322 billion in FY2011 was to remain available for use by the Office. The budget proposal also recommended that past fee increases remain in effect, that a 15.0% surcharge be leveled on fees charged or authorized, and that the fees generated by the surcharge be designated for use only by the USPTO. As passed by the House, H.R. 1 would have given $2.016 billion in budget authority to the USPTO, the same figure included in FY2010 appropriations legislation and 13.2% below the amount requested by the Administration. P.L. 112-10 provides the USPTO with the budget authority to spend $2.090 billion in FY2011. This figure is 3.7% above both the FY2010-enacted amount and that included in H.R. 1 , and 10.0% below the Administration's FY2011 proposal. According to a preliminary decision from OMB, the 0.2% across the board rescission will not apply to the USPTO as rescissions generally do not apply to offsetting collections and/or receipts. The ability of the USPTO to use all fees collected during a given fiscal year has been of ongoing congressional interest. Until recently, appropriations measures limited USPTO use of these fees. Proponents of this approach claim that the Office has been given sufficient financial support to operate and that the existing process provides necessary financing for other programs in the relevant budget category given budget scoring practices and the caps placed upon the Committees on Appropriations. However, many in the community that pay the fees to maintain and administer intellectual property disagree with this assessment. Critics argue that, over time, significant portions of the fees collected were not returned to the USPTO because of the ceilings established by the appropriations process and the inability of the Office to use the fees on a dollar-for-dollar basis. They maintain that all fees are necessary to cover actual, time-dependent activities at the USPTO and that the ability of the appropriators to limit funds diminishes the efficient and effective operation of the Office. NIST is a laboratory of the Department of Commerce with a mandate to increase the competitiveness of U.S. companies through appropriate support for industrial development of pre-competitive, generic technologies and the diffusion of government-developed technological advances to users in all segments of the American economy. NIST research also provides the measurement, calibration, and quality assurance techniques that underpin U.S. commerce, technological progress, improved product reliability, manufacturing processes, and public safety. The Administration's FY2011 budget proposed $918.9 million in funding for NIST, a 7.3% increase over the $856.6 appropriated for FY2010. Support for primarily in-house research and development (R&D) under the Scientific and Technical Research and Services (STRS) account (including the Baldrige National Quality Program) would have increased 13.5% from the FY2010 figure of $515.0 million to $584.5 million. The Manufacturing Extension Partnership (MEP) program would have received $129.7 million, 4.0% more than the $124.7 million appropriated in FY2010. Financing for the Technology Innovation Program (TIP) would have increased 14.3% over FY2010 funding of $69.9 million to $79.9 million. The $124.8 million in the construction budget would have represented a decline of 15.1% from the FY2010 figure of $147.0 million. Under H.R. 1 , NIST would have received an appropriation of $697.1 million, 18.6% below the FY2010-enacted figure and 24.1% less than the Administration's FY2011 request. Included in H.R. 1 was $469.5 million for the STRS account, which would have been 8.8% below the FY2010 figure and 19.7% below the President's budget proposal. The $124.7 million for the MEP program was the same as the FY2010 appropriation and 3.9% less than the budget request. Funding for TIP would have totaled $44.9 million, which would have represented a decrease of 35.8% from the previous fiscal year and a decrease of 43.8% from the Administration's figure. The $58.0 million for construction was 60.5% less than the FY2010 appropriation and 53.5% less than the President requested. P.L. 112-10 funds NIST at $750.1 million after the 0.2% across the board rescission, 12.4% below the FY2010 appropriation, 18.4% below the President's budget request, and 7.6% more than the figure in H.R. 1 . Support for the STRS account (including the Baldrige National Quality Program) totals $507.0 million, 1.6% less than the FY2010 figure, 13.3% less than the Administration proposed, and 8.0% above the amount in H.R. 1 . The MEP program receives $128.4 million, 3.0% more than both the FY2010 appropriation and the funding included in H.R. 1 , and 1.0% below the Administration's budget. The $44.8 million for TIP represents a decrease of 35.9% from FY2010, is 43.9% less than the President requested, and almost the same as the amount in H.R. 1 . The construction budget declines 52.4% from FY2010 funding to $69.9 million, is 44.0% below the Administration's proposal, and 20.5% above the funding in H.R. 1 . Continued support for NIST extramural programs (currently MEP and TIP) directed toward increased private sector commercialization has been a major issue. Some Members of Congress have expressed skepticism over a "technology policy" based on providing federal funds to industry for development of pre-competitive generic technologies. This approach, coupled with pressures to balance the federal budget, led to significant reductions in appropriations for several of these NIST activities. The Advanced Technology Program (ATP) and the Manufacturing Extension Partnership, which accounted for more than 50% of the FY1995 NIST budget, were proposed for elimination at various times by the House and Senate. In 2007, ATP was terminated and replaced by the Technology Innovation Program. While much of the legislative debate has focused on extramural efforts, increases in spending for the NIST laboratories that perform the research essential to the mission responsibilities of the agency have tended to remain small. As part of the American Competitiveness Initiative, announced by former President George W. Bush in the 2006 State of the Union address, the Administration stated its intention to double funding over 10 years for "innovation-enabling research" done at NIST through its "core" programs (defined as internal research in the STRS account and the construction budget). In April 2009, the current President stated his decision to double the budget of key science agencies, including NIST, over the next 10 years. While additional funding has been forthcoming, it remains to be seen how support for internal R&D at NIST will evolve and how this might affect financing of extramural programs such as TIP and MEP. The National Oceanic and Atmospheric Administration (NOAA) conducts scientific research in areas such as ecosystems, climate, global climate change, weather, and oceans; supplies information on the oceans and atmosphere; and conserves coastal and marine resources. NOAA was created in 1970 by Reorganization Plan No. 4. The reorganization plan was designed to unify the nation's environmental activities and to provide a systematic approach for monitoring, analyzing, and protecting the environment. NOAA's administrative structure has evolved into five line offices, which include the National Environmental Satellite, Data, and Information Service (NESDIS); the National Marine Fisheries Service (NMFS); the National Ocean Service (NOS); the National Weather Service (NWS); and the Office of Oceanic and Atmospheric Research (OAR). In addition to NOAA's five line offices, Program Support (PS), a cross-cutting budget activity, includes the NOAA Education Program, Corporate Services, Facilities, and the Office of Marine and Aviation Services (OMAO). For FY2011, the Administration requested a total of $5.544 billion, 17.0% more than the FY2010-enacted amount of $4.738 billion. NOAA's budget is divided into two main accounts, Operations Research and Facilities (ORF) and Procurement, Acquisition, and Construction (PAC). The Administration proposed funding ORF at $3.303 billion and PAC at $2.184 billion. Nearly all of the requested increase would fund the PAC account for NESDIS activities related to satellite programs. H.R. 1 would have provided $4.350 billion for NOAA, 8.2% less than the FY2010-enacted amount and 21.5% less than the Administration's FY2011 request. The FY2011-enacted amount for NOAA is $4.588 billion, 3.2% less than the FY2010-enacted amount and 17.2% less than the Administration's request, but 5.5% more than what would have been provided in H.R. 1 . The FY2011-enacted amount provides $3.180 billion for the ORF account and $1.333 billion for the PAC account. One of NOAA's priorities is to support NESDIS to ensure continuity of satellite operations and to provide coverage for weather forecasts and climate measurements. The Administration would have increased FY2011 PAC funding for NESDIS by $819.4 million. Although the funding levels of specific programs are unknown at this time, NOAA-wide PAC funding was decreased in the FY2011-enacted NOAA budget by $25.7 million. Established by an act of 1870 with the Attorney General at its head, DOJ provides counsel for citizens in federal cases and protects them through law enforcement. It represents the federal government in all proceedings, civil and criminal, before the Supreme Court. In legal matters, generally, the department provides legal advice and opinions, upon request, to the President and executive branch department heads. The major functions of DOJ agencies and offices are described below. United States Attorneys prosecute criminal offenses against the United States, represent the federal government in civil actions, and initiate proceedings for the collection of fines, penalties, and forfeitures owed to the United States. United States Marshals Service provides security for the federal judiciary, protects witnesses, executes warrants and court orders, manages seized assets, detains and transports unsentenced prisoners, and apprehends fugitives. Federal Bureau of Investigation (FBI) investigates violations of federal criminal law; helps protect the United States against terrorism and hostile intelligence efforts; provides assistance to other federal, state, and local law enforcement agencies; and shares jurisdiction with Drug Enforcement Administration over federal drug violations. Drug Enforcement Administration (DEA) investigates federal drug law violations; coordinates its efforts with state, local, and other federal law enforcement agencies; develops and maintains drug intelligence systems; regulates legitimate controlled substances activities; and conducts joint intelligence-gathering activities with foreign governments. Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) enforces federal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives. It was transferred from the Department of the Treasury to the DOJ by the Homeland Security Act of 2002 ( P.L. 107-296 ). Federal Prison System (Bureau of Prisons) provides for the custody and care of the federal prison population, the maintenance of prison-related facilities, and the boarding of sentenced federal prisoners incarcerated in state and local institutions. Office on Violence Against Women coordinates legislative and other initiatives relating to violence against women and administers grant programs to help prevent, detect, and stop violence against women, including domestic violence, sexual assault, and stalking. Office of Justice Programs (OJP) manages and coordinates the activities of the Bureau of Justice Assistance, Bureau of Justice Statistics, National Institute of Justice, Office of Juvenile Justice and Delinquency Prevention, and the Office of Victims of Crime. Community Oriented Policing Services (COPS) advances the practice of community policing by awarding grants to law enforcement agencies to hire and train community policing professionals, acquire and deploy crime-fighting technologies, and develop and test innovative policing strategies. Most crime control has traditionally been a state and local responsibility. With the passage of the Crime Control Act of 1968 (P.L. 90-351), however, the federal role in the administration of criminal justice has increased incrementally. Since 1984, Congress has approved five major omnibus crime control bills, designating new federal crimes, penalties, and additional law enforcement assistance programs for state and local governments. For FY2011, the Administration's request included almost $29.737 billion for DOJ (as shown in Table 3 ), which included $8.265 billion for the FBI, $2.13 billion for the DEA, $1.163 billion for the ATF, $6.806 billion for BOP, and $2.07 billion for OJP. The FY2011 request would have represented an increase of $1.659 billion compared with the FY2010-enacted appropriation of $28.078 billion. This 5.9% proposed increase in funding was largely reflected in proposed increases for BOP, FBI, DEA, and Legal Activities, including additional amounts for the U.S. Attorneys and fees and expenses for the Witness Security Program. The President's FY2011 budget request also proposed notable funding reductions among several accounts, including State and Local Law Enforcement Assistance (-3.7%), Juvenile Justice (-31.6%), COPS (-12.8%), and it proposed eliminating the Weed and Seed program. H.R. 1 would have provided a total of $27.123 billion for DOJ. This amount would have represented a 3.4% decrease in appropriations compared to the FY2010-enacted level. It would also have been 8.8% less than the Administration's FY2011 request. The most notable decreases under the H.R. 1 would have been for DOJ's grant accounts. Under H.R. 1 , appropriations for COPS would have been 25.7% less than the FY2010-enacted amount and appropriations for OJP would have been 35.1% below FY2010-enacted levels. The act provides a total of $27.389 billion for DOJ for FY2011. This amount is 2.5% less than the FY2010-enacted appropriation and it is 7.9% less than the Administration's FY2011 request. However, the amount provided in the act is 1.0% more than the amount that would have been provided in H.R. 1 . The $27.389 billion provided for DOJ for FY2011 includes $1.14 million for the U.S. Marshals, $7.926 billion for the FBI, $2.016 billion for the DEA, and $1.113 billion for the ATF. Reductions to DOJ FY2011 appropriations, compared to FY2010, are mostly the result of Congress reducing funding for DOJ's General Administration accounts; FBI, U.S. Marshals and ATF construction; and DOJ's grant programs. While there was an overall reduction in DOJ's funding for FY2011, Congress did provide increased funding for the Office of the Federal Detention Trustee and the FBI and the Bureau of Prisons' salaries and expenses accounts. The General Administration account provides funds for salaries and expenses for the Attorney General's office, the Inspector General's office, and other programs designed to ensure that the collaborative efforts of DOJ agencies are coordinated to help fight crime as efficiently as possible. The Administration's request included $2.593 billion for FY2011. This amount was $316.6 million more than the enacted FY2010 appropriation of almost $2.277 billion, an increase of 13.9%. H.R. 1 included a total of $2.248 billion for general administration, which would have been 1.3% less than FY2010-enacted appropriations and 13.3% below the Administration's FY2011 request. The FY2011-enacted amount of $2.208 billion for general administration is almost $68.6 million (3.0%) less than the enacted FY2010 appropriation, $385.2 million (14.9%) less than the Administration's FY2011 requested amount, and almost $39.6 (1.8%) less than what would have been appropriated under H.R. 1 . Described below are several General Administration subaccounts, such as the Office of the Inspector General. The General Administration account includes funding for Salaries and Expenses for DOJ administration, as well as for the National Drug Intelligence Center, Justice Information Sharing Technology, and Tactical Law Enforcement Wireless Communications. For DOJ's General Administration, the FY2011 budget request included $655.4 million, what would have been an increase of almost $198.5 million (or 43.4%) over the FY2010 appropriation of $456.9 million. H.R. 1 would have provided a total of $332.9 million for this account, which would have been $124.3 million (or 27.1%) less than the FY2010 appropriated amount and $332.5 million (or 49.2%) less than the Administration's request. The FY2011-enacted appropriation of almost $312.2 million for this account is almost $144.8 million (or 52.4%) less than the FY2010 appropriation, almost $343.3 million (or 52.4%) less than the Administration's request, and $20.7 million (or 6.2%) less than what would have been appropriated under H.R. 1 . Reduced FY2011 funding for this account is mostly the product of a 22.9% reduction in funding for the National Drug Intelligence Center (which received $44.0 million in FY2010), a 31.9% reduction in funding for Justice Information Sharing Technology (which received almost $88.3 million in FY2010), and a 51.6% reduction (compared to FY2010-enacted funding of $206.1 million) for Tactical Law Enforcement Wireless Communications. ARA includes the Executive Office of Immigration Review (EOIR) and the Office of the Pardon Attorney (OPA). The Attorney General is responsible for the review and adjudication of immigration cases in coordination with the Department of Homeland Security's (DHS's) efforts to secure the nation's borders. The EOIR handles these matters, and the OPA receives and reviews petitions for executive clemency. For FY2010, Congress appropriated nearly $296.7 million for ARA. The Administration's request included $315.2 million for ARA funding for FY2011. The requested amount exceeded the FY2010 funding level by $18.5 million and would have represented an increase of 6.2%. H.R. 1 would have provided $296.7 million for this account, the same as FY2010-enacted funding and 5.9% less than the Administration's FY2011 request. The FY2011 enacted appropriation of nearly $296.1 million for this account is $0.6 million (or 0.2%) less than the FY2010 enacted appropriation, $19.1 million (or 6.1%) less than the Administration's FY2011 request, and $0.6 million (or 0.2%) less than what would have been appropriated under H.R. 1 . The OFDT provides overall management and oversight for federal detention services relating to federal prisoners in nonfederal institutions or otherwise in the custody of the U.S. Marshals Service. The FY2011 budget request included almost $1.534 billion for OFDT. This amount was $95.2 million (6.6%) more than the FY2010 appropriation of almost $1.439 billion. The increase in detainee operation costs is reportedly linked to the detention of illegal immigrants along the Southwest border. H.R. 1 included $1.534 billion for OFDT. The H.R. 1 proposed funding for OFDT was 6.6% more than the FY2010-enacted appropriation and nearly identical to the Administration's FY2011 request (the difference is $200,000). The FY2011-enacted appropriation for OFDT is $1.516 billion, which represents a 5.3% increase over the FY2010 appropriation, but it is 1.2% than both the Administration's request and the amount that would have been provided in H.R. 1 . The OIG is responsible for detecting and deterring waste, fraud, and abuse involving DOJ programs and personnel; promoting economy and efficiency in DOJ operations; and investigating allegations of departmental misconduct. The Administration's request included $88.8 million for the OIG in its FY2011 budget. This amount would have been $4.4 million greater than the almost $84.4 million appropriated by Congress for FY2010 and would have represented a 5.2% increase in funding for FY2011. H.R. 1 would have provided $84.4 million for the OIG, the same as FY2010-enacted funding and 5.0% less than the Administration's FY2011 request. The FY2011 appropriation of nearly $84.2 million is almost $0.2 million (0.2%) less than the FY2011 appropriation, almost $4.6 million (5.2%) less than the Administration's request for the OIG, and almost $0.2 million (0.2%) less than what would have been provided by H.R. 1 . The U.S. Parole Commission adjudicates parole requests for prisoners who are serving felony sentences under federal and District of Columbia code violations. For FY2011, the President's budget request included almost $13.6 million for the commission, an increase of nearly $0.7 million (5.6%) compared with the FY2010 appropriation of almost $12.9 million. The commission would have received $12.9 million under H.R. 1 . This amount would have been the same as the commission's FY2010-enacted appropriation and 5.3% less than the Administration's FY2011 request. Congress provided $12.8 million for the commission for FY2011, an amount that is 0.2% less than both the FY2010 appropriation and the amount that would have been provided in H.R. 1 and 5.5% less than the Administration's requested funding. The Legal Activities account includes several subaccounts: general legal activities, U.S. Attorneys, and other legal activities. The President's FY2011 budget request included $3.402 billion for the Legal Activities account, or what would have been 10.3% more than the FY2010-enacted appropriation of $3.085 billion. H.R. 1 would have provided a total of $3.075 billion for this account. This amount would have represented a 0.3% decrease compared to the enacted FY2010 appropriation and a 9.6% decrease compared to the Administration's FY2011 request. The FY2011 appropriation of $3.177 billion is 0.3% more than the FY2010 appropriation, 6.6% less than what the Administration requested for legal activities, and 3.2% more than what would have been provided by H.R. 1 . Some of the Legal Activities subaccounts are described below. The General Legal Activities account funds the Solicitor General's supervision of the department's conduct in proceedings before the Supreme Court. It also funds several departmental divisions (tax, criminal, civil, environment and natural resources, legal counsel, civil rights, INTERPOL, and dispute resolution). The Administration's FY2011 request proposed $976.4 million for General Legal Activities, what would have been $101.3 million more than the enacted FY2010 appropriation of $875.1 million. The requested amount would have increased FY2011 funding by 11.6% more than FY2010-enacted appropriation level. H.R. 1 would have provided $865.1 million for this account, which would have represented a 1.1% reduction compared to the FY2010-enacted appropriation and a 11.4% reduction compared to the Administration's FY2011 request. The FY2011 appropriation of almost $863.4 million for General Legal Activities is $11.7 million (1.3%) less than the FY2010 appropriation, $113.0 million (11.6%) less than the Administration's request, and $1.7 million (0.2%) less than what would have been provided by H.R. 1 . The U.S. Attorneys enforce federal laws through prosecution of criminal cases and represent the federal government in civil actions in all of the 94 federal judicial districts. The President's FY2011 budget proposal included $2.041 billion for the salaries and expenses of the U.S. Attorneys. This amount reflected an increase of 5.5%, or almost $107.3 million over the enacted FY2010 funding level of $1.934 billion. Under H.R. 1 , the U.S. Attorneys would have received $1.934 billion, the same as the enacted FY2010 appropriation. The proposed amount under H.R. 1 would have been 5.3% less than the Administration's request. The act provides $1.93 billion for the U.S. Attorneys, an amount that is 0.2% less than the FY2010-enacted amount, 5.4% below the Administration's request, and 0.2% less than what would have been provided under H.R. 1 . Other Legal Activities includes the Antitrust Division, the Vaccine Injury Compensation Trust Fund, the U.S. Trustee System Fund (which is responsible for maintaining the integrity of the U.S. bankruptcy system by, among other things, prosecuting criminal bankruptcy violations), the Foreign Claims Settlement Commission, the Fees and Expenses of Witnesses, the Community Relations Service, and the Assets Forfeiture Fund. For FY2011, the Administration's request included $384.6 million for Other Legal Activities, what would have been 39.3% more than FY2010 funding of $276.1 million. H.R. 1 included a total of $276.1 million for Other Legal Activities, the same as the enacted FY2010 appropriation and 28.2% less than the Administration's request. The FY2011 enacted appropriation of $383.8 million is 39.0% more than the FY2010 appropriation and what would have been provided by H.R. 1 , but it is 0.2% less than the Administration's request. The USMS is responsible for the protection of the federal judicial process, including protecting judges, attorneys, witnesses, and jurors. In addition, USMS provides physical security in courthouses, safeguards witnesses, transports prisoners from court proceedings, apprehends fugitives, executes warrants and court orders, and seizes forfeited property. The President's FY2011 budget request included $1.207 billion for the USMS. The requested amount exceeded the FY2010-enacted appropriation of $1.152 billion by $54.8 million, or 4.8%. H.R. 1 would have provided $1.143 billion for the U.S. Marshals, which would have represented a 0.8% reduction in funding compared to FY2010-enacted levels. The H.R. 1 amount would have been 5.3% less than the Administration's FY2011 request. For FY2011, the U.S. Marshals received a total of $1.14 billion, which is 1.1% less than what the U.S. Marshals received for FY2010, 5.6% less than the Administration's FY2011 request, and 0.2% less than the amount that would have been provided by H.R. 1 . The reduction in FY2011 funding for the U.S. Marshals is almost entirely the result of a $10.0 million reduction in construction funding. The NSD coordinates DOJ's national security and terrorism missions through law enforcement investigations and prosecutions. The NSD was established in DOJ in response to the recommendations of the Commission on the Intelligence Capabilities of the United States Regarding Weapons of Mass Destruction (WMD Commission), and authorized by Congress on March 9, 2006, in the USA PATRIOT Improvement and Reauthorization Act of 2005. Under the NSD, the DOJ resources of the Office of Intelligence Policy and Review and the Criminal Division's Counterterrorism and Counterespionage Sections were consolidated to coordinate all intelligence-related resources and to ensure that criminal intelligence information is shared, as appropriate. For FY2011, the President's request included $99.5 million for the NSD, a proposed increase of nearly $11.6 million (13.2%), when compared with the FY2010-enacted appropriation of $87.9 million. For FY2011, Congress appropriated $87.9 million for the NSD. This amount is $176 thousand (-0.2%) less than FY2010 appropriation of $87.9 million, $11.8 million (11.8%) less than the President's request, and $175 thousand less (-0.2%) less than the amount that would have been provided under the House-passed H.R. 1 . The Interagency Law Enforcement account reimburses departmental agencies for their participation in the Organized Crime Drug Enforcement Task Force (OCDETF) program. Organized into nine regional task forces, this program combines the expertise of federal agencies with the efforts of state and local law enforcement to disrupt and dismantle major narcotics-trafficking and money-laundering organizations. From DOJ, the federal agencies that participate in OCDETF are the DEA; the FBI; the ATF; the USMS; the Tax and Criminal Divisions of DOJ; and the U.S. Attorneys. From DHS, Immigration and Customs Enforcement and the U.S. Coast Guard participate in OCDETF. In addition, from the Department of the Treasury, the Internal Revenue Service and Treasury Office of Enforcement also participate in OCDETF. Moreover, state and local law enforcement agencies participate in approximately 90% of all OCDETF investigations. For FY2011, the Administration proposed $579.3 million for OCDETF. The proposed FY2011 funding level would have exceeded the FY2010-enacted funding level of $528.6 million by almost $50.8 million, or 9.6%. Under H.R. 1 , this account would have received $528.6 million, the same as the FY2010-enacted appropriation but 8.8% less than the Administration's FY2011 request. The FY2011 appropriation of $527.5 million is almost $1.1 million (0.2%) less than the FY2010 appropriation, $51.8 million (8.9%) less than the Administration's FY2011 request for OCDETF, and almost $1.1 million (0.2%) less than what would have been provided by H.R. 1 . As mentioned, in response to concerns that the escalating drug trafficking-related violence in Mexico could spread into the United States, the Administration request included $37.3 million to enhance enforcement and prosecution activities as part of the Southwest Border Enforcement Initiative. Among other things, the funding would have enhanced USMS support of Mexican and Colombian fugitive apprehension activities, expanded OCDETF's co-located strike forces, expanded the capacity of the OCDETF fusion center, provided funding to the Southwest Border Threat Response Unit for the review of Title III wiretap applications, and provided additional attorneys for Southwest border districts. The FBI is the lead federal investigative agency charged with defending the country against foreign terrorist and intelligence threats; enforcing federal laws; and providing leadership and criminal justice services to federal, state, municipal, tribal, and territorial law enforcement agencies and partners. Since the September 11, 2001, terrorist attacks, the FBI has reorganized and reprioritized its efforts to focus on preventing terrorism and related criminal activities. From FY2001 through FY2010, Congress has more than doubled direct appropriations for the FBI from $3.32 billion to $7.899 billion, or a 137.9% increase. For FY2011, the President requested $8.265 billion for the FBI, including $181.2 million for construction. This request would have provided the FBI with $366.1 million (4.6%) more than the FY2010-enacted appropriation of $7.899 billion. In turn, Congress appropriated a total of $7.926 billion for the FBI. This amount is $27.7 million (0.4%) greater than the FY2010-enacted appropriation, $338.4 million (-4.1%) less than the President's FY2011 request, and $160.7 million (2.1%) greater than the amount that would have been provided under H.R. 1 . For FBI salaries and expenses, Congress appropriated $7.819 billion for FY2011. This amount is $160.5 million (2.1%) greater than the FY2010-enacted appropriation of $7.659 billion, $264.3 million (-3.3%) less than the President's request of $8.083 billion, and $160.5 million (2.1%) greater than the $7.659 billion that would have been provided under H.R. 1 . In the FBI FY2012 budget summary, however, the FY2010 enacted appropriation was presented differently. Instead of $7.659 billion, the budget summary showed the FBI FY2010-enacted appropriation to be $7.633 billion, an amount that reflects a $50 million rescission and $24 million supplemental appropriation for FY2010. Accordingly, the budget summary showed that the President's request for $8.083 billion would have provided the FBI with an increase of $425 million (5.5%). This proposed increase included $215.5 million (over base), which included $232.8 million in budget enhancements that were offset by $17.3 million in reductions. The requested FY2011 budget enhancements included the following: $45.9 million for cyber security (computer intrusions); $25.2 million for national security (counterterrorism and counterintelligence); $25.1 million for operational enablers, who will address FBI shortfalls in information technology and other areas of technical expertise; $9.1 million for weapons of mass destruction (WMD) countermeasures; $40 million for WMD response and render safe capabilities; $75.3 million for white collar crime investigations; $10.8 million for child exploitation investigations; $952 thousand for modernizing U.S. law enforcement's approach to international organized crime; and $328 thousand for crime in Indian country. The FY2011 request also included a proposal to transfer $19.0 million from the Department of the Interior to the FBI to address crime in Indian country. As described above, the FY2011-enacted appropriation for salaries and expenses is $264.3 million less that the President's request. As a consequence, some of these initiatives may not be funded for FY2011. For FBI construction, Congress appropriated $107.1 million for FY2011. This amount is $132.8 million (-55.4%) less than the $239.9 million appropriated for FY2010; $74.1 million (-40.9%) less than the amount $181.2 requested by the President for FY2011; and $180,000 (0.2%) greater than the $106.9 million that would have been provided under H.R. 1 . From FY2003 to FY2010, the lion's share of new resources provided to the FBI have been allocated to national security, including the intelligence and counterterrorism/counterintelligence budget decision units. For those years, the allocations for national security from the salaries and expenses account increased from $2.107 billion (46.0%) to $4.762 billion (62.2%). The FY2011 request included a proposed allocation of $5.015 billion (62.0%) for FY2010 for national security activities. At the same time, as a percentage of S&E funding, the allocations for criminal enterprises and federal crimes (traditional crime) decreased from $2.199 billion (48.0%) to $2.471 billion (32.3%). Some Members of Congress have expressed concern about the diminishing percentage of funding allocated for traditional crime (including drug enforcement, violent crime, and white collar crime investigations). The FY2011 request included a proposed allocation of $2.642 billion (32.7%) for traditional crime. Meanwhile, as a percentage of S&E funding, the allocations for criminal justice services decreased from $275.0 million (6%) for FY2003 to $424.0 million (5.5%) for FY2010. The FY2011 request included a proposed allocation of $416.5 million (5.3%) for criminal justice services. The FBI's lead strategic goals are to prevent, disrupt, and defeat terrorist operations before they occur, and to combat espionage against the United States. To advance these goals, the FBI FY2011 salaries and expenses request included $5.015 billion. As described above, the FY2011 request included funding increases to meet several national security threats, such as terrorism, WMDs, foreign intelligence, and cybercrime. The request included a $25.2 million increase for national security operations. It also included a $49.1 million increase for WMD-related response and render safe operations, and would have brought total funding for these purposes to $501.2 million for FY2011. The FBI's secondary strategic goal is to reduce the threat, incidence, and prevalence of crime. To advance this goal, the FY2011 salaries and expenses request included $2.642 billion. Requested crime control increases included $75.3 million to address white collar crime. This amount included $44.8 million to make 211 positions funded with supplemental funding for FY2009/FY2010 permanent. These positions and associated funding were provided by Congress to address the following: mortgage and sub-prime industry related fraud; Emergency Economic Stabilization Act of 2008 (EESA) Troubled Asset Relief Program (TARP) criminal abuse and fraud; and Housing and Economic Recovery Act (HERA) fraud. The requested increase also included $16.7 million for corporate fraud investigations, $10 million for securities and commodities fraud (Ponzi and other high-yield investment schemes), and $3.8 million for block grant abuse and fraud against the U.S. government. The $75.3 million increase would have brought total funding for white collar crime to $453.7 million for FY2011. In addition, the FY2011 request included increases for child exploitation and Indian country crime. The request included $10.8 million to bolster investigations against child prostitution, sex tourism, and pornography. This increase would have brought total funding dedicated to child exploitation investigations to $333.2 million for FY2011. The request also included $328,000 for two forensic examiners to support Indian country investigations. This increase would have brought total funding for the violent crime/gangs program to $224.5 million. On the national security side of the FBI's mission, the FBI cyber program covers counterterrorism- and counterintelligence-related computer intrusion investigations. On the crime side, the program covers intellectual property rights, copyright infringements involving computer software, credit/debit card fraud, identity theft, and child exploitation investigation related to the criminal use of computers. The FBI underscored that terrorist groups, hostile foreign intelligence services, and transnational criminal organizations are a grave threat to U.S. economic security. Such groups have compromised computer networks; stolen classified, proprietary, and sensitive information; manipulated critical data; and perpetuated fraud. To expand FBI investigative capabilities related to computer intrusions, the FY2011 request included a $45.9 million increase, which would have brought funding for this program to $181.8 million for FY2011. The FBI is relying increasingly on information technology specialists, analysts, scientists, and other professional staff to support investigative personnel assigned to national security and crime-fighting programs. The FY2011 request included a $25.1 million increase to hire additional professional staff, who would provide forensic support, intelligence collection and management, and other support. This increase would have brought total funding for operational enablers to $812.7 million for FY2011. The DEA is the only single-mission federal agency tasked with enforcing the nation's controlled substance laws in order to reduce the availability and abuse of illicit drugs and the diversion of licit drugs for illicit purposes. DEA's enforcement efforts include the disruption and dismantling of drug trafficking and money laundering organizations through drug interdiction and seizures of illicit revenues and assets derived from these organizations. DEA continues to face evolving challenges in limiting the supply of illicit drugs as well as reducing drug trafficking across the Southwest border with Mexico into the United States. DEA continues to play a key role in the Administration's Southwest Border Initiative to counter drug-related border violence, focusing on the convergent threats of illegal drugs, drug-related violence, and terrorism in the region. For FY2011, the President's budget request included $2.13 billion for DEA. The requested amount represented an increase of $110.4 million, what would have been 5.5% more than FY2010-enacted appropriation of almost $2.02 billion. The President's FY2011 budget request for DEA included the following: $12.3 million to expand and reinforce DEA's operations on the Southwest border and in Mexico, of which $1.5 million would be for improving the technological capacity of the El Paso Intelligence Center (EPIC), DEA's national tactical intelligence-sharing organization focusing on the Southwest border; $41.9 million to provide construction funding to expand and renovate the existing EPIC facility, which currently houses employees from 22 federal, state and local agencies; $33.5 million to address staffing shortfalls at DEA for the Diversion Control Program's enforcement and regulatory support; $5.2 million to expand and enhance DEA's information-sharing capacity with the intelligence community and other law enforcement agencies to strengthen DEA's efforts to reduce the supply of illegal drugs, protect national security, and combat global terrorism; and $3.0 million to support the Prescription Drug Monitoring Program (PDMP) initiative at the Office of National Drug Control Policy (ONDCP). The DEA would have received $2.02 billion under H.R. 1 , the same as the enacted FY2010 appropriation. This amount would have been 5.2% less than the Administration's FY2011 request. The FY2011 appropriation of almost $2.016 billion is $4.0 million (0.2%) less than the FY2010 appropriation, almost $114.5 million (5.4%) less than the Administration's request for DEA, and $4.0 million (0.2%) less than what would have been provided by H.R. 1 . The ATF enforces federal criminal law related to the manufacture, importation, and distribution of alcohol, tobacco, firearms, and explosives. ATF works both independently and through partnerships with industry groups; international, state and local governments; and other federal agencies to investigate and reduce crime involving firearms and explosives, acts of arson, and illegal trafficking of alcohol and tobacco products. From FY2001 through FY2010, Congress has increased the direct appropriation for the ATF, from $771.0 million to $1.121 billion, a 45.4% increase. The President's FY2011 budget request included $1.163 billion for ATF, an increase of $42.2 million (3.8%), compared with the FY2010-enacted appropriation. Proposed increases (over base) included $11.8 million for Project Gunrunner and $1.2 million for Emergency Support Function #13 (ESF 13), the Public Safety and Security Annex to the National Response Framework (NRF). The NRF sets broad responsibilities and lines of authority for federal agencies in the event of a national emergency or major disaster. Under the NRF, the Attorney General is responsible for ESF-13, which entails all hazards law enforcement planning and coordination for the entire United States and its territories. The Attorney General, in turn, has delegated his responsibility for ESF-13's implementation to the ATF. For FY2011, Congress appropriated $1.113 billion for the ATF. This amount is $8.2 million (-0.7%) less than the FY2010-enacted appropriation of $1.121 billion, $50.4 million (-4.3%) less than the President's request, and $2.2 million (-0.2) less than the $1.115 billion that would have been provided under H.R. 1 . The Bureau of Prisons (BOP) was established in 1930 to house federal inmates, to professionalize the prison service, and to ensure consistent and centralized administration of the federal prison system. The mission of BOP is to protect society by confining offenders in prisons and community-based facilities that are safe, humane, cost-efficient, and appropriately secure, and that provide work and other self-improvement opportunities for inmates so that they can become productive citizens after they are released. BOP currently operates 115 correctional facilities across the country. BOP also contracts with Residential Re-entry Centers (RRC) (i.e., halfway houses) to provide assistance to inmates nearing release. RRCs provide inmates with a structured and supervised environment along with employment counseling, job placement services, financial management assistance, and other programs and services. Congress funds BOP's operations through two accounts under the Federal Prison System heading: Salaries and Expenses (S&E) and Buildings and Facilities (B&F). The S&E account (i.e., the operating budget) provides for the custody and care of federal inmates and for the daily maintenance and operations of correctional facilities, regional offices, and BOP's central office in Washington, DC. It also provides funding for the incarceration of federal inmates in state, local, and private facilities. The B&F account (i.e., the capital budget) provides funding for the construction of new facilities and the modernization, repair, and expansion of existing facilities. In addition to appropriations for the S&E and B&F accounts, Congress usually places a cap on the amount of revenue generated by the Federal Prison Industries (FPI) that can be used for administrative expenses in the annual CJS appropriations bill. Although Congress does not appropriate funding for the administrative expenses of FPI, the administrative expenses cap is scored as enacted budget authority. For FY2011, the Administration requested a total of $6.806 billion for BOP, which includes $6.534 billion for the S&E account and $269.7 million for the B&F account. The FY2011 request was $618.1 million above the FY2010-enacted amount of $6.188 billion, representing a proposed increase of 10.0% for FY2011. The proposed amount for the S&E account was $447.5 million more than the FY2010-enacted amount of $6.086 billion, and the proposed funding for the B&F account was $170.6 million more than the FY2010-enacted amount of $99.2 million. H.R. 1 would have provided a total of $6.427 billion for BOP, which would have been 3.9% more than the FY2010 appropriation, but it was 5.6% less than the Administration's FY2011 request. H.R. 1 included $6.325 billion for the S&E account and $99.2 million for the B&F account. The FY2011-enacted amount for BOP is $6.384 billion, which is 3.2% more than what BOP received for FY2010, but it is 6.2% below the Administration's request and 0.7% less than what would have been provided in H.R. 1 . The FY2011-enacted amount includes $6.295 billion for the S&E account, which is $208.8 million more than the FY2010-enacted amount, and $99.2 million for the B&F account, the same as the FY2010-enacted amount. The growing federal prison population and prison crowding continue to be a major concern for BOP. Over the past decade, the number of inmates held in BOP facilities grew from 125,560 in FY2000 to 173,305 in FY2010. During that same time period, prison crowding grew from 32% over rated capacity to 37% over rated capacity, even though the number of facilities operated by BOP increased from 97 to 116. The Administration requested $66.9 million for the S&E account and $170.0 million for the B&F account to acquire, renovate, and operate a high-security prison in Thomson, IL. According to BOP, the Thomson prison would add up to 1,600 additional high-security beds to the federal prison system. In addition, the facility has already been built, so acquiring the facility would increase BOP's capacity in a shorter period of time than constructing a new facility. However, the facility in Thomson was also identified as a facility that might have been used to house Guantanamo Bay detainees, should they be brought to the United States and tried in civilian courts. One issue Congress considered was whether to allow BOP to acquire the Thomson prison even if Congress chose to prohibit DOJ from using any of its FY2011 appropriations to bring Guantanamo Bay detainees to the United States. P.L. 112-10 includes a provision that prevents any federal agency from constructing or modifying any facility in the United States to house Guantanamo Bay detainees. However, even though the provision does not prohibit BOP from purchasing the Thompson prison to house federal inmates, it does not appear that BOP will have the resources to purchase the prison. Congress did not provide any additional funding for BOP's B&F account for FY2011 and the increase in the S&E account was $13.1 million more than what BOP requested as a base adjustment to its FY2010 appropriation. The $13.1 million Congress provided for program increases is less than the $66.9 million BOP requested to activate the Thompson prison after purchasing it. The OVW was created to administer programs created under the Violence Against Women Act (VAWA) of 1994 and subsequent legislation. These programs provide financial and technical assistance to communities around the country to facilitate the creation of programs, policies, and practices designed to improve criminal justice responses related to domestic violence, dating violence, sexual assault, and stalking. The Administration's request for OVW for FY2011 was $438.0 million, which was $19.5 million, or 4.7%, more than the FY2010-enacted amount of $418.5 million. Under H.R. 1 , OVW would have received $418.5 million, the same as the FY2010-enacted amount but 4.5% less than the Administration's FY2011 request. The FY2011-enacted amount for OVW is $417.7 million, which is 0.2% less than both the FY2010-enacted amount and the amount that would have been provided under H.R. 1 and it is 4.6% less than the Administration's request. Table 4 provides a breakdown of funding for OVW grant programs. H.R. 1 would have continued funding for each of the grant programs funded under the account at FY2010-levels. FY2011-enacted funding for each program is equal to the FY2010-enacted level minus the 0.2% across-the-board rescission. The OJP manages and coordinates the National Institute of Justice, Bureau of Justice Statistics, Office of Juvenile Justice and Delinquency Prevention, Office for Victims of Crime, Bureau of Justice Assistance, and related grant programs. The Administration requested a total of $2.07 billion for OJP for FY2011. The FY2011 request would have been 9.4% less than the FY2010-enacted amount of $2.284 billion. Most of the funding reductions came from proposed cuts to the State and Local Law Enforcement Assistance and Juvenile Justice Programs accounts, along with the proposed elimination of the Weed and Seed account. H.R. 1 would have provided a total of $1.481 billion for OJP, an amount that would have been 35.1% less than the FY2010-enacted appropriation and 28.4% less than the Administration's FY2011 request. Congress provided a total of $1.698 billion for OJP for FY2011. This amount is 25.6% less than the FY2010-enacted amount and 18.0% less than the Administration's request, but it is 14.6% more than what would have been provided in H.R. 1 . Reductions in OJP's FY2011 appropriation are the result of reduced funding for the State and Local Law Enforcement Assistance and Juvenile Justice Programs account and the elimination of funding for Weed and Seed. The Justice Assistance account, among other things, funds the operations of the Bureau of Justice Statistics and the National Institute of Justice, along with providing assistance to missing and exploited children programs. For FY2011, the Administration requested a total of $224.3 million for the Justice Assistance account—a proposed reduction of 4.6% compared with the FY2010-enacted amount of $235.0 million. H.R. 1 would have provided $225.0 million for the Justice Assistance account, which would have been 4.3% less than the FY2010 appropriation, but 0.3% more than the Administration's request. The FY2011-enacted amount of $234.5 million represents a 0.2% reduction in funding compared to the FY2010-enacted appropriation, but it is 4.6% more than the Administration's request and 4.2% greater than the amount that would have been provided in H.R. 1 . Table 5 provides a breakdown of funding under the Justice Assistance account. H.R. 1 proposed a $10.0 million reduction to the account, but instead of specifying how the reduction would have been applied to each of the programs funded under the account, Congress would have given DOJ the discretion to apply the proposed reduction across the programs. Under the bill DOJ could not have funded a program at a level greater than the FY2010-enacted amount and it could not have funded a program that was not funded in FY2010. FY2011-enacted funding for each program is equal to the FY2010-enacted level minus the 0.2% across-the-board rescission. The State and Local Law Enforcement Assistance account includes funding for a variety of grant programs to improve the functioning of state, local, and tribal criminal justice systems. Some examples of programs that have traditionally been funded under this account include the Edward Byrne Memorial Justice Assistance Grant (JAG) program, the Drug Courts program, and the State Criminal Alien Assistance Program (SCAAP). The Administration's request for this account for FY2011 was $1.479 billion, or $56.3 million (3.7%) less than the FY2010-enacted amount of $1.535 billion. H.R. 1 included $953.5 million for this account. This amount would have represented a 37.9% reduction in funding compared to the FY2010-enacted level. It was also 28.4% less than the Administration's FY2011 request. Congress provides a total of $1.118 billion for the State and Local Law Enforcement Assistance account for FY2011, an amount that is 27.2% less than the FY2010 appropriation and 24.4% less than the Administration's request. However, the FY2011-enacted amount is 17.2% more what would have been provided in H.R. 1 . Table 6 provides a breakdown of appropriations for programs funded under the State and Local Law Enforcement Assistance account. H.R. 1 proposed a $581.3 million reduction to the account. As a part of that reduction, the bill would have zeroed-out funding for the Byrne Discretionary Grant program, which was earmarked in FY2010. Instead of specifying how the reduction would have been applied to each of the programs funded under the account, Congress would have given DOJ the discretion to apply the proposed reduction across the programs. Under the bill DOJ could not have funded a program at a level greater than the FY2010-enacted amount and it could not have funded a program that was not funded in FY2010. Under the act, funds appropriated for the State and Local Law Enforcement Assistance account cannot be used to fund the Edward Byrne Discretionary Grant program. The act also requires the reduction in funding for this account to be applied proportionately to each program funded under the account in FY2010. After removing earmarked funding from the FY2010-enacted amount, CRS calculates that each grant program funded under this account will be reduced 17.0% and from that amount the 0.2% across-the-board rescission is applied. One issue Congress considered is whether to—in light of a growing state prison population—increase funding for grants for alternatives to incarceration (e.g., drug and mental health courts) and recidivism reduction (e.g., the Residential Substance Abuse Treatment (RSAT) program and programs authorized by the Second Chance Act of 2007 ( P.L. 110-199 )). The Bureau of Justice Statistics (BJS) reports that the state prison population increased from approximately 1.3 million in 2000 to approximately 1.5 million in 2008. In addition, BJS reported that prison populations in 17 states exceed the state's highest measured capacity and prisons in 19 other states are operating between 90% and 100% of their highest measured capacity. Increased use of drug and mental health courts may help alleviate prison crowding by diverting low-level offenders from prison while still holding them accountable for their crimes. The RSAT program and the programs authorized by the Second Chance Act could also assist states with decreasing their prison populations by helping reduce recidivism. For FY2011, the Administration requested $100.0 million for programs authorized by the Second Chance Act, $30.0 million for the RSAT program, and $57.0 million for drug, mental health, and problem-solving courts. Congress provided funding for these programs, albeit at levels below the Administration's request. For FY2011, Congress provides $82.8 million for programs authorized under the Second Chance Act, $24.9 million for RSAT, $37.3 million for drug courts, and $9.9 million for mental health courts. The Weed and Seed program is designed to provide grants to help communities build stronger, safer neighborhoods by implementing local-level approaches to solve and prevent crimes. The program provides assistance for community-based strategies of "weeding and seeding" activities based on the premise that leaders from neighborhood and community organizations, including faith-based organizations, law enforcement, and private enterprise, must be involved in leveraging resources to solve community problems at the local level. Site funding generally provides resources for "weeding" activities, which include joint law enforcement operations and community policing, and "seeding" activities, which range from prevention activities, including physically improving the neighborhood and economic development. The Administration did not request any funding for the Weed and Seed program for FY2011. FY2010-enacted funding for Weed and Seed was $20.0 million. H.R. 1 did not include any funding for the Weed and Seed account. Ultimately, Congress chose to not fund the Weed and Seed program for FY2011. As mentioned, an issue Congress considered was whether to accept the Administration's request to end funding for the Weed and Seed Program, which it did. According to the Administration, even though it did not request funding for Weed and Seed for FY2011, it requested $40.0 million for a new Byrne Criminal Justice Innovation Program under the State and Local Law Enforcement Assistance account. The proposed program would have replaced and build on concepts employed by the Weed and Seed program. Congress did not accept the Administration's proposal. The Juvenile Justice Programs account includes funding for grant programs to reduce juvenile delinquency and help state, local, and tribal governments improve the functioning of their juvenile justice systems. For FY2011, the Administration's request included $289.8 million for this account, what would have been almost $133.8 million, or 31.6%, less than the $423.6 million appropriated for the Juvenile Justice Programs account for FY2010. Under H.R. 1 , this account would have received $232.5 million, or what would have been 45.1% below the FY2010-enacted level and 19.8% less than the Administration's FY2011 request. The FY2011 appropriation of $275.4 million for Juvenile Justice Programs is almost $148.2 million (35.0%) less than the FY2010 appropriation, almost $14.4 million (5.0%) less than the Administration's request for juvenile justice funding, and $42.9 million (18.5%) less than what would have been provided by H.R. 1 . Table 7 provides a breakdown of programs funded under the Juvenile Justice Programs account. H.R. 1 proposed a $191.1 million reduction to the account. As a part of that reduction, the bill would have zeroed-out funding for Part E—Demonstration Project grants, which were earmarked in FY2010. Instead of specifying how the reduction would have been applied to each of the programs funded under the account, Congress would have given DOJ the discretion to apply the proposed reduction across the programs. Under the bill DOJ could not have funded a program at a level greater than the FY2010-enacted amount and it could not have funded a program that was not funded in FY2010. Under the act, funds appropriated for the Juvenile Justice Programs account cannot be used to fund the Part E grants. The act also requires the reduction in funding for this account to be applied proportionately to each program funded under the account in FY2010. After removing earmarked funding from the FY2010-enacted amount, CRS calculates that each grant program funded under this account will be reduced 17.0% and from that amount the 0.2% across-the-board rescission is applied. The PSOB program provides three different types of benefits to public safety officers and their survivors: death, disability, and education. The PSOB program is intended to assist in the recruitment and retention of law enforcement officers, firefighters, and first responders and to offer peace of mind to men and women who choose careers in public safety. The Administration requests $77.3 million for PSOB for FY2011, an increase of $7.2 million, or 10.3%, compared with the FY2010-enacted amount of $70.1 million. The Full-Year CR includes $70.1 million for PSOB, the same as the FY2010-enacted level but 9.3% below the Administration's FY2011 request. The COPS Office awards grants to state, local and tribal law enforcement agencies throughout the United States so they can hire and train law enforcement officers to participate in community policing, purchase and deploy new crime-fighting technologies, and develop and test new and innovative policing strategies. Some examples of grant programs traditionally funded under this account include the Law Enforcement Technology grant program, the Methamphetamine Hot-spots Initiative, and grants to reduce the DNA backlog. The FY2011 requested funding for COPS was $690.0 million. The FY2011-requested amount would have been $101.6 million (12.8%) less than the $791.6 million Congress appropriated for COPS for FY2010. H.R. 1 included $588.5 million for COPS. This amount would have been 25.7% less than the FY2010 appropriation for COPS and 14.7% below the Administration's FY2011 request. For FY2011, Congress provides $494.9 million for COPS. This amount is 37.5% less than the FY2010 appropriation, 28.3% less than the Administration's request, and 15.9% less than what would have been provided in H.R. 1 . Table 8 provides a breakdown of grant programs funded under the COPS account. H.R. 1 proposed a $203.1 million reduction to the account. As a part of that reduction, the bill would have zeroed-out the earmarked portion of both the COPS Law Enforcement Technology program and the COPS Methamphetamine Hot-spots Initiative. Instead of specifying how the reduction would have been applied to each of the programs funded under the account, Congress would have given DOJ the discretion to apply the proposed reduction across the programs. Under the bill DOJ could not have funded a program at a level greater than the FY2010-enacted amount and it could not have funded a program that was not funded in FY2010. Under the act, funds appropriated for the COPS account cannot be used to fund the earmarked portions of the COPS Law Enforcement Technology program or the COPS Methamphetamine Hot-spots Initiative. The act also requires the reduction in funding for this account to be applied proportionately to each program funded under the account in FY2010. After removing earmarked funding from the FY2010-enacted amount, CRS calculates that each grant program funded under this account will be reduced 17.0% and from that amount the 0.2% across-the-board rescission is applied. This account provides for the salaries and expenses of OVW, OJP, and COPS. This account was funded for the first time in FY2009. Congress established a Salaries and Expenses account for OVW, OJP, and COPS to "achieve greater transparency, efficiency and accountability in the management, administration and oversight of the Justice Department grant programs." The Administration's requested funding for this account for FY2011 was $279.4 million. The FY2011 request would have represented a proposed 31.0% increase when compared to the FY2010-enacted amount of $213.4 million. H.R. 1 included $213.4 million for OVW, OJP, and COPS salaries and expenses, the same as the FY2010-enacted level. The FY2011-enacted amount for this account is $186.6 million, which represents a 12.5% decrease in funding compared to both the FY2010 appropriation and what would have been provided in H.R. 1 . The FY2011-enacted amount is 33.2% below the Administration's request. The Science Agencies fund and otherwise support research and development (R&D) and related activities across a wide variety of federal missions, including national competitiveness, climate change, energy and the environment, and fundamental discovery. For FY2011, the Administration requests a total of $26.431 billion for the Science Agencies. The FY2011 request includes $7.0 million for the Office of Science and Technology Policy, $19.0 billion for the National Aeronautics and Space Administration (NASA), and $7.424 billion for the National Science Foundation (NSF). The FY2011 funding request for the Science Agencies would be 3.0% greater than the FY2010 enacted amount of $25.658 billion. H.R. 1 would have provided a total of $24.697 billion for the Science Agencies. Proposed funding for the Science Agencies in H.R. 1 would be 3.7% less than the FY2010-enacted level and 6.6% less than the President's FY2011 request. The act provides a total of $25.315 billion for the Science Agencies, which includes $6.6 million for the Office of Science and Technology Policy, $18.448 billion for NASA, and $6.86 billion for NSF. The FY2011-enacted appropriation is 1.3% less than the FY2010 appropriation and 4.2% less than the Administration's request, but it is 2.5% more than what would have been provided in H.R. 1 . Congress established the Office of Science and Technology Policy (OSTP) through the National Science and Technology Policy, Organization, and Priorities Act of 1976 ( P.L. 94-282 ). The act states that "the primary function of the OSTP director is to provide, within the Executive Office of the President, advice on the scientific, engineering, and technological aspects of issues that require attention at the highest level of Government." The OSTP director, often referred to informally as the President's science advisor, also manages the National Science and Technology Council (NSTC), which coordinates science and technology policy across the federal government, and co-chairs the President's Council of Advisors on Science and Technology (PCAST), a council of external advisors that provides advice to the President on matters related to science and technology policy. OSTP is one of two offices in the Executive Office of the President (EOP) that is funded in the CJS appropriations bill. OSTP's FY2010 budget was $7.0 million. An additional $3.0 million was provided through the National Science Foundation appropriation for the Science and Technology Policy Institute (STPI), a federally funded research and development center that supports OSTP. For FY2011, the Administration requested $7.0 million, $10 thousand (0.01%) below its FY2010 level. The request would have supported four Senate-confirmed associate directors, reportedly reflecting a commitment to operate more efficiently and cost-effectively. Also, according to OSTP Director Holdren, the request reflected the President's continuing recognition of the importance and diversity of OSTP's functions in keeping "science in its rightful place" in his Administration. The NSF again requested FY2011 funding for STPI ($3.0 million, no change from FY2010). H.R. 1 would have provided $6.5 million for OSTP, a 7.1% decrease compared to FY2010 appropriations and 7.0% less than the Administration's FY2011 request. FY2011-enacted appropriations provide $6.6 million for OSTP, a 5.9% decrease compared to FY2010 appropriations and 5.8% less than the Administration's FY2011 request. Funding for STPI falls below the appropriations-account level and is not identified in either legislation. NASA was created by the 1958 National Aeronautics and Space Act (P.L. 85-568) to conduct civilian space and aeronautics activities. The agency is managed from headquarters in Washington, DC. It has nine major field centers around the country, plus the Jet Propulsion Laboratory, which is operated under contract by the California Institute of Technology. The Administration requested $19.000 billion for NASA for FY2011, a 1.5% increase over the FY2010 appropriation. H.R. 1 as passed by the House would have provided $18.123 billion. The final appropriation in P.L. 112-10 was $18.448 billion. See Table 10 for a breakdown of these amounts by appropriations account. For several years, budget priorities throughout NASA were driven by the Vision for Space Exploration. The Vision was announced by President Bush in January 2004 and endorsed by Congress in the NASA Authorization Act of 2005 ( P.L. 109-155 ) and the NASA Authorization Act of 2008 ( P.L. 110-422 ). Under the Vision, NASA's primary goal was to return humans to the Moon by 2020. In 2009, the Augustine committee conducted an independent review of NASA's human spaceflight activities. The committee found that the program outlined by the Vision would require additional NASA funding of $3 billion per year, even if a return to the Moon were delayed by a few years. The Administration's budget for FY2011 proposed to cancel the Moon program. Under the Administration proposal, NASA's eventual goal would be human exploration of Mars, preceded in the medium term by other destinations, such as an asteroid. In the near term, commercial crew launch services would provide access to the International Space Station, and long-term technology development would receive increased emphasis. In the NASA Authorization Act of 2010 ( P.L. 111-267 ), Congress established new goals and policy priorities for NASA that addressed many of these issues. The Administration's request for Exploration in FY2011 was $4.263 billion, a 12.8% increase over FY2010. The activities funded by this account would change significantly under the Administration's proposal. The bulk of the account previously funded the Constellation program, developing the Orion crew vehicle and the Ares I rocket for carrying humans into low Earth orbit, as well as the heavy-lift Ares V cargo rocket and other systems needed for a Moon mission. The Administration budget for FY2011 would eliminate Constellation. Instead of developing Orion and Ares I, the Administration would provide $812.0 million to spur development of commercial crew and cargo transport services to low-Earth orbit. Instead of developing Ares V and the lunar systems, it would provide $1.551 billion for robotic precursor missions and technology R&D to enable future human exploration. In addition, it would provide $1.9 billion to cover transition and closeout costs for Constellation. H.R. 1 would have provided the FY2010 amount for Exploration: $3.746 billion. The final appropriation was $3.801 billion, including not less than $3.000 billion for the multipurpose crew vehicle and heavy lift launch vehicle delineated by the 2010 authorization act as alternatives to Orion and Ares. P.L. 112-10 did not specify how much of the Exploration appropriation should be allocated to development of commercial crew services. The President's $5.006 billion request for Science in FY2011 was an 11.4% increase over FY2010. The largest proposed increase was for Earth Science. The request included $171 million to fund a replacement for the Orbital Carbon Observatory (OCO), which was launched in February 2009 but failed to reach orbit, and $150 million as the first year of a five-year, $2.1 billion global climate initiative. The climate initiative and other increases would accelerate the development and launch of several Earth Science missions recommended in 2007 by a National Academies decadal survey. The Administration request also proposed increased funding for Planetary Science and Heliophysics. H.R. 1 would have provided the FY2010 amount, $4.469 billion. The final appropriation was $4.935 billion. The request for Aeronautics was $579.6 million, an increase of 14.3% from FY2010. A new Space Technology program in the same appropriations account would receive $572.2 million. The new program's focus would be technologies that are applicable to multiple missions in the long term, as opposed to components needed for specific systems in the short term. It would seek to advance technologies from the point of early-stage innovation to the demonstration of flight readiness. The Senate committee recommended the requested amount for Aeronautics, but only $325.0 million for Space Technology. Within Space Technology, the committee recommended nearly the requested amount for Small Business Innovation Research (SBIR) and Small Business Technology Transfer (STTR); as a result, the committee recommendation for the rest of the Space Technology program was about 60% less than the request. H.R. 1 would have provided the FY2010 amount for Aeronautics: $501 million. The final appropriation was $534 million. The FY2011 request of $4.888 billion for Space Operations, which funds the space shuttle, the International Space Station (ISS), and the Space and Flight Support program, was a 20.9% decrease from FY2010. In addition, a budget amendment submitted in June 2010 proposed transferring $100 million from this account to the Departments of Commerce and Labor to address economic and workforce issues arising from the retirement of the space shuttle and the restructuring of the human spaceflight program. Under the request, the space shuttle program would receive $989.1 million, down from $3.139 billion in FY2010, as the program approaches its planned termination during FY2011. The requested funding for the ISS was $2.780 billion, a 20.0% increase. The Administration's budget would extend ISS operations from 2015 to at least 2020. Increased ISS funding would provide for greater utilization of existing facilities, in part by paying the launch costs of non-NASA users of the ISS national laboratory. H.R. 1 would have provided $5.947 billion for Space Operations. The final appropriation was $5.498 billion. It appears that this funding will support an additional space shuttle flight in mid-2011, not proposed in the request but authorized in the 2010 authorization act. The President requested $3,111.4 billion for Cross-Agency Support, a 2.6% reduction from the FY2010 level. This account funds indirect costs for other NASA programs, including management and operations activities at the NASA centers and at NASA headquarters. H.R. 1 would have provided $2.833 billion, a reduction of 11.3% from the FY2010 level and 8.9% from the FY2011 request. The final appropriation for Cross-Agency Support was $3.105 billion. The National Science Foundation (NSF) supports basic research and education in the non-medical sciences and engineering. Congress established the Foundation as an independent federal agency in 1950 and directed it to "promote the progress of science; to advance the national health, prosperity, and welfare; to secure the national defense; and for other purposes." The NSF is a primary source of federal support for U.S. university research. It is also responsible for significant shares of the federal science, technology, engineering, and mathematics (STEM) education program portfolio and federal STEM student aid and support. P.L. 112-10 provides a total of $6.860 billion for NSF. This amount is $292.9 million or 4.5% more than the $6.567 billion for NSF in H.R. 1 ; $66.6 million or 1.0% less than the FY2010 enacted level of $6.927 billion; and $564.5 million or 7.6% less than the President's FY2011 request of $7.424 billion. The President's FY2011 request for increased funding at the NSF was part of an ongoing effort to double funding for the NSF, NIST laboratories and construction accounts, and the DOE Office of Science. The Obama Administration has asserted that increases to these accounts would "expand the frontiers of human knowledge and create the foundations for the jobs and industries of the future." However, some policymakers expressed concerns about funding for the doubling effort in light of the federal fiscal condition, deficit, and debt. In aggregate, FY2011 enacted funding for the NSF and the other targeted doubling accounts sets a pace for doubling over approximately 15-years with respect to FY2006 funding. At this pace, doubling would take twice as long as the approximately seven-year pace set by the America COMPETES Act ( P.L. 110-69 ) in 2007, and four years longer than the approximately 11-year pace established by the America COMPETES Reauthorization Act of 2010 ( P.L. 111-358 ) in January 2011. NSF organizes its budget into six major accounts: Research and Related Activities (R&RA), Education and Human Resources (EHR), Major Research Equipment & Facilities Construction (MREFC), Agency Operations and Award Management (AOAM), Office of the Inspector General (OIG), and the National Science Board (NSB). The R&RA, EHR, and MREFC accounts represent the core of the NSF's research and education program activities and funding. FY2011-enacted appropriations include $5.564 billion for R&RA in FY2011. This amount is $96.0 million or 1.8% more than the $5.468 billion for R&RA in H.R. 1 ; $54.0 million or 1.0% less than the FY2010 enacted level of $5.618 billion; and $455.0 million or 7.6% below the President's FY2011 request for $6.019 billion. R&RA primarily supports basic research (76.3%, $4.591 billion of the FY2011 request), with about a quarter ($1.410 billion) of its FY2011 budget request for the Mathematics and Physical Sciences Directorate. Most R&RA funds are awarded to U.S. colleges and universities through a merit-based, peer review system. Questions about NSF's research-related activities include whether NSF-supported research is sufficiently high-risk, whether the peer review process favors certain institutions or investigators, whether the Foundation receives enough funding to support the number of competitive proposals it receives, and whether there is appropriate balance in the NSF portfolio by research field and location. Congress has responded to these questions in a variety of ways. These include directing NSF to pursue high-risk, high-reward basic research and research in particular fields, such as climate change. Similarly, Congress established the Experimental Program to Stimulate Competitive Research program ($154.4 million in FY2011 request) in response to concerns about the geographic distribution of NSF's research grants. The NSF also requested R&RA funds in FY2011 for some of the Foundation's educational programs, such as the Graduate Research Fellowship ($50.7 million), and to NSF-wide and federal multi-agency research activities. These include the NSF-wide Science, Engineering, and Education for Sustainability ($765.5 million) portfolio; and the multi-agency National Nanotechnology Initiative ($401.3 million) and Networking and Information Technology Research and Development ($1.170 billion) program. The FY2011-enacted funding level for EHR is $861.0 million. This amount is $135.3 million or 18.6% more than the $725.8 million for EHR in H.R. 1 ; $11.7 million or 1.3% less than the FY2010 enacted level of $872.8 million; and $31.0 million or 3.5% less than the President's FY2011 request for $892.0 million. The President's FY2011 EHR budget request included $107.6 million for the Graduate Research Fellowship program, an increase of 4.9% over the FY2010 estimate, in support of its goal of tripling the number of new fellows by FY2013. Other FY2011 requests for NSF STEM education programs included Discovery Research K-12 ($118.7 million), Mathematics and Science Partnership ($58.2 million), Robert Noyce Scholarship Program ($55.0 million), Integrative Graduate Education and Research Traineeship ($29.5 million), and Informal Science Education ($64.4 million). The EHR portfolio is focused on, among other things, increasing the technological literacy of all citizens; preparing the next generation of science, engineering, and mathematics professionals; and closing the achievement gap of underrepresented groups in all scientific fields. Among the questions raised about NSF's STEM education programs are those that center on how to evaluate program effectiveness or respond to student achievement gaps; on coordination of and funding levels for the federal STEM education effort; and on support for STEM students and STEM education programs at minority-serving institutions (MSIs) of higher education. In particular, the Administration's FY2011 budget request for NSF proposed a realignment of the Foundation's MSI programs (e.g., Historically Black Colleges and Universities Undergraduates Program, Tribal Colleges and Universities, etc.). Under the Administration's proposal these programs would have been consolidated into a single program, the Comprehensive Broadening Participation of Undergraduates (CBPU) in STEM program. Hispanic-Serving Institutions (HSIs) would have been eligible for CBPU funds. The FY2011 request for the consolidated program was $103.1 million, $13.0 million more than combined funding for NSF's MSI programs in FY2010 (estimated). Some analysts argued for keeping NSF's MSI programs as separate programs, noting that MSIs serve different populations with different needs. However, keeping the programs separate might result in less availability of funds for HSIs because NSF has not established, and Congress has not specifically appropriated funds for, a separate HSI program at the Foundation. Congressional appropriators and authorizers rejected the Administration's FY2011 request to consolidate NSF's MSI programs. The FY2011-enacted level for MREFC is $117.1 million. This amount is the same as the FY2010 enacted level ($117.3 million), less the 0.2% across-the-board rescission. MREFC FY2011 funding is $62.3 million more (113.6%) than the $54.8 million for MREFC in H.R. 1 , and $48.1 million less (-29.1%) than the President's FY2011 request for $165.2 million. In its FY2011 budget request, NSF anticipated construction of the National Ecological Observatory Network (NEON) at a cost of $20.0 million. In addition, NSF will continue its support of four ongoing construction projects: Advanced Laser Interferometer Gravitational Wave Observatory ($23.6 million); Atacama Large Millimeter Array ($13.9 million); Advanced Technology Star Telescope ($17.0 million); and the Ocean Observatories Initiative ($90.7 million). MREFC funds the acquisition and construction of major research facilities and equipment that support research intended to extend the boundaries of science, engineering, and technology. NSF gives highest priority to ongoing projects and second highest priority to projects that have been approved by the National Science Board for new starts. To qualify for support, NSF requires MREFC projects to have "the potential to shift the paradigm in scientific understanding and/or infrastructure technology." There has been considerable debate in the academic and scientific communities and in Congress about the management and oversight of major MREFC projects and the prioritization of potential projects. One continuing question has focused on the process for including major projects in the upcoming budget cycle. In a management report on major projects, NSF contends that because of the changing nature of science and technology, it is necessary to have the flexibility to reconsider facilities at the various stages of development. In addition, NSF asserts that it must be able to respond effectively to possible changes in interagency participation, international and cooperative agreements, or co-funding for major facilities. NSF maintains that while some concepts may evolve into major research projects, others may prove infeasible for project support. FY2011-enacted appropriations for the AOAM, NSB, and OIG accounts are the same as FY2010 levels, less the 0.2% rescission. The FY2011 enacted funding levels for AOAM, NSB, and OIG are $299.4 million, $4.5 million, and $14.0 million, respectively. These amounts are $29.8, $0.3, and $0.4 million less than the Administration's FY2011 request. H.R. 1 would have funded these accounts at FY2010 levels. For FY2011, the Administration requested a total of $973.4 million for the related agencies. The FY2011 request was $38.6 million, or 4.1%, greater than the FY2010-enacted amount of $934.8 million. The proposed $38.6 million increase is largely due to proposed increases in funding for the Equal Employment Opportunity Commission and the Legal Services Corporation. Under H.R. 1 , the related agencies would have received a total of $864.8 million, which would have been 7.5% less than the FY2010-enacted appropriation of $934.8 million and 11.2% less than the Administration's FY2011 request. Congress provides a total of $917.9 million for the related agencies for FY2011, which is 1.8% less than the FY2010-enacted amount and 5.7% less than the Administration's FY2011 request, but it is 6.1% more than what would have been provide in H.R. 1 . Established by the Civil Rights Act of 1957, the U.S. Commission on Civil Rights (the Commission) investigates allegations of citizens who may have been denied the right to vote based on color, race, religion, or national origin; studies and gathers information on legal developments constituting a denial of the equal protection of the laws; assesses the federal laws and policies in the area of civil rights; and submits reports on its findings to the President and Congress when the Commission or the President deems it appropriate. The requested funding for the Commission on Civil Rights for FY2011 was $9.4 million, the same amount as the commission's FY2010 appropriation. H.R. 1 would have provided $9.4 million for the commission, the same amount as its FY2010 appropriation. The FY2011-enacted appropriation is $18,800 less than what the commission received for FY2010, representing a 0.2% decrease compared to the FY2010 appropriation, the Administration's request, and the amount that would have been provided in H.R. 1 . The EEOC enforces several laws that ban employment discrimination based on race, color, national origin, sex, age, or disability. In the past few years, appropriators were particularly concerned about the agency's implementation of a restructuring plan, initiated in 2005, that included the creation of the National Contact Center (NCC), realignment of field structure and staff, and restructuring of headquarters operations. In response to congressional concerns about call intake practices, the EEOC transitioned to an in-house call center (see below). The FY2011 President's request was $18.0 million (4.9%) more than the FY2010-enacted level of $367.3 million. The FY2011 President's request and the FY2010-enacted budget provided up to $30.0 million for FEPAs and TEROs. Under H.R. 1 , the EEOC would have received $367.3 million, the same amount as the commission's FY2010 appropriation but 4.7% less than the Administration's FY2011 request. The commission's FY2011-enacted appropriation is $366.6, which is 0.2% less than both the FY2010 appropriation and the amount that would have been provided under H.R. 1 and it is 4.9% less than the Administration's request. According to the Commission, the anticipated growth in its workload partly reflects the transition from a contractor-operated to an in-house call center, which allows the public to begin the charge process online. In addition, more cases are likely to be filed under such recently enacted legislation as Title II of the Genetic Information Nondiscrimination Act (GINA), which became effective in November 2009; the Lilly Ledbetter Fair Pay Act of 2009; and amendments to the Americans with Disabilities Act (ADA), which became effective in January 2009. The FY2011 President's request for 188 new hires, such as investigators, mediators, attorneys, and support staff, was intended not only to address the expected increase in the agency's private sector charge backlog but also to promote enforcement of the Commission's focus on systemic discrimination cases. The EEOC began the systemic initiative in April 2006. The goal of the initiative is to strengthen and update the Commission's nationwide approach to systemic cases (i.e., a pattern or practice, policy, and/or class in which discrimination has a broad effect on an industry, occupation, company, or geographic location). The EEOC federal sector hearings workload is estimated to increase from 6,617 pending hearings in FY2009, to 7,398 in FY2011. The Commission is implementing three initiatives to support the federal sector program. The proposed Three Track Case Processing System is meant to help administrative law judges process, manage, and track cases to increase the number of cases they hear. The continuation and expansion of the Hearings Electronic Case Processing System (HECAPS) pilot, currently being tested in five hearing units, would allow field offices to coordinate with the EEOC Office of Information Technology through an electronic complaint system. Lastly, HotDocs Software, a commercial document assembly software package, is being tested by a workgroup to develop and order templates for processing cases more efficiently. The ITC is an independent, quasi-judicial agency established by Congress that advises the President and Congress on U.S. foreign economic policies. The mission of ITC can be categorized into three separate functions: (1) administering U.S. trade remedy laws within its mandate in a fair and objective manner; (2) providing the President, the U.S. Trade Representative, and Congress with independent analysis, information, and support on matters of tariffs and international trade and competitiveness; and (3) maintaining the Harmonized Tariff Schedule of the United States. As a matter of policy, its budget request is submitted to Congress by the President without revision. The FY2011 budget request for ITC is $87.0 million, a $5.1 million (6.2%) increase from the FY2010-enacted amount of $81.9 million. The budget request states that the requested increase in the budget is driven largely by increases in salaries, benefits, and rent costs. The Full-Year CR includes $81.9 million for ITC, the same as the FY2010-enacted level and 5.9% less than the Administration's FY2011 request. The LSC is a private, nonprofit, federally funded corporation that provides grants to local offices that, in turn, provide legal assistance to low-income people in civil (noncriminal) cases. The LSC has been controversial since its incorporation in the early 1970s and has been operating without authorizing legislation since 1980. There have been ongoing debates over the adequacy of funding for the agency and the extent to which certain types of activities are appropriate for federally funded legal aid attorneys to undertake. In annual appropriations bills, Congress traditionally has included legislative provisions restricting the activities of LSC-funded grantees, such as prohibiting any lobbying activities or prohibiting representation in certain types of cases. The FY2010 appropriation for LSC was $420.0 million. Moreover, Congress continued existing limitations on the use of LSC funds (and non-LSC funds) except for the restriction on the ability of LSC-funded programs to collect attorneys' fees. The FY2010 appropriation for the LSC included $394.4 million for basic field programs and required independent audits, $17.0 million for management and administration, $3.4 million for client self-help and information technology, $4.2 million for the Office of the Inspector General, and $1.0 million for loan repayment assistance. Current LSC funding now surpasses the LSC's previous highest funding level of $400.0 million in FY1994 and FY1995. For FY2011, the Obama Administration requested $435.0 million for the LSC. This amount is $15.0 million (3.6%) above the FY2010 appropriation of $420.0 million for the LSC. The Administration's budget request included $407.0 million for basic field programs and required independent audits; $20.0 million for management and grants oversight; $3.0 million for client self-help and information technology; $4.0 million for the Office of the Inspector General; and $1.0 million for loan repayment assistance. The Administration also proposed that LSC restrictions on class action suits and attorneys' fees be eliminated. H.R. 1 included $350.0 million for LSC. This amount represented a proposed 16.7% reduction in funding compared to the FY2010-enacted appropriation of $420.0 million. The amount in H.R. 1 would have been 19.5% less than the Administration's FY2011 request. The act includes $420.0 million for LSC for FY2011, an amount that is 3.8% less than the FY2010 appropriation and 7.1% below the Administration's request. However, the amount provided to LSC for FY2011 is 15.5% greater than what would have been provided in H.R. 1 . The Marine Mammal Commission is an independent agency of the executive branch, established under Title II of the Marine Mammal Protection Act (MMPA; P.L. 92-522). The Marine Mammal Commission (MMC) and its Committee of Scientific Advisors on Marine Mammals provide oversight and recommend actions on domestic and international topics to advance policies and provisions of the Marine Mammal Protection Act. As funding permits, the Marine Mammal Commission supports research to further the purposes of the MMPA. For FY2011, the Obama Administration proposed $3.0 million for necessary expenses of the Marine Mammal Commission, a decrease of approximately $0.3 million (-7.7%) from the FY2010 appropriation of approximately $3.3 million for this independent agency. Under H.R. 1 , the Marine Mammal Commission would have received $3.3 million, which would have been the same as the commission's FY2010 appropriation. The proposed funding under H.R. 1 would have been 8.3% more than what the Administration requested for FY2011. For FY2011, Congress provides an amount that is 0.2% less than the FY2010 appropriation and the amount that would have been provided in H.R. 1 ($3.2 million), but is 8.1% more than the Administration's request. The USTR, located in the Executive Office of the President, is responsible for developing and coordinating U.S. international trade and direct investment policies. The USTR is the President's chief negotiator for international trade agreements, including commodity and direct investment negotiations. USTR also conducts U.S. affairs related to the World Trade Organization. The FY2011 budget request is $48.3 million, a $0.5 million (1%) increase from the FY2010-enacted amount of $47.8 million. The Full-Year CR would provide $47.8 million for the USTR, an amount equal to the FY2010-enacted level but 0.9% less than the Administration's request. The SJI is a nonprofit corporation that makes grants to state courts and funds research, technical assistance, and informational projects aimed at improving the quality of judicial administration in state courts across the United States. It is governed by an 11-member board of directors appointed by the President and confirmed by the Senate. Under the terms of its enabling legislation, SJI is authorized to present its budget request directly to Congress, apart from the President's budget. For FY2011, the Administration requested $5.4 million for SJI, which would have represented a 5.5% increase in funding compared with the $5.1 million Congress appropriated for SJI for FY2010. Under H.R. 1 , SJI would have received $5.1 million, which would have been equal to SJI's FY2010 appropriation, but the proposed funding level would have been 5.2% less than the Administration's FY2011 request. The FY2011-enacted amount for SJI is $10,000 (0.2%) less than the FY2010 appropriation and the amount that would have been provided in H.R. 1 . The FY2011 appropriation for SJI is 5.4% below the Administration's request.
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This report provides an overview of actions taken by Congress to provide FY2011 appropriations for Commerce, Justice, Science, and Related Agencies (CJS). It also provides an overview of FY2010 appropriations for agencies and bureaus funded as a part of the annual appropriation for CJS. The Consolidated Appropriations Act, 2010 (P.L. 111-117), included a total of $68.705 billion in new budget authority for CJS. Of the $68.705 billion appropriated for FY2010, $14.035 billion was for the Department of Commerce, $28.078 billion was for the Department of Justice, $25.658 billion was for the Science Agencies, and $934.8 million was for the related agencies. For FY2011, the Administration requested a total of $66.109 billion for CJS, a 4.0% decrease in budget authority compared with FY2010 appropriations. The FY2011 request included $8.968 billion for the Department of Commerce, $29.737 billion for the Department of Justice, $26.431 billion for the Science Agencies, and $973.4 million for the related agencies. On February 11, 2011, the Full-Year Continuing Appropriations Act, 2011 (H.R. 1) was introduced in the House. The bill passed the House on February 19, 2011. The House-passed version of H.R. 1 would have provided a total of $60.065 billion for agencies and bureaus funded as a part of the annual appropriation for CJS. This included $7.38 billion for the Department of Commerce, $27.123 billion for the Department of Justice, $24.697 billion for the Science Agencies, and $864.8 million for the related agencies. On April 15, 2011, President Obama signed into law the Department of Defense and Full-Year Continuing Appropriations Act, 2011 (P.L. 112-10). The act provides a total of $61.202 billion for agencies and bureaus funded as a part of the annual appropriation for CJS. The $61.202 provided by the act includes $7.581 billion for the Department of Commerce, $27.389 billion for the Department of Justice, $25.314 billion for the Science Agencies, and $917.9 million for the related agencies.
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This report provides policy and historical background about Puerto Rico's political status —referring to the relationship between the federal government and a territorial one. Congress has not altered the island's status since 1952, when it approved a territorial constitution. Status is the lifeblood of Puerto Rican politics, spanning policy and partisan lines in ways that are unfamiliar on the mainland. Puerto Rico has been in political flux in recent years, culminating most recently in the 2017 plebiscite. Momentum toward that outcome began in the 2016 elections, when Puerto Ricans selected a prostatehood New Progressive Party (NPP/PNP) Governor, Resident Commissioner, and majorities in the Legislative Assembly. Shortly after assuming office, the Governor and legislature enacted a territorial law authorizing a plebiscite containing two ballot choices: statehood or free association/independence. (Free association is a form of independence entailing negotiated close ties between two countries.) After the U.S. Department of Justice declined to certify the release of federal funds to support the plebiscite, Puerto Rico amended its plebiscite law to add a status-quo option on the ballot. Some political parties and other groups on the island encouraged their supporters to boycott the plebiscite. On June 11, 23.0% of voters turned out for the plebiscite, where 97.2% selected statehood; 1.5% selected free association/independence; and 1.3% chose the "current territorial status." In anticipation of a statehood victory in the plebiscite, the territorial legislature enacted, and the Governor signed, legislation in June 2017 to pursue a "Tennessee Plan" path to statehood. That method traditionally involves sending an appointed or elected "delegation" to Washington to lobby Congress to grant statehood. Because the U.S. Constitution grants Congress broad discretion over territories, the House and Senate may choose to reexamine Puerto Rico's political status, or to decline to do so. If Congress chose to alter Puerto Rico's political status, it could do so through statute regardless of whether a plebiscite were held or what sentiment such a vote revealed. As with all CRS reports, this product provides background information and analysis for Congress. It emphasizes those facets of the status policy debate that historically have been most relevant for House and Senate consideration, and that appear to remain most relevant for Members and staff who are considering those issues. It emphasizes the current status debate in Puerto Rico specifically rather than examining status in all U.S. territories. This report is not intended to substitute for a comprehensive analysis of the complex and culturally sensitive issues surrounding Puerto Rico's more than 100-year affiliation with the United States. The report also is not intended to be an analysis of the various legal, economic, or social issues that might arise in considering Puerto Rico's political status or a change in its relationship with the United States. Parts of this report are adapted from another CRS product, which provides additional discussion of the 2012 plebiscite. Puerto Rico has been the subject of strategic and political attention for more than 500 years. Spain was the first colonial power to claim the island. Christopher Columbus landed on the west coast of the main island of present-day Puerto Rico on November 19, 1493. There, he encountered native Taíno Indians, who called the island "Borinquén" (or, in some spellings, "Borinkén"). As one scholar has noted, "[a] permanent foothold was finally established in 1508, when Juan Ponce León led a group of settlers from Hispaniola." Spanish colonizers forced the Taíno into servitude, and "[b]y 1521, the Indian Borinquén had become another Spanish settlement in an expanding empire." For the next 400 years, Puerto Rico served as a Spanish agricultural and mining outpost in the Caribbean. When the United States defeated Spain in the Spanish-American War (1898), the United States acquired Puerto Rico, Guam, and the Philippines from Spain via the Treaty of Paris. Puerto Rico provided the United States with a central location from which to exercise military and strategic power in the Caribbean, particularly before World War II. The U.S. military briefly administered the island until Congress established a civilian government in 1900. Today, Puerto Rico is both deeply integrated into American society and insulated from it. On one hand, the American flag has flown over San Juan, the capital, for more than 100 years. In addition, those born in Puerto Rico are U.S. citizens. Many live and work on the mainland and serve in the military. On the other hand, as shown in Figure 1 , the island is geographically isolated from the mainland United States; it lies approximately 1,500 miles from Washington and 1,000 miles from Miami. Residents of Puerto Rico lack full voting representation in Congress, typically do not pay federal income taxes on income earned on the island, do not have the same eligibility for some federal programs as those in the states, do not vote in presidential elections (although they may do so in party primaries), and enjoy a culture and predominant Spanish language that some argue more closely resembles Latin America than most of the 50 states. Some regard status as the fundamental political question that drives everything else about the Puerto Rico-U.S. relationship. Others see status as a distraction from more compelling everyday policy and economic challenges. Perhaps because that debate remains unsettled, status is an undercurrent in virtually every policy matter on the island. Federal policy debates generally are less affected by status, but here, too, status often arises at least tangentially. As such, even a basic knowledge of the topic may be helpful in multiple policy areas. In the foreseeable future, oversight of Puerto Rico is likely to be relevant for Congress as the House and Senate monitor the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA) enacted during the 114 th Congress (discussed elsewhere in this report and in other CRS products) in response to the island's financial crisis. Legislation introduced in the 115 th Congress, discussed elsewhere in this report, could affect the island's political status. In addition, the House and Senate could choose to respond to the 2017 plebiscite through oversight, legislation, or both. (Congress also could choose to take no action.) Finally, before proceeding, it is noteworthy that much of the status debate in Puerto Rico concerns attitudes surrounding past or future plebiscites. Whether in the past or future, Puerto Rico may choose to hold its own plebiscites without congressional authorization. Recently, however, plebiscite supporters have argued that federal support for a plebiscite could increase the perceived legitimacy of the results. Plebiscites are not required to revisit status. Whether or not a plebiscite were held, Congress could admit Puerto Rico as a state, or decline to do so, at its discretion, through statute. Puerto Rico is a U.S. territory subject to congressional authority derived from the Territory Clause of the U.S. Constitution. The Territory Clause grants Congress "Power to dispose of and make all needful Rules and Regulations respecting the Territory or other Property belonging to the United States." Congress has enacted various statutes to address specific matters concerning the island's political status. Puerto Rico's current political status, as determined by federal statute (or otherwise, as noted), is summarized briefly below. After military governance since the United States acquired Puerto Rico in 1898, Congress established a civilian government on the island in 1900. Among other points, the Foraker Act established an "executive council" consisting of a presidentially appointed civilian governor and various department heads. The new government also included a popularly elected House of Delegates (which shared decisionmaking power with the executive council) and a U.S.-style judiciary system. The Foraker Act also established the Resident Commissioner position to represent island interests in Washington. These duties came to include nonvoting service in the U.S. House of Representatives (the primary role of the Resident Commissioner today). Through the Jones Act (1917), Congress authorized appropriations for legislative staff and franking privileges for the Resident Commissioner. Devoted primarily to strengthening Puerto Rico's civil government, the Jones Act also extended U.S. citizenship to Puerto Ricans and established a bill of rights for the island. Major governmental changes included establishing a three-branch government similar to the one on the mainland. Congress recognized island authority over matters of internal governance in 1950 through the Federal Relations Act (FRA) and when it approved the island's Constitution in 1952. No major status changes have occurred since. After enactment of the FRA and approval of the territorial constitution, Puerto Rico became known formally as the "Commonwealth of Puerto Rico." Use of the word "commonwealth" and whether the term carries particular legal or political significance is a topic of substantial historical and scholarly debate—most of which is not addressed herein. A brief summary of the competing major perspectives, however, provides important context for understanding the ongoing status debate. Some contend that Puerto Rico's commonwealth status signifies a unique recognition somewhere between territory and state. This perspective is often called "enhanced commonwealth" or "new commonwealth." As longtime territories scholar Arnold H. Leibowitz has summarized, those holding this view have argued that more than local self-government was achieved by the 1950-1952 legislation. It contends that a new legal entity was created with a unique status in American law: the Commonwealth, a status which is an internationally recognized non-colonial status.... Most important, in this view, Commonwealth is not a "territory" covered by the 'Territory Clause' of the Constitution, nor quite obviously is it a state; rather, Commonwealth is sui generis and its judicial bounds are determined by a "compact" which cannot be changed without the consent of both Puerto Rico and the United States. Others, however, contend that, at least in the Puerto Rican context, the term "commonwealth" does not hold particular legal or political significance. From this viewpoint, "commonwealth" is a stylistic or historical term of art, as used in the formal names of states such as the Commonwealth of Pennsylvania. Some also suggest that commonwealth refers to a form of government, but does not designate a unique nonterritorial status. As Leibowitz has observed, From the outset the non-Commonwealth parties in Puerto Rico, seeking either Statehood or independence ... questioned the concept of the Commonwealth. They have argued that although Congress may delegate powers to a territorial government, the broad powers granted to Congress under the Territorial Clause of the Constitution and the implied powers of the national government remain and may be exercised should the need arise. Further they cite the legislative history of Public Law 600 [the FRA] to challenge the compact and Commonwealth concept. Debate over significance of the "commonwealth" term notwithstanding, action by Congress would be necessary to alter Puerto Rico's political status. Doing so, of course, would require passage of legislation by Congress and approval by the President. Finally, those rejecting the status quo also generally suggest that Puerto Rico's current status was not intended to be—or perhaps should not be—permanent, and that statehood or independence are natural next steps. The dominant Democratic and Republican party labels found in the mainland United States do not necessarily translate to Puerto Rican politics. In Puerto Rico, politics tends to revolve around three status perspectives represented by the three most established political parties: The status quo or "procommonwealth" position is generally associated with the Popular Democratic Party (PDP/PPD). The prostatehood position is generally associated with the New Progressive Party (NPP/PNP). The independence position is generally associated with the Independence Party (PIP or Independ en t istas ). In recent years, the PIP has not received sufficient electoral support to be certified a major party, but the independence perspective continues to be a factor in the status debate. Views within the three major parties, as well as among other parties and interest groups, are not necessarily uniform. These differences regularly produce active factional groups or officially recognized minor parties. The PDP, NPP, and PIP nonetheless remain the most consistent partisan forces in Puerto Rican politics. Other options that call for modified versions of the current commonwealth status or independence may appeal to members of one or more parties. Typically, the two major perspectives other than the status quo, statehood, or independence are (1) "enhanced commonwealth" and (2) "free association." The former arguably signals a semiautonomous status whereas the latter suggests independence with closer ties to the United States than a more traditional independence option. The viability of the "enhanced commonwealth" position is not universally accepted. At the federal level, positions on status do not necessarily follow clear partisan patterns. For those Members of Congress who have firm positions on status, personal preference or constituent issues appear to be key motivations. Particularly in recent years, members of both parties in Congress have generally argued that if the island is to choose a different status, clear consensus is necessary among the Puerto Rican people, regardless of the selected option. Before the 2017 plebiscite, Puerto Rico had held five status plebiscites or referenda since adopting its current relationship with the United States. These votes were held in 2012, 1998, 1993, 1991, and 1967. Ballot wording and options during each plebiscite or referendum differed. Most recently, in 2012, voters were asked to answer two questions: (1) whether they wished to maintain Puerto Rico's current political status; and (2) regardless of the choice in the first question, whether they preferred statehood, independence, or to be a "sovereign free associated state." Figure 2 shows a sample ballot. According to results certified by the Puerto Rico State Elections Commission, approximately 54.0% of those who cast ballots answered "no" to the first question. In the second question, approximately 61.2% of voters chose statehood. However, results of the plebiscite were controversial. Debate focused on whether almost 500,000 blank answers on the second question should be included in the total, thereby affecting whether any option received a majority. A concurrent resolution approved by the territorial legislature and supported by PDP Governor Alejandro García Pad illa (who was elected on the same day as the plebiscite) contended that the results were "inconclusive." Another CRS report provides additional detail about the 2012 plebiscite. After Governor García Padilla assumed office in 2013, momentum toward revisiting status waned on the island. As explained below, interest in status rebounded in 2016. In Washington, the House and Senate provided federal funds to support a future plebiscite. Specifically, in the FY2014 omnibus appropriations law, Congress appropriated $2.5 million for "objective, nonpartisan voter education about, and a plebiscite on, options that would resolve Puerto Rico's future political status." These plebiscite-education funds remain available until expended, but Congress placed conditions on their release that appear to exclude the "enhanced commonwealth" status option as a choice on the ballot. As discussed below, the Justice Department determined in 2017 that enhanced commonwealth remained inconsistent with the U.S. Constitution. In the 2016 general election, Puerto Rico voters selected NPP candidates for both the Governor and Resident Commissioner posts. The prostatehood NPP also retained majorities in the territorial House and Senate. Governor-Elect Ricardo Rosselló announced that he "intend[ed] to make joining the union [as a state] the central focus of his administration." Soon after the November election, some in the NPP began urging congressional action to admit Puerto Rico as a state. In his election night victory speech, according to one media report, Rosselló called his election an "'unequivocal mandate to tell the world that the transition to statehood has started,' which he will promote through the Tennessee Plan." The "Tennessee Plan" is a term of art referring to the method by which Tennessee and six other states joined the union. Each territory employed this method somewhat differently, but the central thrust of the Tennessee Plan involves organizing a political entity that is essentially a state in all but name. Steps typically include drafting of a state constitution, election of state officers, and sending an elected congressional delegation to Washington to lobby for statehood. These developments notwithstanding, there is no single path to statehood. Changing Puerto Rico's political status by the Tennessee Plan or any other method ultimately would require a statutory change by Congress with presidential approval. In January 2017, Rosselló assumed the governorship and the NPP assumed the majority in the legislature. Puerto Rico was thus now primarily represented by a Governor, legislative majority, and Resident Commissioner who publicly favored statehood. On February 3, 2017, the legislature enacted, and the Governor subsequently signed, legislation setting the June 11, 2017, plebiscite date. The new NPP government framed the 2017 plebiscite as the first "sanctioned" by the federal government (through the FY2014 appropriations language discussed above). The legislature also characterized the 2017 plebiscite as a way to "reassert the desire for decolonization and the request for Statehood" from 2012. Similar arguments that had surrounded the previous plebiscite language resurfaced in 2017. Similar criticisms also emerged from those who opposed the plebiscite. As explained below, the initial ballot was subsequently amended after the U.S. Department of Justice (DOJ) declined to certify the federal funds appropriated in FY2014 (discussed above) to administer the plebiscite. NPP supporters argued that the 2012 plebiscite established that Puerto Rican voters preferred a nonterritorial option, and that statehood or a form of independence were the only constitutionally permissible choices. The plebiscite law thus included two "non-territorial and non-colonial political status" options on the ballot: (1) "Statehood" and (2) "Free Association/Independence." The law further specified that only ballots marking one of those options would be counted—a reference to controversy over "blank" ballots believed to be cast in protest in 2012. The law also directed that if the "Free Association/Independence" option received a majority in the June 11 plebiscite, an October 8, 2017, referendum would be held for voters to select from these two choices. Both free association and independence would entail Puerto Rico becoming an independent country. The former suggests an ongoing, mutually negotiated relationship in which the United States might continue to provide some benefits or services, such as the United States today has with the Western Pacific nations of the Federated States of Micronesia (FSM), the Republic of Micronesia, and the Republic of Palau. PDP supporters objected to the ballot wording and choices. They argued that the ballot improperly omitted a status-quo option and was biased to favor a statehood outcome. After the legislature enacted the initial law establishing the plebiscite date and ballot, attention turned to whether the U.S. Justice Department would approve releasing the federal funds appropriated in FY2014. Importantly, Puerto Rico does not require federal approval to conduct a plebiscite or to otherwise reconsider its political status, but plebiscite supporters argued that federal approval would enhance the vote's perceived legitimacy in Washington. On April 13, 2017, Acting Deputy Attorney General Dana Boente wrote to Governor Rosselló that "multiple considerations preclude [DOJ] from notifying Congress that it approves of the plebiscite ballot and obligating the funds." According to the letter, "the Department does not believe that the results of the 2012 plebiscite justify omitting Puerto Rico's current status as an option on the [2017] ballot." Boente explained that DOJ also had determined that the ballot language included "several ambiguous and potentially misleading statements, which may hinder voters' ability to make a fully informed choice as well as efforts to ascertain the will of the people from the plebiscite results." In particular, DOJ raised concerns about what it regarded as deficiencies in how U.S. citizenship rights were explained in the "statehood" ballot description; and the chance that voters could "misperceive" the "free association" option as a constitutionally impermissible form of "enhanced commonwealth." After DOJ issued its determination, attention shifted back to the island. As discussed briefly below, the prostatehood government amended the plebiscite law to include a commonwealth option. Soon after the DOJ issued its April 13 letter, the Rosselló Administration and the NPP majority in the legislature announced that they would amend the plebiscite law. The amended "statement of motives" declared that,"[D]ue to the position stated by the U.S. Department of Justice, [the Legislative Assembly has] acted, under protest, on [DOJ's] recommendation to include the current territorial status among the options, so that the Plebiscite may be fully supported by the Federal Government." As Figure 3 below shows, the revised ballot included three options: (1) statehood, (2) "free association/independence," and (3) "current territorial status." The Justice Department did not formally respond to the ballot changes before voters went to the polls. However, supporters framed the new ballot options as tantamount to federal endorsement for the plebiscite. Opponents noted that the department had not approved the language. Changing the ballot language was intended to address the Justice Department's concerns, but it also reignited political controversy among the island's political parties. The Independence Party (PIP), which initially announced that it would encourage its supporters to participate in the plebiscite in hopes of defeating statehood, changed its position. In light of what it regarded as a colonial "commonwealth" ballot option now being included, the PIP announced that it would boycott the plebiscite, as did the PDP, in addition to some other nonparty groups. PDP leadership called for repealing the plebiscite law and beginning anew. On June 11, 2017, voters in Puerto Rico chose among the three options on the revised plebiscite ballot. 97.2% of voters chose statehood, 1.5% of voters chose free association/independence, and 1.3% of voters chose the "current territorial status." Turnout for the plebiscite was 23% (approximately 518,000 of 2.3 million voters). In anticipation of a statehood victory in the plebiscite, the territorial legislature enacted, and the Governor signed, legislation in June 2017 to pursue a "Tennessee Plan" path to statehood, including appointing a "delegation" to advocate for statehood before the House and Senate in Washington. The PDP opposition criticized the law and vowed to challenge it in court and in future elections. As discussed elsewhere in this report, the House and Senate may determine how or whether to respond to these developments. Two status bills have been introduced in the 115 th Congress. One proposes statehood, while the other proposes a form of independence. Brief discussion appears below. One day after assuming office, Puerto Rico's newly elected Resident Commissioner, Jenniffer González-Cólon, introduced legislation to admit the island as a state. H.R. 260 proposes that if voters choose statehood in the plebiscite provided for in the FY2014 omnibus appropriations law (discussed previously), Puerto Rico would join the union as a state by January 3, 2025. Separate legislation, introduced in February 2017, would require the Puerto Rico legislature to "provide for a referendum" between two status options. Specifically, H.R. 900 , introduced by Representative Gutiérrez, proposes a popular vote between independence and free association. The bill also authorizes treaty negotiations to implement either outcome. Unlike H.R. 260 , H.R. 900 would permit mainlanders (or others) of Puerto Rican descent to participate in the referendum. The bill specifies voting eligibility for those "born in Puerto Rico" or those who "[have] a parent who was born in Puerto Rico." Status was not a major component of debate in the 114 th Congress. Status was, however, a contextual issue as Congress considered legislation related to the island's ongoing economic crisis. The 114 th Congress did not enact any legislation directly affecting Puerto Rico's political status, but committees held hearings that partially addressed the topic. One bill devoted to Puerto Rico's political status was introduced in the 114 th Congress. H.R. 727 (Pierluisi) would have authorized the Puerto Rico State Elections Commission to "provide for a vote" in the territory on admitting Puerto Rico as a state. The bill did not advance beyond introduction. H.R. 727 specified that the proposed ballot "shall" include a single question: "Shall Puerto Rico be admitted as a State of the United States? Yes___ No___." The bill further specified a statehood admission process to be followed, to conclude on January 1, 2021, if a majority of voters selected statehood. Much of the status debate emphasizes governance, political participation, and democratic principles rather than economic issues or other policy matters. Furthermore, the relationship between status and economics is subject to ongoing debate, with some arguing that the two issues are inextricably linked and others replying that the status debate distracts from long-standing economic problems. Most recently, Puerto Rico's ongoing financial crisis has, however, shaped some aspects of recent attention to status, as discussed briefly below. As noted previously, economic issues are otherwise beyond the scope of this report. In June 2016, Congress enacted legislation responding to an ongoing economic crisis in Puerto Rico. The Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; P.L. 114-187 ) establishes a process for restructuring the island government's public debt. PROMESA also establishes a federal oversight board, formally known as the Financial Oversight and Management Board for Puerto Rico, with "broad powers of budgetary and financial control over" the island. Status was not a central component of the congressional deliberation over PROMESA, although some Members addressed status in testimony or floor statements. Some hearings also addressed the topic. Perhaps most consequentially for the status debate, some of those who opposed PROMESA, including some Members of Congress, characterized the broad powers provided to the oversight board as undemocratic. In particular, opponents objected to the board's powers to approve fiscal plans submitted by the Governor and to approve territorial budgets, among others. Although not necessarily addressing the oversight board explicitly, proponents generally argued that, in the absence of bankruptcy protection for territories, PROMESA was necessary to help the island's government to restructure its debts in an orderly fashion. Critics, on the other hand, contended that the oversight board undermines the mutually agreed status relationship established in 1952. Connections between PROMESA and status also were a component of the 2016 Puerto Rico elections (discussed previously). One brief section of PROMESA explicitly addresses status. Section 402 of the law states that "[n]othing in this Act shall be interpreted to restrict Puerto Rico's right to determine its future political status, including" through another plebiscite as authorized in the FY2014 omnibus appropriations law ( P.L. 113-76 ). A December 2016 report released by a congressional task force established in PROMESA (devoted primarily to economic issues) recommended that if such a plebiscite is held, Congress "analyze the result ... with care and seriousness of purpose, and take any appropriate legislative action." Just as status provides context for debates about other areas of public policy, status also can arise in legal cases that primarily concern other topics. In June 2016, the Supreme Court of the United States issued an opinion in Puerto Rico v. Sanchez Valle . This report does not provide a legal overview of the case, which concerned the application of the U.S. Constitution's Double Jeopardy Clause to criminal prosecutions in Puerto Rico. As another CRS product explains, the case examined "whether defendants in a criminal case can be prosecuted under the local laws of Puerto Rico if they have been previously convicted under federal criminal law for the same conduct." The Court's opinion did not alter Puerto Rico's political status. However, those interested in the status debate followed the case closely in anticipation of how the Court would describe the island's relationship with the United States. The majority opinion addressed the island's political and status history to establish background for the double-jeopardy analysis. Particularly important for status discussions, the Court traced the "ultimate source" of Puerto Rico's prosecutorial power to Congress. As the Court summarized, Puerto Rico's "Constitution, significant though it is, does not break the chain" of congressional authority. As CRS has written elsewhere, although Sanchez Valle was "limited [and] did not address broader issues of Puerto Rico's sovereignty," the holding suggests that "when Congress passes legislation affecting Puerto Rico's government, as it did recently with the passage of ... PROMESA, Sanchez Valle would not appear to suggest a limit on Congress's constitutional authority over Puerto Rico." Puerto Rican politicians representing diverse perspectives have suggested that Sanchez Valle signals that the commonwealth status does not provide the local autonomy that some, particularly in the PDP, have long suggested. In addition, some have suggested that Sanchez Valle is inconsistent with the U.S. government's previous characterization to the United Nations (U.N.) of Puerto Rico's status. In brief, the U.N. determined in 1953 that Puerto Rico, in light of enactment of the territorial constitution and the Federal Relations Act, was sufficiently self-governing to terminate a previous U.S. reporting requirement that applied to non-self-governing territories. However, meetings of the U.N. Special Committee on Decolonization remain a venue for debating the island's political status and for U.N. monitoring of the island's relationship with the United States. At the Special Committee's June 2016 meetings, after Sanchez Valle , representatives of various Puerto Rican parties and interest groups testified that the ruling suggested the need to reexamine the island's relationship with the United States. In particular, Governor García Padilla (PDP) has suggested that in light of Sanchez Valle and "through PROMESA, the United States has effectively backtracked from the democratic accomplishments of 1953 and must respond for this new position before the international community." The Special Committee's attention to Puerto Rico post- Sanchez Valle is not necessarily remarkable in and of itself, as the committee and the U.N. regularly examine territorial issues worldwide. Furthermore, as a practical matter, the Decolonization Committee's inquiries on Puerto Rico tend to be comparatively less prominent in Washington policy debates than in those held on the island. Consequently, the topic might or might not be a prominent aspect of future congressional attention to Puerto Rico's status debate. Nonetheless, it is potentially noteworthy that both the departing and incoming Governors, representing two opposing political parties (PDP and NPP, respectively), testified that Sanchez Valle raises questions about the island's degree of self-governance.
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Puerto Rico lies approximately 1,000 miles southeast of Miami and 1,500 miles from Washington, DC. Despite being far outside the continental United States, the island has played a significant role in American politics and policy since the United States acquired Puerto Rico from Spain in 1898. Puerto Rico's political status—referring to the relationship between the federal government and a territorial one—is an undercurrent in virtually every policy matter on the island. In a June 11, 2017, plebiscite (popular vote), 97.2% of voters chose statehood when presented with three options on the ballot. Turnout for the plebiscite was 23.0% of eligible voters. Some parties and other groups opposing the plebiscite had urged their bases to boycott the vote. (These data are based on 99.5% of precincts reporting results.) After initially including only statehood and free association/independence options, an amended territorial law ultimately permitted three options on the plebiscite ballot: statehood, free association/independence, or current territorial status. Before the latest plebiscite, Puerto Ricans most recently reconsidered their status through a 2012 plebiscite. On that occasion, voters were asked two questions: whether to maintain the status quo, and if a change were selected, whether to pursue statehood, independence, or status as a "sovereign free associated state." Majorities chose a change in the status quo in answering the first question, and statehood in answering the second. The results have been controversial. If Congress chose to alter Puerto Rico's political status, it could do so through statute. Ultimately, the Territory Clause of the U.S. Constitution grants Congress broad discretion over Puerto Rico and other territories. Congress has not enacted any recent legislation devoted specifically to status. Two bills have been introduced during the 115th Congress. H.R. 260 proposes to admit Puerto Rico as a state if residents choose statehood in a plebiscite. H.R. 900 proposes a popular vote between independence and free association (which entails an ongoing relationship between independent countries). In the 114th Congress, H.R. 727, which did not advance beyond introduction, would have authorized a plebiscite on statehood. Even in seemingly unrelated federal policy debates, Puerto Rico status often arises at least tangentially. In the foreseeable future, oversight of Puerto Rico is likely to be relevant for Congress as the House and Senate monitor the Puerto Rico Oversight, Management, and Economic Stability Act (PROMESA; P.L. 114-187; 48 U.S.C. §2101 et seq.) enacted during the 114th Congress. Status also shaped the policy context surrounding the U.S. Supreme Court's decision in the 2016 Sanchez Valle case. This report does not provide an economic or legal analysis of these topics; instead, it provides policy and historical background for understanding status and its current relevance for Congress. This report will be updated in the event of significant legislative or status developments.
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The Employee Retirement Income Security Act of 1974 (ERISA) provides a comprehensive federal scheme for the regulation of private-sector employee benefit plans. While ERISA does not require an employer to offer employee benefits, it does mandate compliance with its provisions if such benefits are offered. Besides the regulation of pension plans, ERISA also regulates welfare benefit plans offered by an employer to provide medical, surgical and other health benefits. ERISA applies to health benefit coverage offered through health insurance or other arrangements (e.g., self-funded plans). Health plans, like other welfare benefit plans governed by ERISA, must comply with certain standards, including plan fiduciary standards, reporting and disclosure requirements, and procedures for appealing a denied claim for benefits. However, these health plans must also meet additional requirements under ERISA. This report discusses some of these additional requirements for group health plans, as well as health insurance issuers that provide group health coverage. As enacted in 1974, ERISA's regulation of health plan coverage and benefits was limited. However, beginning in 1986, Congress added to ERISA a number of requirements on the nature and content of health plans, including rules governing health care continuation coverage, limitations on exclusions from coverage based on preexisting conditions, parity between medical/surgical benefits and mental health benefits, and minimum hospital stay requirements for mothers following the birth of a child. The Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) added a new Part 6 to Title I of ERISA, which requires the sponsor of a group health plan to provide an option of temporarily continuing health care coverage for plan participants and beneficiaries under certain circumstances. Under ERISA section 601, a plan maintained by an employer with 20 or more employees must provide "qualified beneficiaries" with the option of continuing coverage under the employer's group health plan in the case of certain "qualified events." A qualifying event is an event that, except for continuation coverage under COBRA, would result in a loss of coverage, such as the death of the covered employee, the termination (other than by reason of the employee's gross misconduct) or reduction of hours of the covered employee's employment, or the covered employee becoming entitled to Medicare benefits. Under section 602 of ERISA, the employer must typically provide this continuation coverage for 18 months. However, coverage may be longer, depending on the qualifying event. Under ERISA 602(1), the benefits offered under COBRA must be identical to the health benefits offered to "similarly situated non-COBRA beneficiaries," or in other words, beneficiaries who have not experienced a qualifying event. The health plan may charge a premium to COBRA participants, but it cannot exceed 102% of the plan's group rate. After 18 months of required coverage, a plan may charge certain participants 150% of the plan's group rate. However, the American Recovery and Reinvestment Act of 2009 includes provisions to subsidize health insurance coverage through COBRA. ARRA provides for COBRA premium subsidies of 65% to help the unemployed afford health insurance coverage from their former employer. The subsidy is available for up to nine months to those individuals who meet the income test and who are involuntarily terminated from their employment on or after September 1, 2008, and before January 1, 2010. For more information on the COBRA premium subsidies, see CRS Report R40420, Health Insurance Premium Assistance for the Unemployed: The American Recovery and Reinvestment Act of 2009 , coordinated by [author name scrubbed]. The Health Insurance Portability and Accountability Act of 1996 (HIPAA) added a new Part 7 to Title I of ERISA to provide additional health plan coverage requirements. Other federal legislation amended Part 7 of ERISA to require plans that offer specific health benefits to meet certain standards. The requirements of Part 7 generally apply to group health plans, as well as health insurance issuers that offer group health insurance coverage. HIPAA was enacted in 1996 in part to "improve the portability and continuity of health insurance coverage in the group and individual markets." One of the ways that HIPAA implements this goal is by amending ERISA, as well as other federal laws, to limit the circumstances under which a group health plan or insurer providing group health coverage may exclude a participant or beneficiary with a preexisting condition from coverage. A preexisting condition exclusion under a group health plan or group health insurance coverage can be applicable to an individual as a result of information relating to an individual's health status before the effective date of coverage, such as a condition identified as a result of a pre-enrollment questionnaire, a physical examination given to the individual, or review of medical records relating to the pre-enrollment period. Under Section 701 of ERISA, as created by HIPAA, an exclusion period for an individual's preexisting condition may be applied if medical advice, diagnosis, care, or treatment was recommended or received within the six months before the enrollment date in the plan. This exclusion from coverage cannot be for more than 12 months after an employee enrolls in a health plan (or 18 months for late enrollees). Further, this 12-month period must be reduced by the number of days that an individual has "creditable coverage," with no significant break in this coverage. A significant break is a 63-day continuous period in which the individual had no creditable coverage after the termination of prior health coverage and before the enrollment date of the new coverage. In other words, if an individual maintains certain creditable coverage, the individual cannot be subject to an exclusion period when moving from one group health plan to another. HIPAA prohibits plans and insurers from imposing preexisting condition exclusions under certain circumstances. For instance, pre-existing condition exclusion may not be imposed for any conditions relating to pregnancy. Similarly, newborns and adopted children cannot be subject to a preexisting condition exclusion if they were covered under "creditable coverage" within 30 days after birth or adoption, and there has not been a gap of more than 63 days in this coverage. HIPAA also requires health plans to provide a special enrollment opportunity to allow certain individuals to enroll in a health plan without waiting until the plan's next regular enrollment season. For example, special enrollment rights must be extended to a person who becomes a new dependent through marriage, birth, adoption or placement for adoption, or to an employee or dependent who loses other health coverage. Effective April 1, 2009, the Children's Health Insurance Program Reauthorization Act of 2009 amended ERISA to provide that group health plans must permit employees and dependents who are eligible for, but not enrolled in, coverage under the terms of the plan to enroll in two additional circumstances: (1) the employee's or dependent's coverage under Medicaid or SCHIP is terminated as a result of loss of eligibility, or (2) the employee or dependent becomes eligible for a financial assistance under Medicaid or SCHIP, and the employee requests coverage under the plan within 60 days after eligibility is determined. Under these two circumstances, an employee must request coverage within 60 days after termination of Medicaid or SCHIP coverage, or becoming eligible for this coverage. HIPAA also created ERISA Section 702, which provides that a group health plan or health insurance issuer may not base coverage eligibility rules on certain factors, including health status (physical or mental), claims experience, receipt of health care, medical history, genetic information, evidence of insurability, or disability. In addition, a health plan may not require an individual to pay a higher premium or contribution than another "similarly situated" participant, based on these health-related factors. The Genetic Information Nondiscrimination Act (GINA), passed in the 110 th Congress, amended Section 702 of ERISA to prevent certain types of genetic discrimination. Under this section, a health plan may not adjust premiums or contribution amounts for an entire group covered by the plan on the basis of genetic information. "Genetic information," as defined by the act, includes information about a genetic test of an individual or a family member of an individual, the manifestation of a disease or disorder in the family members of an individual, as well as request for, or receipt of, genetic services. GINA restricts a health plan from requiring or requesting an individual or a family member of an individual to undergo a genetic test. The act includes an exception to this provision, under which a health plan may request a genetic test for research purposes, but only if certain conditions are met. Further, GINA prohibits a plan from requesting, requiring, or purchasing genetic information for underwriting purposes or with respect to an individual prior to the individual's enrollment in the plan. The amendments made by GINA apply to health plans for plan years beginning after May 21, 2009. HIPAA also added Section 703 of ERISA, which provides that certain health plans covering multiple employers cannot deny an employer (whose employees are covered by the plan) coverage under the plan, except for certain reasons, such as an employer's failure to pay plan contributions. In 1996, Congress enacted the Mental Health Parity Act (MHPA), which added section 712 of ERISA to create certain requirements for mental health coverage, if this coverage was offered by a health plan. Under the MHPA, health plans are not required to offer mental health benefits. However, plans that choose to provide mental health benefits must not impose lower annual and lifetime dollar limits on these benefits than the limits placed on medical and surgical benefits. The MHPA allows a plan to decide what mental health benefits are to be offered; however, the parity requirements do not apply to substance abuse or chemical dependency treatment. Certain plans may be exempt from the MHPA. Plans covering employers with 50 or fewer employees are exempt from compliance. In addition, employers that experience an increase in claims costs of at least 1% as a result of MHPA compliance can apply for an exemption. Recently, Congress enacted legislation which expands the MHPA's requirements. The new requirements apply to group health plans for plan years beginning after October 3, 2009. These requirements, included as part of the Emergency Economic Stabilization Act of 2008, expand the parity requirements under the current version of the MHPA for mental health and substance use disorder coverage if such coverage is offered by a group health plan. In general, the act amends section 712 of ERISA, as well as other federal laws, to require parity between mental health/substance use disorder benefits and medical/surgical benefits in terms of the predominant (1) financial requirements and (2) treatment limitations imposed by a group health plan. As defined by the act, financial requirements include requirements such as deductibles, co-payments, co-insurance and out-of-pocket expenses; treatment limitations include limits on the frequency of treatment, number of visits, days of coverage, or any other limits on the duration or scope of treatment. The parity requirements of the act apply to mental health and substance use disorder benefits as defined by the health plan or applicable state law. Health plans may qualify for an exemption from the parity requirements if it is actuarially determined that the implementation of the act's requirements would cause a plan to experience an increase in actual total costs of coverage that exceed 2% of the actual total plan costs during the first plan year, or exceed 1% of the actual total plan costs each subsequent year. In 1996, Congress passed the Newborns' and Mothers' Health Protection Act (NMHPA), which amended ERISA and established minimum hospital stay requirements for mothers following the birth of a child. In general, the NMHPA prohibits a group health plan or health insurance issuer from limiting a hospital length of stay in connection with childbirth for the mother or newborn child to less than 48 hours, following a normal vaginal delivery, or to less than 96 hours, following a cesarean section. The Women's Health and Cancer Rights Act, enacted in 1998, amended ERISA to require group health plans providing mastectomy coverage to cover prosthetic devices and reconstructive surgery. Under section 713 of ERISA, this coverage must be provided in a manner determined in consultation between the attending physician and the patient. On October 9, 2008, President Bush signed legislation, known as "Michelle's Law," that extends the ability of dependents to remain on their parents' plan for a limited period of time during a medical leave from full-time student status. The act requires group health plans and health insurance issuers that provide group health coverage to continue coverage for a child dependent on a medically necessary leave of absence for a period of up to one year after the first day of the leave of absence or the date on which such coverage would otherwise terminate under the terms of the plan, whichever is earlier. A dependent child for purposes of the act is a dependent under the terms of the plan who was both enrolled in the plan on the first day of the medically necessary leave of absence and as a full-time student at a postsecondary education institution until the first day of the medically necessary leave of absence. Michelle's law applies to plan years beginning on or after October 9, 2009 (one year after enactment), and to medically necessary leaves of absence beginning during such plan years.
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The Employee Retirement Income Security Act (ERISA) sets certain federal standards for the provision of health benefits under private-sector, employment-based health plans. These standards regulate the nature and content of health plans and include rules on health care continuation coverage as provided under the Consolidated Omnibus Budget Reconciliation Act (COBRA), guarantees on the availability and renewability of health care coverage for certain employees and individuals, limitations on exclusions from health care coverage based on preexisting conditions, and parity between medical/surgical benefits and mental health benefits. This report discusses these health benefit requirements under ERISA.
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A data breach occurs when there is a loss or theft of, or other unauthorized access to, data containing sensitive personal information that results in the potential compromise of the confidentiality or integrity of data. The first state data security breach notification law was enacted in California in 2002. In response to state security breach notification laws enacted thereafter in numerous jurisdictions, over 2,676 data breaches and computer intrusions have been disclosed by the nation's largest data brokers, businesses, retailers, educational institutions, government and military agencies, healthcare providers, financial institutions, nonprofit organizations, utility companies, and Internet businesses. A brief chronology of significant data breaches follows. In February 2005, the data broker ChoicePoint disclosed a security breach, as required by the California Security Breach Act, involving the personal information of 163,000 persons. In 2006, the personal data of 26.5 million veterans was breached when a VA employee's hard drive was stolen from his home. In 2007, the retailer TJX Companies revealed that 46.2 million credit and debit cards may have been compromised during the breach of its computer network by unauthorized individuals. In 2008, the Hannaford supermarket chain revealed that approximately 4 million debit and credit card numbers were compromised when Hannaford's computer systems were illegally accessed while the cards were being authorized for purchase. In 2009, 130 million records from credit card processor Heartland Payment Systems Inc. of Princeton, N.J., were breached. Also, in 2009, personal information from Health Net on almost half a million Connecticut residents and 1.5 million patients nationally was breached. In 2011, another breach of patient data occurred when data for 20,000 emergency room patients from Stanford Hospital in California was posted on a commercial website for nearly a year. In January 2012, New York State Electric & Gas and Rochester Gas and Electric, subsidiaries of Iberdrola USA, sent notices to customers advising them of unauthorized access to customer data on the companies' customer information systems, which contained Social Security numbers, dates of birth, and financial institution account numbers. Data breaches are caused by computer hacking, malware, payment card fraud, employee insider breach, physical loss of non-electronic records and portable devices, and inadvertent exposure of confidential data on websites or in e-mail. Data breaches are expensive, time consuming, and can damage a company's reputation. U.S. companies are reportedly reticent about buying cyber liability insurance even though data breaches have cost companies millions of dollars. Data breaches involving sensitive personal information may also result in identity theft and financial crimes (e.g., credit card fraud, phone or utilities fraud, bank fraud, mortgage fraud, employment-related fraud, government documents or benefits fraud, loan fraud, and health-care fraud). Identity theft involves the misuse of any individually identifying information to commit a violation of federal or state law. With continued media reports of data security breaches, concerns about identity theft are widespread. Cloud computing also poses particular data security challenges as illustrated by the 2011 Epsilon, Sony, and Amazon data breaches. E-mail marketing company Epsilon announced in April 2011 that its databases had been hacked, compromising customer names and e-mail addresses for companies that outsource their marketing communications to Epsilon. E-mails concerning the breach from companies including Citibank, Chase, Capital One, Walgreens, Target, Best Buy, TiVo, TD Ameritrade, Verizon, and Ritz Carlton were sent after Epsilon announced the data breach. About 2% of Epsilon's estimated 2,500 clients were affected by the attack, which amounted to millions of exposed records. Sony announced that in April 2011 certain PlayStation Network and Qriocity service user account information was compromised in connection with an illegal and unauthorized intrusion into its network. The Amazon Web Services cloud computing platform, Amazon Elastic Compute Cloud (Amazon EC2), suffered a partial failure when one of Amazon's giant server farms (the northern Virginia data center—"US-East"), whose storage and processing facilities it rents to other companies, suffered a lengthy outage. Customers whose information technology was hosted by Amazon EC2 were down. These included applications like Foursquare, Formspring, HootSuite, and Reddit, among others. In addition, the failure propagated across multiple "availability zones." It was also reported that Amazon permanently lost some customer data. Litigation and enforcement actions arising from security breaches of personal information are becoming common. Lawsuits seeking class action status are proceeding against retailers, credit card issuers, payment processors, and banks. The Federal Trade Commission (FTC) has brought enforcement actions, along with states' attorneys general, for violations of consumer protection laws amounting to unfair practices. Consumers have sued complaining that merchants, banks, and payment processors were negligent in their failure to protect their personal information. The imposition of data security and security breach notification obligations on entities that own, possess, or license personal information is a recent phenomenon. California was the first jurisdiction to enact a data breach notification law in 2002, requiring notification when unencrypted personal information was, or is reasonably believed to have been, acquired by an unauthorized person. There followed the emergence of numerous federal and state bills modeled after the California law imposing notification requirements on entities that own, license, or process personal information. Many states, however, included an element of harm as a trigger for notification rather than simply unauthorized acquisition. For example, under Alaska law "disclosure is not required if, after an appropriate investigation and after written notification to the attorney general of this state, the covered person determines that there is not a reasonable likelihood that harm to the consumers whose personal information has been acquired has resulted or will result from the breach." The majority of states have enacted laws requiring notice of security breaches of personal data. As of January 2012, 46 states, the District of Columbia, Puerto Rico, and the Virgin Islands have enacted laws requiring notification of security breaches involving personal information. According to the National Conference of State Legislatures, in 2011 at least 14 states introduced legislation expanding the scope of laws, setting additional requirements related to notification, or changing penalties for those responsible for breaches. Several states have reportedly considered legislation to hold retailers liable for third-party companies' costs arising from data breaches. The Massachusetts security breach and data destruction law and security regulations are considered to "constitute one of the most comprehensive sets of general security regulations yet seen at the state level.... [And] are clearly modeled after aspects of developing data security law at the federal level." Alabama, Kentucky, New Mexico, and South Dakota do not have security breach notification laws. In September 2012, when the amended Texas breach notification law goes into effect, breach notification obligations will exist in all states because Texas will then require entities doing business within the state to provide notification of data breaches to residents of states that have not enacted their own breach notification law. Thus, breach notification obligations will exist in all states because Texas's consumer notification obligations will apply not only to residents of Texas, but also to residents of states that don't have security breach notice requirements. Variations in state security breach notification law have been described as "so numerous that it is virtually impossible to convert these state laws into the more manageable format of fifty-state surveys." Because states have different requirements, businesses engaged in interstate commerce are confronted with compliance challenges and cite the lack of uniformity as justification for a national security breach notification standard. State security breach notification laws have been criticized for creating "a fragmented, incoherent liability scheme." The nature of any causal connection between security breaches and concrete harms suffered by consumers such as identity theft remains unclear. Because American consumers are not protected by a general right of information privacy, mere notice that a security breach has occurred is not associated with any right to compensation. Attempts to establish a right to damages following receipt of a security breach notice through class action lawsuits have generally only succeeded in clarifying the degree to which no such right exists, although many businesses suffering breaches have chosen on a voluntary basis to provide their customers with credit monitoring services to reduce the risk of harm from identity theft. Proponents of state security breach notification laws believe that state laboratories can provide stronger protection for sensitive personal information. State security breach notification laws generally follow a similar framework and can be categorized into several standard elements: (1) delineating who must comply with the law; (2) defining the terms "personal information" and "breach of security"; (3) establishing the elements of harm that must occur, if any, for notice to be triggered; (4) adopting requirements for notice; (5) creating exemptions and safe harbors; (6) clarifying preemption and relationships to other federal laws; and (7) creating penalties, enforcement authorities, and remedies. State security breach notification laws vary regarding who is subject to the law—covered entities include businesses, state agencies, for profits, non-profits, information brokers, or persons conducting business within the state that own, license, or maintain the personal information of state residents. Twenty-nine states impose similar duties for the public and private sectors, 14 states do not, and Oklahoma's law applies only to the public sector. State security breach notification laws generally apply to electronic or computerized data. Security breach notification laws typically include definitions for "personal information" or "personally identifiable information." In information privacy law, there is no uniform definition of "personally identifiable information." A common definition includes an individual's first name or initial and last name combined with SSN; driver's license or state ID number; account number, credit or debit card number, combined with any required information that allows access to account or any other financial information. A few states include medical information and/or health insurance information. Many states exclude from the definition of personal information any publicly available information that is lawfully made available to the general public from federal, state, or local government records. The term "sensitive personally identifiable information" is a subset of personally identifiable information (PII), the meaning of which also varies, but typically includes any information about an individual (including education, financial transactions, medical history, and criminal or employment history) along with information that can be used to distinguish or trace the individual's identity (including name, address, or telephone number; date and place of birth; mother's maiden name; Social Security number or other government-issued unique identification number; biometric data; or unique account identifiers). The standard definition for "breach of security" is unauthorized acquisition of personal information that compromises the security, confidentiality, or integrity of personal information maintained by a covered entity. In some states, the standard trigger for notice is the unauthorized access and acquisition of personal information. Some states require a risk of harm assessment to determine the level of harm or the risk of misuse involved. The results of the risk assessment determine whether notice is required. State security breach notification laws describe who must provide notice (some require third-party service providers to notify the owner or licensor of the data when a breach occurs); recipients of notification (individuals, consumer reporting agencies for large scale breaches, state attorneys general); timing (following discovery or following unauthorized access, promptly, without unreasonable delay); methods (written, mail, email, substitute, mass media); content of notice; and delayed notification for law enforcement or national security purposes. Many states provide a safe harbor for entities that are regulated under the Gramm-Leach-Bliley Act (GLBA) or the Health Insurance Portability and Accountability Act (HIPAA) and accompanying regulations and guidance. The safe harbor is generally available to entities that are in compliance with those laws, rules, regulations, or guidelines. Forty-six states, the District of Columbia, Puerto Rico, and the Virgin Islands exempt encrypted information from notification requirements. Thirteen states, the District of Columbia, and Puerto Rico permit an individual to bring a private right of action to recover damages and/or obtain equitable relief from businesses for injuries from the breach, for failure to notify customers of a security breach in a timely manner, or under state consumer protection statutes (e.g., unfair or deceptive practices). In some cases, prevailing plaintiffs are permitted to recover reasonable attorneys fees and court costs. Some permit the state attorney general to bring an action; other states only allow attorney general enforcement. Penalties may be included for failure to promptly notify customers of a security breach. Penalties vary from imposition of a civil penalty of up to $500, but not to exceed $50,000 for each state resident who was not notified; a civil penalty not to exceed $10,000 per breach; assessment of appropriate penalties and damages; $1,000 per day per breach, then up to $50,000 for each 30-day period up to 180 days not to exceed $500,000; $2,500 per violation and for any actual damages; state attorney general actions under state consumer protection laws which permit the imposition of significant fines, injunctive relief, and attorneys' fees; and identity theft penalties. The legal and regulatory framework for the protection of personally identifiable information is complex because businesses, governments, and individuals who process data must comply with the requirements of many differing privacy, information security, and breach notification laws. No single federal law or regulation governs the security of all types of sensitive personal information. Determining which federal law, regulation, and self-regulatory guidance is applicable depends in part on the entity or sector that collected the information, and the type of information collected and regulated. Under federal law, certain sectors are legally obligated to protect certain types of sensitive personal information. These obligations were created, in large part, when federal privacy and security legislation was enacted in the credit, financial services, health care, government, securities, and Internet sectors. Federal regulations were issued to implement information security programs and provide standards for security breach notice to affected persons. For example, there are federal information security requirements applicable to all federal government agencies via the Federal Information Security Management Act (FISMA) and a federal information security and security breach notification law applicable to a sole federal department (Veterans Affairs). Federal departments and agencies are obligated by memorandum to provide breach notification, while the Department of Veterans Affairs is statutorily obligated to do so. Other federal laws and regulations, such as the Health Insurance Portability and Accountability Act (HIPAA) and the Gramm-Leach-Bliley Act (GLBA), require private sector entities to maintain security safeguards to ensure the confidentiality, integrity, and availability of personal information, and require notification of security breaches. In the private sector, different laws apply to private sector entities engaged in different businesses (such as HIPAA, the Health Information Portability and Accountability Act, and GLBA, Gramm-Leach-Bliley Act, discussed hereinafter). This is what is commonly referred to as a sectoral approach to the protection of personal information. The Federal Trade Commission Act (the FTC Act) prohibits unfair and deceptive practices in and affecting commerce. The Payment Card Industry Data Security Standards (PCI-DSS) include information security requirements for organizations that handle bank cards. Some critics say that current laws focus too closely on industry-specific uses of information rather than on protecting the privacy of individuals. Others believe the sectoral approach to the protection of personal information reflects not only variations in the types of information collected (e.g., government, private sector, health, financial, etc.), but also differences in the regulatory framework for particular sectors. Others advocate a national standard for entities that maintain personal information in order to harmonize legal obligations. Others distinguish between private data held by the government and private data held by others, and advocate a higher duty of care for governments with respect to sensitive personal information in the U.S. public sector and to data breaches. This section describes information security and data breach notification requirements included in the Gramm-Leach-Bliley Act, the Health Insurance Portability and Accountability Act, and the Health Information Technology for Economic and Clinical Health Act. Also discussed are implementing regulations, to the extent that they include data security and breach notification requirements, such as the FTC Safeguards Rule and the Information Security Interagency Guidance issued by the federal banking regulators. Because some of the federal security breach notification bills would also apply to federal agencies, we are including an overview of the Office of Management and Budget's "Breach Notification Policy" for federal agencies. In response to recommendations from the President's Identity Theft Task Force, the Office of Management and Budget issued guidance in May 2007 for federal agencies on "Safeguarding Against and Responding to the Breach of Personally Identifiable Information." The OMB Memorandum M-07-16 requires all federal agencies to implement a breach notification policy to safeguard "personally identifiable information" by August 22, 2007, to apply to both electronic systems and paper documents. To formulate their policy, agencies are directed to review existing privacy and security requirements, and include requirements for incident reporting and handling and external breach notification. In addition, agencies are required to develop policies concerning the responsibilities of individuals authorized to access personally identifiable information. Attachment 1 of the OMB memorandum, Safeguarding Against the Breach of Personally Identifiable Information , reemphasizes agencies' responsibilities under existing law (e.g., the Privacy Act and FISMA), executive orders, regulations, and policy to safeguard personally identifiable information and train employees. New privacy and security requirements are established. Agencies are required to review holdings of all personally identifiable information to ensure that they are accurate, relevant, timely, and complete, and reduced to the minimum necessary amount. Agencies must also establish a plan to eliminate the unnecessary collection and use of Social Security numbers. Agencies must implement the following security requirements (applicable to all federal information): encrypt all data on mobile computers/devices carrying agency data; employ two-factor authentication for remote access; use a "time-out" function for remote access and mobile devices; log and verify all computer-readable data extracts from databases holding sensitive information; and ensure that individuals and supervisors with authorized access to personally identifiable information annually sign a document describing their responsibilities. Attachment 2 of the OMB Memorandum, Incident Reporting and Handling Requirements , applies to the breach of personally identifiable information in electronic or paper format. Agencies are required to report all incidents involving personally identifiable information within one hour of discovery/detection, and publish a "routine use" under the Privacy Act applying to the disclosure of information to appropriate persons in the event of a data breach. Attachment 3, External Breach Notification , identifies the factors agencies should consider in determining when notification outside the agency should be given and the nature of the notification. Notification may not be necessary for encrypted information. Each agency is directed to establish an agency response team. Agencies must assess the likely risk of harm caused by the breach and the level of risk. Agencies should provide notification without unreasonable delay following the detection of a breach, but are permitted to delay notification for law enforcement, national security purposes, or agency needs. Attachment 3 also includes specifics as to the content of the notice, criteria for determining the method of notification, and the types of notice that may be used. Attachment 4, Rules and Consequences Policy , directs each agency to develop and implement a policy outlining rules of behavior and identifying consequences and corrective actions available for failure to follow these rules. Supervisors may be subject to disciplinary action for failure to take appropriate action upon discovering the breach or failure to take required steps to prevent a breach from occurring. Rules of behavior and corrective actions should address the failure to implement and maintain security controls for personally identifiable information; exceeding authorized access to, or disclosure to unauthorized persons of, personally identifiable information; failure to report any known or suspected loss of control or unauthorized disclosure of personally identifiable information; and for managers, failure to adequately instruct, train, or supervise employees in their responsibilities. Consequences may include reprimand, suspension, removal, or other actions in accordance with applicable law and agency policy. Part C of the Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires "the development of a health information system through the establishment of standards and requirements for the electronic transmission of health information." These "Administrative Simplification" provisions require the Secretary of Health and Human Services to adopt national standards to facilitate the electronic exchange of information; establish code sets for data elements; protect the privacy of individually identifiable health information; maintain administrative, technical, and physical safeguards for the security of health information; provide unique health identifiers; and to adopt procedures for the use of electronic signatures. HIPAA covered entities—health plans, health care clearinghouses, and health care providers who transmit financial and administrative transactions electronically—are required to comply with the national standards and regulations. Under HIPAA, the Secretary is required to impose a civil monetary penalty on any person failing to comply with the national standards and regulations. The minimum civil money penalty (i.e., the fine) for a violation is $100 per violation and up to $25,000 for all violations of an identical requirement or prohibition during a calendar year. The maximum civil money penalty (i.e., the fine) for a violation is $50,000 per violation and up to $1,500,000 for all violations of an identical requirement or prohibition during a calendar year. HIPAA also establishes criminal penalties for any person who knowingly and in violation of the Administrative Simplification provisions of HIPAA uses a unique health identifier, or obtains or discloses individually identifiable health information. Enhanced criminal penalties may be imposed if the offense is committed under false pretenses, with intent to sell the information or reap other personal gain. The penalties include a fine of not more than $50,000 and/or imprisonment of not more than one year; if the offense is under false pretenses, a fine of not more than $100,000 and/or imprisonment of not more than five years; and if the offense is with intent to sell, transfer, or use individually identifiable health information for commercial advantage, personal gain, or malicious harm, a fine of not more than $250,000 and/or imprisonment of not more than 10 years. These penalties do not affect other penalties imposed by other federal programs. HIPAA required adoption of a national privacy standard for the protection of individually identifiable health information. HHS issued final Standards for Privacy of Individually Identifiable Health Information, known as the Privacy Rule, on April 14, 2003. The HIPAA Privacy Rule is applicable to health plans, health care clearinghouses, and health care providers who transmit financial and administrative transactions electronically. The rule regulates "protected health information" that is "individually identifiable health information" transmitted by or maintained in electronic, paper, or any other medium. The Privacy Rule requires covered entities to enter into agreements with business associates who create, receive, maintain, or transmit protected health information (PHI) on their behalf. The Office of Civil Rights (OCR) in HHS enforces the Privacy Rule. The HIPAA Privacy Rule limits the circumstances under which an individual's protected health information may be used or disclosed by covered entities. A covered entity is permitted to use or disclose protected health information without patient authorization for treatment, payment, or health care operations. For other purposes, a covered entity may only use or disclose PHI with patient authorization subject to certain exceptions. Exceptions permit the use or disclosure of PHI without patient authorization or prior agreement for public health, judicial, law enforcement, and other specialized purposes. In certain situations that would otherwise require authorization, a covered entity may use or disclose PHI without authorization provided that the individual is given the prior opportunity to object or agree. The HIPAA Privacy Rule also requires a covered entity to maintain reasonable and appropriate administrative, technical, and physical safeguards to protect the privacy of protected health information. HIPAA also required adoption of a national security standard for the protection of individually identifiable health information. HHS issued the HIPAA Security Rule in 2003. The Security Rule applies only to protected health information in electronic form (EPHI), and requires a covered entity to ensure the confidentiality, integrity, and availability of all EPHI the covered entity creates, receives, maintains, or transmits. Covered entities must protect against any reasonably anticipated threats or hazards to the security or integrity of such information and any reasonably anticipated uses or disclosures of such information that are not permitted or required under the Privacy Rule and ensure compliance by their workforces. The Security Rule requires covered entities to enter into agreements with business associates who create, receive, maintain, or transmit EPHI on their behalf. A covered entity is not liable for violations by the business associate unless the covered entity knew that the business associate was engaged in a practice or pattern of activity that violated HIPAA, and the covered entity failed to take corrective action. The Centers for Medicare and Medicaid Services (CMS) has been delegated authority to enforce the HIPAA Security Rule. The Security Rule allows covered entities to consider such factors as the cost of a particular security measure, the size of the covered entity involved, the complexity of the approach, the technical infrastructure and other security capabilities in place, and the nature and scope of potential security risks. The Security Rule establishes "standards" that covered entities must meet, accompanied by implementation specifications for each standard. The Security Rule identifies three categories of standards: administrative, physical, and technical. The Health Information Technology for Economic and Clinical Health Act (HITECH Act) was enacted as part of the American Recovery and Reinvestment Act of 2009 (ARRA). As part of this new law, sweeping changes to the health information privacy regime were enacted. Most of the privacy provisions are additional requirements supplementing the HIPAA Privacy and Security Rules, but a few provisions deal specifically with electronic health records (EHRs). The HITECH Act extended application of some provisions of the HIPAA Privacy and Security Rules to the business associates of HIPAA-covered entities, making those business associates subject to civil and criminal liability; established new limits on the use of protected health information for marketing and fundraising purposes; provided new enforcement authority for state attorneys general to bring suit in federal district court to enforce HIPAA violations; increased civil and criminal penalties for HIPAA violations; required covered entities and business associates to notify the public and HHS of data breaches; changed certain use and disclosure rules for protected health information; and created additional individual rights. The HITECH Act provides that covered entities' business associates that obtain or create PHI pursuant to a business associate agreement may only use or disclose that PHI in compliance with its terms. The HITECH Act also requires existing business associate agreements to incorporate the new privacy provisions. Prior to the HITECH Act, covered entities have been liable for violations of the Privacy Rule that were committed by their business associates, but only if the covered entity had knowledge of "a pattern of activity or practice" of the business associate that violates the Privacy Rule. Under the HITECH Act, business associates are also made liable for violations of the Privacy Rule committed by the covered entities with which they contract, if the business associates are aware of a pattern and practice of unlawful conduct by the covered entity. While business associates are still not defined as covered entities under HIPAA, they are subject to the same civil and criminal penalties for improper uses or disclosures of PHI. The HITECH Act also extended application of the HIPAA Security Rule's provisions on security safeguards and documentation to business associates of covered entities, making those business associates subject to civil and criminal liability for violations of the HIPAA Security Rule. Under the HIPAA Security Rule, only covered entities can be held civilly or criminally liable for violations. While business associates are still not considered covered entities under HIPAA, they are subject to the same civil and criminal penalties as a covered entity for Security Rule violations. The HITECH Act also requires existing business associate agreements to incorporate the new security requirements. The HITECH Act required the HHS Secretary to issue guidance specifying the technologies and methodologies to render protected health information unusable, unreadable, or indecipherable to unauthorized individuals. The HITECH Act also provides a definition. Guidance on the meaning of "unsecured protected health information" was issued by HHS that became effective upon issuance. It identified two methods for rendering PHI unusable, unreadable, or indecipherable: encryption and destruction (paper and electronic form). Pursuant to this guidance, "if PHI is rendered unusable, unreadable, or indecipherable to unauthorized individuals by one or more of the methods identified in this guidance, then such information is not 'unsecured' PHI." Because the HITECH Act's breach notification requirements apply only to breaches of unsecured PHI, this guidance provides the means by which covered entities and their business associates can determine whether a breach has occurred and whether notification obligations apply. The Health Information Technology for Economic and Clinical Health Act (HITECH Act) imposed breach notification requirements on covered entities, their business associates, and vendors of personal health records (PHRs). The HITECH Act requires covered entities, business associates, and vendors of PHRs to notify affected individuals in the event of a "breach" of "unsecured protected health information." A "breach" is defined as the "unauthorized acquisition, access, use, or disclosure of protected health information which compromises the security or privacy of such information, except where an unauthorized person to whom such information is disclosed would not reasonably have been able to retain such information." A vendor of PHR is defined as "an entity, other than a covered entity ... that offers or maintains a personal health record." The term "unsecured protected health information" means "protected health information that is not secured through the use of a technology or methodology specified by the Secretary in guidance." In August 2009, the Department of Health and Human Services (HHS) issued an interim final breach notification regulation. The Breach Notification Interim Final Regulation addresses notification to individuals, the media, and the Secretary, by a business associate; law enforcement delay; and administrative requirements and burdens of proof. The HITECH Act also directed the Federal Trade Commission (FTC) to issue breach notification regulations for web-based businesses to notify consumers when the security of their electronic health information is breached. The FTC rule applies to both vendors of personal health records—which provide online repositories that people can use to keep track of their health information—and entities that offer third-party applications for personal health records. It applies to breaches by vendors of PHRs, PHR-related entities, and third-party service providers that maintain information on U.S. citizens or residents. The rule contains provisions discussing timeliness, methods of notification, content, and enforcement of the breach notification requirements. The HITECH Act requires a covered entity to notify affected individuals when it discovers that their unsecured PHI has been, or is reasonably believed to have been, breached. This requirement applies to covered entities that access, maintain, retain, modify, record, store, destroy, or otherwise hold, use, or disclose unsecured protected health information. The scope of notification is dependant upon the number of individuals whose unsecured PHI was compromised. Generally, only written notice need be provided if less than 500 individuals are involved. For larger breaches, notice through prominent media outlets may be required. In all cases, the Secretary of HHS must be notified, although breaches involving less than 500 people may be reported on an annual basis. The Secretary of HHS is directed to display on the department's website a list of covered entities with breaches involving more than 500 individuals. Generally, notice must be given without unreasonable delay, but no later than 60 days after the breach is discovered. If a delay is not reasonable, a covered entity may still have violated this provision even if notice was given within 60 days. In an enforcement action of this provision, the covered entity has the burden of proving that any delay was reasonable. Delayed notification is permitted for law enforcement purposes if a law enforcement official determines that notice would impede a criminal investigation or cause damage to national security. To the extent possible, notification of a breach must include a description of what occurred; the types of information involved in the breach; steps individuals should take in response to the breach; what the covered entity is doing to investigate, mitigate, and protect against further harm; and contact information to obtain additional information. Annually, the Secretary is required to submit a report to Congress containing information on the number and nature of breaches for which notice was provided and actions taken in response to such breaches. The HITECH Act includes a breach notification requirement for PHR vendors (such as Google Health or Microsoft Vault), service providers to PHR vendors, and PHR servicers that are not covered entities or business associates that sunsets "if Congress enacts new legislation." Under this breach notification requirement, these entities are required to notify citizens and residents of the United States whose unsecured "PHR identifiable health information" has been, or is believed to have been, breached. PHR vendors, service providers to PHR vendors, and PHR servicers are also required to notify the Federal Trade Commission (FTC). The HITECH Act defines several terms specific to the PHR breach notification requirement. A "breach of security" is defined as the unauthorized acquisition of an individual's PHR identifiable health information. PHR identifiable health information is defined as individually identifiable health information, and includes information provided by or on behalf of the individual, and information that can reasonably be used to identify the individual. The requirements regarding the scope, timing, and content of these notifications are identical to the requirements applicable to breaches of unsecured PHI. Violations of these requirements shall be considered unfair and deceptive trade practices in violation of the Federal Trade Commission Act. Title V of the Gramm-Leach-Bliley Act of 1999 (GLBA) requires financial institutions to provide customers with notice of their privacy policies and requires financial institutions to safeguard the security and confidentiality of customer information, to protect against any anticipated threats or hazards to the security or integrity of such records, and to protect against unauthorized access to or use of such records or information which could result in substantial harm or inconvenience to any customer. Financial institutions are defined as businesses that are engaged in certain "financial activities" described in Section 4(k) of the Bank Holding Company Act of 1956 and accompanying regulations. Such activities include traditional banking, lending, and insurance functions, along with other financial activities. Financial institutions are prohibited from disclosing "nonpublic personal information" to non-affiliated third parties without providing customers with a notice of privacy practices and an opportunity to opt out of the disclosure. A number of statutory exceptions are provided to this disclosure rule, including that financial institutions are permitted to disclose nonpublic personal information to a non-affiliated third party to perform services for or functions on behalf of the financial institution. Regulations implementing GLBA's privacy requirements published by the federal banking regulators govern the treatment of nonpublic personal information about consumers by financial institutions; require a financial institution in specified circumstances to provide notice to customers about its privacy policies and practices; describe the conditions under which a financial institution may disclose nonpublic personal information about consumers to nonaffiliated third parties; and provide a method for consumers to prevent a financial institution from disclosing that information to most nonaffiliated third parties by "opting out" of that disclosure, subject to exceptions. This rule implements GLBA's requirements for entities under FTC jurisdiction. The Safeguards Rule applies to all businesses, regardless of size, that are "significantly engaged" in providing financial products or services. These include, for example, check-cashing businesses, payday lenders, mortgage brokers, nonbank lenders, real estate appraisers, and professional tax preparers. The Safeguards Rule also applies to companies like credit reporting agencies and ATM operators that receive information about the customers of other financial institutions. The rule requires financial institutions to have an information security plan that "contains administrative, technical, and physical safeguards" to "insure the security and confidentiality of customer information: protect against any anticipated threats or hazards to the security or integrity of such information; and protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer." Using its authority under the Safeguards Rule, the commission has brought a number of enforcement actions to address the failure to provide reasonable and appropriate security to protect consumer information. Section 501(b) of GLBA requires the banking agencies to establish standards for financial institutions relating to administrative, technical, and physical safeguards to ensure the security, confidentiality, and integrity of customer information; protect against any anticipated threats or hazards to the security or integrity of such information; and protect against unauthorized access to or use of such information that could result in substantial harm or inconvenience to any customer. Interagency Guidance issued by the federal banking regulators applies to customer information, which is defined as "any record containing nonpublic personal information ... about a customer, whether in paper, electronic, or other form, that is maintained by or on behalf of" a financial institution. The security guidelines direct each financial institution to assess the risks of reasonably foreseeable threats that could result in unauthorized disclosure, misuse, alteration, or destruction of customer information and customer information systems; the likelihood and potential damage of threats; and the sufficiency of policies, procedures, customer information systems, and other controls. Following the assessment of risks, the security guidelines require a financial institution to manage and control the risk through the design of a program to address the identified risks; train staff to implement the program; regularly test the key controls, systems, and procedures of the information security program; and develop and maintain appropriate measures to dispose of customer information. The security guidelines also direct every financial institution to require its service providers by contract to implement appropriate measures designed to protect against unauthorized access to or use of customer information that could result in substantial harm or inconvenience to any customer. Each financial institution is required to monitor, evaluate, and adjust its information security program as necessary. Finally, each financial institution is required to report to its board at least annually on its information security program, compliance with the security guidelines, and issues such as risk assessment, risk management and control decisions, service provider arrangements, results of testing, security breaches or violations and management's responses, and recommendations for changes in the information security program. The security guidelines recommend implementation of a risk-based response program, including customer notification procedures, to address unauthorized access to or use of customer information maintained by a financial institution or its service provider that could result in substantial harm or inconvenience to any customer, and require disclosure of a data security breach if the covered entity concludes that "misuse of its information about a customer has occurred or is reasonably possible." Pursuant to the guidance, substantial harm or inconvenience is most likely to result from improper access to "sensitive customer information." At a minimum, an institution's response program should contain procedures for assessing the nature and scope of an incident and identifying what customer information systems and types of customer information have been accessed or misused; notifying its primary federal regulator when the institution becomes aware of an incident involving unauthorized access to or use of sensitive customer information; consistent with the Agency's Suspicious Activity Report ("SAR") regulations, notifying appropriate law enforcement authorities; taking appropriate steps to contain and control the incident to prevent further unauthorized access to or use of customer information (e.g., by monitoring, freezing, or closing affected accounts and preserving records and other evidence); and notifying customers when warranted. The security guidelines note that financial institutions have an affirmative duty to protect their customers' information against unauthorized access or use, and that customer notification of a security breach involving the customer's's information is a key part of that duty. The guidelines prohibit institutions from forgoing or delaying customer notification because of embarrassment or inconvenience. The guidelines provide that when a financial institution becomes aware of an incident of unauthorized access to sensitive customer information, the institution should conduct a reasonable investigation to promptly determine the likelihood that the information has been or will be misused. If the institution determines that misuse has occurred or is reasonably possible, it should notify the affected customer as soon as possible. Customer notice may be delayed if an appropriate law enforcement agency determines that notification will interfere with a criminal investigation and provides the institution with a written request for the delay. The institution should notify its customers as soon as notification will no longer interfere with the investigation. If a financial institution can determine which customers' information has been improperly accessed, it may limit notification to those customers whose information it determines has been misused or is reasonably likely to be misused. In situations where the institution determines that a group of files has been accessed improperly, but is unable to identify which specific customers' information has been accessed, and the institution determines that misuse of the information is reasonably possible, it should notify all customers in the group. The guidelines also address what information should be included in the notice sent to the financial institution's customers.
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A data security breach occurs when there is a loss or theft of, or other unauthorized access to, sensitive personally identifiable information that could result in the potential compromise of the confidentiality or integrity of data. Forty-six states, the District of Columbia, Puerto Rico, and the Virgin Islands have laws requiring notification of security breaches involving personal information. Federal statutes, regulations, and a memorandum for federal departments and agencies require certain sectors (healthcare, financial, federal public sector, and the Department of Veterans Affairs) to implement information security programs and provide notification of security breaches of personal information. In response to such notification laws, over 2,676 data breaches and computer intrusions involving 535 million records containing sensitive personal information have been disclosed by data brokers, businesses, retailers, educational institutions, government and military agencies, healthcare providers, financial institutions, nonprofit organizations, utility companies, and Internet businesses. As a result, a significantly large number of individuals have received notices that their personally identifiable information has been improperly disclosed. This report provides an overview of state security breach notification laws applicable to entities that collect, maintain, own, possess, or license personal information. The report describes information security and security breach notification requirements in the Office of Management and Budget's "Breach Notification Policy," the Health Insurance Portability and Accountability Act (HIPAA), the Health Information Technology for Economic and Clinical Health Act (HITECH), and the Gramm-Leach-Bliley Act (GLBA). The Senate Judiciary Committee marked up three data security bills and reported the three bills with substitute amendments. See CRS Report R42474, Selected Federal Data Security Breach Legislation, by [author name scrubbed]. S. 1151 (Leahy), the Personal Data Privacy and Security Act of 2011, would apply to business entities to prevent and mitigate identity theft, ensure privacy, provide notice of security breaches, and enhance criminal penalties. It would provide law enforcement assistance and other protections against security breaches, fraudulent access, and misuse of personally identifiable information. S. 1408 (Feinstein), the Data Breach Notification Act of 2011, would require federal agencies and persons engaged in interstate commerce, in possession of data containing sensitive personally identifiable information, to disclose any breach of such information. S. 1535 (Blumenthal), the Personal Data Protection and Breach Accountability Act of 2011, would protect consumers by mitigating the vulnerability of personally identifiable information to theft through a security breach, provide notice and remedies to consumers, hold companies accountable for preventable breaches, facilitate the sharing of post-breach technical information, and enhance criminal and civil penalties and other protections against the unauthorized collection or use of personally identifiable information. The House Subcommittee on Commerce, Manufacturing and Trade marked up H.R. 2577 (Bono Mack), the SAFE Data Act, to protect consumers by requiring reasonable security policies and procedures to protect data containing personal information, and to provide for nationwide notice in the event of a security breach. Several subcommittee Democrats objected to the bill's definition of personal information, arguing that the description is limited and does not adequately protect consumers from identity theft. The House Commerce, Manufacturing and Trade Subcommittee approved H.R. 2577 by voice vote and the measure was referred to the full committee for consideration. H.R. 1707 (Rush) and H.R. 1841 (Stearns) were also introduced to protect consumers by requiring reasonable security policies and procedures to protect computerized data containing personal information and providing for nationwide notice in the event of a breach. Congress may address data security during its consideration of cybersecurity legislation.
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Farmers and scientists have a history of modifying animals to maximize desirable traits. Genetic modification is one of the current approaches for modifying animals to increase their beneficial traits. In the broadest sense, genetic modification refers to changes in an organism's genetic makeup not occurring in nature, including the production of conventional hybrids. With the advent of modern biotechnology (e.g., genetic engineering or bioengineering), it is now possible to take the gene (or genes) for a specific trait either from an organism of the same species or from an entirely different one and transfer it to create an organism having a unique genetic code. This technique can add both speed and efficiency to the development of new foods and products. Genetically engineered plant varieties, such as herbicide-resistant corn and soybeans, have already been widely adopted by U.S. farmers, and some advocate using similar techniques to produce genetically engineered fish or seafood for the aquaculture industry. A number of environmental concerns have been raised related to the development of genetically modified (GM) fish, including the potential for detrimental competition with wild fish, and possible interbreeding with wild fish so as to allow the modified genetic material to escape into the wild fish population. Sterilization and bioconfinement have been proposed as means of isolating GM fish to minimize the potential for harming wild fish populations. In the process of congressional oversight of executive agency regulatory action, concerns have been raised about the adequacy of the U.S. Food and Drug Administration's review of applications for approval of GM animals, with respect to the potential for environmental harm. In response to these concerns, several bills were introduced in the 112 th Congress seeking to declare GM fish unsafe or require that GM fish be specifically labeled as such. No final action was taken on these bills in the 112 th Congress. Scientists are seeking ways to genetically engineer fish and other seafood species to introduce or amplify economically valuable traits. Fish are of particular interest to food researchers since many fish produce large quantities of eggs; those eggs, being external to the animal (as opposed to mammals that produce a few eggs internally), make it relatively simple to insert novel DNA. Research on transgenic strains is currently under development for at least 35 species of fish worldwide, as well as for a variety of mollusks, crustaceans, plants, and marine microorganisms. Fish are being modified to improve the production of human food, to produce pharmaceuticals, to test water contamination, and for other uses. The U.S. Food and Drug Administration (FDA) regulates GM fish under the Federal Food, Drug, and Cosmetics Act (FFDCA) provisions on new animal drugs (21 U.S.C. §321). Under these provisions, FDA must keep all information about a pending drug application confidential, with the exception of information publicly disclosed by the manufacturer. This approach limits the opportunity for public comment before approval. Some critics are calling for more transparency in this process and for more authority to be given to environmental and wildlife agencies. One GM fish has been marketed to date. Glofish™, a genetically altered version of the popular aquaria zebrafish ( Danio rerio ), fluoresce after the insertion of a sea anemone gene into the zebrafish egg. This fish is currently legal to be sold in all states except California. Since Glofish™ are not meant for human consumption, FDA determined that the Glofish™ was not under its jurisdiction. Another private research company has taken genetic information from Chinook salmon and ocean pout (an eel-like, edible fish) and inserted this material into Atlantic salmon to create a fish that grows to market size twice as fast as its non-GM counterparts. This company, AquaBounty Technologies, Inc., is currently seeking regulatory approval from the FDA to sell its AquAdvantage salmon for human consumption in the United States and received a grant from the U.S. Department of Agriculture's National Institute of Food and Agriculture for work on transgenic tilapia. Other examples of GM fish that have been developed, but for which regulatory approval has not yet been sought, include fish that would produce a blood-clotting factor to treat individuals with hemophilia and disease-resistant channel catfish. In addition to its responsibility for assuring food safety, FDA is charged with assessing the potential environmental impacts of newly engineered plants and animals. To fully assess these potential impacts, FDA consults with the Fish and Wildlife Service and the National Marine Fisheries Service (NOAA Fisheries). Despite this consultation, critics question whether FDA has the mandate and sufficient expertise to identify and protect against all potential ecological damage that might result from the widespread use of transgenic fish. The possible impacts from the escape of GM organisms from aquaculture facilities are of great concern to some scientists and environmental groups. A National Research Council report stated that transgenic fish pose the "greatest science-based concerns associated with animal biotechnology, in large part due to the uncertainty inherent in identifying environmental problems early on and the difficulty of remediation once a problem has been identified." Critics and scientists argue that GM fish could breed with wild populations of the same species and potentially spread undesirable genes. One study postulated a "Trojan gene hypothesis" after observing that GM Japanese medaka, a fish commonly used as an experimental model, were able to out-compete nonaltered fish for mates in a laboratory environment. However, the resulting offspring of this mating between GM fish and wild fish were less fit, lacking certain physical or behavioral attributes that resulted in the eventual demise of the modified population. The ecological risks of stocking GM shellfish in the wild have not yet been thoroughly examined, since confining and isolating these organisms is more difficult than confinement of many fish species, due to their methods of reproduction and dispersal. Even if fast-growing GM fish do not spread their genes among their wild counterparts, critics fear GM fish could disrupt the ecology of streams by competing with native fish for scarce resources. Escaped transgenic fish could harm wild fish through increased competition or predation. In addition, some argue that transgenic fish, especially if modified to improve their ability to withstand wider ranges of salinity or temperature, could be difficult or impossible to eradicate, similar to an invasive species. The consequences of such competition would depend on many factors, including the health of the wild population, the number and specific genetic strain of the escaped fish, and local environmental conditions. Critics maintain that an indication of the magnitude of this potential problem may be noted where non-GM Atlantic salmon from nearshore net pens in the northwest United States and British Columbia have escaped and entered streams, in some cases outnumbering their wild Pacific salmon counterparts. However, it is not known whether GM fish could survive in the wild in sufficient numbers to inflict permanent population damage. One study indicated that, when food supplies were low, GM fish might have the ability to harm a wild population, although the authors caution that laboratory experiments may not reflect what would happen in the wild. Biotechnology proponents argue that GM fish, if they escape, would be less likely to survive in the wild, especially when they are reared in protected artificial habitats and have not learned to avoid predators. A number of potential safeguards to address these environmental concerns exist and could be required. FDA could require that only sterile GM fish be approved for culture. Fertilized fish eggs that are subjected to a heat or pressure shock retain an extra set of chromosomes. The resulting triploid fish do not develop normal sexual characteristics and, in general, the degree of sterility in triploid females is greater than males. Thus, all-female lines of triploid fish are considered to be one of the best current methods to insure nonbreeding populations of GM fish. Nonetheless, there are batch-to-batch variations, and it is uncertain whether this method could be effective for all species; it has not been successful for shrimp, for example. Also, critics question whether escaped triploid fish, which in some species have sufficient sex hormone levels to enable normal courtship behavior, could mate with wild individuals, lowering reproductive success of the wild population. Other sterilization methods are currently under study, and it is likely that research in this area will increase options. Critics of GM fish counter that the risks to native fish populations, however small, may outweigh the potential benefits of this technology, especially where native fish populations are already threatened or endangered. To be most effective in reducing ecological risk, the National Research Council report on Bioconfinement of Genetically Engineered Organisms recommends that each individual species have its own bioconfinement plan. Also, since no single method is likely to be 100% effective, bioconfinement redundancy significantly increases the likelihood of control, especially if it will not be combined with physical confinement. Growing GM marine fish in isolated onshore tanks rather than in offshore or nearshore pens may substantially lower the risk of escape into the wild. Biotechnology proponents maintain that genetic modification techniques have many advantages over traditional breeding methods, including faster and more specific selection of beneficial traits. Because scientists are able to directly select traits they wish to create or amplify, the desired change can be achieved in very few generations, making it faster and lower in cost than traditional methods, which may require many generations of selective breeding. Genetic modification techniques allow scientists to precisely select traits for improvement, enabling them to create an organism that is not just larger and faster-growing, but potentially improved, for example, by increasing nutritional content. Proponents claim that faster-growing fish could make fish farming more productive, increasing yields while reducing the amount of feed needed, which in turn could reduce waste. With intense exploitation of wild fish stocks, GM fish and seafood could be important means to meet increasing human nutrition needs and address food security concerns. Shellfish and finfish, genetically modified to improve disease resistance, could reduce the use of antibiotics. Increased cold resistance in fish could lead to the ability to grow seafood in previously inhospitable environments, allowing aquaculture to expand into previously unsuitable areas. Research efforts are also under way to improve human health by genetically modifying fish to produce human drugs like a blood clotting factor and to create shellfish that will not provoke allergic reactions. Biotechnology proponents claim that these advantages could translate into a number of potential benefits, such as reduced costs to producers, lower prices for consumers for edible fish and pharmaceuticals, and environmental benefits, such as reduced water pollution from wastes. Food scientists and the aquaculture industry may support the introduction of genetic engineering, provided that issues of product safety, environmental concerns, ethics, and information are satisfactorily addressed. On the other hand, while the majority of consumers in the United States appear to have generally accepted GM food and feed crops, it is uncertain whether consumers will be as accepting of GM fish. Although such fish may taste the same and are expected, like their traditionally bred counterparts, to be less expensive than wild-caught fish, ethical concerns over the appropriate use of animals, in addition to environmental concerns, may affect public acceptance of GM fish as food. Ongoing campaigns by environmental and consumer groups have asked grocers, restaurants, and distributors to sign a pledge to not sell GM fish products, even if they are approved by FDA. In addition, the commercial fishing industry says that it has successfully educated the public to discriminate among fish from different sources, such as wild and farmed salmon. It is possible that a publicized escape of GM fish could lead to reduced public acceptance of their wild product. Environmental and consumer groups are asking that genetically engineered products be specially labeled. However, industry groups are concerned that such labeling might lead consumers to believe that their products are unsafe for consumption. A National Research Council study maintains that there is a low to moderate food safety risk from GM seafood. Since genetic engineering can introduce new protein into a food product, there are concerns that this technique could introduce a previously unknown allergen into the food supply or could introduce a known allergen into a "new" food. Within FDA, the Center for Veterinary Medicine regulates transgenic animals intended for human consumption under the same authority it uses to regulate new animal drugs. In addition, GM fish must adhere to the same standards of safety under the FFDCA and the FDA's Center for Food Safety and Applied Nutrition that apply to conventionally bred fish. Under the adulteration provisions in Section 402(a)(1) of the FFDCA, FDA has the power to remove a food from the market or sanction those marketing the food if that food poses a risk to public health. This CRS report does not consider the food safety regulation of GM fish; for background on food safety regulation, see CRS Report RS22600, The Federal Food Safety System: A Primer , by [author name scrubbed]. By early 2010, AquaBounty Technologies, Inc., had provided FDA with almost all of the data required by the agency to consider approving the company's GM AquAdvantage salmon. The approval debate has focused on whether GM animals should be allowed, and if so, whether they should be labeled as such. The question of how to label the food derived from the AquAdvantage salmon is separate from the decision about whether to approve the new animal drug application. If the Commissioner determines that the new animal drug meets the approval standard, she "shall issue an order approving the application." Issues related to the question of whether a food from the AquAdvantage salmon is misbranded, based on its labeling, are separate. Although FDA is not required to address these issues prior to the food being marketed, FDA is considering these two issues simultaneously. The AquAdvantage salmon, all sterile females, are proposed to be grown only in isolated contained facilities, not in ocean pens that have a higher risk of escape into the wild. More specifically, AquaBounty has proposed producing eggs on Prince Edward Island, Canada, shipping these eggs to Panama, growing and processing the fish in Panama, and shipping table-ready, processed fish to the United States for retail sale. If approved, it could take two to three years for the AquAdvantage salmon to reach supermarkets. As a first step in the approval process, FDA held public hearings on AquAdvantage salmon by its Veterinary Medicine Advisory Committee on September 19-21, 2010. Although the public comment period on FDA approval was open through November 22, 2010, there was no deadline for FDA's decision on AquaBounty's application. Meanwhile, critics claimed the convoluted 16-year FDA review process was scientifically unjustified, and threatened to rob society of both environmental and economic benefits. In an effort to broaden the evaluation of the AquaBounty application, a coalition of environmental groups called on FDA to prepare an environmental impact statement (EIS) on this action and to consult with federal agencies about possible threats to endangered wild Atlantic salmon. Subsequently, on May 25, 2011, these groups filed a formal citizen petition urging FDA to withhold approval until an EIS has been completed. Some scientists also expressed concern for a broader evaluation, including pointing out that potential price decreases from technological innovation in producing GM fish could promote health benefits from increased consumption. Concern has also increased in Canada over the possible effects of producing these GM fish. On December 20, 2012, FDA announced the availability for public comment of (1) a draft environmental assessment of the proposed conditions specified by AquaBounty and (2) FDA's preliminary finding of no significant impact (FONSI) for AquaBounty's conditions. A 60-day public comment period initially ran through February 25, 2013, but was extended through April 26, 2013. If significant new information or challenges arise in the public comments, FDA must decide whether or not a full EIS is required prior to approval of AquaBounty's application. If FDA approves AquaBounty's application, FDA retains the authority to withdraw its approval should significant concerns arise subsequently. States have also taken steps to regulate the use and transport of GM fish. For example, Maryland, Washington, Oregon, Minnesota, Wisconsin, and California have passed laws banning the release of GM fish in some or all state waters. In addition, Alaska requires GM fish to be labeled. No federal law specifically addresses GM fish and seafood. In the 112 th Congress, several bills were introduced to address concerns related to GM fish. S. 229 , H.R. 520 , and H.R. 3553 would have amended the Federal Food, Drug, and Cosmetic Act to require labeling of genetically engineered fish. S. 230 and H.R. 521 would have amended the Federal Food, Drug, and Cosmetic Act to prevent the approval of genetically engineered fish for human consumption. Section 744 of H.R. 2112 , as passed by the House on June 16, 2011, would have prohibited the Food and Drug Administration from spending FY2012 funds to approve any application for genetically engineered salmon. On September 7, 2011, the Senate Committee on Appropriations reported H.R. 2112 , without the prohibition on FDA related to genetically engineered salmon ( S.Rept. 112-73 ), and this provision was not in the subsequently enacted P.L. 112-55 . S. 1717 would have prohibited the sale of genetically altered salmon. On December 15, 2011, the Senate Commerce, Science, and Transportation Subcommittee on Oceans, Atmosphere, Fisheries, and Coast Guard held an oversight hearing on the environmental risks of genetically engineered fish. On May 24, 2012, S.Amdt. 2108 to S. 3187 was defeated, proposing to prohibit approval by FDA of genetically engineered fish unless NOAA concurred with such approval. No further action was taken on any of these bills by the 112 th Congress.
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In the process of congressional oversight of executive agency regulatory action, concerns have been raised about the adequacy of the FDA's review of a genetically modified (GM) salmon. More specifically, concern has focused on whether and how potential environmental issues related to this GM salmon might be addressed. In response to these concerns, several bills were introduced in the 112th Congress seeking to declare GM fish unsafe and thus prevent FDA approval of this salmon for human consumption or to require that GM fish be specifically labeled. No final action was taken on these bills by the 112th Congress. Genetic engineering techniques allow the manipulation of inherited traits to modify and improve organisms. Several GM fish and seafood products are currently under development and offer potential benefits such as increasing aquaculture productivity and improving human health. However, some are concerned that, in this rapidly evolving field, current technological and regulatory safeguards are inadequate to protect the environment and ensure public acceptance that these products are safe for consumption. (The safety of GM foods for human consumption is not addressed in this report.) In the early 2000s, several efforts began to develop GM fish and seafood products, with a GM AquAdvantage salmon developed by AquaBounty, Inc., in the forefront of efforts to produce a new product for human consumption. By September 2010, requested data had been provided to the U.S. Food and Drug Administration (FDA) by AquaBounty, and FDA's Veterinary Medicine Advisory Committee held public hearings on the approval of AquAdvantage salmon for human consumption. The public comment period on FDA approval closed on November 22, 2010. Environmental concerns related to the development of GM fish include the potential for detrimental competition with wild fish, and possible interbreeding with wild fish so as to allow the modified genetic material to escape into the wild fish population. Sterilization and bioconfinement have been proposed as means of isolating GM fish to minimize harm to wild fish populations. To address these concerns, AquaBounty proposed producing salmon eggs (all sterile females) in Canada, shipping these eggs to Panama, growing and processing fish in Panama, and shipping table-ready, processed fish to the United States for retail sale. On December 20, 2012, FDA announced the availability for public comment of (1) a draft environmental assessment of the proposed conditions specified by AquaBounty and (2) FDA's preliminary finding of no significant impact (FONSI) for AquaBounty's conditions. A 60-day public comment period initially ran through February 25, 2013, but was extended through April 26, 2013. If significant new information or challenges arise in the public comments, FDA must decide whether or not a full environmental impact statement is required prior to approval of AquaBounty's application. If approved, AquAdvantage salmon would be the first GM animal approved for human consumption.
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There have been three different versions of the homebuyer tax credits enacted since the summer of 2008. In July 2008, Congress enacted a first-time homebuyer tax credit as part of the Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289 ). The tax credit was originally set to expire on July 1, 2009. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5 ) increased the tax credit's value and extended its expiration date to December 1, 2009. Most recently, the Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA; P.L. 111-92 ) extended the tax credit through the first half of 2010 and expanded it to repeat homebuyers. The Joint Committee on Taxation (JCT) has estimated the 10-year cost of the most recent version of the tax credit to be $10.8 billion. In comparison, the original HERA version of the first-time homebuyer tax credit was estimated to cost $4.9 billion over 10 years, while the 10-year cost of the modifications made by ARRA was estimated to be $6.5 billion. Originally, the first-time homebuyer tax credit was intended to reduce the excess inventory of homes and stabilize falling home prices. The most recently available data suggest that home prices in general may be stabilizing, at least temporarily. In addition, the home inventory appears to be returning to a more normal level. Given the close proximity of these improvements to when the homebuyer tax credit was enacted by HERA and first modified ARRA, one could argue that the tax credit was the cause of these improvements. A correlation, however, does not imply causation. Around the same time the homebuyer tax credit was enacted, home prices were falling and mortgage rates were approaching recent historic lows, which may have led more homebuyers to enter the market. This report provides an economic analysis of the homebuyer tax credit. It begins by providing an overview of the tax credit and presenting data on the number of credits claimed thus far. A review of current market conditions is then presented. This is followed by an analysis of the effect that the HERA and ARRA versions of the tax credit had on a typical buyer's mortgage payment compared to home prices and mortgage rates. Estimates of the number of home purchases that may be attributable to the ARRA and WHBAA versions of the tax credit are reported and compared to private industry estimates. The analysis concludes by investigating the ability of the tax credit to provide support to the housing market moving forward. The original (HERA) version of the homebuyer tax credit only applied to first-time buyers who purchased a home after April 8, 2008, and before January 1, 2009. Eligible buyers were allowed a refundable credit against their federal income tax equal to a maximum of 10% of a home's purchase price, or $7,500. The amount of the credit that could be claimed was reduced for individuals with modified adjusted gross income (AGI) of more than $75,000 ($150,000 for joint filers), and was zero for those individuals with modified AGI in excess of $95,000 ($170,000 for joint filers). To qualify for the credit the buyer must not have had an interest in a principal residence in the last three years. Those who claimed the 2008 first-time homebuyer tax credit must repay the tax credit in equal installments over 15 years beginning in the second taxable year after the purchase of a home. Given that interest does not accumulate during the repayment period, the repayable tax credit equates to an interest free loan with a 16-year repayment period (a 1-year grace period plus 15 years of payments). The annual repayment is equal to one-fifteenth the amount of the original tax credit. Should the home be sold or no longer used as the owner's principal residence, the entire tax credit is to be repaid in the tax year when such change in use of the property occurs. The recaptured amount may not exceed any gain realized by the sale of the house. The 2008 homebuyer tax credit was refundable, which allowed lower-income households with little or no tax liability to take full advantage of the credit. For example, consider a first-time homebuyer who owes $5,000 in income taxes. Assuming the buyer and the home purchase qualify for a $7,500 tax credit, the buyer's tax liability would be reduced to zero, and the buyer would receive a $2,500 refund check from the Treasury. In contrast, if the tax credit were nonrefundable, the buyer's tax liability would be reduced to zero, but the buyer would receive no refund check from the Treasury. The second (ARRA) version of the tax credit, passed in February 2009, was available for first-time buyers who purchased a home anytime from January 1, 2009, to November 6, 2009. The credit amount was set equal to a maximum of 10% of a home's purchase price, or $8,000. The tax credit remained refundable, although the repayment requirement was removed. The income limits remained unchanged so that the credit amount was reduced for individuals with modified AGI of more than $75,000 ($150,000 for joint filers), and was zero for those individuals with modified AGI in excess of $95,000 ($170,000 for joint filers). The third (WHBAA) version of the homebuyer tax credit was made available for home purchases made after November 6, 2009, and before July 1, 2010. WHBAA required that a homebuyer be entered into a binding written contract before May 1, 2010, and complete the home purchase by July 1, 2010, to qualify for the credit. The credit is available to first-time as well as repeat homebuyers. For first-time homebuyers, the maximum credit amount is limited to 10% of a home's purchase price, or $8,000. The maximum credit amount is reduced to $6,500 for repeat homebuyers. To qualify as a repeat buyer the taxpayer must have owned and used their previous house as their principal residence for five consecutive years during the eight-year period ending with the home purchase. The credit amount is reduced for homebuyers (first-time or repeat) with modified AGI of more than $150,000 ($225,000 for joint filers), and is zero for those individuals with modified AGI in excess of $170,000 ($245,000 for joint filers). Purchasers of homes with prices exceeding $800,000 are ineligible for the latest version of the credit. The changes also include special rules regarding members of the Armed Forces and individuals who serve on qualified official extended duty. Specifically, the requirement that a homebuyer repay the tax credit if their home is no longer used as their principal residence within the first three years is waived for members of the Armed Forces and certain other individuals who must sell their house as the result of government orders for qualified official extended duty. All other taxpayers are subject to the three-year repayment (or recapture) requirement. In addition, the tax credit deadlines are extended by one year for individuals who serve on qualified official extended duty outside the United States for 90 days before May 1, 2010. Mostly recently, the deadline by which homebuyers need to complete their home purchases in order to qualify for the credit was extended to September 30, 2010. Buyers are still required to have been entered into a binding contract before May 1, 2010. The extension was provided by H.R. 5623 , the Homebuyer Assistance and Improvement Act of 2010. Due to several unrelated provisions contained in the bill, the estimated $140 million 10-year cost of the extension was mostly off-set. Any homebuyer claiming the tax credit in 2009 or 2010 may elect to treat an eligible purchase as having occurred in the previous year for tax purposes. The ability to treat a home purchase as having occurred in the previous tax year enables a homebuyer to receive the benefit of the tax credit more quickly. For example, a homebuyer in 2009 may claim the tax credit on a 2008 tax return by filing an amended tax return. Normally, a homebuyer would have to wait until spring 2010 (when 2009 taxes are filed) to claim the tax credit. Likewise, a homebuyer in 2010 would normally have to wait until spring 2011 to claim the tax credit, but because of this provision can either claim the credit on a 2009 tax return (if the purchase is made prior to filing the 2009 return), or by filing an amended 2009 tax return (if the purchase is made after filing the 2009 return). The Department of Housing and Urban Development (HUD) has released conditions under which the first-time homebuyer tax credit could be "monetized" and made available for use at closing. The tax credit may either be monetized via a loan to the buyer, or by being purchased from the homebuyer in an amount not to exceed the tax credit he or she is expected to receive. The tax credit may only be monetized when the buyer uses an FHA-insured mortgage. Regardless, the monetized tax credit may not be used to satisfy the FHA required 3.5% down payment. However, the tax credit may be used to make an additional down payment, to buy down the mortgage rate, or put toward closing costs. It remains to be seen if the monetization program will be extended to repeat buyers. The IRS has recently released preliminary figures on the number of first-time homebuyer tax credits claimed. Thus far, 1.4 million first-time homebuyers have claimed approximately $10 billion worth of tax credits. This includes those who claimed either the $7,500 repayable or $8,000 non-repayable first-time homebuyer credit for home purchases made between April 9, 2008, and August 24, 2009. The majority of the tax credit claims (approximately 1 million) thus far have been for the $7,500 credit. The average tax credit claimed was $7,004. The IRS has also released a state-by-state breakdown of the number and dollar amount of tax credits claimed. This information is reported in Table A -1 in Appendix A . Roughly 28% of the number of credits claimed and dollar amount of tax credits claimed were concentrated among three states: California, Florida, and Texas. This is not surprising given the population of these states. No other state accounted for more than 4% of all tax credits claimed. The average tax credit amount claimed ranged from $6,540 (West Virginia) to $7,377 (Utah). While the IRS data reveal the number of people who have utilized the tax credit, they do not by themselves provide an indication of how effective the credit has been. This depends partly on how many additional home purchases can be attributable to the credit. Some fraction of the 1.4 million people who claimed the tax credit likely represented new buyers incentivized into the market by the credit, while the majority of the other claimants likely were buyers who had already decided to purchase a home, and simply claimed the tax credit because it was available. Still, as recent reports are suggesting, some of those claiming the tax credit may have done so fraudulently. It is important to point out that the data reported by the IRS include nearly four months of first-time homebuyer activity that benefited from the tax credit but that could be argued to not have been influenced by the credit. The homebuyer tax credit was originally enacted on July 30, 2008, but could have been claimed retroactively for home purchases as far back as April 9, 2008. Those who claimed the tax credit retroactively likely did not represent new home buying activity that occurred because of the credit since the credit was not available to them when they decided to purchase a home. Thus, although those that bought a home between April 9, 2008, and July 30, 2008, may have claimed the tax credit, they may not have been incentivized by it. This section provides a brief summary of current housing market conditions and identifies risks to the housing market moving forward. The original intent of the first-time homebuyer tax credit was to address falling home prices and an elevated home inventory. The tax credit was extended and expanded to repeat buyers to provide continued support to the housing market and to provide stimulus to the broader economy. Reviewing current conditions is useful for understanding how effective the first-time homebuyer may have been achieving its intended objective. Discussing conditions moving forward is useful for understanding the impact that extending and expanding the tax credit may have. There are signs that overall home prices may be stabilizing, at least temporarily. The top half of Figure 1 plots the S&P/Case-Shiller (Case-Shiller) home price index and the Federal Housing Finance Agency (FHFA) home price index—two popular measures of home prices. After nearly three years of steady declines, the Case-Shiller index remained stable between March and May of 2009, before increasing in both June and July. In addition, the FHFA index has remained more or less flat since in November 2008. Still, home price behavior has been different depending on the particular market considered. Prices in certain markets are still falling, while prices in other markets have begun to rise. Figure B -1 in Appendix B provides a graphical summary of home prices for seven metropolitan areas contained in the broader Case-Shiller composite index. Home prices across the low-, mid-, and high-priced markets are beginning to converge back to a common path—behavior which is consistent with home price stabilization. During the run-up in housing, home values across the low-, mid-, and high-priced markets departed from their historical trend of moving together. Typically home values in the low-priced market increased fastest as first-time buyers rushed into the market, followed by the mid- and high-priced markets. However, prices across the three tiers have not begun to move in complete unison in every region of the country which may indicate further price corrections could occur. See Figure C -1 in Appendix C for a summary of regional housing markets by price tier. Even with home values across price tiers beginning to appear to stabilize, there are reports that the share of foreclosures attributable to the high end of the market is increasing. Online real estate service provider Zillow.com recently reported that the fraction of foreclosures attributable to the top one-third of the housing market stood at 30% in June 2009. This is approximately double the share of foreclosures that the top one-third was responsible for in 2006. The fall in home prices at the higher end is likely being driven by foreclosures and rising unemployment, which, in turn, is re-enforcing foreclosures. As a result, prices of higher-end homes may have some time before they stabilize fully. While foreclosures are picking up at the higher end of the market, the share attributable to the bottom one-third of the housing market appears to have fallen from 55% to 35%. The data suggest that the lower-priced market may be close to stabilizing. There are also indications that the inventory (supply) of homes on the market may be returning to a more normal level. The housing inventory is measured as the number of months it would take the quantity of homes on the market to be sold given the current rate of sales. A stable housing market has historically been associated with a 5.0 to 6.0 month home inventory. The latest data presented in Table 1 reveal that the existing home inventory currently stands at an 7.0 months supply, down from a high of 11.0 months in November 2008. Likewise, the new home inventory currently stands at a 6.7 months supply. This is down from a peak of 13.3 months, which was reached in January 2009. Other indicators also suggest that the housing market may be beginning to stabilize. For example, the National Association of Realtors (NAR) reported on September 1, 2009, that pending home sales, an indicator of where the market is headed, rose for the sixth straight month, something the NAR says has not occurred since 2001. In response, NAR chief economist Lawrence Yun said that "the rise in pending home sales is clearly implying that the worst in housing is over." Home builder confidence also appears to be on the rise. On September 16, 2009, the National Association of Home Builders (NAHB) reported that builder confidence for the single family homes market increased for the third consecutive month. While builder confidence may be improving, home building activity is still weak. For example, housing starts were at a seasonally adjusted annual rate of 598,000 in August 2009, compared to a historical average of 1.5 million. Homeownership affordability has improved, which may continue to assist in stabilizing the housing market. For example, according to the National Association of Homebuilders/Wells Fargo Housing Opportunity Index, homeownership affordability is near its highest level in 18 years. Similarly, the NAR First-Time Homebuyer Affordability Index indicates that homeownership has become more affordable for first-time buyers relative to when home prices peaked in the second half of this decade. Much of the increase in affordability is likely the result of falling home prices and low mortgage interest rates. If affordability remains high, buyers could continue to be lured into the market, which could have a positive effect on home prices and help reduce the home inventory. While mortgage rates are not necessarily an indicator of the current condition of the housing market, they are an important determinant of home buying activity. Figure 2 displays the average interest rate on a 30-year fixed-rate mortgage since July 2006. Also identified are the dates the homebuyer tax credit was enacted and then modified and enhanced by ARRA. What is important to note is that although mortgage rates were rising slightly at the time the tax credit was enacted, they fell shortly after from around 6.5% to slightly above 5.0% by the time the credit was modified by ARRA. Mortgage rates continued falling until April 2009 when they reached 4.81%, rose slightly, and fell again. The effect mortgage rates may have had in encouraging home buying is discussed in the economic analysis section. It is important to emphasize that, moving forward, recent improvements could be reversed if the foreclosure rate continues to rise. The issue of foreclosures has been well documented and has received attention from policy makers since the housing market began to show signs of weakening. Originally, the problem was concentrated among subprime borrowers who, for a variety of reasons, were more susceptible to foreclosure when the housing market began to deteriorate. The concern now is that the foreclosure rate among prime borrowers also appears to be rising. Prime borrowers tended to face more scrutiny from lenders or were perceived to be less risky, which may explain why they were better able to weather the initial downturn in housing. But since home prices continued to fall and unemployment began to rise in late 2007, the foreclosure rate among prime borrowers, and to a lesser degree FHA borrowers, has trended upward. Elevated unemployment, as is the case in late 2009, could also stunt a recovery in housing. Today, an unemployment rate of around 5.0% to 6.0% is considered consistent with a strong economy and a well functioning labor market. In October 2009 the unemployment rate was 10.2%, and has risen every quarter since the fourth quarter of 2006. Among potential homebuyers, the unemployment rate in the third quarter of 2009 was the highest for the group most likely to represent first-time buyers (those ages 25-34) at 10.3%. If unemployment remains elevated, home buying activity may diminish as concern grows over the ability to make mortgage payments. In addition, elevated unemployment could cause the foreclosure rate to continue to rise, increasing the supply of homes on the market and putting downward pressure on home prices. The previous section presented evidence that suggests home prices and the home inventory are, at least temporarily, beginning to stabilize. Given the close proximity of these improvements to when the first-time homebuyer tax credit was enacted and modified one may be tempted to conclude that the tax credit was the cause of the housing market improving. A correlation, however, does not imply causation. Around the same time that the homebuyer tax credit was enacted, home prices were falling and mortgage rates were approaching recent historic lows, which may have led more homebuyers to enter the market. This section analyzes the homebuyer tax credit. It begins by estimating the effects that home prices and mortgage rates had on the mortgage payment of a typical buyer, and comparing them to the effects of the HERA (original) and ARRA (second) versions of the tax credit. The results suggest that home prices, and to a lesser degree mortgage rates, may have been quantitatively more important in reducing the cost of becoming a homeowner than the first-time homebuyer tax credit. Next, estimates of the number of additional first-time purchases that can be attributed to the ARRA and WHBAA versions of tax credit are then presented and compared to private industry estimates. The estimates presented here raise questions about those reported by industry analysts and the role of the tax credit in stabilizing the housing market. The analysis concludes by examining how effective the extended first-time homebuyer tax credit and new repeat buyer tax credit may be at providing continued support to the housing market. To quantify the potential effect of the HERA and ARRA versions of the first-time homebuyer tax credit and compare it to the effect of falling prices and mortgage rates, an estimate was made of how much each reduced the typical buyer's mortgage payment. This was accomplished by first estimating the mortgage payment for a median priced home at the peak of the housing market assuming a 30-year fixed rate mortgage. The mortgage payment was then recomputed three times after accounting for the fall in home prices (price effect); the fall in mortgage rates (mortgage rate effect); and the homebuyer tax credit (tax credit effect). The effect of each factor was then measured as the difference between the mortgage payment at the peak of the housing market and the mortgage payment after each factor changed. Several assumptions were made to carry out the estimation. The first assumption relates to the peak of the housing market. As Figure 1 shows, the two most popular measures of home prices, the Case-Shiller and FHFA indices, disagree as to exactly when this occurred. The Case-Shiller index peaked in May 2006, while the OFHEO index peaked in April 2007. In addition, regional markets tended to peak at different times. As a compromise, the peak of the housing market was chosen as January 2007. The median existing home sales price ($210,600) was then chosen as the median home price at the peak of the housing market, and the mortgage rate was assumed to be the rate that prevailed at the time. The next assumption concerns the decrease in home prices. Since the Case-Shiller and the FHFA indices provide different estimates, the decrease in home prices was calculated three times using the Case-Shiller index, the FHFA index, and the average of the two. Each time, the percentage decrease in the index was used to compute how much the median home price fell from the peak of the market to when the tax credit was enacted. Lastly, the tax credit was assumed to effectively lower the purchase price of a home. For the $8,000 ARRA tax credit which was available to 2009 homebuyers this is straightforward. But the original $7,500 tax credit available in 2008 must be repaid, which lowers its effect on a home's purchase price. After accounting for repayment, the $7,500 tax credit was estimated to have a reduced a home's purchase price by $2,104 or 1.0%. Table 2 presents the estimation results separately for the $7,500 HERA tax credit for 2008 homebuyers and the $8,000 ARRA tax credit for 2009 homebuyers. Consider the results for the 2008 tax credit first (top half of table). At the peak of the housing market, a potential buyer of a median price home would have been required to make a monthly mortgage payment of $1,293. Between the peak of the housing market and when the tax credit was enacted, home price decreased from $210,600 to $187,595, or an average of 11%. The column labeled "Price Effect" shows that this decrease in home prices is estimated to have reduced a potential buyer's mortgage payment by $141 a month, or $1,694 annually. Over the same time period, mortgage interest rates actually increased slightly from 6.22% to 6.43%. The column labeled "Mortgage Rate Effect" indicates that this rise in mortgage rates increased a buyer's monthly mortgage payment by an estimated $29 and annual monthly payment by $346. The top half of Table 2 also shows that the HERA homebuyer tax credit is estimated to have reduced a typical first-time homebuyer's mortgage payment by about $13 a month or $156 annually. To understand the impact of the $7,500 tax credit, consider that the reduction in a typical buyer's mortgage payment that can be attributed to the credit is less than one-tenth the reduction that can be attributed to falling home prices. That is, the benefit to potential home buyers from falling home prices was more than 10 times the benefit received from the tax credit. The last column of Table 2 shows that the total effect of home prices, mortgage rates, and the 2008 tax credit resulted in the typical homebuyer's mortgage payment falling $129 a month or $1,544 a year compared to the peak of the housing market. The bottom half of Table 2 reports the estimation results for the ARRA version of the homebuyer tax credit. By the time the ARRA tax credit became available in February 2009 home prices had fallen an average of 19% from the peak of the market. The home price decline alone is estimated to have decreased a typical homebuyer's monthly mortgage payment by $247 and annual mortgage payment by $2,970. The decrease in mortgage rates that began in mid-2008 and continued until after the 2009 credit was enacted is estimated to have reduced the median mortgage payment by $145 a month or $1,743 annually. Due to the removal of the repayment requirement and the increased credit amount, the ARRA version of the homebuyer tax credit had a larger effect on the cost of owning a home than the HERA version of the credit. Specifically, Table 2 presents estimates that suggest the ARRA tax credit reduced the median monthly mortgage payment by $49 and the annual mortgage payment by $589. The results imply that the ARRA tax credit had about one-fifth the impact that falling home prices did, and one-third the effect of lower mortgage rates. Combined, home prices and mortgages rates were estimated to be eight times more powerful at lowering the cost of homeownership than the tax credit. That low home prices, together with low mortgage rates, appear to have provided the largest incentive to purchase a home is important. Unlike the tax credit, which only benefited first-time buyers, lower prices and mortgages rates benefited all buyers (first-time and repeat). As a result, lower home prices and mortgage rates may have played a larger role in stabilizing the housing market than the tax credit since the incentive that they provided was larger and more widespread than the incentive provided by the homebuyer tax credit. At the same time, the price effects reported in Table 2 may understate the influence falling prices had in some markets. The results reported above were based on the average change in home prices as computed from the average of the Case-Shiller and FHFA price indices. But the Case-Shiller index, which captures price changes in some of the larger bubble-prone markets, fell an average of 18% and 29%, respectively, leading up to the tax credit's enactment and modification. Prices in some harder hit markets such as Las Vegas, Miami, Phoenix, San Diego, and San Francisco fell by as much as 30% prior to the tax credit, and by as much as 50% prior to its modification. Estimating the effect of falling home prices for these markets, which is presumably larger than the analysis above, would greatly reduce the relative effect of the tax credit effect. Along the same lines, the price effects reported in Table 2 may overstate the influence falling prices had in some markets. There are smaller housing markets, particularly in the Midwest, where the decline in home prices was relatively small when compared to some larger "bubble" markets. In addition, before the housing crisis, home prices in these markets were usually lower than the national average. As a result, the effect of falling home prices may have been smaller than the effect of the tax credit in some areas of the country. Understanding regional difference in falling prices is important to understanding the effectiveness of the homebuyer tax credit. Markets that had the largest home inventories also experienced some of the largest declines in prices. And it was the decline in home prices that appears to be what may have provided the majority of the incentive to purchase a home. So in markets that were hardest hit by the housing downturn the homebuyer tax credit may have had a minor effect when compared to the effect of lower home prices. In addition, the estimates presented in Table 2 were derived using the national median purchase price at the peak of the market, rather than when the tax credit was enacted or modified. Table D -1 in Appendix D reports the estimates assuming the median purchase price at the time the tax credit was modified in February 2009. The dollar amounts are essentially the same and the effects of home prices and mortgage rates relative to the tax credit are also quite close to the results presented in Table 2 . It is possible to estimate how many additional home sales may be attributable to the tax credit given a measure of how responsive home purchases are to price changes. Recall that the tax credit effectively lowers the purchase price of a home. Generally, economists measure how sensitive consumers are to price changes by using a "price elasticity." Price elasticity is defined as the percent change in a quantity purchased, in this case homes, in response to a given percent price change. Estimates for the price elasticity of home purchases vary but generally fall in the -0.5 to -1.0 range. This range implies that the number of home purchases increases between 0.5% to 1.0% for every 1.0% decrease in home prices. Combining home purchase data with estimates of price elasticity allows for the number of additional home sales attributable to the tax credit to be computed. The top half of Table 3 reports the CRS estimated number of additional home purchases that could be expected to be attributable to the ARRA and WHBAA versions of the tax credit. The estimates should be interpreted as the number of additional home purchases that the tax credit could have originally been expected to elicit at the time of enactment if the credit was left unaltered until it expired. This approach allows for a comparison to estimates made by industry analysts around the time the ARRA and WHBAA versions of the credit were being debated. Because estimates of the price elasticity vary, three different values were used; -0.5, -1.0, and -1.5. The last price elasticity was included because a buyer's response to a temporary tax credit may be higher than a typical price change. Depending on the assumed responsiveness of buyers to price changes, it was estimated that the ARRA tax credit could have been expected to result in between 42,790 and 128,371 additional home purchases, while it was estimated that the WHBAA tax credit could be expected to result in between 51,523 and 153,760 additional purchases. The bottom half of Table 3 reports estimates by private industry analysts of the number of additional home purchases that each version of the tax credit was originally expected to generate. Only the NAHB provided a publicly available estimate of the WHBAA version of the credit. It is immediately apparent that private industry analysts' estimates are higher than those reported in the top half of the table. One explanation, which is important for the estimates of ARRA first-time homebuyer tax credit, is that industry estimates likely attempt to account for a "trade-up" effect; existing homeowners, who were not eligible for the first-time buyer tax credit, moving up in the market due to the increased demand for their own entry-level homes. But still, the estimates appear to be assuming either a rather large trade-up effect, or that buyers are particularly sensitive to price changes, or both. In the end, however, it is difficult to understand exactly how industry analysts arrived at their estimates. Information about assumptions, data, and the exact methodology used are unknown. The additional purchases generated by the credit should have had a significant impact on the inventory of unsold homes if the tax credit had been a driving force in the stabilization of home prices. When ARRA enhanced the homebuyer tax credit by removing the repayment requirement and increasing the credit amount to $8,000 the total home inventory (new and existing) was at a 9.7 months supply. The industry estimates reported in Table 3 imply that the ARRA version of the homebuyer tax credit could have been expected to reduce the total home inventory from a 9.7 months supply to between an 8.9 to 9.3 months supply, or by 4% to 8%. One could question how big an impact a 4% to 8% reduction in the home inventory may have had on stabilizing the housing market given that the inventory was at times more than double what is considered normal. It could also be argued that the tax credit's impact on the home inventory may have been even smaller if the estimates made by industry analysts about the number of additional purchases are believed to be too generous. The number of additional home purchases attributable to either version of the tax credit may be significantly less than those attributable to lower home prices and mortgage rates. Recall that the previous section estimated that the combined effect of falling home prices and mortgage rates on a typical buyer's mortgage payment was around eight times that of the ARRA version of the homebuyer tax credit. In addition, lower home prices and mortgage rates benefited homebuyers across the board (repeat and first-time) as opposed to just first-time buyers. Thus, the improvements in the housing market (stabilized home prices and falling inventory) that occurred around the time of the HERA and ARRA versions of the credit may have been more the result of lower home prices and mortgage interest rates. Two common rationales that have been offered for the extended and expanded WHBAA version of the tax credit are that it will continue to support the housing market and may also have a stimulative effect on the broader economy. This section focuses exclusively on analyzing the credit as a tool for supporting the housing market moving forward. The wide range of policy tools and options for stimulating the economy place such an analysis beyond the scope of this report. The expansion of the tax credit to repeat buyers allows the credit to be taken advantage of by a larger pool of potential homebuyers, and may increase the credit's ability to stimulate aggregate home buying. As a result, the modified homebuyer credit may increase the rate at which the home inventory is drawn down, leading the housing market to fully stabilize sooner rather than later. The stimulative effect of the tax credit would likely be greatest if the modifications are viewed as temporary. If potential buyers come to expect that the credit will be available in the future then the incentive to purchase a home now is reduced. In addition, the temporary nature of the tax credit reduces the potential that its value is built into home prices as sellers respond by raising prices. The simulative effect on home buying activity from expanding the credit to repeat buyers, however, may be limited. Repeat buyers typically purchase higher priced homes than first-time buyers. But the incentive provided by the tax credit to purchase a home falls as home prices increase. The tax credit amount is also reduced for repeat buyers, which may limit the potential of the credit to stimulate home buying further. For example, the $8,000 first-time homebuyer tax credit reduces the purchase price of a $200,000 by 4.0%, while the $6,500 repeat buyers tax credit only reduces the purchase price of a $400,000 house by 1.6%. In addition, to take a advantage of the tax credit a repeat buyer will typically have to sell a home, which will often require paying a real estate agen and incurring other costs, possibly reducing the credit's incentive more. As a result, extending the tax credit to repeat buyers may increase the likelihood that the credit is simply claimed by those that would have purchased a home regardless. This may be particularly true if it is believed that the overriding determinants of home buying activity are currently low home prices and mortgage rates. The tax credit may also be of limited use if conditions in the housing market begin to deteriorate. One of the biggest threats to the housing market moving forward is rising foreclosure rates, which, at this point in the housing downturn, are being driving primarily by rising unemployment. And although the tax credit has been expanded to repeat homebuyers partly to address foreclosures in the mid- to high-priced markets, the tax credit has little direct effect on the employment status of unemployed homeowners. As a result, the tax credit may not be effective at preventing foreclosure rates from rising. The expanded tax credit, however, may reduce the time foreclosed homes remain on the market. At the same time, lower home prices may still be the primary determinant for a potential buyer. Appendix A. Tax Credits Claimed On A State-by-State Basis Appendix B. Regional Home Prices Appendix C. Home Prices By Price Tier Appendix D. Estimated Reduction In Mortgage Payment Assuming Lower Initial Price Appendix E. Method for Estimating Additional Home Purchases This appendix outlines the assumptions, data, and methods used to estimate the number of additional home purchases attributable to the ARRA and WHBAA homebuyer tax credits. The first step in the estimation was to determine the number of home purchases that would have occurred without the homebuyer tax credit. This number was then adjusted upward to account for the increase in first-time home buying activity. It was assumed that the number of home purchases that would have occurred absent the tax credit was simply equal to the total number of home purchases in 2008. The NAR reports that there were 4,913,000 existing home purchases in 2008, while the Census Bureau reports that there were 485,000 new home purchases in 2008. Thus, the total number of home purchases in 2008 was 5,398,000. Historically, first-time buyers have represented about 40% of annual home purchases. Therefore, in 2008 it was estimated that there were 2,159,200 first-time home purchases (40% × 5,398,000), and 3,238,800 repeat home purchases. Next, the price reduction induced by the homebuyer tax credit was calculated. The ARRA homebuyer tax credit was enacted in February 2009. According to the NAR, the median existing home price at this time was $168,200. This implies that the ARRA homebuyer tax credit effectively reduced the purchase price of a home by 4.76% ($8,000/$168,200). The WHBAA homebuyer tax credit was enacted in November 2009. Home price data had not been released at the time this report was originally authored. Using the median home price in October ($218,000), however, the WHBAA tax credit was estimated to reduce the purchase price for a first-time buyer by 3.67% ($8,000/$218,000) and by 2.98% ($6,500/$218,000) for repeat buyers. Note, for simplicity it was assumed that the median first-time and median repeat buyer purchased homes worth identical prices Given an assumption about how responsive buyers were to these price reductions, an estimate can be formed about the annual increase in home purchases. A buyer's responsiveness to price changes is captured by the price elasticity of demand. The estimates in the body of the report assumed a range -0.5 to -1.5 for the price elasticity of demand. The elasticity multiplied by the tax credit induced price reduction indicates the percentage increase in home purchases that can be attributable to the tax credit, which can then be used to adjust annual homes purchases upward. As a result, the increase in annual first-time purchases attributable to the ARRA tax credit was estimated to be between 51,348 and 154,045 (elasticity × -4.76% × 2,159,200). The increase in annual first-time purchases attributable to the WHBAA tax credit was estimated to be between 39,600 and 118,801 (elasticity × -3.67% × 2,159,200), while the increase in annual repeat home purchases attributable to the WHBAA credit was estimated to between 48,263 and 144,788 (elasticity × -3.67% × 3,238,800). Thus, the WHBAA tax credit was estimated to result in 87,863 to 263,589 additional home purchases. Lastly, these annual increases in home purchases were adjusted for the fact that the tax credits were or are not available for a full year. The ARRA tax credit was enacted in February and was set to expire December 1, 2009. So the annual increase in first-time purchases attributable to the ARRA tax credit was multiplied by 10/12. Likewise, the WHBAA tax credit was enacted in November 2009 and is set to expire July 1, 2010. Thus, the annual increase in home purchases attributable to the WHBAA tax credit was multiplied by 7/12. Doing so produces the results reported in Table 3 .
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There have been three different versions of the homebuyer tax credit enacted since the summer of 2008. In July 2008, Congress enacted a first-time homebuyer tax credit as part of the Housing and Economic Recovery Act of 2008 (HERA; P.L. 110-289). The tax credit was originally set to expire on July 1, 2009. The American Recovery and Reinvestment Act of 2009 (ARRA; P.L. 111-5) increased the tax credit's value and extended its expiration date to December 1, 2009. The Worker, Homeownership, and Business Assistance Act of 2009 (WHBAA; P.L. 111-92) extended the tax credit through the first half of 2010 and expanded it to repeat homebuyers. The changes enacted by P.L. 111-92 extended the tax credit to homebuyers who enter a written binding contract before May 1, 2010, and completed their purchase before July 1, 2010. These deadlines were extended by one year for members of the military and other individuals who serve on qualified official extended duty outside the United States for 90 days before May 1, 2010. The tax credit for repeat buyers was capped at $6,500 and was limited to those who have owned and lived in their current home for five of the last eight years. Other changes included an expansion of the maximum credit income eligibility limits to $125,000 for individuals and $225,000 for married couples, up from $75,000 and $150,000, respectively. Lastly, an $800,000 limit on the purchase price of a home was included. Mostly recently, the deadline by which homebuyers need to complete their home purchases in order to qualify for the credit was extended to September 30, 2010. Buyers are still be required to have been entered into a binding contract before May 1, 2010. The extension was provided by H.R. 5623, the Homebuyer Assistance and Improvement Act of 2010. Due to several unrelated provisions contained in the bill the estimated $140 million 10-year cost of the extension was mostly off-set. This report provides an economic analysis of the homebuyer tax credit. Recent data suggest that home prices in general may be stabilizing and that the home inventory is beginning to return to a more normal level. Given the close proximity of these improvements to when the homebuyer tax credit was enacted by HERA and first modified by ARRA, one could argue that the tax credit was the cause of these improvements. A correlation, however, does not imply causation. Around the same time, home prices were falling and mortgage rates were approaching recent historic lows, which may have led more homebuyers to enter the market. Results presented in this report suggest that lower home prices and low mortgage rates were quantitatively more important in stabilizing the housing market than the tax credit. For example, the effect of home prices and mortgage rates on the typical buyer's mortgage payment is estimated to have been about eight times that of the first two versions of the tax credit. In addition, lower home prices and mortgage rates tended to benefit first-time and repeat buyers, as opposed to the tax credit which until recently just benefited the former. Estimates of the number of additional home purchases that can be attributed to the ARRA and WHBAA versions of tax credit are presented and compared to those reported by private industry analysts. The estimates raise questions about those reported by industry analysts, as well as questions about how effective the tax credit may have been at reducing the home inventory. The analysis also investigates the tax credit's ability to support the housing market moving forward.
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The United States remains the only major industrialized country in which a nonmetric measurement system is predominantly employed. Thus, while miles, pounds, and degrees Fahrenheit (i.e., the English system of measurement) are widely used in the United States, kilometers, grams, and degrees Celsius are favored throughout the rest of the industrialized world. Voluntary use of the metric system, also known as the International System of Units or SI, has been legal in the United States since 1866, and certain segments of society (particularly scientists and industries involved in international trade) have embraced metric units for many years. Calls for widespread metric conversion intensified during the mid-1960s, particularly after the United Kingdom began its conversion from the English system to metric. In 1968, Congress passed the Metric Study Act of 1968 (P.L. 90-472) which authorized a three-year Department of Commerce study on the feasibility of metric conversion in the United States. The study concluded that conversion to the metric system was in the best interests of the Nation, particularly in view of the increasing importance of technology and international trade to the U.S. economy. In 1975, the Metric Conversion Act ( P.L. 94-168 ) was passed by Congress. The Act established a U.S. Metric Board whose purpose was to coordinate and plan a process of voluntary metric conversion throughout the Nation. However, there appeared to be widespread public antipathy to conversion to the metric system and the Metric Board's efforts were largely ignored (and in some instances, vociferously opposed) by the American public. In 1982, the Metric Board was abolished by the Reagan Administration. By the late 1980s, however, concern over U.S. industrial competitiveness in world markets led Congress to again encourage metric conversion, this time by requiring federal agencies to go metric in their respective activities. Section 5164 of the Omnibus Trade and Competitiveness Act of 1988 ( P.L. 100-418 ) amended the Metric Conversion Act of 1975 to designate the metric system as the "preferred system of weights and measures for United States trade and commerce." The amended Act required all federal agencies to begin using the metric system in procurements, grants, and other business-related activities, except when such use is impractical or is likely to cause significant inefficiencies or loss of markets to U.S. firms. Agencies were also required to report annually to Congress on actions taken to implement fully the metric system of measurement. As follow-up to P.L. 100-418 , Executive Order 12770 ("Metric Usage in Federal Government Programs"), issued in 1991 by President Bush, further required federal agencies to formulate and implement metric conversion plans. Federal agencies were initially slow in responding to the metric conversion mandate. A March 1990 General Accounting Office (GAO) report found that most federal agencies had not shown a commitment to metric conversion. After Executive Order 12770 was issued, agency compliance measurably improved. A Committee Print issued December 1993 by the House Committee on Science, Space and Technology, reported that 29 out of 36 federal agencies had reported their metric activities to Congress (as required by P.L. 100-418 ). The study concluded that a "general commitment toward converting to the metric system by each federal government agency reporting appears clearly evident." Meanwhile, a January 1994 GAO report on metric conversion found that while federal preparations for metric conversion were well underway, basic problems limited federal metric procurement; grants and other business activities showed mixed progress; and federal agencies indicated a need for greater support from the private sector and the public. The Metric Program at the Department of Commerce's National Institute of Standards and Technology (NIST) is responsible for coordinating the metric transition activities of all federal agencies. NIST chairs the Interagency Committee on Metric Policy (ICMP) and is required by Executive Order 12770 to report to the President annually regarding metric conversion progress made by individual federal agencies. The most recent report, the 1993 Metric Progress Report, concluded that metric conversion progress among agencies is widely variable, and depends upon the metric readiness of the industries a particular agency's programs affect, budget limitations, and the amount of visible high level leadership within the agency. Notable examples of metric conversion activities in the federal government include: the proposed metric conversion of federal highways (discussed below), a requirement that all new federal building construction projects be conducted in metric units, and a Federal Trade Commission (FTC) rule requiring consumer product packaging to be labeled with dual (English and metric) units. Other agencies, however, have determined it unfeasible or unpractical to convert particular activities to metric at this time. The GAO found that "[metric conversion] problems encountered by federal agencies frequently involve opposition from the private sector or the public. Generally speaking, the more directly a proposed conversion affects the private sector or the public, the greater the resistance." Thus, for example, the Secretary of Agriculture has granted a general exemption from metric conversion for projects or programs that directly affect individual farmers or farm programs. The National Weather Service in the Department of Commerce, while gathering all of its data in metric units, converts back to the inch-pound system before providing its data to the public. An issue that has received much attention from congressional policy makers and the public is the proposed metric conversion of the federal highway system. On June 11, 1992, the Federal Highway Administration (FHWA) announced its metric conversion policy, which stipulated that all highway construction plans, specifications, and estimates be prepared in metric units of measurement by September 30, 1996. After that date, Federal Aid Highway Program funds would not be authorized for nonmetric projects, unless a specific exception was issued by FHWA. Many state highway agencies have been working with FHWA and the American Association of State Highway & Transportation Officials (AASHTO) to meet the September 30, 1996, deadline for metric conversion. However, on November 28, 1995, the President signed the National Highway System Designation Act of 1995 ( P.L. 104-59 ), which provides that before September 30, 2000, the Secretary of Transportation shall not require any state to use or plan to use the metric system with respect to designing or advertising, or preparing plans, specifications, estimates or other documents for a federal-aid highway project. Legislation introduced into the 104 th Congress by Representative Duncan ( H.R. 3617 ), and reintroduced into the 105 th Congress by Representative Bachus ( H.R. 813 ) and Senator Baucus ( S. 532 ) would indefinitely remove the federal mandate for metric conversion in federal highway projects (see discussion in next section of this report). The issue of highway sign conversion was considered separately from FHWA's overall metric conversion policy, and was not subject to the September 30, 1996 deadline. On August 31, 1993, the FHWA announced in the Federal Register a solicitation of public comments on options it was considering for "coordinating an orderly transition of distance, weight, and speed traffic control sign legends from English to metric units." In response to the FHWA notice, a series of bills were introduced in Congress which sought to prohibit the use of federal funds for metric conversion of highway signs. Additionally, Department of Transportation Appropriation bills for FY1994 ( P.L. 103-122 ), FY1995 ( P.L. 103-331 ), and FY1996 ( P.L. 104-50 ) specifically prohibited use of appropriated funds for metric conversion of highway signs. On June 27, 1994, the FHWA announced its decision in the Federal Register not to require the implementation of metric signs until "at least after 1996, or until further indication of the intention of Congress on this subject is received." The FHWA stated that one of the factors in its decision was "a possible future congressional restriction on using Federal funds for metric signs." Accordingly, the National Highway System Designation Act of 1995 ( P.L. 104-59 ) prohibits FHWA from requiring the states to expend any federal or state funds for metric conversion of highway signs. Meanwhile, an April 1996 Battelle study commissioned by FHWA has estimated that the cost of metric highway sign conversion could range from $15.6 million for routine replacement, to $826 million for dual posting. Similar to the metric provisions of the National Highway System Designation Act, much of the metric-related legislation introduced in the 104 th Congress sought to limit metric conversion activities in the federal government, particularly in cases where the federal government is seen to be imposing metric conversion mandates on the States. Section 302 of the Unfunded Mandate Reform Act of 1995 ( P.L. 104-4 ), signed into law on March 22, 1995, directed the Advisory Commission on Intergovernmental Relations (ACIR) to study specific federal mandates, including "requirements of the departments, agencies, and other entities of the federal government that state, local, and tribal governments utilize metric systems of measurement." On January 24, 1996, the ACIR issued its preliminary report on federal mandates. The Commission identified FHWA metric conversion requirements for federal highway construction as a federal mandate, and recommended the repeal of "requirements that state and local governments convert to metric on a Federal timetable as a condition of receiving Federal aid." Metric proponents have objected to the ACIR findings, asserting that metric conversion has already been implemented by most states, that the metric system is becoming increasingly accepted by the construction community, and that metric conversion costs constitute a tiny percentage of total federal highway funds received. Other legislation in the 104 th Congress sought to amend the Metric Conversion Act. The Federal Reports Elimination and Sunset Act of 1995 ( P.L. 104-66 ), which was signed into law on December 21, 1995, repeals section 12 of the Metric Conversion Act requiring federal agencies to report to the Congress on their metric conversion activities. A further amendment to the Metric Conversion Act was included in Department of Commerce dismantling legislation, which was attached to the House version of the debt limit extension bill ( H.R. 2586 , subsequently vetoed by the President). This provision would have repealed the provision of the Metric Conversion Act which requires federal agencies to use the metric system in their procurements, grants, and other business-related activities. Additionally, the Metric Program at NIST would have been abolished. Finally, a bill passed by the 104 th Congress ( P.L. 104-289 ) sought to curb some federal agency requirements that businesses convert their modular construction products to a hard metric specification in order to supply federal construction contracts. While the vast majority of products procured for federal construction are soft converted (which means that an existing product is relabeled in metric units but does not change size), some modular products are required in hard metric sizes in order to be dimensionally coordinated with other building components. A hard metric conversion requires, in addition to the expression of the dimensions of a product in metric units, a physical change in the dimension of that product in order to conform to a rounded metric unit. Certain construction materials industries (primarily makers of concrete masonry block and recessed lighting fixtures) objected to hard metric requirements, arguing instead for soft metric conversion. The Savings in Construction Act of 1996 ( P.L. 104-289 ), signed into law on October 11, 1996, applies only to concrete masonry units and recessed lighting fixtures. The law prohibits federal agencies from specifying hard metric dimensions for concrete block and lighting fixtures, unless certain criteria are met, including a determination by the agency that the costs of the modular metric components are estimated to be equal to or less than the total installed price of using non-hard metric products. Additionally, P.L. 104-289 directs each executive agency awarding construction contracts to designate a metrication ombudsman who will respond to industry complaints and concerns regarding construction metrication issues. In the 105 th Congress, metric related legislation remains focused on the federal highway construction issue. H.R. 813 (introduced by Representative Bachus) would remove the extended deadline of September 30, 2000 from the National Highway System Designation Act ( P.L. 104-59 ), thereby indefinitely prohibiting FHWA from requiring the states to convert their federal highway projects to metric units. Section 303 of the Surface Transportation Authorization and Regulatory Streamlining Act ( S. 532 , introduced by Senator Baucus), contains identical language. Similarly, there are plans in the House to attach such language to legislation reauthorizing the Intermodal Surface Transportation Efficiency Act (ISTEA). Proponents of removing the federal mandate for metric conversion cite the costs of conversion experienced by highway contractors, and maintain that metric conversion decisions should be left to the states. Opponents of H.R. 813 , including the Department of Transportation, point out that over 40 states are already surveying and designing their new projects in metric units, and that states have spent nearly $71 million to convert standard plans, specifications, and computer programs. Removing the federal mandate, they argue, would create confusion in the highway construction industry, and reverse progress that most states have already made in converting to the metric system.
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The United States remains the only major industrialized country in which a nonmetric measurement system is predominantly employed. Section 5164 of the Omnibus Trade and Competitiveness Act of 1988 (P.L. 100-418) amended the Metric Conversion Act to require federal agencies to use the metric system in their activities. Legislation in the 104th and 105th Congress limits federal metric conversion activities, particularly in instances where states, local governments, and the private sector may be required to convert to the metric system in order to participate in federally funded programs.
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The term "social media" refers to Internet-based applications that enable people to communicate and share resources and information. Some examples of social media include blogs, discussion forums, chat rooms, wikis, YouTube channels, LinkedIn, Instagram, Facebook, and Twitter. Social media can be accessed by computers, tablets, smart and cellular telephones, and mobile telephone text messaging (SMS). The use of social media is an evolving phenomenon. Rapid changes in communication technologies in the past decade have enabled people to interact and share information through media that were non-existent or widely unavailable as recently as 15 years ago. In the last 10 years social media has played an increasing role in emergencies and disasters in both the public and private sectors. Facebook hosts numerous emergency-related organizations, including Information Systems for Crisis Response and Management (ISCRAM), and the Humanitarian Free and Open Source Software (FOSS) Project. Additionally, numerous emergency and disaster-related organizations, including universities, the private and nonprofit sectors, and state and local governments use Facebook to disseminate information, communicate with each other, and coordinate activities such as emergency planning and exercises. There is also evidence that social media is increasingly being used at the community and household level to respond to emergencies and crises. A study conducted in 2012 by the American Red Cross found that 40% of the respondents said they would use social tools to tell others they were safe. That percentage is most likely higher today given the rapid proliferation and acceptance of social media in recent years. Other examples of community and household use of the media include warning others of unsafe areas or situations, creating ad hoc volunteer response groups, and raising funds for disaster relief and recovery efforts. Perhaps one of the greatest benefits of social media is that it allows people to communicate when traditional lines of communication are unavailable. For example, when power or landline service is interrupted, people generally continue to have access to information—at least on a limited basis—through social media platforms with SMS and Global Positioning Satellite (GPS) frameworks, such as Twitter. Thus, certain elements of social media can remain viable during catastrophic events when traditional forms of communication are rendered unusable. The use of social media for emergencies and disasters can be conceptualized as two broad categories of usage. First, social media can be used as an output to disseminate public safety related information. Second, social media can be used as an emergency management tool through the use of inputs. Some examples of using social media as an emergency management tool include using the medium to conduct emergency communications and issue real time warnings; using social media to receive requests for assistance; monitoring user activities and postings to establish situational awareness; using uploaded images to create damage estimates; and using social media to conduct investigations and post-incident analysis. Social media sources have a broad range of applications in emergencies and disasters. The following sections provide examples of the ways in which social media are being used. Not all of these examples are from the federal government nor are they all governmental. Additionally, federal usage of social media varies from agency to agency just as its use varies from non-governmental entity to non-governmental entity. The following is not an exhaustive list and some of the examples may change or quickly become outdated due to advances in social media. Social media are often used by emergency management organizations to coordinate and send out notifications of upcoming training events and exercises. Notifications can also be sent to mobilize first responders to respond to an incident. Using social media for mobilization purposes can be particularly useful when traditional call systems fail. For instance, during Hurricane Gustav, a Community Emergency Response Team (CERT) used social media to send mass email notifications to team members through Facebook when its call notification system went down. The CERT group also updated status messages to notify first responders and citizens of developments as the incident unfolded. Social media has been used to disseminate a wide range of public safety information before, during, and after various incidents. Prior to an incident (or in the absence of an incident), many organizations and agencies provide citizens with preparedness and readiness information through social media. For example, the Department of Health and Human Services (HHS) used Twitter to provide information on Zika virus prevention. Social media are also used for community outreach and customer service purposes by soliciting feedback on public safety-related topics. Social media is often used by organizations to provide key public safety information during emergency situations. Further, social media is being increasingly used to provide "real-time" updates as the event unfolds. For example, Orlando authorities used social media to inform the public on the shootings in the Pulse nightclub. Another example is a stream of tweets issued by the Boston Police Department to keep citizens up to date in real-time throughout the Boston Marathon bombings and subsequent manhunt. The Boston Police Department also used social media to address and correct instances of misinformation. The National Weather Service (NWS) also used social media to alert citizens in Massachusetts of road conditions during the 2015 snowstorms. Similarly, the U.S. Geological Survey launched a pair of Twitter feeds to give out automated, real-time river levels and rainfall amounts during heavy rains in response to floods in Texas. The platform automatically Tweets out river gauge levels and flow rates when they hit the flood stage. It also includes searchable hashtags and links to more information on the agency's website. Emergency alerts used at the federal level include the Federal Communications Commission (FCC) Personal Localized Alerting Network known as "PLAN" (technically the Commercial Mobile Alert System, or CMAS). Implemented in 2011, PLAN expands the emergency alert system notifications sent over TV and radio to include mobile and smart phones. PLAN sends geographically targeted alerts through cell towers in the form of text-like messages to the cell phones of people who have requested to be notified in the event of an emergency. PLAN enables government officials to target emergency alerts to specific geographic areas, which then push the information to dedicated receivers with PLAN-enabled mobile devices. The Federal Emergency Management Agency (FEMA) oversees development and operation of the Integrated Public Alert and Warnings System (IPAWS), a national system for delivering emergency alerts and warnings to the public. Today, over 150 entities—including approximately 75 counties, 25 states, and the Commonwealth of Puerto Rico—have access to the IPAWS-OPEN gateway, which allows them to transmit messages to cellular phones (using Wireless Emergency Alerts or WEA), radio and television (using the Emergency Alert System), and National Oceanic and Atmospheric Administration (NOAA) weather radios. In addition, the NWS can send weather alerts, and the National Center for Missing and Exploited Children can send AMBER alerts over IPAWS. In addition to alerts and messages sent by emergency management and governmental organizations, valuable crisis information is often disseminated by citizens. For example an estimated 3.5 million tweets with the hashtag #sandy were generated in 24 hours during Hurricane Sandy and roughly ten pictures per second were uploaded using Instagram. Social media can also be used by users to let family and friends know they are safe if they are near an incident or natural disaster. For example, Facebook activated a feature called "safety check" during the Paris terrorist attacks to allow users to post if they are safe or not in the area of an incident. The feature can also be used to check if others in the area are safe. The above are examples of how information is disseminated through outputs. However, social media can also use inputs to provide unique emergency and disaster information. For example, Crowdsourcing has been effectively used to provide information about a crisis or incident. Crowdsourcing consists of obtaining needed services, ideas, or content by soliciting contributions from the online community. An example of a federal government crowdsourcing tool is a U.S. Geological Survey (USGS) "Did You Feel It?" project which creates automatic intensity maps based on "felt" reports submitted online. More than 2 million reports have been filed on this website, with 40 earthquakes receiving more than 10,000 reports each. Another useful source of information during an incident are crisis maps. Crisis maps combine information scattered across the Internet along with other information and places them on a single map. Users can use the crisis map to ascertain storm paths and flood zones, as well as identify evacuation routes, shelter locations, and power outage areas. Information posted at the time of an event could be valuable later for investigative and research purposes. For example, viewers at the 2012 theater shooting in Aurora, CO, tweeted and posted messages moments before the attack took place. Forensic analysis of the information was used to construct incident timelines and retrieve first-hand accounts of the event as it unfolded. Social media is used to alert emergency managers and officials to certain situations by monitoring the flow of information from different sources during an incident. Monitoring information flows help establish "situational awareness." Situational awareness is the ability to identify, process, and comprehend critical elements of an incident or situation. At the local level, first responders can leverage social media, both to communicate and to gather and share real-time, dynamic information, to enhance situational awareness and assist in decision-making. Obtaining real-time information as an incident unfolds can help officials determine where people are located; assess victim needs; and alert citizens and first responders to changing conditions and new threats. Emergency managers can also use the information to direct certain resources to reduce damages, loss of life, or both. In some cases it might be possible to obtain this information before first responders reach the disaster area. Another benefit of social media is that it provides the public with another method to communicate with the government. While current emergency communication systems have largely been centralized via one-way communication—from the agency or organizations to individuals and communities—social media is increasingly altering emergency communications because information can flow in multiple directions (known as backchannel communications). One example of backchannel communication are requests for assistance. Social media are increasingly seen by some as a supplement or replacement to "911" emergency system lines and can be particularly useful when traditional forms of communication are not available. The use of social media to request assistance is likely to become more common. According to a study by the American Red Cross, younger people generally use social media more frequently than older segments of society. They are also more likely to request help through social media, believe agencies should monitor their postings, and have high expectations that agencies will respond quickly to their requests. There are also indications that older adults are increasingly using social media. As more older adults use social media, they too may develop similar expectations. As a consequence, some may argue that emergency managers and officials may need to embrace social media technology in order to be responsive to the public's needs. Others may question the feasibility of taking requests through social media—particularly during periods when there is a high volume of incoming information. Social media has also played a role after an incident through recovery efforts. At the state and local level, groups are using social media to manage donations and organize volunteer efforts. At the federal level, social media is commonly used to provide information concerning what types of assistance is available to individuals and households, how to apply for assistance, announce application deadlines, and provide information and links to other agencies and organizations that provide recovery assistance such as the American Red Cross, or the Small Business Administration's Disaster Loan Program (SBA). In some cases, individuals and households do not qualify for FEMA Individual Assistance (IA) grants. Social media could be used to raise funds in such cases through private contributions. However, it would not likely be capable of supplanting federal assistance altogether. Recovery from large-scale disasters can cost billions of dollars (the federal government provided approximately $120 billion and $50 billion in supplemental funding for Hurricanes Katrina and Sandy respectively). Social media has the capacity to accelerate the damage estimate process by transmitting images of damaged structures such as dams, levees, bridges, and buildings uploaded from tablets or smart phones. For example, in Kansas a smart phone application has been used to help the Army Corps of Engineers identify and report breeches, seepage, overtoppings, and other areas of structural weakness in levees. The application allows the Army Corps of Engineers to take a photo of problem areas and then "geotag" its precise location. According to Corps officials, the application has helped improve the efficiency, speed, and accuracy of detecting and responding to levee failures. In addition, the application has also helped reduce human error by reducing instances of mislabeling or misreporting problems. Within the past decade, reports on successful use of social media during emergencies and disasters have spurred congressional interest and policy discussions concerning how to better incorporate social media at the federal level. Much of the congressional and executive branch interest has centered on how social media can be used to improve disaster response and recovery capabilities. On May 5, 2011, Craig Fugate, the FEMA Administrator, testified before the Senate Committee on Homeland Security and Governmental Affairs, Subcommittee on Disaster Recovery and Intergovernmental Affairs that he had met with representatives from Apple, Craigslist, Facebook, Google, Microsoft, and Twitter to discuss how to harness the "capabilities of the digital world to better serve the public." According to Fugate, possible future applications include using smartphone-friendly mobile versions of FEMA websites to allow users to access information, request assistance, and facilitate communication between citizens, first responders, volunteer groups, the private sector, and all levels of government. Subsequent hearings were held by the Subcommittee on Emergency Preparedness, Response, and Communications Committee on Homeland Security on June 4, 2013, and July 9, 2013. The hearings investigated how social media efforts could be enhanced. The hearings also explored how social media was transforming preparedness, response, and recovery efforts in the private sector and how lessons learned in these sectors might be applied at the federal level. Lessons learned were also discussed as well as how crowdsourcing can be used to enhance the quality and timeliness of critical information. Crowdsourcing information can be geotagged with longitude and latitude coordinates. According to Mathew Stepka, Vice President, Technology for Social Impact for Google, during some disasters, authoritative sources may not have as expansive information as individuals who are experiencing the incident first-hand. Stepka provided an example of crowdsourcing in his testimony to the Subcommittee. According to Stepka, it was unclear during Hurricane Sandy which filling stations had gasoline. Stepka related that during Sandy, a group of student volunteers called stations in New Jersey to check whether they were open and had gas available. Within a few days they had data for more than 1,000 different stations, which was fed into our Sandy crisis map automatically. The Department of Energy's call center ended up referencing this information. Study findings reported at the hearings also underscored the growing use of social media during emergencies and disasters. According to Suzanne DeFrancis, Chief Public Affairs Officer of the American Red Cross, 20% of Americans received some form of emergency information from an app. Surveys conducted in 2012 by the American Red Cross found that 76% of American expect help within three hours of posting a request on social media and 40% would use social media to inform others they were safe. Both of these figures are higher than the percentages reported (68% and 24% respectively) in their 2011 survey. The study also found that roughly 75% of social media users use the medium to seek information about an incident including road closures, damage reports, and weather conditions. One noteworthy finding from the hearings was a reported need to enhance public and private partnerships to facilitate communications and collaboration between the two sectors. Legislation to address this need was introduced in the 113 th Congress ( H.R. 4263 ) and later in the 114 th Congress ( H.R. 623 ). H.R. 623 , which was enacted on November 5, 2015 ( P.L. 114-80 , the DHS Social Media Improvement Act of 2015) amended the Homeland Security Act of 2002 to direct the Secretary of Homeland Security to establish within the Department of Homeland Security (DHS) a social media working group. The law requires the social media group to submit an annual report to Congress that includes a review of current and emerging social media technologies being used to support preparedness and response activities related to terrorist attacks and other emergencies; a review of best practices and lessons learned on the use of social media during the response to terrorist attacks and other emergencies that occurred during the period covered by the report; recommendations to improve DHS's use of social media for emergency management purposes, to improve public awareness of the type of information being disseminated through social media and how to access such information during a terrorist attack or other emergency, and to improve information sharing among DHS and its components and among state and local governments; a review of available training for government officials on the use of social media in response to a terrorist attack or other emergency; and a summary of coordination efforts with the private sector to discuss and resolve legal, operational, technical, privacy, and security concerns. Another bill introduced in the 114 th Congress, H.R. 3517 , requires the DHS Secretary to conduct a one-year pilot program with the American Red Cross to research and develop mechanisms to better leverage social media to improve preparedness and response capabilities, including (1) the timely dissemination of public preparedness information for terrorist attacks and other disasters, and (2) the delivery of response supplies to affected areas. The bill requires the DHS Secretary to issue a report to the House Committee on Homeland Security and the Senate Committee on Homeland Security and Governmental Affairs no later than 90 days after completion of the pilot program regarding the extent to which the DHS partnered with the American Red Cross in furtherance of preparedness and response capabilities in the previous year. H.R. 3517 was referred to the Subcommittee on Emergency Preparedness, Response, and Communications. The following section describes how some federal entities use social media for emergencies and disasters. This list is not exhaustive—there are many federal entities that use social media for emergencies and disasters in various capacities. The federal government does not use a single platform for emergency and disasters. Rather, federal entities use different social media for different purposes. Some have platforms dedicated to emergencies and disasters while others have emergency and disaster information comingled with other agency information. This section highlights just some of the ways in which social media are being used by the federal government. When possible statistics on social media use are provided; however, not all entities collect such data. It is important to note that social media is subject to rapid advances in applications and technologies. New uses are being adopted on a continual basis. Social media products typically require digitally signing terms of service agreements. Many terms of service agreements are, however, incompatible with federal law, policies, and regulations. To address this challenge, federal agencies have negotiated federal-compatible terms of service agreements with social media vendors. These agreements modify or remove problematic language or clauses in standard terms of service agreements. Negotiated terms of service can be developed individually by the federal entity, or through the assistance of the Government Services Administration (GSA). GSA provides government-wide support, training, and assistance with various social media platforms. In FEMA's case, the agency developed negotiated terms of service agreements with various social media outlets. Doing so allows FEMA to quickly create a Facebook page, upload pictures and videos, or post information in response to a particular emergency or disaster. FEMA began using Youtube in 2006, Twitter in 2008, and Facebook in 2009 and currently uses multiple social media platforms. FEMA primarily uses social media to disseminate information and coordinate recovery efforts. The information FEMA provides includes what people should do before, during, and after an incident. FEMA also uses social media to inform people where and how to apply for federal and nongovernmental assistance. For example, FEMA provides information about the Small Business Administration's (SBA) Disaster Loan Program and/or services provided by the American Red Cross through social media. Similarly, FEMA also uses social media to share key messages or information with other federal, state, local, tribal, territorial, and private sector partners so that they too can disseminate emergency and crisis information. FEMA also provides a mobile app that provides weather alerts from the NWS and information on where to find open shelters. In addition to using social media as an external stakeholder outreach tool, FEMA can use social media as an emergency management tool by integrating various social media platforms through the use of tools referred to as "social media management systems." The social media management systems include software that allows the agency to better handle information overload by eliminating non-critical information. Doing so helps FEMA focus or "listen" to relevant user information. Listening information is used to improve customer service, obtain situational awareness of an incident or situation, and discredit inaccurate information about the incident. Listening also enables FEMA to get a sense of where people in need are located and what supplies they might need. FEMA's social media, however, cannot be used for individual or immediate requests for assistance. FEMA's app also allows users to take a photograph in a disaster area and submit it, along with a short text description, to the "Disaster Reporter" which gathers crowdsourced disaster-related information within the United States, allowing citizens, first responders, emergency managers, community response and recovery teams, and others to view and contribute information on a publicly accessible map. FEMA has staff responsible for day-to-day social media operations but has the capacity to deploy people from Regional Offices for surge support. For example, 10 people were deployed to the National Response Center from FEMA's Regional Offices to assist social media efforts during Hurricane Sandy. FEMA's social medial policies are guided by its Web 2.0 policy which describes how to sign up for third party outlets, how to moderate discussions (including which comments can be deleted), and what information needs to be retained in accordance with records management. Additionally, FEMA's Office of External Affairs has a growing digital engagement section. Their responsibility includes designing and developing social media items. The digital engagement section can also be activated to assist with social listening in the event of an emergency or major disaster. SBA has been a major source of assistance for the restoration of commerce and households in areas stricken by natural and human-caused disasters. SBA offers low-interest, long-term loans for physical and economic damages to businesses, individuals, and households and to help repair, rebuild, and recover from economic losses after a declared disaster. SBA utilizes social media on several different platforms including Facebook, Twitter, YouTube, and blogs. Each SBA region has its own Twitter account to provide users with specific local information. SBA thinks of their social media as part of their larger digital engagement with users. Using social media SBA will often provide links to information on their website for more technical information and may link and share posts from FEMA and other agencies. In addition to their social media outreach, approximately 1.6 million people have subscribed to SBA's e-newsletter online which often provides preparedness recovery advice. SBA comingles emergency and disaster information with other information about small business programs on their social media platforms, but they often issue web pages dedicated to each declaration. HHS directs and coordinates preparedness activities and oversees public health agencies within the Department with responsibilities for emergency preparedness and response. These include the Centers for Disease Control and Prevention (CDC), the Health Resources and Services Administration (HRSA), the National Institutes of Health (NIH), the Food and Drug Administration (FDA), and the Agency for Healthcare Research and Quality (AHRQ). HHS uses a variety of social media platforms including Facebook and Twitter. In particular, social media plays an integral role in HHS's National Health and Security Strategy—an engagement initiative designed to prepare communities for threats to health that are associated with emergencies and disasters. HHS also provides health information through social media during incidents and directs people to health resources through web links and hashtags. HHS does not use dedicated web pages for incidents and does not collect data on social media usage. Each subentity of HHS contains working groups with separate social media efforts that focus on their particular organizational mission and goals. The HHS working group is relatively small but has capacity to surge if needed for large incidents. The working group monitors social media to dispel rumors, obtain situational awareness, and answer questions about preparedness and public health issues. HHS does not respond to immediate requests for assistance. The working group also coordinates information with other organizations with preparedness and response responsibilities. The Centers for Disease Control and Prevention (CDC) works with states and localities, as well as other nations to detect, investigate, and prevent disease and injury, to develop and implement prevention strategies, to monitor the effect of environmental conditions on health, and to study illness and injury in the workplace. CDC responds and supports state and local efforts to save lives and reduce suffering when a disaster occurs. CDC also helps states and localities recover and restore public health functions after the initial response to an incident. CDC uses Twitter, Facebook, Pinterest, and YouTube among other social media platforms. In some cases, CDC has a number of profiles on each platform (for example, CDC has 30 different Facebook profiles and over 60 Twitter profiles addressing various public health topics). However, CDC does not use incident-specific social media accounts, but does have web pages for specific incidents. CDC's primary social media focus is disseminating public health and preparedness information, but it also uses social media to answer questions and obtain situational awareness through listening. CDC does not respond to individual requests for assistance. In an emergency, CDC coordinates with other federal entities, state and local agencies, and partners through the emergency operations center. CDC uses a handful of social media staff in an emergency event, but has the capacity to surge if needed. During the 2014 Ebola response, the social media team surged to meet the round-the-clock needs of the response and interest of the public. Oversight for CDC social media is carried out by the Social Media Council—which consists of 15-20 individuals representing program areas within CDC. During an emergency, social media information is coordinated through CDC's Joint Information Center (JIC) to ensure all platforms provide consistent information. The National Guard is both a state and federal organization: it is simultaneously the organized militia of a state or territory and a reserve component of the Army and the Air Force. Due to its size (over 450,000 individuals), trained personnel, and available equipment, it is frequently used for emergency response. Normally, the National Guard operates in a state status, under the control of state and territorial governors, who can order National Guard personnel to perform full-time "state active duty" in response to disasters and civil disorders. In this state capacity, National Guard personnel are not subject to the restrictions of the Posse Comitatus Act (that is, they can perform law enforcement functions). Under certain conditions, the National Guard can also be activated to respond to emergencies and disasters under Title 32 of the U.S. Code. Guard personnel who are activated under Title 32 remain under state control, but pay and benefits are provided by the federal government. The National Guard Bureau (NGB) is a joint activity of the Department of Defense and serves as the channel of communications between the Departments of the Army and Air Force and the states on all matters pertaining to the National Guard. NGB operates its social media efforts out of its public affairs office to educate and inform the public about National Guard preparedness and response efforts. NGB uses a variety of social media platforms including Facebook, Twitter, Google+, Instagram, and YouTube. The National Guard Bureau also uses social media through internal pages to conduct internal communications. For example, uploaded images of damages posted by social media users are circulated internally to help understand the extent of damages caused by an incident. The images, however, are not used for damage estimates. The National Guard Bureau also monitors social media for situational awareness, and rumor control. Policy guidance for the NGB's use of social media is outlined in the Department of Defense's "Web and Internet-Based Capabilities (IBC) Policies." The IBC polices describe terms of service agreements, protocols for deleting user posts, and records management. In addition, the National Guard uses response-specific analytics to help make data-driven decisions with respect to future applications of social media for emergencies and disasters (see Table 1 ). The National Guard Bureau does not use disaster specific web pages and does not respond to individual requests for assistance. In addition to flood control and improving and maintaining navigable channels, the U.S. Army Corps of Engineers (USACE) provides emergency response activities through more than 40 planning and response teams (PRTs). These deployable teams have been specifically trained to perform USACE emergency response functions, including provision of emergency power, debris removal, temporary housing, temporary roofing, and structural safety assessments. USACE social media platforms include Facebook, Twitter, Google+, Youtube, and Pinterest among others. The U.S. Army Corps of Engineers synchronizes outgoing information across the platforms and coordinates with other federal agencies such as FEMA and NWS. In general, the Emergency Operations Center and the Joint Field Office for each incident have external affairs personnel with social media responsibilities. USACE does not use incident-specific web pages or respond to individual requests. At the start of FY2015, the U.S. Army Corps of Engineers began collecting Facebook usage data. The text box at right provides composite data and results for FY2015. It is not specific to disaster or emergency related posts. The NWS is a component of the National Oceanic and Atmospheric Administration within the Department of Commerce. The NWS provides weather, water, and climate data, along with forecasts and warnings for the protection of life and property. The social media platforms used by the NWS mainly consist of Twitter and Facebook. Each of the Weather Service's 122 weather forecast offices, along with other specialized field offices, national centers (e.g., National Hurricane Center), and regional and national headquarters utilize social media. This approach allows the NWS to serve both local and national communities. Local users can follow a field office for more specific information to their local area or the headquarter account for national or general information. The NWS does not have incident specific pages, but does use social media outlets to address specific threats. For an example, the NWS may utilize social media to let users know a hurricane is approaching a particular area and that people should prepare for dangerously high wind and flooding. Following the event, they may assist the emergency response community by providing critical post-event information that aids in emergency response efforts. The NWS mainly uses social media as a tool to provide information about weather events to users, including important safety information on a variety of hazards. In some instances the field offices utilize social media information in conjunction with traditional spotter reports to identify and confirm weather events. Following significant meteorological or hydrological events, NWS conducts Service Assessments to evaluate NWS products and services before, during, and after events. Experts from both within and outside the NWS conduct these assessments. Every NWS Service Assessment since 2011 has included sections on the NWS's social media use. For an example, an assessment following Hurricane/Post-Tropical Cyclone Sandy praised the NWS's use of social media as an important tool in increasing awareness of Sandy's threats. It also included a section on improving NOAA's web presence and use of social media. While not necessarily social media, the NWS also sends out Wireless Emergency Alerts (WEA) to mobile phone users within a close proximity of a critical weather event. These alerts are 90 characters in length and may include information on the weather event and suggestions like " take shelter " or " avoid flood areas. " As previously mentioned, surveys indicate that many citizens expect help within three hours of posting a request on social media. Some jurisdictions may not yet have the capacity or resources to meet this expectation. Others might argue that this expectation is unrealistic, particularly during large-scale disasters, due to the potential volume of incoming messages and posts. They may further argue that some jurisdictions do not have the capabilities to effectively monitor social media for incoming requests for assistance. For example, according to the West Virginia State Police, citizens should not use social media to request immediate help because the organization does not have the manpower and resources to monitor its social media around the clock. The use of social media as a tool to request assistance (similar to a call to 911) may be of potential interest to Congress. If so, Congress could explore the feasibility of using social media to make requests and investigate potential polices to help state, local, and federal jurisdictions develop their capacity to receive and effectively respond to the requests. Congress could also investigate the use of a pilot program that would allow people to request assistance through social media. The program could then be evaluated to determine its effectiveness. A key issue of interest with respect to social media and emergencies and disasters is the diffusion of technology developed in the private sector to the public sector. One potential method that could be used to accelerate diffusion is through public-private partnerships (PPPs). There is no single, accepted definition of PPPs. For the purposes of this report, a PPP is a contractual arrangement whereby the private sector would assume more responsibility than is traditional for the development and design of new technologies. Once developed, the new technology would be shared with the public sector. In the case of social media for emergencies and disasters, Congress could consider providing grants to the private sector or investigate other methods that would help foster partnerships between the private and public sectors. For example, FEMA provides a number of tools and models to help organizations start emergency management PPPs. These tools and models could be expanded to include social media PPPs. Proponents of PPPs would likely argue they would inject additional resources in to the development of social media as a tool for emergency management, increase private sector involvement, potentially reduce costs and project delivery times, and reduce public sector risk. Some argue that government agencies can potentially achieve more objectives more efficiently through PPPs than they could on their own. Detractors, on the other hand, might argue that PPPs are complicated arrangements and require too much oversight. They may also be concerned about potential fraud and abuse of technology grants. Instances of inaccurate and false information may be an inherent problem given the nature of social media platforms and the number of people disseminating information. There have been studies that found that outdated, inaccurate, or false information had been disseminated via social media forums during disasters. Information that is false, inaccurate, or outdated could complicate situational awareness of an incident and consequently hinder or slow response efforts. Inaccurate information could also jeopardize the safety of first responders and the community. The extent to which inaccurate information poses a problem to the emergency management community is not clear and claims of inaccuracy are debatable. Some studies have concluded that social media information is generally accurate; suggesting that reports about the spread of misinformation during incidents may have been exaggerated. In addition to inaccurate information, too much information can also pose a problem. As a disaster or crisis unfolds, the amount of information generated by users can be enormous. Sifting through the data for may be a challenge to emergency managers. The volume and speed with which available information is disseminated, combined with an inability to identify, verify, coordinate, aggregate, and contextualize it can leave this information unused and ultimately, unactionable. Against this backdrop, it is noteworthy that unofficial sources are often trusted and used as information sources by the general public. Some reports have indicated that information from unofficial sources can be just as, and even more desirable than information from official social media websites. This is because citizens may think official sources are too slow, general, or inaccurate to be useful. In a June 4, 2013, hearing, Jorge Cardenas, vice president of asset management and centralized services for Public Service Electric and Gas Company (New Jersey) stated that the number of people using Twitter and Facebook spike during disasters because they are searching immediate information they cannot find on traditional broadcast channels. Given the importance of accurate and timely information in crises situations, Congress could investigate the accuracy of emergency and disaster information and examine strategies and best practices that could increase organizational capacity to handle a large influx of information. Similarly, Congress could examine methods that could help prevent or reduce the spread of misinformation. There is some concern that individuals or organizations might intentionally provide inaccurate information to confuse, disrupt, or otherwise thwart response efforts. Malicious use of social media during an incident could range from mischievous pranks to acts of terrorism. One tactic that has been used by terrorists involves the use of a secondary attack after an initial attack to kill and injure first responders. Social media could be used as a tool for such purposes by issuing calls for assistance to an area, or notifying officials of a false hazard or threat that requires a response. When using social media for situational awareness and response efforts, officials and first responders should be aware it could be used for malicious purposes and develop measures to mitigate those possibilities. In some incidents residents may be without power for 48 hours or longer. Yet many smartphones and tablets have battery lives lasting twelve hours or less depending on their use. In some cases disaster survivors will not have the means to recharge their devices. In other cases, the device may have adequate power, but cellular towers in the area do not, significantly limiting their use in crisis situations. In a June 4, 2013, hearing, Jason Payne of Palantir Technologies testified that internet and cloud technology, such as social media, are extremely valuable as long as people have power and connectivity. Without both, it's useless. We encourage the subcommittee to explore innovative solutions to provide deployable 3/4G mobile networks, as well as mobile device charging stations, to the public during large-scale emergencies. Congress could require FEMA to develop and deploy 3G and 4G mobile networks in presidentially declared disasters. Congress could also consider other methods that would help residents recharge their devices during power outages. Still, while social media may improve some aspects of emergency and disaster response, some may be concerned that overreliance on the technology could be problematic under prolonged power outages. Thus, some may argue that traditional forms of communications still need to be used in conjunction with social media. They may further argue that emergency managers and officials consider alternative or backup options during extended power outages, or other occurrences that could prevent the use of social media. Another concern is the potential of overwhelming Internet traffic during crisis situations. For example, Internet traffic in Belgium after the terrorist attacks in Brussels slowed parts of the country's networks. In response, Belgian officials requested that users reduce their Internet consumption. Congress could examine whether parts of the United States might experience similar problems with Internet traffic and then, if needed, help develop methods to address the issue. It is unclear how much the federal government is paying for its various social media efforts with respect to emergencies and disasters. The number of personnel required to monitor multiple social media sources, verify the accuracy of incoming information, and respond to and redirect incoming messages is also uncertain. In addition, federal entities may experience a large volume of incoming messages from the public during a disaster. As mentioned previously, responding to each message in a timely manner could be difficult and may require an increase in the number of employees responding to incoming messages. Knowledge concerning federal expenditures on social media use during disasters can help Congress determine how the money has been spent and what resources have been provided to the nation. The financial information is also useful for congressional oversight of the entities that have received the funds and to evaluate the overall effectiveness of the expenditures. Financial information can also potentially help Congress identify cost saving opportunities. Privacy concerns exist about the potential for the collection, retention, and data mining of personal information by the federal government with respect to its use of social media for disaster recovery purposes. Specifically, the use of status alerts and the creation of personal pages to establish situational awareness may raise privacy concerns. Others are concerned how the information might be used. For example, would the federal government compile records after a terrorist attack to help investigate certain individuals? The E-Government Act of 2002 mandates that federal agencies conduct an assessment of the privacy impact of any substantially revised or new Information Technology System. The document that results from these mandated assessments is called a Privacy Impact Assessment (PIA). Section 208 of the E-Government Act requires federal agencies to complete PIAs prior to: (1) developing or procuring information technologies that collect, maintain, or disseminate personally identifiable information (PII); or (2) initiating, consistent with the Paperwork Reduction Act, a new collection of PII from ten or more individuals in the public. The PIA uses the Fair Information Privacy Principles (FIPPs) to assess and mitigate any impact on an individual's privacy. In March 2011, the Department of Homeland Security (DHS) issued a Privacy Impact Assessment for the Use of Unidirectional Social Media Applications Communications and Outreach. The DHS PIA on the Use of Unidirectional Social Media Applications does not cover users sending content to the Department, but describes the personally identifiable information (PII) and the limited circumstances under which DHS will have access to PII, how it will use the PII, what PII is retained and shared, and how individuals can gain access to their PII. In 2010, DHS published a PIA on the Use of Social Networking Interactions and Applications (Communications/Outreach/Public Dialogue). Neither PIA covers other social media activity such as monitoring initiatives, law enforcement and intelligence activities, and other similar operations. Some have argued that privacy laws can hamper the use of information obtained from social media during disasters because such laws restrict how the government can collect, maintain, and use PII. Consequently, efforts are being made to develop software that could remove personal information from social media messages without loss of vital disaster information. Congress could consider amending existing laws to make the use of PII less restrictive during disasters, or investigate methods that could help the federal government develop software that removes PII while retaining valuable disaster information. Social media has made tremendous inroads into emergency management for a variety of reasons. For one, social media can provide accurate, reliable, and timely information. This information is vital for public safety before, during, and after an incident. In addition, disaster response efforts—particularly during large scale disasters—have been plagued by communication challenges. Social media has proven to be a useful method for communicating when traditional forms of communication are ineffective or inoperable. In addition, there are strong indications that the use of social media for emergencies and disasters will increase as people continue to embrace new technologies. This increase will lead to a greater expectation that government will meet their information needs during crisis situations through social media. Accordingly, many emergency managers and agencies have already adopted the use of social media to meet this expectation. Emergency management organizations have also started using social media because they recognize its usefulness beyond providing public safety information. As mentioned at the outset of this report, social media applications in emergency management can be conceptualized in two broad categories of usage: output and input. By and large, the federal government uses social media as an output to disseminate information. While useful, the emphasis on outputs could prevent the federal government from fully realizing social media's potential as an effective emergency management tool. A different approach would be to reorient the focus with an emphasis on inputs. The reorientation, however, could be a complicated matter. Some might argue that the federal role in social media efforts should be limited because the decentralized nature of social media makes the medium too unwieldy for large, centralized organizations to control in a manner similar to smaller organizations or emergent groups. They may further argue that federal involvement might lead to standardization and rigid usage guidelines which might hinder the nimbleness of social media to be applied in new and novel ways. They may therefore conclude that state and locals should take the lead with social media with the support of the federal government. Some starting points would include pilot programs and public private partnerships. Congress could also require FEMA to develop and deploy 3G and 4G mobile networks in presidentially declared disasters, and provide grants to state and local governments to help them develop their social media capabilities. Congress could also investigate the use of social media at the federal level to help inform decisionmaking and policymaking. This could include determining hardware and software costs, personnel costs, surge capacity during large-scale disasters, and the federal government's ability to keep pace with advances in and the social media and changing patterns of public usage. Congress could also explore ways to address and overcome some of the other challenges described in this report including using social media to request assistance, inaccurate or malicious crisis information, information overload, and technical limitations. Selected Examples of Federal Social Media Selected Examples of Federal Social Media Use for Hurricane Sandy
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Since the mid-1990s, new technologies have emerged that allow people to interact and share information through the Internet. Often called "social media," these platforms enable people to connect in ways that were non-existent, or widely unavailable 15 years ago. Examples of social media include blogs, chat rooms, discussion forums, wikis, YouTube channels, LinkedIn, Facebook, and Twitter. Social media can be accessed by computers, tablets, smart and cellular telephones, and mobile telephone text messaging (SMS). In recent years social media has played an increasing role in emergencies and disasters. Social media sites now rank as the fourth most popular source to access emergency information. They have been used by individuals and communities to warn others of unsafe areas or situations, inform friends and family that someone is safe, and raise funds for disaster relief. Facebook supports numerous emergency-related organizations, including Information Systems for Crisis Response and Management (ISCRAM), the Humanitarian Free and Open Source Software (FOSS) Project, as well as numerous universities with disaster-related academic programs. The use of social media for emergencies and disasters may be conceptualized as two broad categories. First, social media can be used as an output to disseminate information and issue warnings. Second, it can be used as an emergency management tool through the systematic use of inputs (typically through incoming communication). Examples of systematic usage of social media include using the medium to conduct emergency communications; using social media to receive victim requests for assistance; monitoring user activities to establish situational awareness; and using uploaded images to create damage estimates; conduct investigations; monitor search queries to anticipate flu outbreaks and detect terrorist activity; among others. Federal entities, including the Federal Emergency Management Agency, use social media in both manners, although primarily as an output to disseminate information. Recent stories and reports describing how a wide range of international, state, and local organizations have successfully used social media during emergencies and disasters have spurred congressional interest and discussion about how to harness social media capabilities to improve federal response and recovery efforts. Based on these favorable stories and reports, some may argue that the federal government should take the lead in developing social media as a tool for emergencies and disasters. Others might argue that it would be difficult for the federal government to replicate state and local success because the decentralized nature of social media may make the medium too unwieldy for large, centralized organizations to control in a manner similar to smaller organizations or emergent groups. They may, therefore, argue it would be more appropriate for state and local governments to take the lead with the federal government playing a supporting role. If that is the case, Congress could, for example, provide grants to further its development at the state and local level. Congress could also explore policy options that could enhance social media usage at the state and local level. These policy options include public-private partnerships, and social media pilot programs. This report provides selected examples of how social media has been used by emergency management officials and agencies, and examines the potential uses and benefits of using social media in the context of emergencies and disasters. The report also provides additional perspectives and reviews some of the policy implications of using social media for emergencies and disasters. These include the use of social media to make individual requests for assistance; the use of private-public partnerships to develop social media tools for emergencies and disasters; the accuracy of social media information and the challenge of information overload; malicious use of social media during disasters; the technological implications of social media; administrative costs considerations; and privacy concerns. This report will be updated as events warrant.
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A fundamental objective of congressional oversight is to hold executive officials accountable for the implementation of delegated authority. This objective is especially important given the huge expansion of executive influence in the modern era. If the Founding Fathers returned to observe their handiwork, they would likely be surprised by such developments as the creation of a "presidential branch" of government (the Office of Management and Budget, the National Security Council, and the like) and the establishment of so many federal departments and agencies. From three departments in 1789 (State, Treasury, and War, renamed Defense in 1947), a dozen more have been added to the cabinet. The newest creation, in 2002, is the Department of Homeland Security (DHS). Formed from the merger of 22 separate executive branch units, it employees roughly 180,000 people. Contemporary presidents have expressed some concern about the size and reach of the national government. In his 1981 inaugural address, for instance, President Ronald Reagan declared that "government is not the solution to our problem, government is the problem." Fifteen years later, in his State of the Union address, President Bill Clinton exclaimed, "The era of big government is over." Needless to say, the era of big government is back, if it ever went away. Under presidents of both parties, the national government continues to grow. The administration of Republican President George W. Bush witnessed substantial governmental growth, partially triggered by new domestic security, law enforcement, and military requirements after the September 11, 2001, terrorist attacks. As journalist David S. Broder concluded, President Bush presided over one of the largest expansions of government in history. "He has created a mammoth Cabinet department [DHS], increased federal spending, imposed new federal rules on local and state governments, and injected federal requirements into every public school in America." President Bush also initiated the Troubled Asset Relief Program (TARP)—a major governmental intervention in the private sector—as part of the Emergency Economic Stabilization Act ( P.L. 110-343 ). TARP was authorized to purchase up to $700 billion in "troubled" real estate and other assets following a nationwide financial meltdown in numerous business enterprises. Democratic President Barack Obama took office in the midst of the most serious national economic crisis since the Great Depression. Regularly, the news media spotlighted such stories as the hikes in joblessness, home foreclosures, or plant closings. As a result, the government intervened dramatically in the marketplace. Trillions of dollars were committed to revive the ailing economy and prevent the recession from spiraling downward into another depression. "Not since Lyndon B. Johnson," wrote a congressional journalist, has a president like Obama "moved to expand the role of government so much on so many fronts—and with such a sense of urgency." In short, the probabilities of any major retrenchment or rollback in the role and scope of the federal government seem remote. Hence the importance of Congress exercising its implicit constitutional prerogative to check the delegated authority that it grants to federal departments and agencies. The goals of this report, then, are essentially six-fold: (1) highlight several reasons for the expansion of the role and reach of government; (2) discuss a few definitions of oversight; (3) spotlight three essential purposes of oversight; (4) comment upon a few oversight laws and rules; (5) review several important oversight techniques; and (6) identify several incentives and disincentives to the conduct of congressional oversight. The report concludes with summary observations. "The role of government in a free society must be a matter of continuous negotiation among members of the public," wrote Princeton Professor Michael Walzer. This fundamental idea is the essence of self-government by the people through their elected representatives. From the beginning, our Founding Fathers argued about the role of the national government. Their basic argument continues to this day. Two schools of thought emerged during this early period, one articulated by Thomas Jefferson and the other by Alexander Hamilton. Jefferson was an advocate of limited government: "That government governs best that governs least." Government closest to the people—state and local units—is to be preferred, according to Jefferson, to a robust and remote national government. As Jefferson said in his March 4, 1801, inaugural address: Still one thing more, fellow-citizens—a wise and frugal Government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government, and this is necessary to close the circle of our felicities. President Jefferson, however, was not reluctant to use the government to double the size of the country with the Louisiana Purchase. Jefferson's rival, Alexander Hamilton, favored a strong national government and an energetic chief executive as essential if the new nation was to survive and prosper. A proponent of the implied powers of government, Hamilton wrote in Federalist No. 31 : "A government ought to contain in itself every power requisite to the full accomplishment of the objects committed to its care, and to the complete execution of the trust for which it is responsible, free from every other control but a regard to the public good and to the sense of the people." Hamilton's philosophy, in brief, was that the national government could be a positive instrument for addressing common problems that no individual or locality could resolve by itself, such as maintaining a strong defense against foreign adversaries or creating a national currency. As Abraham Lincoln put it, "Government is people coming together collectively to do that which they could not do as well, or at all, individually." Fast forward to the contemporary era and it appears evident that the Hamiltonian view has largely prevailed over the Jeffersonian perspective. To be sure, Jefferson's ideas of limited government and states' rights resonate powerfully with millions of Americans including lawmakers, analysts, scholars, and others. Yet their actions often belie their words. Today's yeoman farmers might say they dislike or even resent big government, but they strongly support farm subsidies. Many people, it seems, are ideologically conservative but operationally liberal. On the one hand, they may emotionally view government as a necessary evil, but personally they support federal programs that benefit them, and even welcome the government's expansion in various areas (security from terrorist attacks, protection of the environment, and so on). The fundamental reality is that the national government has taken on increasingly numerous functions and responsibilities throughout American history. The 20 th century—from the Progressive era to World War I, from the New Deal to the Great Society—witnessed a huge increase in the size and power of government. Its expansion was driven by a number of factors. Domestic and international crises have expanded the reach of the government. Wars, for example, threaten the nation itself, and the government often accrues new and expanded prerogatives to protect the country. The intelligence community, as an example, grew rapidly during the Cold War as the United States of America faced a major threat from a nuclear-armed superpower rival: the Soviet Union. The internationalization of numerous domestic issues—trade, the environment, immigration, drug trafficking, and more—often requires a federal response for their resolution. Complexity is another factor the promotes governmental growth. New issues and problems constantly arise that call for governmental action, such as food safety or national preparedness in the event of an epidemic or pandemic (H1N1, the swine flu virus, for instance). Many national programs, moreover, are crosscutting—that is, more than one federal agency, jurisdiction, and, in some cases, international organizations are engaged in policy implementation—which adds to the complexness of determining how or what the government is doing. To be sure, a nation with over 300 million people creates a variety of federal issues (civil rights, financial turmoil, high unemployment, and so on). Even when issues have been traditionally under the purview of states and localities, such as education, it does not mean that they are exclusively state and local responsibilities. In brief, a host of military, economic, and social challenges, along with many other factors (industrialization, globalization, scientific and technological developments, public demand, and more), all contributed to the large expansion in the size and reach of the federal government. Given today's large federal establishment, congressional oversight is more important than ever in ensuring that the federal government functions economically, efficiently, and effectively. The American public's traditional and usually healthy skepticism about concentrating power in government underscores the legislative review function's significant role in holding federal agencies and officials accountable for their actions and decisions. To determine the quantity and quality of legislative oversight is not an easy assignment, however. Different definitions of oversight influence perspectives on the adequacy of the review function. Oversight has two basic dictionary meanings. First, it denotes some form of legislative "supervision" or "watchfulness" of delegated authority to executive branch entities and officials. It is this general definition that orients the focus of this report. The second meaning of oversight implies a "failure to notice"—something that is overlooked or inadvertently omitted. Ironically, the two definitions may sometimes overlap one another. As Speaker Thomas P. O'Neill, D-Mass. (1977-1987), once exclaimed: Members "like to create and legislate, but we have shied from both the word and deed of oversight." A Senator offered a related observation about the need for more overseeing rather than overlooking. Congress has "delegated so much authority to the executive branch of government, and we ought to devote more time to oversight then we do." Scholars have advanced a number of definitions of oversight that go beyond the meanings provided in dictionaries. For example, one political scientist wrote: '"Oversight,' strictly speaking refers to review after the fact. It includes inquiries about policies that are or have been in effect, investigations of past administrative actions, and the calling of executive officers to account for their financial transactions." Another political scientist provided an expanded definition: "Legislative oversight is behavior by legislators and their staffs, individually or collectively, which results in an impact, intended or not, on bureaucratic behavior." A third scholar offered a narrower definition: "I define [oversight] as congressional review of the actions of federal departments, agencies, and commissions, and of the programs and policies they administer, including review that takes place during program and policy implementation as well as afterward." The absence of consensus on a precise definition means that it is difficult quantitatively to know how much oversight Congress is performing, largely through its committees and subcommittees. Oversight is a ubiquitous activity on Capitol Hill that occurs in various ways, forums, and activities. It is subsumed in many hearings, meetings, or informal settings that may not be labeled as "oversight." Indeed, the review function is a byproduct of many congressional activities—committee meetings on legislation, the confirmation process, casework, informal Member and staff meetings with executive officials, legislative communications with administrative leaders, and so on. Thus, questions about whether Congress does enough oversight are difficult to answer because of methodological limitations (time and resources, for instance) in measuring its frequency comprehensively and systematically. Moreover, how "oversight is defined affects what oversight one finds." Suffice it to say that undercounting surely characterizes the amount of oversight carried out by Congress primarily through the work of its committees, Members, staff aides, and legislative support units, such as the Government Accountability Office (GAO). Worth raising is a related matter: What constitutes effective or quality oversight? The traditional method of exercising congressional oversight is through committee hearings and investigations into executive branch operations. For more than 200 years, Congress has conducted investigations of varying types and with varying results. Along the way, there have been abuses and excesses—for example, the 1954 Army-McCarthy hearings about communists in government—and successes and accomplishments. For instance, the World War II Truman Committee's (after Senator and later President Harry S Truman) investigation of the war mobilization effort, including waste and fraud in defense procurement, was viewed by many as a large success. Although people may disagree on what constitutes "quality" oversight, there are a number of components that appear to foster effective oversight. They include (1) a committee chair who is committed to doing oversight on a sustained basis; (2) the involvement of committee members in an activity that might take weeks or months of time and resources; (3) bipartisanship: more is likely to be achieved when both parties work together rather than against each other; (4) an experienced professional staff with investigatory skills; (5) preparation and documentation in advance of public hearings; (6) coordination with other relevant committees of jurisdiction; and (7) follow-through to ensure that any recommendations of the committee are acted upon. Helpful, too, is a cooperative Administration. Absent cooperation, committees may need to use compulsory processes (subpoena and contempt) to obtain pertinent reports and documents and the testimony of key witnesses. Oversight is an implicit constitutional obligation of the Congress. According to Historian Arthur Schlesinger, Jr., the framers believed it was not necessary to make specific reference to "oversight" in the Constitution. "[I]t was not considered necessary to make an explicit grant of such authority," wrote Schlesinger. "The power to make laws implied the power to see whether they were faithfully executed." The Constitution also granted Congress an array of formal powers—the purse strings, lawmaking, impeachment, among others—to hold the president and the administration accountable for their actions or inactions. In short, oversight plays a key role in our system of checks and balances. There is a large number of overlapping purposes associated with oversight. This array can be divided into three basic types: programmatic, political, and institutional. P rogrammati c purposes include such objectives as making sure agencies and programs are working in a cost-effective and efficient manner; ensuring executive compliance with legislative intent; evaluating program performance; improving the economy of governmental performance; investigating waste, fraud, and abuse in governmental programs; reviewing the agency rulemaking process; acquiring information useful in future policymaking; or determining whether agencies or programs are fulfilling their statutory mission. There are also political purposes associated with oversight, such as generating favorable publicity for lawmakers, winning the electoral support of constituents and outside groups, or rebutting criticisms of favorite programs or agencies. After all, oversight occurs in an ever-present political context in which Congress's relationship with administrative entities can range from cooperation to conflict. There are, moreover, inherent constitutional and political tensions between Congress and the President even during periods of unified government (one party in charge of the House, Senate, and White House). Partisan and inter-branch conflicts are not uncommon in the conduct of the legislative review function. In addition, there are institutional oversight purposes that merit special mention, because they serve to protect congressional prerogatives and strengthen the American public's ability to evaluate and reevaluate executive activities and actions. Three institutional purposes include checking the power of the executive branch; investigating how a law is being administered; and informing Congress and the public. One of the most dramatic developments of the modern era, as noted earlier, is the huge expansion of executive entities. Little surprise that some scholars refer to "the administrative state"—the plethora of federal departments, agencies, commissions, and boards. The rise of the administrative state has produced a policymaking rival to the Congress. Administrators do more than simply "faithfully execute" the laws according to congressional intent (which may be vague). Federal agencies are filled with knowledgeable career and noncareer specialists who, among other things, write rules and regulations that have the force of law; enforce the rules via investigations and inquiries; formulate policy initiatives for Congress and the White House; interpret statutes in ways that may expand their discretionary authority or undermine legislative intent; and shape policy development by "selling" their ideas to lawmakers and committees via the hearings process, the issuance of agency reports, and in other ways. The large role of the executive branch, whose activities affect nearly every citizen's life, underscores the critical role of oversight in protecting the policymaking prerogatives of Congress and holding administrative entities accountable for their actions and decisions. Congressional oversight ideally involves the continuous review by the House and Senate, especially through their committee structures, of how effectively and efficiently the executive branch is carrying out legislative mandates. The "continuous watchfulness" precept—an obligation statutorily assigned to the standing committees by the Legislative Reorganization Act of 1946—implied that Congress would henceforth participate actively in administrative decisionmaking, in line with the observation that "administration of a statute is, properly speaking, an extension of the legislative process." Oversight, in brief, is crucial to the lawmaking process. Only by investigating how a law is being administered can Congress discover deficiencies in the original statute and make necessary adjustments and refinements. As a Senator stated, "We must do more than write laws and decide policies. It is also our responsibility to perform the oversight necessary to insure that the administration enforces those laws as Congress intended." A central function of representative government, wrote two Senators, is "to allow a free people to drag realities out into the sunlight and demand a full accounting from those who are permitted to hold and exercise power." Dragging "realities out" is how Congress shines the spotlight of public attention on many significant issues, allowing lawmakers and the American people to make informed judgments about executive activities and actions. Woodrow Wilson, in his 1885 classic titled Congressional Government , declared that Congress's informing function "should be preferred even to its legislative [lawmaking] function." He explained: Unless Congress have and use every means of acquainting itself with the acts and dispositions of the administrative agents of government, the country must be helpless to learn how it is being served; and unless Congress both scrutinize these things and sift them by every form of discussion, the country must remain in embarrassing, crippling ignorance of the very affairs which it is most important it should understand and direct. To encourage, promote, and prod the legislative branch to do more oversight, the House and Senate have enacted an array of laws and rules that help to complement its many techniques (see " Oversight Techniques " section below) for monitoring executive branch performance. Mention of a few laws and rules illustrates Congress's continuing interest in strengthening its own procedures for oversight, as well as obtaining oversight-related information from the executive branch. Two statutes worth briefly noting for illustrative purposes are the Government Performance and Results Act of 1993 (GPRA, or the Results Act) and the Congressional Review Act of 1996 (CRA). The Results Act aims to promote more cost-effective federal spending by requiring agencies to set strategic goals—for example, a statement of their basic missions and the resources required to achieve those objectives—and to prepare annual performance plans and annual performance reports, which are submitted to Congress and the President. GPRA strengthens legislative oversight by enhancing committees' ability to hold agencies accountable for the implementation of their performance goals and actual outcomes; to evaluate the budget requests of various agencies, and to reduce or eliminate unnecessary overlap and duplication among federal agencies that implement similar policy areas. For example, various lawmakers have urged an overhaul of the food inspection structure, because there are "at least 15 government agencies [that] have a hand in making sure food is safe under at least 30 different laws." The administrative reality, exclaimed a House Appropriations subcommittee chair, is that there is "no one person, no individual today who is responsible for food safety." The chair's observation was underscored by a House majority leader when he held up a pizza box: "If this were a cheese pizza, it would be inspected by the [Food and Drug Administration]. If it were a pepperoni pizza, it would be inspected by the [Department of Agriculture]. We definitely have a great deal of duplication here." The Congressional Review Act enables Congress to review and disapprove agency rules and regulations. Under the CRA, agencies must submit their major rules to the House, Senate, and Government Accountability Office (GAO) before they can take effect. The act provides for expedited procedures in the Senate (but not the House) if a lawmaker introduces a joint resolution of disapproval. "To be eligible for consideration under the terms of the Act, a disapproval resolution must be submitted in either house within 60 days after Congress receives the rule." This law, however, has been little used by Congress to block agency rules. Since the law went into effect, only one rule has been rejected (an ergonomics rule in March 2001) despite nearly 50,000 rules that have become effective. Various interpretive ambiguities, such as whether the act allows disapproval of parts of a rule or only its entirety, account in part for its limited use. Analysts also acknowledge that the law contains a potential flaw: The President can veto the joint resolution of disapproval—"which is likely if the underlying rule is developed during his administration." Congress is unlikely to override the President's veto given the two-thirds vote required of each chamber. Still, the law is available to either chamber to express its views about agency rulemaking. Congress, to be sure, can repeal rules by passing statutes, including appropriations measures that include provisions "designed to prevent or restrict the development, implementation, or enforcement" of certain rules or types of rules. The two chambers, especially the larger House, have a number of formal oversight rules. For example, the House has a rule requiring all standing committees to prepare at the start of each Congress an oversight plan that, among other things, ensures to the maximum extent feasible that "all significant laws, programs, or agencies within its jurisdiction are subject to review every 10 years" (House Rule X, clause 2). At the start of the 111 th Congress (2009-2011), the House amended its rules "to require each standing committee to hold at least three hearings per year on waste, fraud, and abuse [in the programs and agencies] under each respective committee's jurisdiction." Committees, moreover, are obligated to hold a hearing if "an agency's financial statements are not in order" and if a program under the panel's jurisdiction is "deemed by GAO to be at high risk for waste, fraud, and abuse." The Senate, too, has a number of rules that address oversight. Committee reports accompanying each bill or joint resolution must contain an evaluation of their regulatory impact, including "a determination of the amount of additional paperwork that will result from the regulations to be promulgated pursuant to the bill or joint resolution" (Senate Rule XXVI, clause 11). The Senate assigned comprehensive oversight authority to certain standing committees (see Rule XXV) for specific policy areas, such as oceans policy or energy and resources development. The Senate chair who authored the rule explained its purposes. Standing committees are directed and permitted to undertake investigations and make recommendations in broad policy areas—for example, nutrition, aging, environmental protection, or consumer affairs—even though they lack legislative jurisdiction over some aspects of the subject. Such oversight authority involves subjects that generally cut across the jurisdictions of several committees. Presently, no single committee has a comprehensive overview of these policy areas. [This rule change] corrects that. It assigns certain committees the right to undertake comprehensive review of broad policy issues. The House has a similar rule which it calls "special oversight." For instance, the Committee on Homeland Security is authorized to "review and study on a continuing basis all Governmental activities relating to homeland security" (House Rule X, clause 3) even though some of those activities fall within the legislative jurisdiction of other standing committees. In carrying out its oversight responsibilities, Congress must be able to choose from a variety of techniques to hold agencies accountable, so that if one technique proves to be ineffective, committees and Members can employ others singly or in combination. Most of these techniques are utilized by the committees of Congress: standing, subcommittee, select, or special. In no particular order, they include such oversight methods as the10 discussed briefly below. A traditional method of congressional oversight is hearings and investigations into executive branch operations. Legislators need to know how effectively federal programs are working and how well agency officials are responding to legislative or committee directives. And they want to know the scope and intensity of public support for government programs to assess the need for statutory changes. Although the terms "hearings" and "investigations" overlap ("investigative hearings," for example) and they may look alike in their formal setting and operation, a shorthand distinction is that hearings focus generally on the efficiency and effectiveness of federal agencies and programs. Investigations, too, may address programmatic efficiency and effectiveness, but their primary focus—triggered by widespread public interest and debate—is often on allegations of wrongdoing, lack of agency preparedness or competence, fraud and abuse, conflicts of interest, and the like. Famous examples include investigations so well-known that a few words are often enough to trigger the attentive public's recollection, such as the 1972 Watergate break-in, the 1987 Iran-Contra affair, or the Hurricane Katrina debacle of 2005. Congress can pass authorizing legislation that establishes, continues (a reauthorization), or abolishes (a de-authorization) a federal agency or program. It can enact "statutes authorizing the activities of the departments, prescribing their internal organization and regulating their procedures and work methods." Once an agency or program is created, the reauthorization process, which typically occurs on an annual or multiyear cycle, can be an important oversight tool. As a House member observed during debate on a bill to require the annual reauthorization of the Federal Communications Commission (FCC): Our subcommittee hearings disclosed that the FCC needs direction, need guidance, needs legislation, and needs leadership from us in helping to establish program priorities. Regular oversight through the reauthorization process, as all of us know in Congress, is necessary, and nothing brings everybody's attention to spending more forthrightly than when we go through the reauthorization process. Significant issues are often raised during the authorization or reauthorization process. Lawmakers may ask such questions as: Can the agency be made smaller? If this program or agency did not exist, would it be created today? Should functions that overlap several agencies be merged or consolidated? What fundamental changes need to be made in how the department operates? Congress probably exercises its most effective oversight of agencies and programs through the appropriations process. As James Madison wrote in The Federalist Papers No. 58: "The power of the purse may, in fact, be regarded as the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people, for obtaining a redress of every grievance, and for carrying into effect every just and salutary measure." By cutting off or reducing funds, Congress can effectively abolish agencies or curtail federal programs. For example, in its various committee reports to accompany FY2010 appropriations measures, the House Appropriations Committee includes "a three-part list of terminations, program reductions and White House initiatives that have been denied." By increasing funds, appropriators can build up neglected program areas. In either case, the appropriating panels in each chamber have formidable power to shape ongoing federal agencies and programs. A noted, congressional budget expert remarked that the appropriating process as an oversight method is comparable to a Janus (after the mythical Roman god)-like weapon: "The stick of spending reductions in case agencies cannot satisfactorily defend their budget requests and past performance, and the carrot of more money if agencies produce convincing success stories or the promise of future results." Congress has created statutory offices of inspectors general (IGs) in nearly 70 major federal entities and departments. The IGs, for example, are located in all fifteen cabinet departments, the Central Intelligence Agency (CIA), and the independent regulatory commissions. Granted substantial independence by the Inspectors General Act of 1978, as amended in 1988 and again in 2008, these officials are authorized to conduct investigations and audits of their agencies to improve efficiency, end waste and fraud, discourage mismanagement, and strengthen the effectiveness and economy of agency operations. Appointed in various ways—in most cases either by the President subject to Senate confirmation or by agency heads—IGs report their findings and recommendations to (1) the Attorney General in cases of suspected violations of federal criminal law, (2) semiannually to the agency head, who must transmit the IG report to Congress within thirty days with no changes to the report but with his or her suggestions; and (3) in the case of "particularly serious or flagrant problems," immediately to the agency head who must send the report to Congress within seven days unaltered but with his or her recommendations. Inspectors generals, said a Senator, are "the government's first line of defense against fraud." Congress also has created special inspectors generals (SIGs) who have responsibility for auditing and investigating specific programs. For example, there is a SIG for Iraq Reconstruction (SIGIR) another SIG for Afghanistan Reconstruction (SIGAR), and still another SIG for the Troubled Asset Relief Program (SIGTARP). Whether regular or special, IGs strive to keep Congress fully and currently informed about agency activities, problems, and program performance through such practices as the issuance of periodic reports and testimony before House and Senate committees. The Government Accountability Office (GAO), formerly titled the General Accounting Office until the name change in 2004, was established by the Budget and Accounting Office of 1921. With about 3,100 employees, GAO functions as Congress's investigative arm, conducting financial and program audits and evaluations of executive activities, operations, and programs. For example, in one study, GAO reported "that 19 of 24 Federal agencies … could not fully explain how they had spent taxpayer money appropriated by Congress." The head of GAO is the Comptroller General (CG), who is nominated by the President (following a recommendation process involving the bipartisan leaders of the House and Senate) and subject to the advice and consent of the Senate for a non-renewable 15-year term. The GAO conducts field investigations of administrative activities and programs, prescribes accounting standards for the executive branch, prepares policy analyses, adjudicates bid protests, makes recommendations for legislative action, evaluates programs, and provides legal opinions on government actions and activities. The office submits hundreds of reports to Congress annually, describing ways to root out waste and mismanagement in executive branch programs and to promote program performance. One of its traditional reports to Congress is on government programs and activities that are "high risk," that is, they require significant improvements in their operations and performance. Numerous laws require executive agencies to submit reports periodically, and as required by specific events or certain conditions, to Congress and its committees. As one scholar explained: Reporting requirements are provisions in laws requiring the executive branch to submit specified information to Congress or committees of Congress. Their basic purpose is to provide data and analysis Congress needs to oversee the implementation of legislation and foreign policy by the executive branch. Generally the report requirement encourages self-evaluation by the executive branch and promotes agency accountability to Congress. Reporting requirements involve weighing Congress's need for information and analysis to conduct evaluations of agencies and programs against the imposition of burdensome or unnecessary obligations on executive entities. (Recall, too, that IGs regularly report to Congress.) High-ranking public officials are chosen by the President "by and with the Advice and Consent of the Senate," in accord with the Constitution. In general, the Senate gives the President considerable latitude in selecting cabinet heads, nominees to regulatory boards and commissions, and other significant executive branch positions. Nomination hearings establish a public record of the policy views of nominees, on which they could be called to account at a later time. Committees, for example, might ask agency nominees to discuss their plans for addressing the high-risk programs under their jurisdiction that GAO identified as being vulnerable to waste, fraud, and abuse. Committees may also extract pledges from nominees that they will testify at hearings when requested to do so, with the implicit acknowledgement that otherwise the appointee's name might not be reported for consideration to the full Senate. They can also inquire into nominees' previous government experience and other pertinent matters. Program evaluation is an approach to oversight that uses social science and management methodology, such as surveys, cost-benefit analyses, and efficiency studies, to assess the effectiveness of ongoing programs. This type of analysis is often conducted by the GAO, IGs, and the agencies themselves. President Obama has stressed the importance of measuring the effectiveness of government programs. "All programs—from Medicare to small-business loans—will be judged based on their progress in meeting certain quantifiable goals developed with input from agencies, Congress, management experts and the public," he said. Peter Orszag, the director of the Office of Management and Budget (OMB), added: "Rigorous, independent program evaluation can be a key resource in determining whether government programs are achieving their intended outcomes as well as possible and at the lowest possible cost." Each lawmaker's office handles thousands of requests each year from constituents seeking help in dealing with executive agencies. The requests range from inquiries about lost Social Security checks or delayed pension payments to disaster relief assistance and complicated tax appeals to the Internal Revenue Service. "Constituents perceive casework in nonpolitical terms," wrote two scholars. "They expect their representatives to provide [this service]." Casework, an ombudsman-like function, has the positive effect of bringing quirks in the administrative machinery to Members' attention. Solutions to an individual constituent's problems can suggest legislative remedies on a broader scale. On occasion, constituents' casework requests may be used in oversight hearings by Members to highlight and lend support to a problem or shortcoming in the operations of a program or agency. The ultimate check on the executive (and judicial) branch is impeachment and removal from office, and it is vested exclusively in Congress. Article II, section 4, of the Constitution states: "The President, Vice President, and all Civil Officers of the United States, shall be removed from office on Impeachment for, and Conviction of, Treason, Bribery, or other high Crimes and misdemeanors." The House has the authority to impeach an official by majority vote. (Impeachment is the formal lodging of charges against an official.) House trial managers then prosecute the case before the Senate, where a two-thirds vote is required for conviction. The process of impeachment and removal is complex and cumbersome; as a result, it has been employed in over 200 years only in a limited number of instances involving executive branch officials, judges, and Presidents. Despite the importance of oversight, "pass it and forget it" lawmaking sometimes occurs on Capitol Hill. This reality is not to suggest that committees and subcommittees fail to hold regular oversight hearings and meetings, often aimed at rooting out government waste and abuse and, more broadly, monitoring the executive branch. Instead, there are various institutional and other developments that have limited the ability of committees and lawmakers to carry out their "continuous watchfulness" function in a continual manner. There are, in brief, various disincentives and incentives associated with the conduct of oversight. Three will be spotlighted in each category for illustrative purposes. First, there are time and energy limits. Workload-packed legislative schedules, constant campaign fund-raising, weekly travel back-and-forth to Members' districts or states, periodic meetings with constituents visiting Washington, or print and media interviews are among the factors that combine to reduce constant attention to oversight. The term lawmaker , moreover, suggests where many Members prefer to spend much of their time. As former Speaker Newt Gingrich, R-GA (1995-1999) put it: "This is the city [Washington, DC] which spends almost all of its energy trying to make the right decisions and almost none of its energy focusing on how to improve implementing the right decisions. And without implementation, the best ideas in the world simply don't occur." Second, unified government could act as a disincentive to assertive and aggressive oversight of administrative departments and agencies, especially during an era of partisan polarization. As one senior House Republican said of President George W. Bush's Administration: "Our party controls the levers of government. We're not about to go out and look beneath a bunch of rocks to try and cause heartburn. Unless they really screw up, we're not going to go after them." Added another experienced GOP lawmaker: "We ended up functioning like a parliament, not a Congress. We confused wanting a joint agenda with not doing oversight." Third, the policy or political payoff might be minimal at best or counterproductive at worst. Oversight can be unglamorous, tedious, technical, and long-term work that achieves few results. "To do it right," said a Republican Senator, "you have to hear an endless stream of witnesses, review numerous records, and at the end of it you may find an agency was doing everything right. It is much more fun to create a new program." Moreover, lawmakers recognize that hard-hitting investigations might arouse the ire of numerous constituents and special interests, which could jeopardize their chance of winning reelection. One of the principal incentives that encourages legislative oversight of the executive branch is divided government (one party in charge of one or both chambers or Congress, the other party in control of the White House). Political and substantive issues are important factors that prompt heightened interest in oversight. Politically, as former Representative Lee Hamilton, D-IN, noted, when Democrats controlled the House during the first two years of the Clinton administration, no subpoenas were issued to executive officials by the panel with broad oversight jurisdiction. However, when Republicans captured control of the House, that same committee handed out "well over a thousand subpoenas to Clinton administration officials." Substantively, policy disagreements between the President and the congressional majority party also contribute to the amount and scope of oversight. As one scholar concluded: [P]olicy divergence is most likely to occur under divided government, so the majority party in Congress will want to constrain the agencies under the president's control. In addition, members of the majority party may believe they can benefit from using oversight to emphasize policy differences between their party and the president's party, and if in the case of such hearings and investigations they embarrass a president and his agency, this is not an insignificant [political] side benefit. Electoral incentives are another factor that can motivate lawmakers to oversee the bureaucracy. The opportunity to assist constituents in their dealings with federal agencies or to receive favorable publicity back home for resolving flaws or inequities in executive programs is a potential electoral bonus for members of Congress. Committee and subcommittee chairs "seek a high pay off—in attention from the press and other agencies—when selecting federal programs to be their oversight targets." Electoral support from constituents, combined with press and media attention, are likely to prompt additional oversight activity by committees and lawmakers. A third incentive for more oversight is large public concern about various issues (surging federal deficits, for instance) or events (a terrorist incident, for example). Numerous analysts and studies emphasize that the nation faces short- and long-term fiscal challenges. Growing citizen concern about the urgency of this issue could provoke committees to devote considerable resources to scrutinizing federal programs for waste and inefficiency, even eliminating or scaling back agencies or programs that are duplicative or not working. The money saved might then be used more productively. To be sure, a specific event can also prompt oversight. The unsuccessful 2009 Christmas Day attempt to blow up an airplane reportedly triggered no fewer than eight House and Senate committee hearings and investigations "to explore the intelligence, homeland security and foreign policy ramifications of the failed attack" by a Nigerian-born terrorist. There is no doubt that Congress has significant authority to oversee the executive branch. Control of the purse strings, enactment of laws, the conduct of investigations, or the Senate's confirmation role are among the principal levers of power available to the legislative branch to hold executive officials accountable for the implementation of federal policies and programs. In carrying out its oversight responsibilities, Congress engages in different, often overlapping, types or models of review: for example, programmatic versus political, adversarial versus cooperative, formal (hearings) versus informal (staff meetings with agency officials), or "police patrol" versus "fire alarm." Police patrol oversight is akin to "the cop on the beat": pro-active, regular, and systematic review of administrative performance by House and Senate committees. Fire alarm oversight is reactive; it occurs when outside events or public interest triggers episodic reviews of the executive branch. Significantly, Congress may be obtaining some extra police patrol assistance through the combination of technology and civic-minded individuals or groups. A rather new oversight trend is the "public as watchdog," or, stated differently, the "democratization" of the review function. There are many groups, such as the Project on Government Oversight (POGO) or The Heritage Foundation, bloggers, and websites devoted to monitoring federal expenditures and activities. For example, websites such as Recovery.gov (initiated and maintained by a task force of federal inspectors general) or StimulusWatch.org (an independent website developed by volunteers) enable interested individuals to monitor projects that receive money from more than $800 billion economic stimulus package enacted during the first session of the 111 th Congress. President Obama has made transparency and open government one of his top priorities. One result is that federal agencies are posting more of their information and data online so citizens who visit the sites can assess how their dollars are being spent or how well agencies are managing their various projects. As the government's chief information officer stated, the new-found transparency "will elicit a more informed public oversight to help guide federal policies and programs." A better informed public is likely to make their evaluations of federal programs and expenditures known to congressional lawmakers. The blogosphere, in short, adds millions of extra eyes to oversight of government spending and activities. Ultimately, Congress will decide how best to pursue its oversight responsibility. Much will depend on the context of the times, the willingness of Members and their staff to watch and assess the executive branch, and Congress's relationship with the incumbent Administration. This relationship may range from cooperation to confrontational, but it is principally Congress that can ensure that executive policies reflect the values of the American people, anticipate long-range trends, and meet the challenges of an every-changing nation and world.
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A fundamental objective of congressional oversight is to hold executive officials accountable for the implementation of delegated authority. This objective is especially important given the huge expansion of executive influence in the modern era. If the Founding Fathers returned to observe their handiwork, they would likely be surprised by such developments as the creation of a "presidential branch" of government (the Office of Management and Budget, the National Security Council, and the like) and the establishment of so many federal departments and agencies. From three departments in 1789 (State, Treasury, and War, renamed Defense in 1947), a dozen more have been added to the cabinet. The newest creation in 2002, is the Department of Homeland Security (DHS). Formed from the merger of 22 separate executive branch units, it employs roughly 180,000 people. Clearly, given the role and scope of the federal establishment, the importance of Congress's review function looms large in checking and monitoring the delegated authority that it grants to federal departments and agencies. The goals of this report, then, are essentially six-fold: (1) highlight several reasons for the expansion of the federal government; (2) discuss a few definitions of oversight; (3) spotlight three essential purposes of oversight; (4) comment upon a few oversight laws and rules; (5) review several important oversight techniques; and (6) identify several incentives and disincentives to the conduct of congressional oversight. The report concludes with summary observations.
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Federal law, commonly known as the Hatch Act, regulates certain government employees' participation in partisan political activities. When enacting the current provisions regulating employees' political participation, Congress expressly stated that the policy underlying the statute recognized employees' right to engage freely "in the political processes of the Nation." Employees in the executive branch of the federal government have been subject to certain limitations and restrictions on their partisan political activities for over a century. A general ban on voluntary, off-duty participation in partisan politics by merit system employees was instituted by executive order in 1907. Specifically, the executive order prohibited employees from using "official authority or influence for the purpose of interfering with an election or affecting the result thereof." Employees retained their right to vote and privately express political opinions, but were prohibited from taking "active part in political management or in political campaigns." Known as Civil Service Rule 1, this restriction and all of the administrative interpretations under it were eventually codified in 1939 and made applicable to most federal executive branch employees under a law commonly known as the Hatch Act. Since 1940, state and local government employees whose official jobs are connected with activities that receive federal funding have come within the purview of a part of the federal Hatch Act regarding partisan political activities. The Hatch Act and civil service restrictions were seen in some respects as protections of federal employees from coercion by higher level, politically appointed supervisors to engage in political activities against their will, as well as an effort by Congress and the Executive to assure a nonpartisan and evenhanded administration of federal laws and programs. With the advent of the modern, more independent and merit-based civil service, and the adoption of increased statutory and regulatory protections of federal employees against improper coercion and retaliation, the need for a broad ban on all voluntary, outside activities in politics as a means to protect employees was seen as less necessary and more restrictive of the rights of private expression of millions of citizens than was needed to accomplish the goals of the Hatch Act. Accordingly, Congress made significant changes to the law in the Hatch Act Reform Amendments of 1993. The 1993 amendments allow most federal employees to engage in a wide range of voluntary, partisan political activities in their time off-duty, away from their federal jobs, and off of any federal premises. While many limitations on employees' political activity were removed, the amendments retained strict restrictions for some employees of designated agencies and provided more express statutory prohibitions on workplace politicking. Most recently, Congress made changes to the Hatch Act in the Hatch Act Modernization Act of 2012. These amendments did not include significant changes to the substantive prohibitions on federal employees' political activity. However, these amendments did change the status of employees of the District of Columbia, who previously were subject to Hatch Act restrictions but now are expressly excluded from coverage, and made changes to the mechanisms for enforcement of Hatch Act violations. In its current form, the Hatch Act generally prohibits some categories of political activities for all covered employees. These restrictions generally prohibit such employees from the following: using their "official authority or influence for the purpose of interfering with or affecting the result of an election"; soliciting, accepting, or receiving political campaign contributions from any person; running "for election to a partisan political office"; soliciting or discouraging participation in political activity of any person who either has an application for a grant, contract, or other status pending before the employing agency or is the subject of an ongoing audit, investigation, or enforcement action by the employing agency; engaging in partisan political activity on official duty time; on federal property; while wearing a uniform or insignia identifying them as federal officials or employees; or while using a government vehicle. Specific political activities that are permitted or prohibited for each category of federal employees covered by the Hatch Act are provided in the Appendix of this report. Notably, employees are not prohibited from all forms of political activity, and the Hatch Act expressly preserves an employee's "right to vote as he chooses and to express his opinion on political subjects and candidates." The U.S. Office of Special Counsel (OSC), an independent executive agency, is responsible for administering the Hatch Act provisions, including investigating complaints and interpreting the parameters of permissible and prohibited political activities. If OSC believes that disciplinary action is warranted, it provides a complaint and statement of facts to the employee and the Merit Systems Protection Board. Employees, if subject to such a complaint, are entitled to certain procedural rights, including representation and a hearing. Penalties under the Hatch Act are generally in the nature of administrative, personnel actions. Following criticism of the penalty structure as "overly-restrictive," current penalties include removal, reduction in grade, debarment from federal employment for up to five years, suspension, reprimand, or a civil fine. The Hatch Act defines employee for purposes of the act as "any individual, other than the President and Vice President, employed or holding office in—(A) an Executive Agency other than the General Accounting Office [Government Accountability Office]; or (B) a position within the competitive service which is not in an Executive agency...." The definition expressly excludes members of the uniformed services and individuals employed or holding office in the government of the District of Columbia. Furthermore, by definition and design, the Hatch Act does not apply to employees in the legislative or judicial branches of the federal government. Notably, although not all employees of the federal government are subject to the Hatch Act, some provisions of the federal criminal code relating to political corruption and campaign finance apply to all federal officers and employees in all three branches of government. The broad definition means that the Hatch Act generally applies to all civilian officers and employees in the executive branch of the federal government. With the exception of the President and Vice President themselves, individuals who are subject to Hatch Act restrictions include rank-and-file employees in the executive branch; all officials of the executive agencies and departments, including agency and department heads appointed by the President with advice and consent of the Senate; and all officials, staff, and aides in the offices of the President and Vice President. There are limited exceptions for applicability of the Hatch Act under certain circumstances, as discussed below. Following the relaxation of limitations on participation in political activity, the majority of individuals identified as "employees" subject to the Hatch Act are considered "less restricted employees." That is, these employees are subject to the standard rules provided by the Hatch Act, whether by statute or regulation, and generally are permitted to "take an active part in political management or in political campaigns," except for the general restrictions outlined above. Some employees covered by the Hatch Act are subject to additional restrictions under current law, and may be referred to as "further restricted employees." These designations mean that such employees are subject not only to the standard rules noted above, but also to additional restrictions in the relevant statutory provisions and regulations. These employees are subject to more restrictive provisions similar to the former "no politics" rule of the original Hatch Act discussed earlier. Further restricted employees are identified by the agencies for which they work or particular positions within the executive branch. The designated agencies generally deal with law enforcement or national security matters and include the following: the Federal Election Commission; the Election Assistance Commission; the Federal Bureau of Investigation; the Secret Service; the Central Intelligence Agency; the National Security Council; the National Security Agency; the Defense Intelligence Agency; the Merit Systems Protection Board; the Office of Special Counsel; the Office of Criminal Investigation of the Internal Revenue Service; the Office of Investigative Programs of the United States Custom Service; the Office of Law Enforcement of the Bureau of Alcohol, Tobacco, and Firearms; the National Geospatial-Intelligence Agency; the Office of the Director of National Intelligence; the Criminal Division of the Department of Justice; and the National Security Division of the Department of Justice. The heightened restrictions also apply to employees holding certain designated positions, including the following: career appointees in an Senior Executive Service position; administrative law judges; contract appeals board members; and administrative appeals judges. Employees in these agencies may not "take an active part in political management or political campaigns," unless the employee was appointed by the President with the advice and consent of the Senate. The law specifies that this prohibition means that these employees are subject to the rules in place under the original Hatch Act provisions (e.g., "no politics" even if off duty or away from their official jobs or workplace). However, further restricted employees are not entirely excluded from political action under the Hatch Act. That is, they may engage in a number of political activities in their capacity as private citizens (i.e., while not on duty, in the federal workplace, or otherwise representing or appearing to represent the government) if the activity "is not performed in concert with a political party, partisan political group, or a candidate for partisan political office." The Hatch Act provides a few limited exceptions, including for employees in certain high-ranking positions and for employees seeking to engage in political activities in certain municipalities. The Hatch Act provides an exception to allow certain high-ranking officials to "engage in political activity otherwise prohibited ... if the costs associated with that political activity are not paid for by money derived from the Treasury of the United States." The exception is available to employees who hold positions with responsibilities that "continue outside normal duty hours and while away from the normal duty post," such as presidential advisers or Cabinet officers appointed by the President with the advice and consent of the Senate. In other words, these officials may engage in political activities during what would be considered official working time, as long as federal funds are not used for such activities. Any such official must reimburse the U.S. Treasury for the federal resources used in campaign activities. Congress authorized regulations that would permit employees otherwise covered by the Hatch Act's restrictions "to take an active part in political management and political campaigns involving the municipality or other political subdivision in which they reside" in certain cases. Generally, this exception may be applied only to municipalities and political subdivisions that have a majority of voters employed by the federal government and expressly includes the District of Columbia and those in Maryland or Virginia that are also "in the immediate vicinity of the District of Columbia." While the Hatch Act includes several categories of restrictions, the restriction on political activities while on duty, in the federal workplace, or otherwise representing the government has been of particular interest in recent years, given various developments in the nature of federal employment. The changing nature of the workplace may raise questions regarding the balance between personal and professional activity, including various platforms of political activity such as email, mobile devices, social media, and telework. One of the categories of restrictions imposed by employees covered by the Hatch Act is commonly known as the prohibition on political activities on duty. That provision states the following: [a]n employee may not engage in political activity—(1) while the employee is on duty; (2) in any room or building occupied in the discharge of official duties by an individual employed or holding office in the Government of the United States or any agency or instrumentality thereof; (3) while wearing a uniform or official insignia identifying the office or position of the employee; or (4) using an vehicle owned or leased by the Government of the United States or any agency or instrumentality thereof. The Hatch Act includes very few definitions of its terms, and the meanings of its provisions are detailed in federal regulations. The scope of the prohibition on political activities on duty, including such activities conducted in the federal workplace, depends largely on the general definitions of these terms. Political activity is defined as "activity directed toward the success or failure of a political party, candidate for partisan political office, or partisan political group." Employees are considered to be on duty during any "time period when an employee is: (1) [i]n a pay status other than paid leave, compensatory time off, credit hours, time off as an incentive award, or excused or authorized absence (including leave without pay); or (2) [r]epresenting any agency or instrumentality of the United States Government in an official capacity." The federal workplace, that is, " a room or building occupied in the discharge of official duties by an individual employed or holding office in the Government of the United States or any agency thereof ," is defined to include federally owned or leased space in which employees regularly perform official duties and public areas of buildings controlled by the General Services Administration. These terms are particularly relevant when applying the Hatch Act to new work scenarios. For example, a mobile device used by an employee during the workday may not be used for partisan political activity, even if the employee does so using a personal device during a break, if the employee remains in the workplace during that break because it would violate the second prong of the prohibition. The Hatch Act does not specify how it is to be applied to various types of communication and methods of engaging in political activity. In other words, the manner in which an employee participates in political activity appears to be irrelevant to whether the activity is permissible. Thus, whether an employee meets with a subordinate in person or calls the subordinate over the phone to solicit contributions for a particular political activity, the employee could be in violation of the Hatch Act. Examples include the increased use of mobile devices (e.g., Blackberry, smartphones), incorporation of social media as a professional tool, and the growth of federal telework programs. Although email has been a common tool in federal offices for decades, the prevalence of smartphones, both for personal and professional use, over the last decade has highlighted new issues in regulation of political activity under the Hatch Act. For instance, to what extent may an employee use his or her official email account or a personal account on a work computer or smartphone to engage in political activity? Accordingly, OSC has offered guidance on the use of email to engage in political activity. In an advisory opinion, the agency examined an email sent by a federal employee entitled "Who is Barack Obama?," which included a number of opinions about then-presidential candidate Obama that OSC found to be in violation of the Hatch Act. OSC noted that the email included "very negative statements about Senator Barack Obama, specifically warn[ed] recipients to 'stay alert' about his candidacy, and stat[ed] that it has information recipients should consider in their 'choice.'" The opinion appears to indicate that the source of the content is at least a consideration in the analysis, highlighting that the "e-mail was not created by a federal employee. Rather, a federal employee received it and then forwarded it to others without adding any content." However, this notation has been considered irrelevant if the employee sends the email while on duty or in a federal workplace. While employees are permitted to receive partisan political emails to any account as well as forward an email from a government account to their own personal account, certain email activities are barred under Hatch Act restrictions. These include sending or forwarding a partisan political email while on duty or in a federal workplace. The prohibition applies to any account, meaning that employees are not only barred from sending such emails from their government accounts, but also prohibited from using personal accounts while at work, even if using their personal phone or tablet. Additionally, employees cannot send or forward such emails to subordinates, nor can they use email to send invitations to political fundraising events. The increased use of mobile communications has expanded the opportunity not only for employees to call or email while in a work environment, but also for use of other applications that may be used to engage in political activity, particularly various outlets of social media. In both their personal and professional capacities, the federal workforce also relies more heavily on the use of social media now than ever. Accordingly, application of the Hatch Act to these methods of communication has been of particular interest. Under OSC guidance, employees may engage in political activity on social media, with some restrictions. All employees are barred from doing so while on duty or in the federal workplace, from using their official titles, or from recommending or soliciting campaign contributions. Further restricted employees also must refrain from posting or linking to campaign or other partisan material, sharing Facebook pages of campaigns or other partisan groups, or retweeting posts from such entities' Twitter accounts. Specific rules apply with regard to social media contacts between supervisors and subordinates, which permit statements directly generally from a supervisor's account, but prohibit statements directed at subordinates in particular. Furthermore, OSC has identified some limitations on the biographical content of users' accounts, such as use of official title, photographs indicating political preferences, and profile information. OSC has announced a number of disciplinary measures related to these new platforms of activity after investigations into some federal employees' activities revealed violations of applicable prohibitions on political activities. In one case, OSC "intended to pursue prosecution" of an employee who used Twitter to advocate for a candidate and to solicit contributions. The employee had issued over 30 tweets but resigned before the prosecution moved forward. In another case, an employee at the Federal Election Commission (FEC) resigned after evidence showed that the employee had issued "dozens of partisan political tweets" and participated in an "internet broadcast via webcam from an FEC facility, criticizing the Republican Party and then-Presidential candidate Mitt Romney." OSC barred the employee from employment in the executive branch for two years in that case. In both of these examples, specific details of the settlements reached were not released. For instance, it is not clear whether the employees used a personal Twitter account or an official account to engage in the restricted activities. Congress has enacted statutory requirements that direct federal agencies to adopt telework policies, and in the most recent report to Congress, the U.S. Office of Personnel Management (OPM) indicated that federal telework programs have expanded accordingly, both in eligibility and participation of employees. Telework has raised several questions with regard to the applicability of the Hatch Act. In congressional testimony, OSC explained that a significant number of employees work from home while using government-issued equipment. Thus, application of Hatch Act restrictions to teleworking employees could be analyzed under several possible frameworks: (1) determination of whether the employee is on duty; (2) clarification of whether the telework location is a federal workplace; and (3) potential expansion of the prohibition on the use of government vehicles to include other government equipment (e.g., laptops, smartphones). Current law does not identify which of these frameworks may be most appropriate, but OSC guidance indicates that "[f]ederal employees are considered 'on duty' during telecommuting hours." OSC has previously recommended that Congress consider clarifying these definitions as a matter of legislative authority rather than relying on the administrative regulations and interpretation. It suggested that "extending the definition of the federal workplace to an employee's home would be inappropriate," and noted the statute's silence with regard to government resources other than vehicles. Accordingly, it suggested that "[a]gencies should be encouraged to develop clear computer-usage and government equipment policies" including the use of official email addresses. However, the issue was not included in the most recent amendments to the Hatch Act. The Office of Special Counsel has provided guidance, including examples, to illustrate what types of activities are permitted and prohibited for less restricted and further restricted employees. Less Restricted Employees Permissible Political Activities May be candidates for public office in nonpartisan elections. May register and vote as they choose. May assist in voter registration drives. May contribute money to political campaigns, political parties, or partisan political groups. May attend political fundraising functions. May attend and be active at political rallies and meetings. May join and be an active member of political clubs or parties. May hold office in political clubs or parties. May sign and circulate nominating petitions. May campaign for or against referendum questions, constitutional amendments, or municipal ordinances. May campaign for or against candidates in partisan elections. May make campaign speeches for candidates in partisan elections. May distribute campaign literature in partisan elections. May volunteer to work on a partisan political campaign. May express opinions about candidates and issues. If the expression is political activity, however—that is, activity directed at the success or failure of a political party, candidate for partisan political office, or partisan political group—then the expression is not permitted while the employee is on duty, in any federal room or building, while wearing a uniform or official insignia, or using any federally owned or leased vehicle. Prohibited Political Activities May not use their official authority or influence to interfere with or affect the result of an election. For example: May not use their official titles or positions while engaged in political activity. May not invite subordinate employees to political events or otherwise suggest to subordinates that they attend political events or undertake any partisan political activity. May not solicit, accept, or receive a donation or contribution for a partisan political party, candidate for partisan political office, or partisan political group. For example: May not host a political fundraiser. May not collect contributions or sell tickets to political fundraising functions. May not be candidates for public office in partisan political elections. May not knowingly solicit or discourage the participation in any political activity of anyone who has business pending before their employing office. May not engage in political activity—that is, activity directed at the success or failure of a political party, candidate for partisan political office, or partisan political group—while the employee is on duty, in any federal room or building, while wearing a uniform or official insignia, or using any federally owned or leased vehicle. For example: May not distribute campaign materials or items. May not display campaign materials or items. May not perform campaign related chores. May not wear or display partisan political buttons, T-shirts, signs, or other items. May not make political contributions to a partisan political party, candidate for partisan political office, or partisan political group. May not post a comment to a blog or a social media site that advocates for or against a partisan political party, candidate for partisan political office, or partisan political group. May not use any e-mail account or social media to distribute, send, or forward content that advocates for or against a partisan political party, candidate for partisan political office, or partisan political group. Further Restricted Employees Permissible Political Activities May register and vote as they choose. May assist in nonpartisan voter registration drives. May participate in campaigns where none of the candidates represent a political party. May contribute money to political campaigns, political parties, or partisan political groups. May attend political fundraising functions. May attend political rallies and meetings. May join political clubs or parties. May sign nominating petitions. May campaign for or against referendum questions, constitutional amendments, or municipal ordinances. May be a candidate for public office in a nonpartisan election. May express opinions about candidates and issues. If the expression is political activity, however—that is, activity directed at the success or failure of a political party, candidate for partisan political office, or partisan political group—then the expression is not permitted while the employee is on duty, in any federal room or building, while wearing a uniform or official insignia, or using any federally owned or leased vehicle. Prohibited Political Activities May not be a candidate for nomination or election to public office in a partisan election. May not take an active part in partisan political campaigns. For example: May not campaign for or against a candidate or slate of candidates. May not make campaign speeches or engage in other campaign activities to elect partisan candidates. May not distribute campaign material in partisan elections. May not circulate nominating petitions. May not take an active part in partisan political management. For example: May not hold office in political clubs or parties. May not organize or manage political rallies or meetings. May not assist in partisan voter registration drives. May not use their official authority or influence to interfere with or affect the result of an election. For example: May not use their official titles or positions while engaged in political activity. May not invite subordinate employees to political events or otherwise suggest to subordinates that they attend political events or undertake any partisan political activity. May not solicit, accept, or receive a donation or contribution for a partisan political party, candidate for partisan political office, or partisan political group. For example: May not host a political fundraiser. May not invite others to a political fundraiser. May not collect contributions or sell tickets to political fundraising functions. May not engage in political activity—that is, activity directed at the success or failure of a political party, candidate for partisan political office, or partisan political group—while the employee is on duty, in any federal room or building, while wearing a uniform or official insignia, or using any federally owned or leased vehicle. For example: May not wear or display partisan political buttons, T-shirts, signs, or other items. May not make political contributions to a partisan political party, candidate for partisan political office, or partisan political group. May not post a comment to a blog or a social media site that advocates for or against a partisan political party, candidate for partisan political office, or partisan political group. May not use any e-mail account or social media to distribute, send, or forward content that advocates for or against a partisan political party, candidate for partisan political office, or partisan political group.
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Federal officers and employees historically have been subject to certain limitations when engaging in partisan political activities. Although they have always retained their right to vote and privately express political opinions, for most of the last century, they were prohibited from being actively involved in political management or political campaigns. At the beginning of the 20th century, civil service rules imposed a general ban on voluntary, off-duty participation in partisan politics by merit system employees. The ban prohibited employees from using their "official authority or influence for the purpose of interfering with an election or affecting the result thereof." These rules were eventually codified in 1939 and are commonly known as the Hatch Act. By the late 20th century, such broad restrictions were seen as unnecessary due to other changes in the nature of the federal workforce, including the advent of a more independent and merit-based civil service and adoption of increased protections for employees against coercion and retaliation. Accordingly, the Hatch Act was significantly amended in 1993 to relax the broad ban on political activities, and now allows most employees to engage in a wide range of voluntary, partisan political activities in their free time, while away from the federal workplace. Some employees may be subject to additional restrictions depending on the employing agency or an employee's specific position. The nature of the federal workforce and work environment has continued to evolve since these amendments, and new issues have arisen for congressional consideration in recent years. In particular, the increased use of technology has raised questions about how email and mobile communications may be regulated under the Hatch Act. The increased availability and use of smartphones may be seen as blurring an employee's time, either by using a personal device while working or using a government device while off-duty. Additionally, alternative work arrangements, for example, telework, have presented similar dilemmas in understanding how Hatch Act restrictions might be applied in the modern workplace. This report examines the history of regulation of federal employees' partisan political activity under the Hatch Act and related federal regulations. It discusses the scope of the application of these restrictions to different categories of employees and provides a background analysis of the general restrictions currently in place. Finally, it analyzes potential issues that have arisen and interpretations that have been offered related to the application of these restrictions to new platforms of activity, for example, email, social media, and telework.
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The white collar crimes on the Supreme Court's 2015 docket consist of three Hobbs Act cases and one on computer fraud. The Hobbs Act outlaws robbery and extortion when committed in a manner which "in any way or degree" obstructs interstate commerce. One of the cases before the Court, Taylor v. United States , involved the robbery of suspected drug dealers. The second, Ocasio v. United States , consisted of a kickback conspiracy between traffic cops and body shop owners. The third, McDonnell v. United States , involved a local drug manufacturer who showered a state governor and his wife with gifts in an apparent attempt to use the governor's office as a bully pulpit for one of his products. H olding : " In order to obtain a conviction under the Hobbs Act for the robbery or attempted robbery of a drug dealer, the Government need not show that the drugs that a defendant stole or attempted to steal either traveled or were destined for transport across state lines. Rather, to satisfy the Act's commerce element, it is enough that a defendant knowingly stole or attempted to steal drugs or drug proceeds, for, as a matter of law, the market for illegal drugs is commerce over which the United States has jurisdiction. And it makes no difference ... that any actual or threatened effect on commerce in a particular case is minimal . " The Court, in a 7-1 decision written by Justice Alito, made it clear that Taylor was more about drugs than about the Hobbs Act: "Our holding today is limited to cases in which the defendant targets drug dealers for the purpose of stealing drugs or drug proceeds. We do not resolve what the government must prove to establish Hobbs Act robbery where some other type of business or victim is targeted." Taylor, the petitioner in the case, was a member of a gang of inept home invaders who sought to rob drug dealers of their cash and drugs. The two robberies for which he was convicted netted the group a total of $40 in cash, three cell phones, a marijuana cigarette, and some jewelry. Federal prosecutors charged Taylor under the Hobbs Act, which condemns anyone who "in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by robbery or extortion." Taylor sought to introduce evidence at his trial that the victim of the robbery dealt only in marijuana grown in-state, but the U.S. District Court for the Western District of Virginia barred admission, holding that drug dealing affects interstate commerce as a matter of law. Taylor was convicted and appealed. On appeal, he questioned whether the government had satisfied the Hobbs Act's commerce element, but he faced two obstacles. Lower federal appellate courts had generally construed the "in any way or degree" language to mean that Congress intended to exercise the full extent of its Commerce Clause powers and that the prosecution need establish no more than a de minimis impact on interstate commerce. Second, the Supreme Court's Raich decision seemed to reenforce the government's position. The Raich opinion declared that "Congress can regulate purely intrastate activity that is not itself commercial ..., if it concludes that failure to regulate that class of activity would undercut the regulation of the interstate market in that commodity." The Fourth Circuit affirmed Taylor's conviction. It concluded that "it was entirely reasonable for the jury to conclude that the robberies would have the effect of depleting the assets of an entity engaged in interstate commerce.... Because drug dealing in the aggregate necessarily affects interstate commerce, the government was simply required to prove that Taylor depleted or attempted to deplete the assets of such an operation." The Second and Seventh Circuits had expressed a somewhat different understanding. The Second Circuit had declared that "[p]roof of drug trafficking is no longer regarded as automatically affecting interstate commerce; instead, even in drug cases, the jury must find such an effect as part of its verdict." The Seventh Circuit indicated that proof of an individualized impact is not necessary for prosecution under the federal drug law, but is required for Hobbs Act prosecutions. The Supreme Court explicitly rejected the arguments of the two circuits. The resolution of the Taylor case, the Court said, "require[d] no more than ... [to] graft [its] holding in Raich onto the commerce element of the Hobbs Act." In Raich , the Court had recognized "Congress' power to regulate purely local activities that are part of an economic class of activities that have a substantial effect on interstate commerce." It also had acknowledged there that "[t]he production, possession, and distribution of controlled substances constitute a class of activities that in the aggregate substantially affect interstate commerce." In the eyes of the Court in Taylor , "the market for marijuana, including its intrastate aspects, is 'commerce over which the United States has jurisdiction.' It therefore follows as a simple matter of logic that a robber[, like Taylor,] who affects or attempts to affect even the intrastate sale of marijuana grown within the State affects or attempts to affect commerce over which the United States has jurisdiction." Justice Thomas dissented. He felt that the limits of congressional authority under the Commerce Clause required a holding that the Hobbs "Act punishes a robbery only when the Government proves that the robbery itself affected interstate commerce." H olding : "A defendant may be convicted of conspiring to violate the Hobbs Act based on proof that he reached an agreement with the owner of the property in ques t ion to obtain that property u n der color of officia l right ." Ocasio was a Baltimore police officer, who with several other officers received kickbacks for referring accident victims to a particular auto body shop. For his efforts, Ocasio was convicted of extortion and conspiracy to commit extortion under the Hobbs Act. The Hobbs Act punishes anyone who "in any way or degree obstructs, delays, or affects commerce or the movement of any article or commodity in commerce, by ... extortion or attempts or conspires so to do." It defines extortion to include "the obtaining of property from another, with his consent ... under color of official right." Ocasio argued at trial and on appeal that the Hobbs Act does not outlaw obtaining property from a co-conspirator. His argument proceeded under alternative theories. First, he contended that a statute which punishes conspirators for obtaining the property "of another" under color of law is limited to victims who are "other" than conspirators. Second, he asserted that otherwise every victim would be liable as a conspirator: "The law must require that a victim under the Hobbs Act be a person outside the conspiracy because otherwise every victim's 'consent' could be considered an agreement to enter into a conspiracy with its victimizer, thereby creating a separately punishable conspiracy in every §1951(a) case." Ocasio claimed persuasive support from a Sixth Circuit case, U.S. v. Brock , which seemed to endorse his alternative theories. The U.S. Court of Appeals for the Fourth Circuit, however, was not convinced. It responded that Ocasio's "property of another" argument was undermined by the fact that the term "property of another" might easily mean the property of anyone other than one acting "under color of law." As for his "consent" argument, it was foreclosed by an earlier Fourth Circuit case "which underscored the proposition that mere acquiescence in an extortion scheme is not conspiratorial conduct. Rather, conduct more active than mere acquiescence is necessary before a person may depart the realm of a victim and may unquestionably be subject to conviction for aiding and abetting and conspiracy." Therefore it is "wrong to suggest that every extortion scheme will necessarily involve a conspiracy to commit extortion." The Supreme Court affirmed the Fourth Circuit's decision. The Court's conspiracy case law provided his undoing. Justice Alito wrote the opinion for the Court joined by four of his colleagues. He pointed to earlier Court decisions which held "that a person may be convicted of conspiring to commit a substantive offense that he or she cannot personally commit." They confirmed that "[i]t is sufficient to prove that the conspirators agreed that the underlying crime be committed by a member of the conspiracy who was capable of committing it." In Ocasio's case, the body shop owners could not commit extortion because they could not act "under color of official right." Nevertheless, "they could ... conspire to commit Hobbs Act extortion by agreeing to help [Ocasio] and the other officers commit the substantive offense." And as a consequence, Ocasio could be convicted of conspiring with them. Justice Alito also responded with precedent to Ocasio's argument that the Court's conspiracy theory would eliminate the distinction between extortion (coercive corruption) and bribery (consensual corruption). Justice Alito explained that the Court had already declared in Evans that Hobbs Act "color of law" extortion is the "rough equivalent of bribery." Justice Thomas dissented, as he had in Evans , because that case "erred in equating common-law extortion with taking a bribe." Justice Breyer joined in the majority opinion, but offered a concurrence acknowledging that he finds troubling, but binding, the Evans "extortion is the rough equivalent of bribery" precedent. Justice Sotomayor and Chief Justice Roberts dissented because they did not believe that "a group of conspirators can agree to obtain property 'from another' in violation of the Act even if they agree only to transfer property among themselves." Holding : Arranging a meeting or hosting an event does not qualify as an "official act" for purposes of the federal bribery statute unless it involves "the formal exercise of governmental power" with respect to some pending or anticipated "question, matter, cause, suit, proceeding or controversy." On September 4, 2014, a jury convicted former Virginia Governor Bob McDonnell and his wife on corruption charges based on his activities as governor. The convictions covered wire fraud, conspiracy, and Hobbs Act offenses. The U.S. Court of Appeals for the Fourth Circuit affirmed. On January 15, 2016, the Supreme Court granted certiorari to review the lower court's definition of the term official act —a necessary element of the mail fraud conviction and by implication of the Hobbs Act convictions. The governor, and his wife, had been showered with gifts during the governor's term in office. Their benefactor, a constituent, was a drug manufacturer who hoped to have one of his products, an antismoking substance, approved by the U.S. Food and Drug Administration, which would require studies of the products. To that end, he sought to have state university medical research and facilities test and report favorably on the products' efficacy. For his part, the governor forwarded promotional material and the company's suggested research protocol to the state official with authority to approve the study. The governor's name was used on invitations, and he attended a promotional luncheon at the Governor's Mansion on behalf of the company. The governor also pitched the company's product to the official responsible for determining the products covered by the state's employee health plans. The wire fraud statute under which the governor was convicted outlaws the use of wire communications as part of a scheme to defraud another of his property. A second statute defines the scheme to defraud element to include any scheme to defraud another of "honest services" to which he is entitled. The Supreme Court, however, has construed this honest services definition to encompass no more than bribery or kickbacks. The Court understands honest services bribery to correspond to the misconduct described in the general federal bribery statute. There, bribery is a corrupt quid pro quo—the exchange of something of value for a public official's commission or omission of an official act. The same kind of official act will upon occasion be an element of the extortion prong of a Hobbs Act violation. Among other things the Hobbs Act outlaws obstructing interstate commerce in any manner by extortion under color of law. The Supreme Court views this Hobbs Act extortion offense as the rough equivalent of bribery—accepting something of value for the commission or omission of an official act. An official act for bribery purposes is defined as "any decision or action on any question, matter, cause, suit, proceeding or controversy, which may at any time be pending, or which may by law be brought before any public official, in such official's official capacity, or in such official's place of trust or profit." The prosecution argued that the governor had committ ed at least five qualifying official acts: "(1) arranging meetings for [Williams] with Virginia government officials, who were subordinates of the Governor, to discuss and promote Anatabloc; "(2) hosting, and ... attending, events at the Governor's Mansion designed to encourage Virginia university researchers to initiate studies of anatabine and to promote Star Scientific's products to doctors for referral to their patients; "(3) contacting other government officials in the [Governor's Office] as part of an effort to encourage Virginia state research universities to initiate studies of anatabine; "(4) promoting Star Scientific's products and facilitating its relationships with Virginia government officials by allowing [Williams] to invite individuals important to Star Scientific's business to exclusive events at the Governor's Mansion; and "(5) recommending that senior government officials in the [Governor's Office] meet with Star Scientific executives to discuss ways that the company's products could lower healthcare costs." The governor argued that the instructions to the jury permit it to convict him without finding that he had exercised or endeavored to influence the formal exercise of governmental power necessary to constitute an official act. The Supreme Court unanimously agreed. It found the instructions deficient on three grounds. First, the jury was not instructed that it must find "a 'question, matter, cause, suit, proceeding or controversy' involving the formal exercise of governmental power ." Without such guidance, the jury may have "thought that a typical meeting, call, or event was itself a 'question, matter, cause, suit, proceeding or controversy'" and was enough without more to constitute an official act. Second, the jury was not instructed that "the 'question, matter, cause, suit, proceeding or controversy' must be more specific and focused than a broad policy objective." And so, the jury may have erroneously concluded, as the prosecution argued in closing, that "[w]hatever it was Governor McDonnell had done, it's all official action." Finally, "the jury was not told that merely arranging a meeting or hosting an event to discuss a matter does not count as a decision or action on that matter." And so, the jury may have thought arranging a meeting or hosting an event did constitute an "official act," without making the additional finding that the governor agreed to take or exert pressure on other officials to take an official action. The Court's decision seems in line with its historic reluctance to endorse federal authorities' policing of state and local political affairs in the absence of clear congressional directive. The decision, however, makes no such statement. Nor does it refer to the cases that evidence that reluctance. Instead, it builds upon its "official act" precedents: The question remains whether—as the Government argues—merely setting up a meeting, hosting an event, or calling another official qualifies as a decision or action, [as an official act]…. Although the word "decision," and especially the word "action" could be read expansively to support the Government's view, our opinion in United States v. Sun-Diamond Growers of Cal . rejects that interpretation. Holding : "We first consider how a court should assess a challenge to the sufficiency of the evidence in a criminal case when a jury instruction adds an element to the charged crime and the Government fails to object. We conclude that the sufficiency of the evidence should be assessed against the elements of the charged crime . We next consider whether the statute-of-limitations defense contained in 18 U.S.C. §3282(a ) ( the general federal criminal statute of limitations ) may be successfully raised for the first time on appeal . We conclude that it may not be." The U.S. Supreme Court recently upheld a computer fraud conviction over objections that the prosecution was not timely and the jury's instructions were in error in Musacchio v. United States . The case presented two questions. First, may a defendant present a statute of limitation challenge for the first time on appeal? Second, may a conviction be undone by a sufficiency-of-the-evidence attack on an extraneous element? The Court answered no to both questions. Musacchio hacked into the computer network of his former employer. The portion of the Computer Fraud and Abuse statute under which he was indicted outlaws accessing a computer system without authorization or in excess of authorization. The indictment charged him with access without authorization. The judge's instructions to the jury, however, suggested that Musacchio could be convicted only if the government proved access both without authorization and in excess of authorization. Musacchio was convicted nonetheless. On appeal, he conceded that there was sufficient evidence at trial to convict for access without authority, but argued without success that there was insufficient evidence to prove access in excess of authorization. He also argued to no avail that the five-year statute of limitations should have barred his prosecution, because his indictment had been filed seven years after the commission of the offense. The two questions had divided the lower federal appellate courts. The Supreme Court took the opportunity to answer them in a single case. First, a statute of limitations bar is ordinarily a defense that must be claimed. If a defendant does not object before conviction that prosecution of his case is untimely, the defense is lost. It may not be raised for the first time on appeal. Congress, however, is free to abrogate the general rule. It may decree that, with respect to a particular statute of limitations, prosecution of a stale charge is a fatal flaw, which may be brought to the attention of the courts at any time. Congress makes its intent clear in the language of the statute, its context, and its legislative history. The Court found no such evidence in the case of the statute at issue, general criminal statute of limitations, 18 U.S.C. Section 3282. Thus, the delay in bringing Musacchio's prosecution was not an issue that could be raised for the first time on appeal. Second, when jury instructions contain extraneous elements, only the necessary elements of the crime charged need to satisfy a sufficiency-of-the-evidence test. As the Court explained, "When a jury finds guilt after being instructed on all elements of the charged crime plus one more element, the jury has made all the findings that due process requires." The Fifth Circuit, from which the case arose, had decided it on the basis of the rule-of-the-case doctrine. The doctrine states that when a court has addressed a legal issue in a particular case it will not revisit the matter at a later stage of the same case. The Fifth Circuit, however, erroneously applied the rule with regard to a lower court ruling in the same case. For, "the doctrine is 'something of a misnomer' when used to describe how an appellate court assesses a lower court's rulings. An appellate court's function is to revisit matter decided in the trial court." The Court left unaddressed the questions of whether the result would have been different had the indictment contained extraneous elements or had the trial court's instructions on the necessary elements been in error. The sex offense entries on the Court's docket involve the sex offender registration obligations of an overseas resident and construction of the recidivist mandatory minimum sentencing provisions of federal law. Holding : " [T]he text and structure of §2252(b ) ( 2) confirm that the provision applies to prior state convictions for 'sexual abuse' and 'aggravated sexual abuse,' whether or not the convictions involved a minor or ward. " The U.S. Supreme Court in a 6-2 decision upheld imposition of a mandatory minimum sentencing enhancement in a child pornography case. The case turned on a matter of statutory construction. The statute at issue set a 10-year mandatory minimum term of imprisonment for a defendant convicted of child pornography: ... if such person has a prior conviction under ... chapter 109A [sexual abuse of a child or adult], or chapter 117 [unlawful sex-related interstate travel involving a child or adult], or under section 920 of title 10 (article 120 of the Uniform Code of Military Justice) [rape and sexual assault], or under the laws of any State relating to aggravated sexual abuse, sexual abuse, or abusive sexual conduct involving a minor or ward .... Lockhart had pleaded guilty to federal child pornography charges. He had earlier been convicted of first degree sexual abuse of an adult under New York state law. The trial court concluded it had no choice but to assess the 10-year mandatory minimum. Lockhart appealed. The U.S. Court of Appeals for the Second Circuit affirmed. Its decision was in line with those of the Fourth, Fifth, and Ninth Circuits and at odds with those of the Sixth, Eighth, and Tenth Circuits. The question that divided the appellate panels was whether the phrase involving a minor or ward applied to aggravated sexual abuse and sexual abuse cases or only to cases of abusive sexual conduct. Did the mandatory minimum apply to Lockhart whose crime involved sexual abuse of an adult? The Supreme Court concluded that it did. Justice Sotomayor, writing for the Court, examined the text of the statute first under the "last antecedent" rule of statutory construction, which suggests that "a limiting clause or phrase," such as involving a minor or ward, "should ordinarily be read as modifying only the noun or phrase that it immediately follows; in this case "abusive sexual conduct." The Justice then pointed out the symmetry between state and federal triggering offenses. The terms aggravated sexual abuse , sexual abuse , and abusive sexual conduct used to identify the state predicate offenses are the very terms used as captions for the federal predicate offenses in Chapter 109A. She wrote, "If Congress had intended to limit each of the state predicates to conduct 'involving a minor or ward,' we doubt it would have followed, or thought it needed to follow, so closely the structure and language of Chapter 109A." Moreover, the Justice was at a loss to "explain why Congress would have wanted to apply the mandatory minimum to individuals convicted in federal court of sexual abuse or aggravated sexual abuse involving an adult, but not to individuals convicted in state court of the same." The opinion seems to have captured the seriousness with which Congress viewed repeat offenders who engage in child pornography. Nevertheless, Justice Kagan's Scalia-like observation in dissent may give one pause: "Suppose a real estate agent promised to find a client 'a house, condo, or apartment in New York.' Wouldn't the potential buyer be annoyed if the agent sent him information about condos in Maryland or California?" It is possible that Congress may reconsider the Court's construction of the repeat offender mandatory minimum in child pornography cases. There have been a number of proposals to reduce recidivist mandatory minimums in various federal criminal statutes in the 114 th Congress. Few, if any, involve child pornography. Holding : The federal Sex Offender Registration and Notification Act (SORNA) requirement that offenders notify the " jurisdiction "(state o r territory) in which they reside of any change of address does not apply to offenders who reside overseas ( i.e., other than in a SORNA jurisdiction ) . The Supreme Court granted certiorari in N i chols in order to resolve a conflict among the lower federal appellate courts over whether an individual required to register as a sex offender must continue to follow registration requirements when he relocates overseas. The Court held that he did not, although subsequent legislation imposes a related obligation. The federal Sex Offender Registration and Notification Act (SORNA) requires individuals convicted of federal or state qualifying sex offenses to register with each state ("jurisdiction") "(a) ... where the offender resides, ... is an employee, and ... is a student." It further insists that after initial registration[s] the individual "not later than 3 business days after each change of name, residence, employment, or student status, appear in person in at least 1 jurisdiction involved pursuant to subsection (a) and inform that jurisdiction of all changes in the information required for that offender in the sex offender registry.... " It is a federal crime for an individual convicted of a federal sex offense to fail to comply. It is also a federal crime for an individual convicted of a state sex offense to fail to comply and subsequently travel in interstate or foreign commerce. In the case before the Supreme Court, Nichols was convicted of a federal qualifying sex offense and upon his release from prison registered with Kansas authorities. He subsequently relocated in the Philippines without appearing or returning to appear before Kansas registration officials. The Philippines deported him back to the United States, where he faced a federal indictment for failing to appear and update his Kansas registration information. He sought unsuccessfully to dismiss the indictment on the grounds that SORNA did not require him to register once he was in the Philippines. He pleaded guilty, reserving the right to appeal. Nichols appealed to the U.S. Court of Appeals for the Tenth Circuit, where he contended that the SORNA's change of residency requirement does not apply when an individual changes his residency in a non-SORNA jurisdiction. The Tenth Circuit rejected the argument on the basis of binding circuit precedent. The Supreme Court in a unanimous opinion by Justice Alito reversed. SORNA requires an offender to appear in one of "three possible jurisdictions: where the offender resides, where the offender is an employee, [or] where the offender is a student." It defines "jurisdictions" as the several states, the various territories of the United States, and certain Indian tribes. The Philippines is not a SORNA jurisdiction. Moreover, Justice Alito explained, SORNA "uses only the present tense: 'resides,' 'is an employee,' 'is a student.' A person who moves from Leavenworth to Manilla no longer 'resides' (present tense) in Kansas; although he once resided in Kansas, after his move he 'resides' in the Philippines." Therefore, "once Nichols moved to Manila, he was no longer required to appear in Kansas to update his registration, for Kansas was no longer a 'jurisdiction'" where he resides, is an employee, or is a student. Justice Alito also noted that Congress had addressed the issue while the case was pending before the Court. In early February, it passed the International Megan's Law to Prevent Child Exploitation and Other Sexual Crimes Through Advanced Notification of Traveling Sex Offenders [Act]. The statute requires sex offenders to provide information related to any foreign travel to "the appropriate official for inclusion in the sex offender registry ... in conformity with any time and manner requirements prescribed by the Attorney General." Perhaps spurred on by the result below, the Supreme Court held that stun guns used for self-defense are not necessarily beyond the guarantees of the Second Amendment right to bear arms. The other firearms cases on the Court's docket raise interpretative issues under the Armed Career Criminal Act and the firearm possession disqualification triggered by a domestic violence misdemeanor. Holding: Supreme Judicial Court of Massachusetts's reasoning for upholding stun gun ban—lack of common use of stun guns at time of Second Amendment 's enactment, unusual nature of stun guns as a modern invention, and lack of ready adaptability of stun guns for use in the military—does not preclude stun guns from being protected by Second Amendment right to bear arms . In Caetano v. Massachusetts, in one fell swoop (and without oral argument) the U.S. Supreme Court granted a petition for certiorari and issued a per curiam opinion vacating the judgment of the Massachusetts Supreme Court that had upheld a Massachusetts law prohibiting the possession of stun guns. Massachusetts has a law that bans the possession of weapons that emit electrical currents (e.g. , stun guns), which was challenged as unconstitutional under the Second Amendment by a woman who had been arrested for violating that law. The Massachusetts court had concluded that the Second Amendment does not encompass stun guns, and thus the statute's prohibition was lawful, because, among other things, stun guns are dangerous, unusual, and were not in common use at the time the Bill of Rights was enacted. Additionally, the court concluded, the stun gun, as used by the defendant, was not used to defend herself in the home. The U.S. Supreme Court vacated the Massachusetts ruling, concluding that its reasoning directly conflicted with the holdings in District of Columbia v. Heller, in which the Court concluded that the Second Amendment encompasses an individual right to possess firearms for traditional, lawful purposes, and McDonald v. Chicago , which applies that right to the states through the Fourteenth Amendment. The Court noted that Heller stated that "the Second Amendment['s protection] 'extends ... to arms ... that were not in existence at the time of the founding'" as well as to firearms that are not readily adaptable for military use. Yet, the Massachusetts court erroneously found Second Amendment protection wanting because stun guns like Caetano's "were not in common use at the time of the Second Amendment's enactment." And in the same misguided vein, the Massachusetts court "found 'nothing in record to suggest that stun guns are readily adaptable to use in the military.'" Holding : "A misdemeanor conviction for recklessly assaulting a domestic relation disqual ifies an individual from possessing a gun ." Under federal law, individuals who have been convicted of a misdemeanor crime of domestic violence may not possess a firearm. The statute defines "misdemeanor crime of domestic violence" as a federal, state, or tribal misdemeanor, that has as an element "the use … of physical force" and is committed against a person with whom the defendant was living or had lived. In an earlier case, Castleman , the Court held that an individual convicted of knowingly or intentionally committing domestic violence may no longer be eligible to possess a firearm, but set aside the question of whether reckless ly committing such an offense is also disqualifying. Here in Voisine , the Court decided it was. When federal authorities investigated Voisine for suspicion of killing of a bald eagle, they discovered he owned a rifle and had a previous state domestic abuse conviction under state law for beating his girlfriend. They charged him with unlawful possession of a firearm. Following his conviction, Voisine appealed, arguing that the state domestic violence misdemeanor conviction was not disqualifying because the state statute covered reckless domestic violence. The United States Court of Appeals for the First Circuit rejected the argument, as did the Supreme Court. Justice Kagan wrote the opinion for the seven-member majority of the Court. She observed that nothing in the operative "use of physical force" phrase conveys the notion that the word "'use' marks a dividing line between reckless and knowing conduct." The word ordinarily encompasses both. Circumstances surrounding enactment confirmed for Justice Kagan that Congress chose its words for their everyday meaning. "Congress enacted [the ban] in 1996 to bar those domestic abusers convicted of garden-variety assault or battery misdemeanors ... from owning guns. Then, as now, a significant majority of jurisdictions ... defined such misdemeanor offenses to include the reckless infliction of bodily harm." To ignore reckless abuse convictions, Justice Kagan reasoned, "would have undermined Congress's aim." In sum, "[t]he federal ban on firearms possession applies to any person with a prior misdemeanor conviction for the 'use ... of physical force' against a domestic relation. That language, naturally read, encompasses acts of force undertaken recklessly…." Moreover, "the state-law backdrop ... indicates that Congress meant just what it said." Justice Thomas dissented on the basis of Second Amendment right-to-bear-arms grounds and because he felt the term "'use of physical force' has a well-understood meaning applying only to intentional acts designed to cause harm." Justice Sotomayor joined the latter part of the dissent. Holding : The Supreme Court's earlier decision in Johnson v. United States , which found the residual clause of the Armed Career Criminal Act constitutionally vague, applies retroactively to the convictions of federal prisoners who seek collateral (habeas corpus) review . The Armed Career Criminal Act (ACCA) calls for a mandatory 15-year term of imprisonment for a defendant convicted of certain firearms offenses, if the defendant has three prior drug or violent felony convictions. The qualifying violent felony convictions fall within one of three clauses. The first clause consists of crimes that have physical force or attempted physical force as an element . The second is made up of drug trafficking and other enumerated crimes such as burglary, arson, and extortion. The third is a residual clause that includes offenses "that present[] a serious potential risk of physical injury to another." The Supreme Court declared the ACCA's residual category unconstitutionally vague in Johnson v. United States . Here, the Court held Johnson retroactively applicable. Welch was convicted of unlawful possession of firearm. The United States District Court for the Southern District of Florida sentenced him under the ACCA on the basis of three state robbery convictions. On appeal, he contended that one of the prior convictions did not qualify as an ACCA predicate conviction, under either the residual or the elements clause. The United States Court of Appeals for the Eleventh Circuit affirmed the sentence on the basis of the residual clause and found it unnecessary to address the elements clause argument. Some years later, Welch sought collateral review under the federal statutory counterpart of habeas corpus. The district court denied his petition. No sooner had the Eleventh Circuit denied him the certificate of appeal ability necessary for further review then the Supreme Court held the residual clause unconstitutionally vague in Johnson . The Court granted Welch's petition for certiorari to determine whether Johnson should be applied retroactively. The Court ultimately concluded it should but returned the case to the Eleventh Circuit to determine whether Welch's state robbery conviction qualified for ACCA sentencing under the elements clause. Justice Kennedy, writing for the seven members of the majority of the Court, pointed out that the retroactivity of a decision like Johnson, which announces a novel constitutional interpretation (a new rule), is governed by the Teague doctrine. The doctrine is calculated, in the interests of finality, to encourage resolution of a prisoner's constitutional challenges on direct appeal rather than waiting to raise them for the first time on collateral review. The doctrine bars federal collateral review to announce or apply a new rule. There are two exceptions, one substantive and one procedural. The procedural exception exists when the new rule constitutes a "watershed" rule in criminal procedure, one that "implicat[es] the fundamental fairness and accuracy of the criminal proceeding." Gideon v. Wainwright is one of the frequently cited, rarely occurring examples of the procedural exception. The substantive exception exists when the new rule "alters the range of conduct or the class of persons that the law punishes." Johnson is an example of the substantive exception. Justice Kennedy explained that "[b]y striking down the residual clause as void for vagueness, Johnson changed the substantive reach of the Armed Career Criminal Act, altering 'the range of conduct or the class of persons that the [Act] punishes.'" He reasoned that "[b]efore Johnson , the Act applied to any person who possessed a firearm after three violent felony convictions, even if one or more of those convictions fell under only the residual clause. An offender in that situation faced 15 years to life in prison." In contrast, "[a]fter Johns on , the same person engaging in the same conduct is no longer subject to the Act…." The lone dissenter, Justice Thomas, argued that the case was not ready for the Supreme Court review and "undermin[ed] any principled limitation on the finality of federal convictions." Holding : " To determine whether a past conviction [qualifies as a n ACCA predicate conviction], courts compare the elements of the crime of conviction with the elements of the 'generic' version of the [ACCA's] listed offenses — i.e., the offense as common ly understood…. [O]ur decisions have held that the prior crime qualifies as a n ACCA predicate if, but only if, its elements are the same as, or narrower than, those of the generic offense. The question in this case is whether the ACCA makes an exception to that rule when a defendant is convicted under a statute that lists multiple alternative means of satisfying one (or more) of its elements. We decline to find such an exception ." The Armed Career Criminal Act (ACCA) sets a 15-year mandatory minimum term of imprisonment for defendants, guilty of certain firearms offenses, who have three prior state or federal serious drug or violent felony convictions. The statute defines the term violent felony to include burglary . Burglary , in the ACCA, said the Supreme Court in Taylor v. United States , means generic burglary—that is, burglary as commonly understood, a crime involving "unlawful or unprivileged entry into, or remaining in, a building or structure, with intent to commit a crime." Conviction under a state burglary statute qualifies as an ACCA predicate conviction only when the state crime's "elements are the same as, or narrower than, those of the generic offense." Mathis was convicted of unlawful possession of a firearm. He was sentenced under the ACCA on the basis of five Iowa burglary convictions. He questioned whether his Iowa burglary convictions qualified as ACCA burglary convictions. The Iowa burglary statute matched the elements of the generic crime of "burglary": unlawful entry into a building or structure with the intent to commit a crime. Elsewhere, however, the Iowa criminal code provided a binding definition of the "building or structure" element to include cars, boats, and planes. Mathis argued that the Iowa burglary convictions were not ACCA qualifying convictions. The United States District Court and Eighth Circuit Court of Appeals disagreed. The Supreme Court reversed. Whether a state burglary conviction qualifies as an ACCA burglary conviction is a matter of elements: "A crime counts as 'burglary' under the Act if its elements are the same as, or narrower than, those of the generic offense," wrote Justice Kagan for the Court. Conversely, "if the crime of conviction covers any more conduct than the generic offense, then it is not an ACCA 'burglary.'" The Iowa statute "enumerates various factual means of committing a single element" when it "itemizes the various places that crime could occur as disjunctive factual scenarios rather than separate elements." As the Iowa Supreme Court observed, the Iowa statute sets out "'alternative methods' of committing one offense, so that a jury need not agree whether the burgled location was a building ... or vehicle." This makes it broader than the generic offense that does not encompass unlawful entry into a vehicle to commit a crime. "Because the elements of Iowa's burglary law are broader than those of generic burglary, Mathis's convictions under that law cannot give rise to an ACCA sentence." Two concurring members of the Court offered less-than-ringing endorsements of the four-Justice main opinion. Justice Kennedy wrote that the "opinion is required by its precedents," with which he disagrees. Those precedents, he observed, are matters of statutory construction that Congress is free to wash away by amending the ACCA. He declared, moreover, that "continued congressional inaction in the face of a system that each year proves more unworkable should require this Court to revisit its precedents in an appropriate case." Justice Thomas was only slightly more enthusiastic: "I join the Court's opinion, which faithfully applies our precedents" and which "avoids further extending its precedents." Justices Breyer and Ginsburg dissented because they believed the federal court should have been allowed to examine the charging documents relating to Mathis's Iowa convictions to determine if the jury there was required to find all the elements of generic burglary. Justice Alito in dissent would go even further and allow the federal court to examine the entire record of prior proceedings, not merely those that identify what the jury must have found. The trio of Fourth Amendment cases presents questions on the exclusionary rule, the warrant requirement for sobriety tests, and qualified official immunity in the face of use of excessive force allegations. Holding: T he attenuation exception to the exclusionary rule "applies when an officer makes an unconstitutional investigatory stop; learns during that stop that the suspect is subject to a valid arrest warrant; and proceeds to arrest the suspect and seize incriminating evidence during a search incident to that arrest." The national debate over policing practices stemming from the deaths of Michael Brown in Ferguson, Missouri, and Freddie Gray in Baltimore, Maryland (and other police-related deaths), made its way to the Supreme Court in Utah v. Strieff —a case about evidence suppression in criminal proceedings. The novel question before the Court was whether evidence should be suppressed (through the exclusionary rule) if it was seized after a search incident to a lawful arrest on an outstanding warrant, when the warrant was discovered only because of an initial, illegal stop by the police. Discussion at oral argument, at times, focused on how the Court's decision would impact heavily policed communities, like Ferguson, where a significant percentage of the population has outstanding arrest warrants for minor offenses, like failing to pay traffic fines. The judicially created exclusionary rule requires the suppression of evidence obtained through illegal searches or seizures, as well as evidence later obtained as a result of the earlier Fourth Amendment violation—the so-called fruit of the poisonous tree. However, this rule will be applied only if a court concludes that suppression would deter future police misconduct and that the potential deterrence outweighs potential costs, such as releasing a criminal into the public. Therefore, not all illegally obtained evidence—and derivative evidence—will be excluded. For example, under the attenuation doctrine, a court will not suppress evidence obtained subsequent to an illegal search or seizure if "the connection between the lawless conduct of the police and the discovery of the challenged evidence has 'become so attenuated as to dissipate the taint.'" To determine whether the intervening event was sufficiently independent of the illegal act to warrant the evidence's admission, courts balance three factors: (1) the temporal proximity of the illegal police activity and the discovery of evidence; (2) the intervening event; and (3) the purpose and flagrancy of the police misconduct. The Court in Strieff reviewed whether evidence obtained from a search incident to a lawful arrest on an outstanding arrest warrant, discovered from a warrant check (the alleged intervening event) during an illegal investigatory stop, falls under the attenuation doctrine and thus should be admissible. In Strieff, the police department in Salt Lake City, Utah, received an anonymous tip that there was ongoing drug activity at a house, after which Officer Doug Fackrell surveilled the house intermittently for approximately three hours total over a weeklong period. During that time, Officer Fackrell observed short-term traffic at the house, which he believed was consistent with drug activity. When the officer saw Edward Strieff leave the house, he questioned him and asked him to produce his ID. Officer Fackrell then ran a warrant check and discovered that Strieff had an outstanding arrest warrant for failing to pay a traffic ticket and searched his body incident to arrest. The search uncovered methamphetamine and drug paraphernalia, and Strieff subsequently was prosecuted for a drug crime. At the suppression hearing, the state conceded that the seizure violated the Fourth Amendment because Officer Fackrell did not have reasonable suspicion to stop and interrogate Strieff. Therefore, the dispute focused on whether the officer's discovery of the outstanding warrant sufficiently attenuated the illegal stop from the discovery of the drugs and paraphernalia. The trial court concluded that it did and denied the motion to suppress. The Utah Supreme Court reversed, however, concluding that only the defendant's voluntary conduct—not police conduct (here, discovering the outstanding warrant)—can attenuate evidence obtained from illegal searches and seizures. Neither party, however, appeared to agree with the Utah Supreme Court's interpretation of the attenuation doctrine, and on appeal to the Supreme Court both Utah and Strieff focused on the flagrancy portion of the three-part attenuation analysis. For example, Utah (with the support of the United States) argued that an arrest warrant that had been issued previously by a neutral and detached magistrate judge should erase the taint of an illegal stop (during which the warrant was discovered) so long as the stop was not "flagrant," and in this case, the state contended, it was not. Conversely, Strieff contended that police activity is flagrant when, as in this case, an officer runs a warrant check during a stop when there is no reasonable suspicion or articulable fear for the officer's safety. Notably, in response to these arguments at oral argument, the Court pondered whether there should be a subjective component (atypical in Fourth Amendment jurisprudence) to the flagrancy portion of the analysis, where a court would ask whether the officer was exploiting the system to obtain evidence of other crimes. Justice Kagan asserted that this potentially could deter illegal stops because, in some jurisdictions, "[i]f you know that there is a significant possibility that somebody you stop is going to have an arrest warrant, that's another reason to stop them." On the other hand, Justice Alito stressed the costs associated with ruling for Strieff, pointing out that it would be "an unusual and unprecedented result" to suppress the fruit of a lawful search, and thus a defendant ought to present "strong circumstances" to justify suppression. The Supreme Court ultimately held, in a 5-3 decision, that the discovery of the warrant was sufficiently attenuated from the illegal stop that the evidence discovered incident to Strieff's arrest was admissible. Writing for the Court, Justice Thomas concluded that Officer Fackrell, in making the illegal stop, "was at most negligent," not flagrant. The Court rejected the notion that "this unlawful stop was part of any systemic or recurrent police misconduct." Rather, the Court concluded, "all the evidence suggests that the stop was an isolated instance of negligence that occurred in connection with a bona fide investigation of a suspected drug house." But the dissent criticized the majority for characterizing such officer behavior as "isolated instance[s] of negligence," noting that it is widespread practice in many localities to stop citizens and run warrant checks, which is especially problematic, according to Justice Sotomayor, given that outstanding warrants for minor offenses like traffic tickets are "surprisingly common." In another dissent, Justice Kagan echoed Justice Sotomayor's concerns, contending that the majority's ruling will increase an officer's incentive to violate the Constitution by giving law enforcement a green light to stop persons without reasonable suspicion, knowing that "[s]o long as the target is one of the many millions of people in this country with an outstanding arrest warrant, anything the officer finds in a search is fair game for use in a criminal prosecution." Holding : I n the absence of a warrant, " a breath test, but not a blood test, may be administered as a search incident to a lawful arrest for drunk driving," and "motorists cannot be deemed to have consented to submit to a blood test on pain of committing a criminal offense." In Birchfield , the Supreme Court consolidated three cases that address the Fourth Amendment question of the circumstances under which police who, having made an arrest for drunk driving, may conduct a warrantless sobriety test. The three are Birchfield v. North Dakota , Bernard v. Minnesota , and Beylund v. Levi . Birchfield drove his car into a ditch. When the police arrived, Birchfield's speech was slurred, he was unsteady on his feet, and he smelled of alcohol. He agreed to a breathalyzer test after he was informed that if he refused he could lose his license and might be prosecuted for the failure to comply. When he failed the test, the officer arrested him and took him to a hospital for a blood test, which Birchfield refused to allow. Birchfield pleaded guilty to a class B misdemeanor for the refusal, but he reserved the right to appeal the Fourth Amendment issue. The North Dakota Supreme Court affirmed the conviction. Bernard's truck became stuck when he tried to pull a boat out of the water. The police arrived in response to a complaint of public drunkenness. Bernard smelled of alcohol. He assured officers that he had not driven the truck although the keys were in his hand at the time. He refused to take a field sobriety test and was arrested. He refused to take a breathalyzer test at the police station and was criminally charged for the refusal. The Minnesota Supreme Court upheld the trial court's decision not to dismiss the charges stemming from Bernard's refusal to agree to the test. Beylund was arrested after police saw him driving erratically. He agreed to a blood test after he was told the criminal penalties for the refusal and for drunk driving were the same. He subsequently challenged the suspension of his driver's license. The North Dakota Supreme Court upheld the action. The Fourth Amendment, in conjunction with the Due Process Clause of the Fourteenth Amendment, prohibits unreasonable governmental searches and seizures. A search or seizure is not unreasonable when conducted pursuant to a warrant issued by a neutral magistrate upon a finding of probable cause. The Supreme Court has recognized several exceptions to the warrant requirement. One occurs under exigent circumstances when evidence must be seized immediately or it will be lost. A second consists of a search incident to a lawful arrest. A third occurs when the subject of law enforcement attention consents to the search or seizure. Justice Alito, the author of the opinion for the Court, began with the exigent circumstance exception. He noted the McNeely holding "that the natural dissipation of alcohol from the bloodstream does not always constitute an exigency justifying the warrantless taking of a blood sample," but stated that the existence of an exigency exception "depend[s] on all of the facts and circumstances of the particular case." Justice Alito then addressed the incident to arrest exception. Here too he found answers in the Court's recent pronouncements. In Riley , the Court had explained that incident to arrest claims are weighed by measuring "the degree to which they intrude upon an individual's privacy and the degree to which they are needed for the promotion of legitimate government interests." He concluded that under such a measure breath tests qualified for the exception, but blood tests did not. "A breath test does not 'implicate significant privacy concerns.' Blood tests are a different matter.... Blood tests are significantly more intrusive, and their reasonableness must be judged in light of the availability of the less invasive alternative for a breath test." Thus, "[b]ecause breath tests are significantly less intrusive than blood tests and in most cases amply serve law enforcement interests, [Justice Alito] concluded that a [warrantless] breath test, but not a blood test, may be administered as a search incident to a lawful arrest for drunk driving." Turning to the consent exception, Justice Alito acknowledged that the Court's "prior opinions have referred approvingly to the general concept of implied-consent laws that impose civil penalties and evidentiary consequences on motorists who refuse to comply." Yet in his mind, the prospect of criminal penalties carried blood tests beyond that to which a motorist could reasonably be said to have implicitly consented. As for Birchfield, Bernard, and Beylund, Birchfield's conviction, predicated upon a refusal to submit to a warrantless, and thus unlawful, blood test, had to be reversed. Bernard's conviction, predicated upon a refusal to submit to a warrantless, but lawful, breath test, remained in place. Beylund, who submitted to a blood test in the face of threatened criminal prosecution and suffered the civil and administrative consequences, saw his case returned to state court to determine whether his consent was voluntary. Justices Sotomayor and Ginsburg concurred in Birchfield and Beylund , but dissented in Bernard , because they felt the Court too readily endorsed warrantless breath tests. Justice Thomas likewise concurred in part and dissented in part, but from the opposite point of view. He would have overruled McNeely and held that both alcohol tests—blood tests and breath tests—always fall within the exigent circumstance exception to the warrant clause. Holding : " The doctrine of qualified immunity shields officials from civil liability so long as their conduct 'does not violate clearly established statutory or constitutional rights of which a reasonable person would have known .... [E]xcessive force cases involving car chases reveal the hazy legal backdrop against which Mullenix acted .... [W]e ... reverse the Fifth Circuit's determination that Mullenix is not entitled to qualified immunity. " Amidst widespread concern over police use of excessive force, the Supreme Court confirmed that under existing law police officers are entitled to qualified immunity from civil liability for the use of force in performance of their duties, except in those cases in which they should have known their conduct was unlawful. The issue arose in the context of a Texas state trooper who fired a rifle at a car involved in a high-speed chase, killing the driver. The chase began when local police tried to arrest Israel Leija at a drive-in restaurant. He fled onto the Interstate with troopers in pursuit. In the course of his flight, which at times reached speeds of 110 miles per hour, Leija called the police dispatcher and threatened to shoot his pursuers unless they gave up the chase. In order to stop Leija, police set out tire spikes on the approach to a highway underpass in his path. Trooper Mullenix, situated on the top of the underpass, decided to try to shoot out the engine of Leija's car to stop him. There is some dispute over whether Mullenix heard the radio dispatch from his supervisor suggesting that he wait to see if the tire spikes did the job first. As the speeding car approached, Mullenix fired six shots. The car hit the spikes and rolled over a couple of times. Leija was dead with four shots in his upper body. Leija's family sued under federal civil rights laws pleading that Mullenix had used excessive force against Leija in violation of Leija's Fourth Amendment right to be free of an unreasonable seizure. Mullenix asked the court to dismiss the case before trial on qualified immunity grounds, which shield law enforcement officers and other officials for performance of their official duties under some circumstances. The U.S. district court refused. Mullenix appealed. The three-judge panel of the U.S. Court of Appeals for the Fifth Circuit agreed with the district court. The panel pointed out that "the doctrine of qualified immunity shields 'government officials performing discretionary functions ... from liability for civil damages insofar as their conduct does not violate clearly established statutory or constitutional rights of which a reasonable person would have known.'" The test is two-fold. First, did the official violate a constitutional or statutory right? Second, was the constitutional or statutory right so clearly established that the official must have known that it banned his conduct? As for the first step, the panel distinguished two recent Supreme Court cases that had found qualified immunity warranted in cases involving police shootings to terminate a high-speed chase. They felt that "the real inquiry is whether the fleeing suspect posed such a threat that the use of deadly force was justifiable," and that based only on the plaintiff's facts the use of deadly force was not justified. On the second step, they concluded it was clearly established that an officer may use deadly force against a fleeing suspect only when the suspect poses a threat of immediate, serious harm to others. Mullenix asked for a rehearing en banc. The Fifth Circuit denied the request, but 7 members of the 19 judges on the Fifth Circuit disagreed. The Supreme Court in an 8-1, unsigned opinion agreed with Mullenix. Without reaching the Fourth Amendment first step, the Court concluded that any Fourth Amendment right was not clearly established. The standard applied by the panel of the Fifth Circuit ("was the threat sufficient to justify the use of deadly force") was too general. As for the more particularized inquiry, the "excessive force cases involving car chases reveal the hazy legal backdrop against which Mullenix acted." Justice Scalia agreed with the result but thought the law was not clearly established for a different reason. In his mind, the car-chase cases cited by the Court involve the use of deadly force in order to make an arrest. He felt that Mullenix should have been seen as a question of deadly force directed at the car rather than its driver. Justice Sotomayor dissented. She would have held that Mullenix "violated Leija's clearly established right to be free of intrusion absent some governmental interest," when he failed to wait to see if the tire spikes would disable Leija's car. She also expressed a concern that "[b]y sanctioning a 'shoot first, think later' approach to policing, the Court renders the protections of the Fourth Amendment hollow." Holding : T he Double Jeopardy Clause of the United States Constitution bars the federal government and Puerto Rico from successively prosecuting a defendant on like charges for the same conduct . Luis Sanchez Vallee sold a firearm to an undercover police officer. A Puerto Rican grand jury indicted him for violation of Puerto Rican law, and a federal grand jury indicted him for violating federal law for the same sale. Sanchez Valle pleaded guilty to the federal charges and moved to dismiss the Puerto Rican charges on double jeopardy grounds. The trial court granted the motion to dismiss. The Puerto Rican Court of Appeals reversed and was in turn reversed by the Supreme Court of Puerto Rico. The double jeopardy issue is grounded in history. Acquired by treaty after the Spanish-American War of 1898, the Commonwealth of Puerto Rico has been granted self-government, it has adopted a constitution, and its residents have been given U.S. citizenship. The nature of the relationship between the U.S. territory and the federal government, however, remains the subject of a long-standing legal and political dispute. Based in part on statutory language providing that the relationship between Puerto Rico and the United States is "in the nature of a compact," arguments have been made that any change in Puerto Rico's political status must be consented to by both parties. Others argue that, under the Territory Clause, the United States has plenary authority to legislate regarding Puerto Rico without first obtaining the Puerto Rican government's consent. In Puerto Rico v. Sanchez Valle , the Court was called upon to decide whether defendants in a criminal case can be prosecuted under the local laws of Puerto Rico if they have been previously convicted under federal criminal law for the same offense. The Double Jeopardy Clause of the Fifth Amendment provides that no person shall "for the same offense ... be twice put in jeopardy of life or limb." Under the dual sovereignty doctrine, however, if two separate sovereigns prosecute a person for the same offense, the constitutional protection against double jeopardy is not triggered. Thus, the Supreme Court has held that state and federal prosecutions can be brought for the same offense, and similarly, it has allowed dual prosecutions by the federal government and Indian tribes. The Court, however, has also held that, as territories operate under power delegated to them by Congress, they are not to be treated as separate sovereigns for purposes of the Double Jeopardy Clause. The case came to the Court from the Supreme Court of Puerto Rico, the island's highest territorial court, which held, consistent with U.S. Supreme Court precedent, that since Puerto Rico is not a separate sovereign, it cannot prosecute a person who has been convicted in federal court for the same crime. This view, however, conflicted with an earlier opinion by the federal appellate court with jurisdiction over Puerto Rico, the U.S. Court of Appeals for the First Circuit, which held that Puerto Rico should be treated as a state for purposes of double jeopardy, allowing a person to be prosecuted for the same crime under Puerto Rican and federal laws. There was also a long-standing circuit split between the First Circuit decision and an opinion by the U.S. Court of Appeals for the Eleventh Circuit on this issue. Puerto Rico, in its petition to the Court for a writ of certiorari, conceded that the dual sovereignty doctrine has not previously been applied to a territory, but it argued that the nature of Puerto Rico's relationship with the United States changed in 1950. In that year, Congress passed P.L. 81-600 (Public Law 600), which contains the "compact" language that allowed Puerto Rico to "organize a government pursuant to a constitution of their own adoption," subject to congressional approval. Puerto Rico argued that when Congress subsequently approved its constitution, this approval established the sovereignty of Puerto Rico in much the same way that other territories have achieved statehood. Puerto Rico analogized this legislatively created sovereignty to the sovereignty of Indian tribes, and further notes instances where Puerto Rico has been treated as a state in statutory contexts. The defendants, in their response to the petition, argued that the passage of Public Law 600 did not change the nature of the relationship between Puerto Rico and the United States, noting Congress's retention of plenary authority to review Puerto Rico's constitution before it became effective. Further, the defendants argued, the legislative history of Public Law 600 provided that nothing in the law would change Puerto Rico's political, social, and economic relationship to the United States. The Court, speaking through Justice Kagan, concluded that the Double Jeopardy Clause does not permit the two entities, the federal government and Puerto Rico, to successively prosecute the defendant for essentially the same crime. She began with the observation that the inquiry did "not probe whether a government possesses the usual attributes, or acts in the common manner, of a sovereign…. [but] whether [the prosecuting entities] draw their authority to punish the offender from distinct sources of power." She explained that, for example, "the States rely on 'authority originally belonging to them before admission to the Union and preserved to them by the Tenth Amendment.'" By the same token, "[o]riginally … 'the [Indian] tribes were self-governing sovereign political communities,' possessing … the 'inherent power to prescribe laws for their members and to punish infractions of those laws.'" In the case of Puerto Rico, Justice Kagan saw the question as: "Do the prosecutorial powers belonging to Puerto Rico and the Federal Government derive from whole independent sources?" She confirmed that with Public Law 600 and with the Commonwealth's subsequent adoption of a constitution, Puerto Rico underwent a profound political change. The question, however, was not about the change, but about the power to make the change. "Congress conferred the authority to create the Puerto Rico Constitution, which in turn confers the authority to bring criminal charges. That makes Congress the original source of power for Puerto Rico's prosecutors," Justice Kagan reminded the parties. When "an entity's authority to enact and enforce criminal law ultimately comes from Congress," she continued, "then it cannot follow a federal prosecution with its own. That is true of Puerto Rico, because Congress authorized and approved its Constitution, from which prosecutorial power now flows." The Court therefore affirmed the decision of the Supreme Court of Puerto Rico that the Double Jeopardy Clause's dual sovereign doctrine does not permit successive federal and Puerto Rico prosecutions for the "same offense." Justices Ginsburg and Thomas joined in the Court's opinion, but offered a concurring opinion to reflect their view that the dual sovereign doctrine seems at odds with the spirit of the Double Jeopardy Clause. Justice Thomas filed an individual concurrence in which he declined to join that portion of the Court's opinion that recited its Indian law-Double Jeopardy precedents. Justices Breyer and Sotomayor dissented, because they believe "for Double Jeopardy Clause purposes that the criminal law of Puerto Rico and the criminal law of the Federal Government do not find their legitimacy-conferring origin in the same 'source.'" The Court's Sixth Amendment cases this term offer a variety of issues ranging from speedy trial, to forfeiture and the right to counsel of choice, to the use of uncounseled convictions as predicate offenses. Holding : "Pretrial restraint of legitimate, untainted assets needed to retain counsel of choice violates the Sixth Amendment." (Plurality). The Supreme Court decided in a 4-1-3 opinion that the "pretrial restraint of legitimate, untainted assets needed to retain counsel of choice violates the Sixth Amendment." Justice Breyer, in an opinion joined by the Chief Justice and Justices Ginsburg and Sotomayor, based his conclusion on "the nature and importance of the constitutional right taken together with the nature of the assets" in the case. Justice Thomas, who concurred in the judgment, based the same conclusion "strictly on the Sixth Amendment's text and common-law backdrop." Sila Luis was indicted for health care fraud. The indictment also identified certain of Luis's assets as property generated by the offense. The government initiated a civil forfeiture proceeding based on the grand jury's probable cause finding. It also secured a pre-trial freeze order covering substitute assets ("property of equivalent value" to the tainted assets) not traceable to the tainted assets, after the court found that Luis had disposed of some of the tainted assets. Luis argued before both the district court and the U.S. Court of Appeals for the Eleventh Circuit that she needed to substitute assets to pay her defense attorney and that as a consequence the freeze order violated her Fifth and Sixth Amendment rights. The Eleventh Circuit held that her arguments were foreclosed by the Supreme Court's Monsanto , Caplin & Drysdale , and Kaley decisions. The Supreme Court granted certiorari to decide the constitutional issue. The Court's Caplin & Drysdale and Monsanto cases arose under the Controlled Substances Act (CSA). The CSA authorizes the confiscation of tainted property traceable to a violation of its provisions. It also authorizes the confiscation of untainted property ("substitute assets") when the tainted property is unavailable. Moreover, it states that the United States acquires title to tainted property when the forfeiture-triggering offense is committed. And most pertinent here, it authorizes pre-trial restraining orders to prevent the dissipation of tainted and untainted assets. The Caplin & Drysdale decision declared that "[w]hatever the full extent of the Sixth Amendment's protection of one's right to retain counsel of his choosing, that protection does not go beyond the individual's right to spend his own money to obtain the advice and assistance of counsel." Thus, it held "[a] defendant has no Sixth Amendment right to spend another person's money for services rendered by an attorney, even if those funds are the only way that that defendant will be able to retain the attorney of his choice." The Monsanto decision held that a judicial finding of probable cause to believe assets were tainted and therefore forfeitable was all that the Constitution required for a pre-trial restraining order barring disposal of the assets, even to pay attorneys' fees. The Kaley decision held that a grand jury's finding of probable cause was enough for a restraining order without the necessity of a judicial probable cause hearing. Luis noted that each of these cases involved tainted assets and that her case involved untainted assets. She argued that therefore the untainted assets she intended to use to finance her criminal defense may not be frozen as a matter of Sixth Amendment right. Five of the Justices essentially agreed. Justice Breyer reiterated that "the Sixth Amendment grants a defendant 'a fair opportunity to secure counsel of his own choice.'" He agreed with Luis that fact that her frozen assets were untainted represented a critical departure from the Court's earlier cases. He offered three reasons to conclude that the restraining order offended Luis's Sixth Amendment rights. First, Luis's constitutionally protected right to her counsel of choice carried greater weight than the government's interest in forfeiture and restitution. Second, as a matter of legal history, seizure of untainted property prior to conviction was virtually unheard of. Third, the government's position carried to its logical conclusion could sweep away a defendant's right to the assistance of a counsel of choice. Justice Thomas agreed the Sixth Amendment barred pre-trial restraint of the defendant's untainted assets, but he would stop there. He declined to "endorse the plurality's atextual balancing analysis." Justice Kennedy, joined by Justice Alito in dissent, bemoaned the fact that the plurality's "unprecedented holding rewards criminals who hurry to spend, conceal, or launder stolen property by assuring them that they may use their own funds to pay for an attorney after they have dissipated the proceeds of their crime." Justice Kagan dissented because she believed the Court was bound by its Monsanto precedent. Holding: T he Sixth Amendment 's Speedy Trial Clause does not apply once a defendant has pleaded guilty or has been found guilty after a trial. Betterman v. Montana presented the question of whether the Sixth Amendment right to a speedy trial applies through sentencing or, instead, ends once a conviction has been obtained. The Sixth Amendment states that "the accused shall enjoy the right to a speedy and public trial," which the Court has described as a "fundamental right" that is "specifically affirmed in the Constitution." The Fourteenth Amendment's Due Process Clause makes the Sixth Amendment binding on the states. The right to a speedy trial is enforced, in part, by the Speedy Trial Act of 1984, as amended, which sets deadlines (with statutory exceptions) for federal courts to complete various stages of a criminal prosecution. Montana has a corresponding constitutional right but no comparable statutory provision. The consequence of denying this Sixth Amendment right to a defendant is having the charges against the accused dismissed. Brandon Betterman was charged with bail jumping after failing to appear for his sentencing hearing for a domestic assault conviction in Montana. Eventually, Betterman turned himself in, after which he was sentenced for the domestic assault charges; he remained in county jail (instead of being transferred to a state penitentiary to begin serving his sentence) during the criminal proceedings for the bail jumping charge. Fourteen months passed between the date on which Betterman was arraigned for, and pleaded guilty to, the bail jumping charge (April 19, 2012) and his sentencing hearing (June 27, 2013). While he awaited sentencing, Betterman moved to dismiss the bail jumping charge after nine months had passed since his guilty plea, contending that the delay in sentencing violated his right to a speedy trial under the Sixth Amendment. The trial court denied that motion, and the Montana Supreme Court affirmed. One of Betterman's principal arguments for why the Sixth Amendment's Speedy Trial Clause should apply until sentencing concludes centers on the Framers' intent and the text and history of the Clause. Yet with Justice Scalia no longer on the bench, it was hard to predict how those rationales would factor into the Court's analysis. According to Betterman, when the Framers penned the Bill of Rights, criminal proceedings were "unitary," and so when using the word "trial" in the Amendment's text, the Framers "adopted protections encompassing not just the petit jury stage but also the sentence and judgment that followed." Montana disputes Betterman's contention, and adds that the Amendment's text, which affords a right to the "accused"—not the convicted—lends support to the conclusion that the right does not continue through sentencing. The National Association of Criminal Defense Lawyers (NACDL) filed an amicus brief in support of Betterman, bringing a human-impact hook for the Court to consider. According to the NACDL, many prisoners, like Betterman, spend long periods in jail awaiting trial, but those facilities are often overcrowded and ill-equipped to handle extended stays, preventing prisoners from accessing adequate medical care and various rehabilitation programs. Thus, the NACDL argues, applying the right to sentencing proceedings could reduce the amount of time in, and allegedly oppressive consequences of, state jail stays. The Supreme Court was unpersuaded by Betterman's arguments and unanimously held that the Sixth Amendment's Speedy Trial Clause does not apply once a defendant has pleaded guilty or been found guilty after trial. The Court, in an opinion by Justice Ginsburg, noted that the Speedy Trial Clause helps protect the accused's presumption of innocence by "'prevent[ing] undue and oppressive incarceration prior to trial ... and ... limit[ing] the possibilities that long delay will impair the ability of an accused to defend himself.'" But that protection, the Court clarified, "loses force upon conviction." Additionally, the Court reasoned that its conclusion fits with the historical understanding of the right to a speedy trial, noting that the Framers believed that "a presumptively innocent person should not languish under an unresolved charge," and thus the language chosen—guaranteeing a right to the "accused"—was purposeful and distinct from the convicted. Moreover, the Court added that "[t]he sole remedy for a violation of the speedy trial right—dismissal of the charges—fits the preconviction focus of the Clause" because, the Court reasoned, "it would be an unjustified windfall, in most cases, to remedy sentencing delay by vacating validly obtained convictions." Still, the Court noted that a defendant who experiences "inordinate delay in sentencing" possibly may be able to seek relief through the Due Process Clause—an issue that Betterman did not raise, but which Justices Thomas, Alito, and Sotomayor noted in separate concurrence. Holding : R eliance on valid uncounseled tribal-court misdemeanor convictions to prove 18 U.S.C . Section 117(a)'s predicate offense element violates neither the Sixth Amendment nor the Due Process Clause. The federal domestic assault by an habitual offender law makes it a crime punishable by imprisonment for up to five years to commit domestic violence within Indian country or U.S. territorial jurisdiction if the offender has at least two prior federal, state, or tribal convictions for a comparable offense. As a general rule, the Constitution assures indigent defendants the right to an appointed attorney in any criminal case where a term of imprisonment is imposed . Indian defendants in tribal courts, however, enjoy no such constitutional assurance. Bryant, a tribal member and reservation resident, had been convicted in tribal court of domestic violence on a number of occasions. He had been imprisoned more than once as a consequence, although always for less than a year. When he was indicted under the federal domestic violence law, he asked the U.S. District Court for the District of Montana to dismiss the charges. He argued that the Sixth Amendment did not permit use of his uncounseled tribal court convictions as proof of an element of the federal domestic violence offense. The district court refused to dismiss. The Ninth Circuit reversed. It felt bound by its earlier decision in United States v. Ant d ecision and was unconvinced by later developments. It concluded that "[b]ecause Bryant's tribal court domestic abuse convictions would have violated the Sixth Amendment right to counsel had they been obtained in federal or state court, using them to establish an element of the offense in a subsequent [federal] prosecution is constitutionally impermissible." The Ant decision held that the Sixth Amendment barred the evidence of a defendant's uncounseled tribal court guilty plea in a parallel federal prosecution. Soon thereafter, however, the Supreme Court observed in the course of its Duro v. Reina opinion that in proceedings against tribal members, a tribal court was not bound by the Bills of Rights—and that even when reinforced by the Indian Civil Rights Act, there was no right to appointed counsel in tribal courts. Still later, the Supreme Court in Nichols declared "an uncounseled [state] misdemeanor conviction[] valid ... because no prison term was imposed," and "also valid when used to enhance punishment at a subsequent [federal] conviction." The Ninth Circuit saw no incompatibility between Ant and Nichols because "even after Nichols , uncounseled convictions that resulted in imprisonment generally could not be used in subsequent prosecutions." As the Ninth Circuit conceded, the Eighth and Tenth Circuits saw it differently. For them , the lesson from Nichols was not why uncounseled convictions were valid, but that the reason didn't matter as long as they were valid convictions: "The ultimate question ... is whether an uncounseled conviction resulting in a tribal incarceration that involved no actual constitutional violation may be used later in federal court.... As per Nichols , then, we believe it is necessary to accord substantial weight to the fact that [the defendant's] prior convictions involved no actual constitutional violation" because the Sixth Amendment does not apply in tribal court. The Supreme Court agreed. Justice Ginsburg pointed out in the opinion for the Court that "Bryant's tribal-court convictions ... infringed no constitutional right because the Sixth Amendment does not apply to tribal-court proceedings." What counted for Sixth Amendment purposes was that Bryant enjoyed the full advantage of counsel at his subsequent federal Section 117 trial. Moreover, Justice Ginsburg observed, echoing sentiments expressed below, "It would be 'odd to say that conviction untainted by a violation of the Sixth Amendment triggers a violation of that same amendment when it's used in a subsequent case where the defendant's right to appointed counsel is fully respected.'" Bryant fared no better with his argument that the want of counsel in tribal court undermined the validity of tribal convictions, triggering a due process bar to their use in later federal criminal proceedings. Not so, said Justice Ginsburg. The panoply of statutory rights guaranteed there "sufficiently ensure the reliability of tribal-court convictions." Justice Thomas filed a concurring opinion. He agreed the Court's precedents dictated the result. He continued, however, to question the validity of those earlier pronouncements. Holding : Failure to anticipate that the Comparative Bullet Lead Analysis would be discredited did not constitut e ineffective assistance of counsel . In its first opinion of the 2015 term, Maryland v. Kulbicki , the Court reversed per curiam and unanimously, a decision of the Maryland Court of Appeals. Kulbicki had been convicted of first degree murder, based in part on the testimony of a forensic expert whose testimony relied on a so-called Comparative Bullet Lead Analysis (CBLA). Some years later, Maryland's highest court declared Comparative Bullet Lead Analysis unreliable. Kulbicki filed a petition for post-conviction relief challenging both the reliability of the analysis and the effectiveness of his attorney's cross-examination of the forensic expert. The trial court denied the petition. The Maryland Court of Special Appeals affirmed. Then, the Maryland Court of Appeals reversed based upon counsel's failure to unearth and exploit a report that cast doubt on the analysis. The Supreme Court overturned the decision of the Maryland Court of Appeals. The Sixth Amendment, made binding on the states through the Due Process Clause of the Fourteenth Amendment, assures the criminally accused of the effective assistance of counsel. The assistance of counsel is constitutionally ineffective when counsel's "performance is deficient, meaning his errors are 'so serious' that he no longer functions as 'counsel,' and prejudicial, meaning his errors deprive the defendant of a fair trial. The Maryland Court of Appeals erroneously used hindsight to judge the effectiveness of Kulbicki's counsel, the Supreme Court concluded. The appropriate standard looks at the adequacy of performance at the time it occurred. At the time of Kulbicki's trial, the analysis was widely accepted. Thus, Kulbicki's "[c]ounsel did not perform deficiently by dedicating their time and focus to elements of the defense that did not involve poking methodological holes in a then-uncontroversial mode of ballistics analysis," the Court explained. Capital punishment cases represent the lion's share of the Court's sentencing cases this term. However, the class also includes the matter of the retroactive application of Miller v. Alabama 's prohibition on a life without parole sentence for murder by a juvenile and the harmless error standard in sentencing cases. Holding : The United States Supreme Court has "jurisdiction to decide whether the Supreme Court of Louisiana correctly refused to give retroactive effect to ... Miller." " Miller's prohibition on mandatory life without parole for juveniles [without] the opportunity to show their crime did not reflect irreparable corruption" applies retroactively even in state collateral review proceedings . Early in the year, the U.S. Supreme Court declared that the previously announced ban on mandatory life imprisonment for juvenile crimes must apply to crimes committed before the ban. The case, Montgomery v. Louisiana , has several distinctive aspects. First, it grants a 69-year-old inmate relief based on a sentence imposed for a murder that occurred when he was 17. Second, it departs from a tradition under which groundbreaking Court decisions rarely travel back to long finalized cases. Third, it uses the so-called Teague doctrine as a vehicle, even though the doctrine was heretofore only invoked to limit state prisoner access to federal habeas corpus review. Finally, its burdens fall most heavily upon the states because federal juvenile prosecutions are few, and federal murder prosecutions are even more uncommon. If the particulars of the Court's disposal of the case were somewhat unusual, the result was probably not totally unexpected. The Court had already stated that the Eighth Amendment's cruel and unusual punishment clause would not permit (1) use of the death penalty for a murder committed by a juvenile; (2) a sentence of life imprisonment without the possibility of parole for an offense other than murder committed by a juvenile; or (3) a sentence of life imprisonment without the possibility of parole for a murder committed by a juvenile. At 17 years of age in 1963, Montgomery killed a deputy sheriff. He was sentenced to life in prison with no chance of parole, the only sentence available when the jury declined to vote for the death penalty. He asked the Louisiana courts to toss out his sentence when its constitutional defects become apparent after Miller . They refused on the ground that the Supreme Court's decisions have not been carried back to the cases of inmates like Montgomery whose appeals had long since become final. State prisoners may ask for review of their convictions or sentences in three stages. First, they may appeal their convictions or sentences in state court ("direct review"). Second, they may ask their state courts to overturn their convictions or sentences under a post-appeal procedure available in each of the states ("collateral review"). Finally, they may ask the federal courts to overturn their convictions or sentences under federal habeas corpus procedures. Montgomery was at the second stage. Had he been at the third stage, the federal habeas corpus stage, he would have encountered the Teague doctrine. The doctrine, so named for the Supreme Court case in which it was first stated, Teague v. Lane , seeks finality. It provides that federal habeas corpus review is not available to consider an inmate's request for a "new rule," that is, a groundbreaking constitutional interpretation. The doctrine has two exceptions. It does not apply to substantive new rules that void a previously valid crime or penalty. And, it does not apply when the new rule is a "watershed" decision, one that "implicat[es] the fundamental fairness and accuracy of the criminal proceeding." The Supreme Court in Montgomery decided to apply Teague's exception to the second stage, the stage at which Montgomery found himself: "when a new substantive rule of constitutional law controls the outcome of a case, the Constitution requires state collateral review courts to give retroactive effect to that rule." In the eyes of the Court, the Miller decision is such a rule; it voided a sentence of life imprisonment without the possibility of parole for a murder committed by a juvenile who was denied the opportunity to prove that he was not irreparably corrupted. The Court returned Montgomery's case to Louisiana with the option either to resentence him or to make him eligible for parole. Justice Thomas in dissent disagreed with the Court's jurisdictional assessment that the case involved a federal constitutional issue rather than a matter of state law. Justice Scalia, in a dissent joined by Justices Thomas and Alito, objected to "ripping Teague 's first exception from its moorings, [and] converting an equitable rule governing federal habeas relief to a constitutional command governing state courts as well." Congress is free to change the result. The Court's appellate jurisdiction is a matter of statute, but the statute has been amended only infrequently. Holding: When "the record is silent as to what the district court might have done had it considered the correct Guidelines range," as was the case here, "the court's reliance on an incorrect range in most instances will suffice to show an effect on the defendant's substantial rights" when conducting plain-error review. And when the defendant's original sentence had fallen within both the incorrect and correct Guidelines sentencing ranges, courts cannot require, as the Fifth Circuit had, defendants to provide additional evidence that the sentencing outcome would have been different. In United States v. Molina-Martinez, the Supreme Court addressed a circuit split concerning how to determine, under plain error review, whether a district court's application of an incorrect guidelines range affected the defendant's substantial rights. When imposing a sentence, the district judge first must calculate the defendant's advisory guidelines range by using the U.S. Sentencing Guidelines (the guidelines) to determine the defendant's total offense level and criminal history score. The district judge must then choose a sentence after considering the guidelines range and weighing, among other things, aggravating and mitigating factors set forth in 18 U.S.C. Section 3553(a). If the defendant does not object to the district court's calculation at sentencing, Federal Rule of Criminal Procedure 52(b) limits appellate review of the sentence to plain error. To establish plain error, the defendant must show (1) that the court made an error; (2) the error was plain (i.e., obvious); and (3) the error affected the defendant's substantial rights, which typically means that it "affected the outcome of the district court proceedings." If the defendant makes that showing, the reviewing court has the discretion to grant relief if the court also concludes that the error "seriously affect[s] the fairness, integrity or public reputation of judicial proceedings." Conversely, if a defendant timely objects at sentencing to a guidelines error, the government has the burden of proving on appeal that the error was harmless. In United States v. Molina-Martinez , defendant Saul Molina-Martinez, a Mexican citizen, was convicted of being unlawfully present in the United States after having been removed previously. The district court adopted the probation office's calculation of Molina-Martinez's guidelines range of 77 to 96 months, based on a total offense level of 21 and criminal history category VI. And though Molina-Martinez objected to the total offense level calculation, which the court overruled, he did not object to the criminal history score. The district court then imposed a 77-month sentence—the bottom of the guidelines range. Molina-Martinez appealed to the Fifth Circuit, contending that the district court plainly erred when it incorrectly calculated his criminal history score. The government conceded that Molina-Martinez's criminal history score should have been category V, not VI, and with that score, the correct guidelines range would have been 70 to 87 months' imprisonment. The court found this error to be "plain" but concluded, nevertheless, that Molina-Martinez had not established that the error had affected his substantial rights. To do so in the Fifth Circuit, a defendant must show that "but for the district court's misapplication of the Guidelines, he would have received a lesser sentence." And "[w]hen the correct and incorrect [guidelines] ranges overlap and the defendant is sentenced within the overlap, " as was the case here, the Fifth Circuit requires that the defendant provide additional evidence to show that his sentence may have been different (e.g., an indication by the district judge that the guidelines range was the primary factor relied on in choosing a sentence). Because the court concluded that Molina-Martinez did not meet that additional burden, it affirmed the district court's judgment. Molina-Martinez petitioned for a writ of certiorari, limited to this question: when a district court incorrectly calculates a defendant's guidelines range, should an appellate court applying plain-error review presume that the error affected the defendant's substantial rights? Molina-Martinez had argued to the Fifth Circuit that such a presumption should apply, but the court—in a footnote—rejected that argument as foreclosed by circuit precedent. In urging the Supreme Court to establish the rebuttable presumption, Martinez-Molina pointed to the Third and Tenth Circuits, which disagree with the Fifth Circuit and presume plain error when the district court imposes a sentence after miscalculating the defendant's guidelines range. And without using the word "presumption," the Seventh and Ninth Circuits have also held that a sentence based on an improperly calculated guidelines range constitutes plain error and requires a remand for resentencing. In arguing that those circuits are correct, Martinez-Molina relied on the Supreme Court's comments in Peugh v. United States that the "federal sentencing scheme aims to achieve uniformity by ensuring that sentencing decisions are anchored by the Guidelines" and that empirical evidence presented "indicat[ed] that the Sentencing Guidelines have the intended effect of influencing the sentences imposed by judges." It follows, said Martinez-Molina, that miscalculations resulting in an incorrect guidelines range fit into a "special category" of errors that should be presumed prejudicial —a premise that the Court raised and left open in United States v. Olano . Conversely, the government opposed the presumption, reminding the Court that it has "repeatedly cautioned that '[a]ny unwarranted extension' of the authority granted by Rule 52(b) would disturb the careful balance it strikes between judicial efficiency and the redress of injustice." At oral argument, the Justices seemed divided over whether the Court should adopt the presumption. For example, Justice Breyer appeared to suggest that in cases in which the defendant proves that the district court incorrectly calculated his guidelines range, the burden of proof should shift to the government "to rebut the common sense notion that of course using the wrong Guideline had an effect on the sentence." Conversely, Justice Scalia asked whether sentencing policy should "establish[] a system ... that induces lawyers to make objections when objections are proper" by continuing to make the defendant's burden more stringent on appeal when he fails to raise errors in the trial court. In its unanimous ruling reversing the Fifth Circuit, the Court, in an opinion crafted by Justice Kennedy, declined to adopt Molina-Martinez's requested presumption unequivocally. Instead, the Court narrowly held that "the error itself can, and most often will, be sufficient to show a reasonable probability of a different outcome outside the error." The Court reasoned that its holding was supported by the "Guidelines' central role in sentencing," as the "starting point" and "benchmark" for sentencing decisions, thus making sentencing calculation errors "particularly serious." Even so, the Court cautioned that "[t]here may be instances when, despite application of an erroneous Guidelines range, a reasonable probability of prejudice does not exist." Still, the Court continued, "[a]bsent unusual circumstances [a defendant] will not be required to show more" than the error, and thus the Court explicitly rejected the Fifth Circuit's unique approach. Indeed, the Court added, "[n]othing in the text of Rule 52(b), its rationale, or the Court's precedents supports a requirement that a defendant," in seeking plain-error review of a Guidelines error, "make some further showing of prejudice beyond the fact that the erroneous, and higher, Guidelines range set the wrong framework for the sentencing proceedings." The menu of the Court's capital punishment cases offers cases concerning jury instructions, jury selection, exclusive jury sentencing prerogatives, Brady violations, appellate court judge recusals, and the application of habeas corpus standards. Holdings : "The Eighth Amendment [does not] require ... capital-sentencing courts to instruct the jury that mitigating circumstances need not be proved beyond a reasonable doubt .... The [Carr's] joint sentencing proceedings did not render the sentencing proceedings fundamentally unfair." Justice Antonin Scalia wrote his last opinion for the Court in a capital punishment case, Kansas v. Carr . There, the Court reversed two decisions of the Kansas Supreme Court and held that "the Eighth Amendment [does not] require ... capital-sentencing courts to instruct the jury that mitigating circumstances need not be proved beyond a reasonable doubt." It also held that the Eighth Amendment did not require separate trials for two of the defendants in one of the Kansas cases. The defendants in one of the cases, the Carr brothers, were convicted of 4 counts of capital murder, 1 count of attempted first-degree murder, 5 counts of aggravated kidnaping, 9 counts of aggravated robbery, 20 counts of rape or attempted rape, 3 counts of aggravated criminal sodomy, 1 count each of aggravated burglary and burglary, 1 count of theft, and 1 count of cruelty to animals as part of one crime spree. Reginald Carr was also convicted of kidnapping, aggravated robbery, aggravated battery, and criminal damage to property committed on another occasion. Both Reginald and Jonathan Carr were convicted of first-degree felony murder in connection with yet a third episode. The defendant in the second case, Gleason, was convicted of two counts of capital murder, aggravated kidnaping, aggravated robbery, and criminal possession of a firearm. Defendants in both cases were sentenced to death, and in both cases the Kansas Supreme Court vacated their sentences on Eighth Amendment grounds. The Kansas court's Gleason decision acknowledged an apparent conflict with U.S. Supreme Court precedent, which it thought distinguishable. It found constitutionally insufficient the trial court's jury instructions that left the jury "to speculate as to the correct burden of proof for mitigating circumstances, and [under which] reasonable jurors might have believed they could not consider mitigating circumstances not proven beyond a reasonable doubt." The Kansas court reiterated that view in its Carr decision, in which it also "concluded that R. Carr's Eighth Amendment right to an individualized sentencing determination was fatally impaired by [the] failure to" separate the capital sentencing proceeding of the two brothers, who were thought to have antagonistic death penalty mitigating defenses. Justice Scalia's opinion for the Court rejected the Kansas court's characterization of the jury instructions. "[N]o juror would reasonably have speculated that mitigating circumstances must be proved by any particular standard, let alone beyond a reasonable doubt.... The instructions repeatedly told the jurors to consider any mitigating factor, meaning any aspect of the defendants' background or the circumstances of their offense. Jurors would not have misunderstood these instructions to prevent their consideration of constitutionally relevant evidence." The Carrs' severance argument fared no better. As Justice Scalia phrased it, "The Kansas Supreme Court agreed with the defendants that, because of the joint sentencing proceedings, one defendant's mitigating evidence put a thumb on death's scale for the other." Yet, the trial court had impressed on the jury the importance of judging the defendants individually. More to the point, vacating the death sentence required a showing that joint proceedings had been fundamentally unfair. "Only the most extravagant speculation would lead to the conclusion that the supposedly prejudicial evidence rendered the Carr brothers' joint sentencing proceeding fundamentally unfair." Justice Scalia explained that the slight prospect of relatively greater or lesser culpability paled next to graphic evidence of the level of equally shared responsibility. "What these defendants did—acts of almost inconceivable cruelty and depravity—was described in excruciating detail by [a surviving victim], who relived with the jury, for two days, the Wichita Massacre. The joint sentencing proceedings did not render the sentencing proceedings fundamentally unfair." Justice Sotomayor, the sole dissenting member of the Court, objected that the Court should have left the cases where they found them and deny certiorari. Instead, the Court had overturned a state high court ruling, not because of a breach of any federal constitutional right, but because the state court had applied the law more generously than would have the highest federal court. Justice Scalia responded that had the Kansas Supreme Court decisions been grounded in state law, they would indeed have been "none of our business." On the other hand, he said, "what a state court cannot do is experiment with our Federal Constitution and expect to elude this Court's review as long as victory goes to the criminal defendant. 'Turning a blind eye' in such cases 'would change the uniform "law of the land" into a crazy quilt.'" Holding : "The Kentucky Supreme Court was not unreasonable in its application of clearly established federal law when it concluded that the exclusion of Juror 638 did not violate the Sixth Amendment." Thus, the U.S. Court of Appeals for the Sixth Circuit's grant of habeas relief to reverse the death sentence is overturned . In mid-December, the U.S. Supreme Court announced its decision in White v. Wheeler and in doing so reversed a lower federal appellate court decision which would have sent back for re-trial a 1997 Kentucky murder case. The Supreme Court, without dissent, held that Kentucky courts had been given insufficient deference in their application of Supreme Court precedents in the area of death-penalty-ambivalent prospective jurors. Wheeler had been convicted and sentenced to death for the murder of a Louisville Kentucky couple. During the questioning of prospective jurors, one initially expressed uncertainty about whether he could vote for the death penalty but ultimately stated he believed he could consider all of the penalty options. The Supreme Court has held that a prospective juror must be excused if he states either that he would always or never vote for the death penalty. The prosecution asked the court to excuse the prospective juror, which the court did after it had questioned him more closely. The Kentucky courts affirmed his conviction and sentence on appeal and denied habeas-like relief after a round of collateral review. The U.S. district court denied Wheeler's petition for federal habeas corpus review, which the U.S. Court of Appeals for the Sixth Circuit reversed. The Sixth Circuit weighed the statutory standard for habeas review of state convictions: "[A] writ of habeas corpus shall not be granted with respect to any claim that was adjudicated on the merits in state court proceedings unless the adjudication of the claim (1) resulted in a decision that was contrary to, or involved an unreasonable application of, clearly established Federal law, as determined by the Supreme Court.... " The Sixth Circuit concluded that the Kentucky courts had misapplied the Supreme Court's "death qualified jury" case law. The Supreme Court disagreed. First, the Court explained that the statutory standard is a particularly demanding one. It "erects a formidable barrier to federal habeas relief for prisoners whose claims have been adjudicated in state court." To overcome it, "a state prisoner must show that the state court's ruling on the claim being presented in federal court was so lacking in justification that there was an error well understood and comprehended in existing law beyond any possibility for fairminded disagreement." The task is even more arduous when it involves jury selection challenges. There, the decision of the state judge, who questioned and observed the prospective juror's answers, is entitled to "double deference." As for Supreme Court precedent, in jury selection cases, a prospective juror may be excused "where the trial judge is left with the definite impression that a prospective juror would be unable to faithfully and impartially apply the law." Moreover, "when there is ambiguity in the prospective juror's statements, the trial court is entitled to resolve it in favor of the State." In the eyes of the Court, the Sixth Circuit simply applied the test incorrectly. "A fairminded jurist could readily conclude that the trial judge's exchange with [the prospective juror] reflected a diligent and thoughtful voir dire ; that she considered with care the juror's testimony; and that she was fair in the exercise of her broad discretion in determining whether the juror was qualified to serve in this capital case." The habeas standard is one of congressional creation. Congress passed it as part of the Antiterrorism and Effective Death Penalty Act (AEDPA) in an effort to reduce delays in capital cases and eliminate federal-state judicial friction. Congress is therefore free to change the standard. However, there have been no proposals to revisit AEDPA's standard in recent years. Holding : "Contrary to the state postconviction court, we conclude that the prosecution's failure to disclose material evidence violated Wearry's due process rights." On March 7, 2016, the U.S. Supreme Court overturned a death penalty conviction because authorities had withheld material evidence favorable to the defendant. The Court's 6-2, unsigned per curiam decision in Wearry v. Cain suggests that the Court may have been influenced in part by the poor performance of the defendant's trial attorney, by the defendant's limited mental competence, and perhaps by suspicions of a racially discriminatory jury selection process. Testimony at Wearry's trial claimed that he, Sam Scott, Eric Brown, Randy Hutchison, and others had stopped the victim's car; driven the victim around, stopping periodically to beat him; and then murdered the victim by running over him with his car. Scott and Brown testified against Wearry, who claimed to have been at a wedding, miles away, at the time. Scott and Brown admitted their testimony conflicted with statements they had made to the police earlier. More to the point, authorities failed to disclose evidence that would have undermined their credibility at trial. Inmates jailed with Scott reported that he wanted to get even with Wearry for telling the police of Scott's involvement in the murder. Then, in spite of the prosecutor's assurances to the jury, the police had undisclosed evidence that Brown had sought to bargain for a reduced sentence in exchange for his testimony. Finally, authorities did not turn over medical records relating to Hutchison's recent knee surgery, which might have cast doubt on testimony concerning the events surrounding the murder, particularly whether Hutchison could have engaged in the physical activities attributed to him at trial. The Supreme Court's Brady v. Maryland decision and the cases that follow it require the prosecution to disclose to the defendant material exculpatory evidence or evidence that materially undermines the credibility of a witness against him. Its Strickland v. Washington decision and related cases guarantee defendants the assistance of competent attorneys. Its Batson v. Kentucky decision and its progeny bar prosecutors from conducting jury selection in a racially discriminatory manner. Finally, its Atkins v. Virginia decision precludes execution of the mentally retarded. The Court's Wearry opinion found that the evidence withheld "suffices to undermine confidence in Wearry's conviction" and returned the case to the Louisiana courts. The opinion is interwoven with signs of the Court's want of confidence for other reasons as well, beginning with the Court's unflattering description of the work of Wearry's trial attorney. His "defense at trial rested on an alibi." Yet, he failed to present impartial corroborative witnesses or to discover additional available corroborative evidence in support of the alibi. In fact, "he had conducted no independent investigation into Wearry's innocence and had relied solely on evidence the State and Wearry had provided." The Court explained, however, that the presence of the Brady error made it unnecessary to consider Wearry's ineffective-assistance-of-counsel argument. The Court's relatively short opinion, nevertheless, took time to observe that various members of the appellate panels below had found credible Wearry's jury selection challenges ("Finding both jury-selection claims credible, then-Justice Johnson dissented") and his mental competence objections ("Justice Crichton would have ... remanded for the trial court to address [Wearry's] claim of intellectual disability under Atkins "). Wearry's case, however, did not turn on the state of the law, but on its application. Did the evidence withheld undermine judicial confidence in the verdict? The majority said it did. Justices Alito and Thomas dissented because they concluded that full disclosure to the defendant would not have changed the result. Holding : " [W] h ere a capital defendant's future dangerousness is at issue, and the only sentencing alternative to death available to the jury is life imprisonment without possibility of parole," the Due Process Clause " entitles the defendant to inform the jury of his parole ineligibility . " When the prosecution raises the issue of a capital defendant's future dangerousness, the defendant is entitled to have the jury informed that the only sentencing options are death or life imprisonment without the possibility of parole. In Lynch , the Supreme Court and the Arizona courts disagreed over whether the defendant had any "possibility" of parole. Lynch was convicted of murder. Murder is a capital offense under Arizona law punishable by death or life imprisonment. Arizona has long since abolished parole in most instances. However, if the jury opts for a sentence of life imprisonment, the court may sentence a defendant to release-eligibility. Release-eligibility makes a defendant eligible for a pardon after 25 years, or in some cases 35 years, in prison. Prior to sentencing, Lynch offered to waive the prospect of a release-eligible sentence and requested that the jury be informed that the only sentences available were death and life imprisonment without the possibility of parole. The trial court refused to accept the waiver or to instruct the jury as requested. Lynch was sentenced to death, and the appellate court affirmed. The Supreme Court reversed in a per curiam opinion. The prospect of clemency was not enough to make parole "possible." Arizona argued before the Court that "nothing prevents the legislature from creating a parole system in the future for which Lynch would have been eligible had the court sentenced him to life with the possibility of release after 25 years." The Court didn't buy it. It had already rejected a similar argument in Simmons . The prosecution had raised the issue of Lynch's future dangerousness. The only realistic choices left to the jury were death or imprisonment for life without possibility of parole. Under those facts, Lynch was entitled to have the jury so informed. He requested such an instruction and was refused. The Arizona appellate court declined to correct the error. That decision had to be reversed and the case returned for correction. Justice Thomas, joined by Justice Alito, dissented. In their view, it was the heinous nature of the defendants' crimes, not ignorance of the absence of parole, that produced the juries' death penalty verdicts, here and in the Court's earlier cases. Holding : "Florida's sentencing scheme, which required the judge alone to find the existence of an aggravating circumstance" denied the capital defendant of his Sixth Amendment right to trial by an impartial jury. Hurst was charged and convicted of first-degree murder for killing a coworker during a robbery at their place of employment. He was sentenced to death and appealed. During post-conviction proceedings, Hurst was granted a new sentencing trial. At the second penalty phase proceeding, the jury returned a recommendation of death by a vote of 7-5. In accordance with state law, the trial court independently weighed the aggravating and mitigating circumstances before sentencing Hurst to death. Hurst appealed his sentence, again asserting that in light of Supreme Court precedent, the trial court committed constitutional error inasmuch as the jury had neither been unanimous in its recommendation nor required to find specific facts regarding aggravating factors. The Florida Supreme Court rejected Hurst's arguments and affirmed the death sentence, holding that the Sixth Amendment does not require that the imposition of death sentences be made by the jury and that Supreme Court precedent does not require the jury to make either specific findings of aggravating circumstances or a unanimous recommendation. The Sixth Amendment in relevant part provides that "[i]n all criminal prosecutions, the accused shall enjoy the right to a speedy and public trial, by an impartial jury." In a series of cases, the Court has held that given the Sixth Amendment right to trial by jury, judges cannot impose sentences beyond the prescribed statutory maximum unless the facts supporting such an increase are found by a jury beyond a reasonable doubt; these cases cover guilty pleas , sentencing guidelines, mandatory minimums, criminal fines, and capital punishment. In invalidating Florida's capital sentencing scheme, the Supreme Court relied heavily on its decision in Ring v. Arizona , in which it held that "[c]apital defendants ... are entitled to a jury determination of any fact on which the legislature conditions an increase in the maximum punishment." In Ring , a jury found the defendant guilty of felony murder. Under Arizona law, Ring could not be sentenced to death, unless further findings were made by a judge conducting a separate sentencing hearing and only if the judge found that the aggravating circumstances outweigh any mitigating ones. The Supreme Court held that because Arizona's enumerated aggravating factors operate as "'the functional equivalent of an element of a greater offense' ... the Sixth Amendment requires that they be found by a jury." According to the Court, "[t]he right to trial by jury guaranteed by the Sixth Amendment would be senselessly diminished if it encompassed the factfinding necessary to increase a defendant's sentence by two years [as in Apprendi], but not the factfinding necessary to put him to death." The Supreme Court in Hurst concluded that Florida's capital sentencing scheme is analogous to the one invalidated in Ring, as Florida requires the judge—not the jury—to make the requisite findings for imposing the death penalty. The Hurst Court found that the advisory nature of Florida's jury recommendation does not comport with Sixth Amendment requirements articulated in Ring . In other words, the Sixth Amendment requires that a jury make specific findings necessary to authorize a death sentence. What lies in the aftermath of this decision remains unclear. While the Court invalidated the method by which Florida imposes the death penalty, it did not invalidate the death penalty itself. It appears that the Florida legislature will have to revise their procedures to make them consistent with the Hurst decision. It also appears that the Florida courts may have to decide whether the decision has retroactive applicability. If so, the state may have to conduct resentencing hearings. Holding: In a highly fact-specific ruling, the Court held that, in striking two of the prospective black jurors from Foster's trial, the "prosecutors were motivated in substantial part by race," and thus violated the principles of Batson . Thirty years after Batson v. Kentucky, in which the Supreme Court recognized a defendant's right to object to the prosecution's peremptory challenges during jury selection on the ground that the state engaged in purposeful discrimination by attempting to exclude members of the defendant's race from the jury, the Court in Foster v. Chatman revisited how to analyze so-called Batson challenges. In jury trials, the parties' lawyers and the presiding judge have the opportunity to examine potential jurors for suitability during a process called voir dire. Based on what is learned during voir dire, the parties may strike potential jurors for cause or exercise peremptory challenges (subject to numerical limitations based on applicable state or federal law) to excuse a juror "for any reason," so long as that reason doesn't violate the Equal Protection Clause of the Fourteenth Amendment. Currently, when a defendant makes a Batson challenge, courts engage in a three-step inquiry: First, the defendant must make a "prima facie showing" that the prosecution exercised a peremptory challenge based on the race of a particular juror; next, the prosecution must provide a race-neutral reason for striking that juror; and finally, the court decides whether the state had purposefully discriminated. In one of the Supreme Court's more recent rulings interpreting Batson, the Court left open the question whether mixed-motive analysis may be applied to Batson challenges, which would allow a prosecutor to defeat a Batson challenge by proving that, despite being motivated in part by race to strike a juror, he would have struck that juror for some other, race-neutral reason, as some circuits currently allow. Foster involved a Batson challenge from Timothy Tyrone Foster's 1987 capital murder trial in Georgia. The potential jury pool for Foster's trial had four black individuals, and the prosecution exercised a peremptory strike against each one. Foster, an African American, raised a Batson challenge based on those strikes, but the trial judge concluded that the prosecution rebutted his assertion of purposeful discrimination. The court noted that the prosecutor had supplied numerous race-neutral reasons for striking those potential jurors, including having ties to social workers (because, in the prosecution's view, they tend to "sympathize" with criminal defendants); having close relationships with people who abuse drugs and alcohol (because of Foster's own drug and alcohol problems, which allegedly played a role in the murder); giving untruthful answers during voir dire; and expressing reluctance to impose the death penalty. Foster was ultimately convicted and sentenced to death. During postconviction habeas corpus proceedings in state court, Foster renewed his Batson claim, arguing that newly discovered evidence—the prosecutor's notes from jury selection—supported his allegation that the state dismissed the four black jurors based on their race. On the prosecution's jury pool list, each black juror's name had been highlighted in green, and there was a corresponding note explaining that the green highlighting "Represents Blacks." Additionally, the four black jurors were ranked number one to number four, and were the first four names on a list labeled "Definite Nos." The Superior Court of Butts County still did not find a Batson violation, and the Supreme Court of Georgia declined to issue a "Certificate of Probable Cause," which would have permitted Foster to appeal the superior court's ruling. Although the parties' briefs focus heavily on the specific facts of Foster's trial—as is typical in Batson challenges—at oral argument some of the Justices raised questions that honed in on broader issues about how to resolve Batson claims. Justice Kennedy, for example, asked "how the Court should approach the Batson analysis" when, in a case like this, the prosecution presents a "laundry list" of allegedly race-neutral reasons for striking a potential juror. And Justice Sotomayor piped in, asking whether an appropriate rule for these "laundry list" cases would be one in which the prosecution could defeat a Batson challenge by supplying just one legitimate race-neutral reason. Foster's lawyer remarked that, in these cases, "the Court should scrutinize the reasons very carefully" because, otherwise, the prosecution will be "encourage[d] ... to just give as many reasons as possible and hope that one will be acceptable." Justice Breyer seemed to agree with Foster's position, posing the following hypothetical: Now, if my grandson tells me ... I don't want to do my homework tonight at 7:00 because I'm just so tired. And besides, I promised my friend I'd play basketball. And besides that, there's a great program on television. And besides that, you know ... my stomach is upset, but I want to eat spaghetti. And so he's now given me five different reasons. What do I think of those reasons?.... And so I would say my answer to my grandchild is, look, you're not too tired to do your homework. And I think any reasonable person looking at this [case] would say no, his reason was a purpose to discriminate on the basis of race. Now, tell me why I'm wrong. In a 7-1, highly fact-specific ruling, the Court held that the " prosecutors were motivated in substantial part by race" when it struck two of the prospective black jurors from Foster's trial. In so holding, the Court reasoned that "the focus on race in the prosecution's file plainly demonstrates a concerted effort to keep black prospective jurors off the jury," and thus "[t]he contents of the prosecution's file ... plainly belie the State's claim that it exercised its strikes in a 'color-blind' manner." However , the Court did not dive into deeper Batson issues raised by the parties and discussed at oral argument, like how to treat cases when the prosecution produces a "laundry list" of race-neutral reasons for excluding a prospective juror or whether a court should apply mixed-motive analysis to a Batson challenge. Thus, Foster provides little guidance on modern-day Batson challenges. Holding: "[U]nder the Due Process Clause there is an impermissible risk of actual bias when a judge earlier had significant, personal involvement as a prosecutor in a critical decision regarding the defendant's case." The U.S. Supreme Court in Williams v. Pennsylvania reviewed whether a Pennsylvania inmate on death row was denied due process of law when a Pennsylvania Supreme Court judge—who, as a former district attorney, participated in the decision to seek the death penalty in his case—declined to recuse himself when the court reviewed (and overturned) a lower court's ruling vacating the death sentence. Recusal is constitutionally required in the rare case when "the probability of actual bias on the part of the judge or decisionmaker is too high to be constitutionally tolerable." In assessing that probability, a court makes an objective inquiry, "ask[ing] not whether the judge is actually, subjectively biased, but whether the average judge in his position is 'likely' to be neutral, or whether there is an unconstitutional 'potential for bias.'" Constitutional standards for recusal differ from legislatively imposed ones, yet this case raised questions about whether certain statutory bases for recusal—such as previously acting in an advisory capacity in a case —should be construed as a floor for constitutional recusal standards, particularly when a judge's ruling implicates the death penalty and the Eighth Amendment's prohibition against cruel and unusual punishment. Terrance Williams was convicted of murder and sentenced to death 30 years ago. The prosecutor handling the case sought approval from higher-ups to seek the death penalty by setting forth aggravating and mitigating circumstances in a written memorandum that made its way to then-Philadelphia District Attorney Ronald Castille. In a handwritten notation on the memorandum, Castille approved the request. During post-conviction proceedings in 2012, newly discovered evidence showed that the trial prosecutor had withheld exculpatory evidence that could have been presented to the sentencing jury as mitigating factors weighing against the death penalty. The post-conviction court granted a stay of execution and vacated Williams's death sentence. The state appealed to the Pennsylvania Supreme Court. At the time, Castille was serving as the Chief Justice, prompting Williams to request that Castille recuse himself. Castille declined to do so and provided no explanation behind his decision. The Pennsylvania Supreme Court, in a unanimous decision, lifted the stay of execution and reinstated the death penalty for Williams. Williams appealed to the U.S. Supreme Court, which agreed to hear the following two questions: (1) whether the Due Process Clause of the Fourteenth Amendment is violated when someone who participated in the initial decision to seek the death penalty in a criminal trial later sits on a judicial panel reviewing the penalty imposed in that same criminal case; and (2) if so, whether due process is still violated, requiring vacateur, when that judge's vote was not decisive? Concerning the first question, Williams argued that the likelihood of bias when "a judge had significant prosecutorial involvement in a criminal case" requires recusal. He pointed to cases involving criminal contempt hearings, in which the Supreme Court had ruled that the Due Process Clause forbids judges from playing certain dual roles. For example, the Court concluded in In re Murchison that in so-called one-man grand jury proceedings (where a single judge plays the investigatory role of the grand jury), if the "judge-grand jury" accuses a witness of being in contempt, that same judge cannot preside over the contempt hearings. The Court later elaborated in Mayberry v. Pennsylvania that when one is "part of the accusatory process, he 'cannot be, in the very nature of things, wholly disinterested in the conviction or acquittal of those accused.'" It follows, said Williams, that the dual role Castille allegedly played—"personally authoriz[ing] the trial prosecutor to pursue a death sentence against Mr. Williams" as district attorney, and then sitting as a judge on the panel deciding whether to vacate the death penalty—violated his due process rights. Pennsylvania, on the other hand, described Castille's prior involvement in the case as a "single administrative act," which, in its view, is insufficient to require recusal. Additionally, Pennsylvania cautioned that creating the rule Williams requested would result in a "dramatic expansion" of the Court's recusal precedent. The second question—concerning how due process may be impacted by a judge's failure to recuse when he does not cast a decisive vote—had been left unresolved by the Supreme Court in Aetna Life Insurance Co. v. Lavoie . In Lavoie, unlike the case here, a judge who had a pecuniary interest in the outcome of the case was part of the majority in a 5-4 decision, and the Court concluded that his failure to recuse violated due process. However, the Court left open the question whether due process could be violated if the judge in question did not cast a decisive vote. Williams contended that the Court should adopt the views of three concurring justices in Lavoie that whether the judge (who should have recused) cast a deciding vote is irrelevant to the Court's analysis because the judge's "mere participation in the shared enterprise of appellate decisionmaking—whether or not he ultimately wrote, or even joined, the ... opinion—pose[s] an unacceptable danger of subtly distorting the decisionmaking process." However, Pennsylvania argued that applying the theory that "one bad apple spoils the bunch" runs afoul of the principle that "[t]he law presumes that judges will carry out their duty to maintain impartiality." Ultimately, in a 5-3 ruling, the U.S. Supreme Court reversed the decision of the Pennsylvania Supreme Court. The Court first held that "under the Due Process Clause there is an impermissible risk of actual bias when a judge earlier had significant, personal involvement as a prosecutor in a critical decision regarding the defendant's case." As applied to the facts of this case, the Court concluded that "due process compelled [the] justice's recusal" given that Castille had participated in the decision to overturn a postconviction court's ruling that had vacated the death penalty in a case for which he had authorized the prosecuting attorney to seek the death penalty when he was a district attorney decades earlier. Additionally, the Court answered the question left open in Lavoie , concluding that even when a judge's vote is not dispositive, a judge's unconstitutional failure to recuse in and of itself is a structural error requiring reversal. In holding that such a judicial failure is "not amendable to harmless-error review," the Court reasoned that "deliberations of an appellate panel, as a general rule, are confidential," and thus "it is neither possible nor productive to inquire whether the jurist in question might have influenced the views of his or her colleagues during the decisionmaking process." Moreover, the Court opined that "the fact that the interested judge's vote was not dispositive may mean only that the judge was successful in persuading most members of the court to accept his or her position," and "[t]hat outcome does not lessen the unfairness to the affected party." Thus, the Court's ruling seemingly brings constitutional recusal standards an inch closer to one of the federal statutory standards. The Prisoner Reform Litigation Act designed to curb frivolous inmate suits generated two of the cases on the Court's 2015 docket—one on the act's installment payment feature and the other on the required exhaustion of administrative remedies. Holding : "[M]onthly installment payments [to cover the costs of in forma pauperis court filings under the Prisoner Reform Litigation Act], like the initial partial payment, are to be based on a per-case basis .... [Section] 1915(b)(2) calls for simultaneous, not sequential, recoupment of multiple filing fees . " Early in the year, the Supreme Court resolved a split among the circuits involving federal inmate payments for court filing fees with a decision that held that the monthly assessments under the Prisoner Reform Litigation Act (PRLA) must be stacked rather than satisfied on a one-a-month basis. The PRLA states in relevant part: (b)(1) ... (a), if a prisoner brings a civil action or files an appeal in forma pauperis, the prisoner shall be required to pay the full amount of a filing fee. The court shall assess and, when funds exist, collect, as a partial payment of any court fees required by law, an initial partial filing fee of 20 percent of the [the prisoner's account] ... (2) After payment of the initial partial filing fee, the prisoner shall be required to make monthly payments of 20 percent of the preceding month's income credited to the prisoner's account. The agency having custody of the prisoner shall forward payments from the prisoner's account to the clerk of the court each time the amount in the account exceeds $10 until the filing fees are paid. Bruce, a federal inmate with several pending cases and outstanding filing fee assessments, sued to challenge his assignment to a "special management unit." He argued that collection for the filing fees for the new case should begin only after he had paid the last installment on the filing fees from his earlier cases—that the installments should be lined up, one beginning only after the final installment of its predecessor. The United States District Court of Appeals for the District of Columbia Circuit, from whom he sought a writ of mandamus, disagreed. It explained in simple terms, the "monthly payment obligation ... applies on a per-case basis." The Supreme Court in a brief unanimous opinion written by Justice Ginsburg agreed. In the eyes of the Court, "[t]he per-case approach more vigorously serves the statutory objective of containing prisoner litigation." Holding : The Fourth Circuit's "special circumstances" exception to the Prison Litigation Reform Act's exhaustion requirement is "inconsistent" with the text and history of the a ct, which permits only one exception: Prisoners need not exhaust if administrative remedies are not "available." The Supreme Court recently opined on the legality of a judicially created exception to the exhaustion requirement in the Prison Litigation Reform Act of 1995 (PLRA, or the act) in Ross v. Blake . Congress enacted the PLRA, in part, to reduce frivolous prisoner lawsuits that purportedly had been overwhelming federal courts. The act, in relevant part, states that "[n]o action shall be brought" by inmates about prison conditions "until such administrative remedies as are available are exhausted." In Ross, the Fourth Circuit joined the Second Circuit in concluding that an inmate may bypass the PLRA's exhaustion requirement and maintain a suit in federal court if special circumstances created a situation in which the inmate "reasonably believed that he had sufficiently exhausted his remedies." Other circuits had concluded differently, perhaps prompting the Supreme Court's review of this case. During a cell block transfer of Shaidon Blake, a Maryland inmate, a state corrections officer, Lieutenant James Madigan—with a key wrapped around his fingers—punched Blake in the face five times. When Madigan struck, another state corrections officer, Lieutenant Michael Ross, was holding a handcuffed Blake against a wall and failed to intervene. Blake reported the episode to senior corrections officers. The Internal Investigative Unit (IIU) of the Maryland Department of Public Safety and Correctional Services concluded, after a year-long investigation, that Madigan used excessive force. Blake did not submit an administrative complaint in accordance with Maryland's Administrative Remedy Procedure (ARP) for inmate grievances. He later filed a civil-rights suit under 42 U.S.C. Section 1983 against Madigan and Ross (among other prison personnel), alleging that the lieutenants violated his Eighth Amendment rights when Madigan struck him multiple times and Ross failed to protect him. The district court granted summary judgment for Ross on the ground that Blake failed to exhaust available administrative remedies before filing suit. (Madigan, however, did not raise the affirmative defense of exhaustion and was found civilly liable after a trial. ) Blake successfully appealed the district court's ruling for Ross to the Fourth Circuit. The court framed the question before it as whether Blake failed to exhaust administrative remedies as required by the PLRA. A majority of the Fourth Circuit panel concluded that "special circumstances" justified Blake's failure to comply with Maryland's administrative procedures. In doing so, the Fourth Circuit adopted the methodology established by the Second Circuit in an earlier case, which asks (1) whether the inmate "was justified in believing" that his participation in another investigatory proceeding procedurally exhausted his administrative remedies; and (2) whether the inmate's participation in that other proceeding substantively exhausted his administrative remedies by giving the prison an opportunity to address the complaint internally. The Fourth Circuit concluded that this two-part inquiry, by having a procedural component—which "ensures that an uncounseled inmate attempting to navigate the grievance system will not be penalized for making a reasonable, albeit flawed, attempt to comply with the relevant administrative procedures"—along with a substantive component—which "safeguards a prison from unnecessary and unexpected litigation"—is consistent with the purposes behind the PLRA's exhaustion requirement. Applying that test, the majority concluded that "Blake reasonably interpreted Maryland's murky grievance procedures" and that his participation in the IIU investigation "provided the Department [of Public Safety and Correctional Services] with ample notice and opportunity to address internally the issues raised." Judge Agee dissented, asserting that "[t]he PLRA's exhaustion requirement may not even be amenable to any exceptions," and, even if it was, Blake failed to satisfy the test that the majority announced. Additionally, Judge Agee noted that three other circuits have ruled that an inmate does not exhaust administrative remedies by participating in an internal investigation. The Supreme Court, presented with the opportunity to resolve the circuit split, asked the parties to address whether the Fourth Circuit misapplied Supreme Court precedents "in holding, in conflict with several other federal courts of appeals, that there is a common law 'special circumstances' exception to the Prison Litigation Reform Act." Ross argued, among other things, that the Second and Fourth Circuits' exhaustion exception conflicts with Congress's intent in enacting the PLRA as well as the Supreme Court's interpretation of the act and its goals. Ross contended that in two previous cases, Booth v. Churner and Woodford v. Ngo , the Supreme Court refused to uphold other judicially created exceptions to the PLRA's exhaustion requirement. For instance, the Court stated in Booth that "we stress the point ... that we will not read ... exceptions into statutory exhaustion requirements where Congress has provided otherwise." Additionally, Ross contended that the PLRA's mandatory exhaustion requirement was designed to fix an alleged flaw in the act's precursor—the Civil Rights of Institutionalized Persons Act of 1980 (CRIPA)—which authorized, but did not obligate, courts to require exhaustion "in the interests of justice." Thus, Ross argued, allowing the exception would "restore[] to courts a significant amount of the discretion expressly removed by Congress" when enacting the PLRA. Blake, in his response brief, devoted little space to answering the question that the Supreme Court certified, contending, instead, that this case is really about whether administrative remedies were "available" to him. He contended that there were no "available" administrative remedies for him to exhaust (as the statute requires), and so he did not need to prove any exceptions to the requirement. According to Blake, when the IIU is investigating a prison incident, "the prison will dismiss any other administrative grievance as procedurally improper" and thus the Court should affirm on the alternative ground that Maryland's ARP was not available to Blake or dismiss the writ of certiorari as improvidently granted. In a unanimous ruling the Supreme Court reversed the Fourth Circuit, concluding that the text and history of the PLRA did not allow the circuit court's "special circumstances" exception to the PLRA's exhaustion requirement. Focusing on the PLRA's text, the Court reasoned that the language is mandatory and does not permit a court to excuse a failure to exhaust available remedies. Indeed, the Court added, to date it had "reject[ed] every attempt to deviate ... from [the act's] textual mandate," including in Booth and Woodford —the cases cited by Ross. The Court also agreed with Ross's contention that "the history of the PLRA underscores the mandatory nature of its exhaustion regime," noting that "[i]n enacting the PLRA, Congress thus substituted an 'invigorated' exhaustion provision" for the "weak exhaustion provision" in the former CRIPA. And permitting the special circumstances exception, in the Court's view, would "resurrect CRIPA's scheme, in which a court could look to all particulars of a case to decide whether to excuse a failure to exhaust administrative remedies. Next, the Supreme Court considered Blake's contention that administrative remedies were unavailable to him—the exception written into the text of the PLRA—clarifying when administrative remedies are "unavailable." Under that exception, "an inmate is required to exhaust those, but only those, grievance procedures that are 'capable of use' to obtain 'some relief for the action complained of.'" Thus, remedies are unavailable when (1) "it operates as a simple dead end—with officers unable or consistently unwilling to provide any relief to aggrieved inmates"; (2) when the administrative remedial scheme is "so opaque that it becomes, practically speaking, incapable of use," such that "no ordinary prison can discern or navigate it"; and (3) "when prison administrators thwart inmates from taking advantage of a grievance process through machination, misrepresentation, or intimidation." Because "[t]he facts of this case raise questions about whether, given these principles, Blake had an 'available' administrative remedy to exhaust," the Court remanded the case to the lower court to evaluate that question in the first instance.
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The white collar crimes on the Supreme Court's 2015 docket consist of three Hobbs Act cases and one on computer fraud (Musacchio v. United States). The Hobbs Act outlaws robbery and extortion when committed in a manner which "in any way or degree" obstructs interstate commerce. One of the Hobbs Act cases before the Court (Taylor v. United States) involves the robbery of suspected drug dealers. The second (Ocasio v. United States) consists of a kickback conspiracy between traffic cops and body shop owners. The third (McDonnell v. United States) involves a local drug manufacturer who showered a state governor and his wife with gifts in an apparent attempt to use the governor's office as a bully pulpit for one of his products. The sex offense entries involve the sex offender registration obligations of an overseas resident (Nichols v. United States) and construction of the recidivist mandatory minimum sentencing provisions of federal law (Lockhart v. United States). Perhaps spurred on by the result below, the Supreme Court held that stun guns used for self-defense are not necessarily beyond the guarantees of the Second Amendment right to bear arms (Caetano v. Massachusetts). The other firearms cases on the Court's docket raise interpretative issues under the Armed Career Criminal Act (Welch v. United States and Mathis v. United States) and the firearm possession disqualification triggered by a domestic violence misdemeanor (Voisine v. United States). The trio of Fourth Amendment cases present questions on the exclusionary rule (Utah v. Strieff), the warrant requirement for sobriety tests (Birchfield v. North Dakota), and qualified official immunity in the face of use of excessive force allegations (Mullenix v. Luna). The Court's Sixth Amendment cases this term offer a variety of issues ranging from ineffective assistance of counsel (Maryland v. Kulbicki), to speedy trial (Betterman v. Montana), to forfeiture and the right to counsel of choice (Luis v. United States), to the use of uncounseled convictions as predicate offenses (United States v. Bryant). Capital punishment cases represent the lion's share of the Court's sentencing cases this term. However, the class also includes the matter of the retroactive application of the Miller v. Alabama prohibition on a life without parole sentence for murder by a juvenile (Montgomery v. Louisiana) and the harmless error standard in sentencing cases (United States v. Molina-Martinez). The menu of the Court's capital punishment cases offers cases concerning jury instructions (Carr v. Kansas); jury selection (Foster v. Chatman); exclusive jury sentencing prerogatives (Hurst v. Florida); Brady violations (Wearry v. Cain); insufficient capital jury instructions (Lynch v. Arizona); appellate court judge recusals (Williams v. Pennsylvania); and the application of habeas corpus standards (White v. Wheeler). The Prisoner Reform Litigation Act, designed to curb frivolous inmate suits, generated two of the cases on the Court's 2015 docket—one on the act's installment payment feature (Bruce v. Samuels) and the other on the required exhaustion of administrative remedies (Ross v. Blake). As noted throughout the course of this report, its text draws heavily from previously prepared, individual legal sidebars.
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Encryption and other technologies can foster increased privacy and heightened security. Simultaneously they have been cited as presenting hurdles for law enforcement and intelligence officials. On the one hand, some contend that technological developments have resulted in a " golden age of surveillance " for law enforcement; the large amount of information that investigators have at their fingertips—access to location data, information about individuals' contacts, and a range of websites—collectively form " digital dossiers " on individuals. On the other hand, some argue that law enforcement is " going dark " as their capabilities are outpaced by the speed of technological change, and thus they cannot access certain information they are otherwise legally authorized to obtain. The tension between the benefits and challenges of encryption is not new. It started in the 1990s and was reinvigorated in 2014 when companies like Apple and Google implemented automatic full-device encryption for mobile devices and automatic encryption for certain communications systems. Companies using such strong encryption assert they do not maintain encryption keys and therefore cannot unlock, or decrypt, the devices or communications—not even when presented with a court authorized wiretap order. Law enforcement concerns about the lack of encryption keys were highlighted by the November and December 2015 terrorist attacks in Paris, France , and San Bernardino, CA . Questions arose as to whether the attackers used strong encryption and, more importantly, if they did, whether and how this might have hindered investigations. These questions have reopened larger discussions on how encryption and quickly advancing technologies could impact law enforcement operations. This report specifically examines certain encryption issues that have been raised in the investigation of the December 2, 2015, terrorist attack in San Bernardino, CA. Following the attack, U.S. investigators recovered a cell phone reportedly used by one of the shooters. Federal Bureau of Investigation (FBI; Bureau) Director James B. Comey testified before Congress two months later, indicating that the Bureau was still unable to access the information on the device. This report highlights certain issues that policymakers may examine as they follow the ongoing dispute between law enforcement and technology companies. While this is a fast-moving issue with many components, this report focuses on questions related to the government's request. The topics discussed are based on developments in the case as of the date of this report. On February 16, 2016, the U.S. District Court for the Central District of California ordered Apple, Inc. under the All Writs Act to provide "reasonable technical assistance to assist law enforcement agents in obtaining access to the data" on the cell phone for which the government had already obtained a probable cause warrant. The order directs Apple's assistance to feature three components: bypass or disable the iPhone's auto-erase after 10 incorrect passcode attempts function (even if the function has not been enabled); enable the FBI to electronically input passcodes for testing; and ensure there is no added delay between passcode attempts. In other words, it essentially asks Apple to create an operating system update that will allow the FBI to (1) enter more than 10 passcodes without the risk of the data being wiped after the tenth incorrect try; (2) automate the entry of those passcode combinations rather than entering them manually; and (3) try back-to-back passcode attempts without the gradually increasing delays between attempts that is currently programmed into the system. This would allow the FBI to try and "brute force" open the iPhone by continuously entering passcode attempts until the correct one is identified. Notably, the order is not asking Apple to provide an encryption key or to break the encryption on the device. The company sees this as "an overreach by the U.S. government" and is opposing the order. An operating system allowing law enforcement to use brute force to open the phone in this case could potentially be replicated and used to open other phones in cases where law enforcement demonstrates lawful need. If the technology then falls into the wrong hands, it could potentially be exploited by criminals and other malicious actors. There is much debate over whether the government's request in the San Bernardino case would constitute the creation of a so-called "back door" or "master key" to the iPhone's encryption. Apple views the government's order as directing a back door be built into its product. It sees the access of any entity, including a government agency, to encrypted user data without the user's explicit authorization, as a back door. In Apple's view, the government is a third party, and only those who are authorized by either the owner/sender of the information (first party) or the recipient of the information (second party) have a right to that information. Apple's view is shared by other technology companies. The government, however, does not consider its request to enable a back door. The order does not request that Apple create a master key, or create a new decryption key in the software that can be used against any iPhone. It narrowly limits the request to Apple's assistance to the specific phone, with the updated operating system only being applicable to the iPhone with the serial number and other unique identifiers in this case. Since 2014, Apple has enabled full disk encryption on iPhones. This ensures the data on a given phone are safe from unauthorized disclosure while at rest . This is different from the encryption of iMessage communications, which ensures the data in transit are safe from authorized disclosure. Examples of information protected on the iPhone with full-disk encryption include geographic location data (where the phone has been) as well as contacts and pictures that were not backed up to an online service. Longer passwords offer more potential combinations, and thus it can be potentially more time-consuming to identify the correct password. Using an automated password guesser, and given the hardware limits of the iPhone 5c, if the phone has a four-digit passcode, it would take about 13 minutes to guess every possibility (10,000 passcode combinations). If that passcode is six-digits, it would take roughly 22 hours to guess all of the one million combinations. If the phone is secured with an eight-character password (letters and numbers, upper and lower case), it would take over 500,000 years to guess every combination. To accomplish what is requested in the court order, the FBI needs Apple, rather than a different entity, to develop this software update. This is because of the method Apple uses to ensure the integrity of all the software that runs when an iPhone is turned on. iPhones look for an Apple certificate which is cryptographically signed before it will boot into the operating system. Without that certificate of assurance, the data would remain encrypted on the device and inaccessible. While it is possible to reverse engineer a software update to the operating system in order to enable unlimited passcode attempts, it is computationally expensive (i.e., time and energy) to recreate that cryptographically signed certificate. Some have suggested that if Apple chooses not to comply, the FBI could likely employ hackers to develop a system. Of note, the court order does not request or compel Apple to compromise implementation of encryption on all iPhones. The order directs Apple to insert a weakness into the implementation—unlimited passcode attempts and no danger of the phone being wiped because of incorrect guesses—only for the iPhone in question. The legal question in the San Bernardino case turns primarily on whether the All Writs Act can be interpreted broadly enough to require Apple to help the government in accessing the data on the device against its wishes. The All Writs Act, enacted as part of the Judiciary Act of 1789, provides that federal courts "may issue all writs necessary or appropriate in aid of their respective jurisdictions and agreeable to the usages and principles of law." The Supreme Court has observed that "[t]he All Writs Act is a residual source of legal authority to issue writs that are not otherwise covered by statute." A writ is a court order to do or not do something. Although the All Writs Act was penned 226 years ago, the debate in the San Bernardino case, and similar past litigation, has centered on a much more recent, although pre-digital 1977 case, United States v. New York Tel. Co . Relying on the All Writs Act, the Court in New York Tel. Co . upheld an order directing the New York Telephone Company to assist the government in installing a pen register—a device for recording the outgoing numbers dialed on a telephone—for which it already obtained a probable cause warrant to do so. The Court observed that the act extends "to persons who, though not parties to the original action or engaged in any wrongdoing, are in a position to frustrate the implementation of the order or the proper administration of justice." While the Court accepted that the All Writs Act can apply to third parties, it observed that "unreasonable burdens may not be imposed." To determine the reasonableness of the order in that case, the Court assessed a seemingly non -exhaustive list of factors, including (1) the company was not "so far removed from the underlying controversy" to avoid compliance; (2) the order required only "meager assistance" from the company; (3) the telephone company was a "highly regulated public utility with a duty to serve the public"; (4) the company had not proffered a "substantial interest in not providing assistance"; the use of the pen register was not "offensive" to the company; (5) the company regularly employed such devices for billing purposes: (6) the company had previously promised to provide the FBI instructions on how to install its own pen register; (7) the order was in no way "burdensome"; (8) the order provided the company be fully reimbursed for its efforts; (9) compliance with the order required "minimal effort" by the company; and (10) there were "no disruptions to its operations." Additionally, the Court observed that the order was "consistent with the intent of Congress." As noted by one commentator, although the Court established a list of factors to consider, it is not clear, among other things, how much weight should be given to each factor, or how these factors might apply to future cases, like the request before the Central District of California. In recent years, courts have been required to apply the All Writs Act and the N ew York Tel. Co. factors to requests by the government to access data stored on various locked electronic devices. For instance, in an unreported 2014 ruling, the Southern District of New York (S.D.N.Y.) read New York Tel. Co. and subsequent lower court case law to require an unnamed company to unlock a smart phone. However, in a pending case in the Eastern District of New York, a magistrate judge issued a preliminary ruling in October 2015 rejecting the government's request to unlock an iPhone 5c running an earlier version of iOS. In the latter case, the magistrate judge was largely persuaded by the fact that "Congress has done nothing that would remotely suggest an intent to force Apple, in the circumstances of this case, to provide the assistance the government now requests." While the San Bernardino case is not the first in which Apple has been ordered to assist the government in unlocking an iPhone, it appears to be the first time Apple has been asked to write and install unique software on a specific device. Without congressional action, the Central District of California and future courts must apply the New York Tel. Co. factors, with minimal guidance provided by lower court case law. Of the New York Tel. Co. factors, two appear especially relevant to the San Bernardino case. First, is whether a reviewing court would view the "unreasonable burden" test as including an assessment of not only the burden on Apple in creating and installing new software on this particular phone, but also the burden on Apple's business as a whole. While one factor from New York Tel. Co is the extent to which the legal order would "disrupt[] … the operations" of the business in question, it is not certain whether the focus should be on the disruption posed by the immediate need to unlock the phone, or the potentially larger disruption to Apple's financial bottom line. Apple has acknowledged that it has the technical capacity to unlock the device, but asserts that the desire to protect the privacy and security of its customers is sufficient to warrant its opposition to the court's order. Second, is how much weight, if any, a reviewing court should place on the fact that Congress has debated, but not enacted, a law mandating forced decryption on U.S technology companies. The Supreme Court has noted that "where a statute specifically addresses the particular issue at hand , it is that authority, and not the All Writs Act, that is controlling." The question here is whether the Communications Assistance for Law Enforcement Act (CALEA) can be read as "specifically address[ing]" the relief the government seeks. Although Congress failed to include companies like Apple in CALEA's mandate that a "telecommunications carrier" must assist the government in "intercept[ing]" communications carried by the provider, this issue was on Congress's radar in 1994 during passage of CALEA. Congress explicitly excluded "information services" from CALEA's scope. The government takes the position, however, that unless and until Congress actually enacts legislation on this issue, congressional silence does not suffice to limit the authority of the federal courts to require Apple to help the government access potentially vital information on this and other devices. Apple has informed the court that it will contest the February 16 order. Its motion and opposition to the government's brief are due by February 26, 2016, and a court hearing with both parties is to be held on March 22, 2016. In response to this legal debate, policymakers may ask a number of questions with respect to the order from the Central District of California and the larger ongoing encryption debate. Apple has indicated that it is possible to develop an alternate operating system for the iPhone in question that would accomplish the items in the court order. As such, the focus now has been on whether it should be done. Will doing so effectively create a "back door" to the encryption? Creating a one-time software update is not without risks. Apple employees and others who have access to the software used to reduce the security of the iPhone may use that knowledge for malicious purposes later. The insider threat has long been considered the greatest threat to cybersecurity—an authorized employee who has access and knowledge of the company has the ability to do far greater harm than someone from the outside. Once Apple creates such a software update to inhibit its encryption implementation, it exists in the world and there is no guarantee that a disgruntled employee or one who is bought would not leak the code to an adversary who may use it against the U.S. or its interests in the future. And even though this particular case is for the iPhone (limited by its unique identifiers), it is conceivable that those identifiers can be swapped with other identifiers in the future to make the compromised operating system more widely applicable to the universe of iPhones in the world. If Apple develops an operating system update to comply with the court order, what precedent does this set for Apple and other companies' compliance with future law enforcement investigations? The FBI has indicated that encryption is not only an issue in terrorism investigations, but in cases against kidnappers, murderers, drug traffickers, and others. Would Apple, Google, and others need to help the FBI develop operating systems to circumvent security features in every case where the FBI requests assistance? If Apple complies with the U.S. court order to help the FBI, would this set a precedent for Apple to help law enforcement in other countries? Apple is a multi-national corporation that manufactures phones sold around the world. Would Apple now need to help international law enforcement entities with similar requests? What burden might this place on Apple and other companies going forward?
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The tension between the benefits and challenges of encryption has been an issue for law enforcement and policymakers since the 1990s, and was reinvigorated in 2014 when companies like Apple and Google implemented automatic enhanced encryption on mobile devices and certain communications systems. Companies using such strong encryption do not maintain "back door" keys and, therefore, now cannot easily unlock, or decrypt, the devices—not even when presented with a valid legal order. Law enforcement concerns about the lack of back door keys were highlighted by the November and December 2015 terrorist attacks in Paris, France, and San Bernardino, CA. Questions arose as to whether the attackers used strong encryption and, more importantly, if they did, whether and how this might have hindered investigations. Following the December 2, 2015, terrorist attack in San Bernardino, CA,, U.S. investigators recovered a cell phone reportedly used by one of the shooters. Federal Bureau of Investigation (FBI) Director James B. Comey testified before Congress two months later, indicating that the Bureau was still unable to access the information on that device. On February 16, 2016, the U.S. District Court for the Central District of California ordered Apple to provide "reasonable technical assistance to assist law enforcement agents in obtaining access to the data" on the cell phone. The order directs Apple's assistance to feature three components: bypass or disable the iPhone's auto-erase after 10 incorrect passcode attempts function (even if the function has not been enabled); enable the FBI to electronically input passcodes for testing; and ensure there is no added delay between passcode attempts. The order is not for Apple to decrypt the device itself, something which Apple has publicly stated it cannot do. Instead, this order would enable the FBI to automate the attempts of every possible passcode for the device until the right combination of characters is hit upon by pushing a software update to the iPhone in question's operating system. Apple is contesting the order, which will require the magistrate judge, and perhaps the district and appeals courts, to assess whether the All Writs Act (28 U.S.C. §1651) can be interpreted broadly to grant the relief the government seeks. The All Writs Act, enacted as part of the first Judiciary Act of 1789, provides a residual source of legal authority to federal judges to enforce the orders of their courts. Whether the All Writs Act can be read to include such an order will largely depend on two inquiries: first, whether a reviewing court would view the FBI's request as an "unreasonable burden" on Apple under the 1977 Supreme Court case United States v. New York Tel. Co.; and, second, whether such a command is consistent with the intent of Congress. This is a fact-intensive inquiry, the contours of which are uncertain. Policymakers may ask a number of questions with respect to the order from the Central District of California and the larger ongoing encryption debate. Apple has indicated that it is possible to develop an alternate operating system for the iPhone in question that would accomplish the items in the court order. As such, a main question now is whether it should be done. Will doing so effectively create a "back door" to the encryption? What precedent might be set by Apple providing the court-ordered assistance? If Apple develops an alternate operating system to comply with this order, would Apple and other companies have to comply with similar requests in other law enforcement investigations? In addition, as a multinational corporation, would Apple need to comply with requests from other national governments?
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The Judgment Fund (or Fund) is a permanent appropriation enacted by Congress in 1956. The Fund is an unlimited amount of money set aside to pay judgments against the United States. It is only accessible when the United States has waived its sovereign immunity and certain statutory conditions are met. The Fund has evolved in administration and function over the last half century and has been subject to limiting principles. Most importantly, the Judgment Fund cannot be used in place of a specific appropriation. The Fund remains a source of continued controversy and discussion, especially in the current fiscal environment. During the budget uncertainties in the 1990s, federal agencies became increasingly concerned about the Judgment Fund's solvency, as statutory and constitutional constraints precluded the agencies from obligating funds where appropriated money is not available. This report reviews the history of the Judgment Fund, which has been administered through different agencies and with variable levels of congressional oversight since its inception. This report also outlines specific instances in which the Fund may be accessed, and when costs other than the principal award may be paid. Finally, this report provides examples of how and when the Judgment Fund may be accessed, as well as instances of when tribal judgment funds are implicated. The U.S. government has sovereign immunity, meaning it cannot be sued unless it has waived immunity or consented to suit. Article III, Section 2 of the U.S. Constitution immunizes federal officials from lawsuit, disallows suits against the federal government by the states, and has been interpreted to prohibit suits against the federal government generally. Under limited circumstances, the United States has waived sovereign immunity; it has done so in a constitutional provision, by express statutory authority, or through a contract. Therefore, the United States can be sued pursuant to certain statutes, most commonly the Federal Tort Claims Act. The Tucker Act, the Military Personnel and Civilian Employees Claims Act, and the Federal Employees Compensation Act are other examples of sovereign immunity waivers passed in the last century. These statutes often contain substantial limiting principles and have been narrowly construed by courts. Congress must make provisions to pay judgments when suits against the United States are successful. Appropriated funds may not be used to satisfy claims unless there is specific statutory authority that allows the claim to go forward and provides a source of funds to pay any award. In the wake of several legislative enactments waiving the United States' sovereign immunity, Congress enacted the Judgment Fund in an effort to reduce the need to allocate specific appropriations for payment of claims. While waiver of sovereign immunity was less common in the early Republic than it is today, determining and settling claims against the United States occupied a substantial amount of Congress's time since its first session. As early as the Continental Congress, the legislature established committees to audit and settle claims against the United States. The structure and staffing of these committees left most of them with an overwhelming workload, as claims from the War for Independence multiplied and dragged on. Therefore, one of Congress's first priorities after the ratification of the Constitution was establishing an executive branch agency that could manage payments of claims against the United States. In its first session, Congress established the Treasury Department in the Treasury Bill of 1789, with an extremely detailed enabling statute that left Congress with substantial control over monetary policy but little ministerial responsibility. Among other things, the act authorized the Treasury Department to settle all claims and accounts, delegating to the Auditor the duty to examine claims and to the Comptroller the duty to approve or disapprove of the Auditor's finding. In the event a claim was disputed by the government, the Treasury Department disallowed the claim and accepted the government's facts. If the claim was denied by the Treasury Department, the claimant could petition Congress directly. Congress, in turn, made specific appropriations for each claim validated by the department or through the petition process. This resulted in many claims waiting in limbo, where the Auditor and Comptroller had agreed to pay the claim, but where Congress had yet to make an appropriation to satisfy the judgment. By 1855, Congress was still dedicating a large portion of its resources to passing appropriations to satisfy claims against the United States, and hearing petitions from claims that were denied by the Treasury Department. In order to reduce its workload, Congress established the Court of Claims, which served in an advisory capacity. Rather than issuing binding decisions, the court simply considered the merits of claims filed against the United States, and recommended appropriations to Congress. At President Lincoln's urging, Congress subsequently empowered the Court of Claims to issue binding decisions, though the Supreme Court found that the Treasury Department could decline enforcement of the decisions. Once Congress repealed this authority, the Supreme Court could hear appeals from the Court of Claims, and the Court of Claims' decisions carried finality and enforcement on par with other Article III courts. Congress also clarified that certifications from the Treasury Department were final and conclusive. However, in 1921, desiring a tighter hold on the payment of claims, Congress again changed the administration of the settlement process. In the Budget Accounting Act of 1921, Congress transferred authority to the General Accounting Office (GAO) for all claims settlement duties previously held by the Treasury Department. GAO, in turn, sought appropriations from Congress, so that Congress could strengthen controls over expenditures. This allowed Congress to regain structural control over the payments process. However, Congress was left with considerable involvement in appropriating funds for each claim, which encumbered committees and ultimately proved untenable. In 1956, Congress passed the Judgment Fund enabling statute, a permanent and indefinite appropriation available to pay all judgments against the United States not covered by a specific appropriation. Congress aimed to reduce the time lapse between judgments entered against the United States and actual payment, so that agencies would pay less post-judgment interest on awards. Originally, the Fund was available only for judgments for claims of less than $100,000 entered in the Court of Federal Claims or a U.S. district court. Congress anticipated that the Fund would cover over 98% of all claims, thereby drastically reducing the need for individual appropriations and also streamlining the payment process. The House report accompanying the bill indicates that a permanent appropriation "will permit a simplification of the payment procedure, will provide uniformity in interest computation, and will serve to reduce the total amount of interest paid by the government." The Senate report underscored the limitations in the bill on what payments could be made from the Judgment Fund, emphasizing the audit, review, and finality requirements. Administration of payments from the Fund changed significantly in the latter 20 th century. In 1961, Congress authorized payment from the Judgment Fund for settlements negotiated by the Department of Justice on behalf of the United States, where litigation could have resulted in a monetary judgment. In addition, the Judgment Fund could also pay for judgments against the United States from state and foreign tribunals subject to certification by the Attorney General. By the mid-1970s, the Fund's $100,000 payment ceiling proved too low to cover many settlements and judgments, and Congress raised the allowable damages to avoid making specific appropriations for larger awards. In 1996, Congress transferred certification of payment from the Judgment Fund from GAO to the Financial Management Service in the Department of the Treasury. GAO retained administrative settlement authority for settlement of non-litigative claims. In recent years, Congress has taken an interest in the amount of money that has been spent from the Judgment Fund. Generally, these bills deal with transparency and improved agency accountability, including the Judgment Fund Transparency Act and proposed amendments to the No FEAR Act. In 2011, the Financial Management Service, the bureau in charge of administering the Fund, published a 2011 fiscal report, which included information about payments made from the Judgment Fund. The Judgment Fund is a permanent, indefinite appropriation. By definition, it requires no further congressional action and does not expire at the close of any fiscal year. The appropriation makes an unlimited amount of funds available for payment of certain judgments against the United States. Awards are only paid out of the Judgment Fund when payment is not otherwise provided for in a specific appropriation. All judgments must be final, meaning the award will not be overturned on appeal. In addition, all settlements paid out of the Judgment Fund must represent the final and comprehensive award for the actual or threatened litigation, negotiated and agreed to by the Department of Justice. Finally, the Judgment Fund may be used to pay certain costs to the prevailing party in litigation, as enumerated in 28 U.S.C. §1920. These costs typically include court fees and compensation for court-appointed experts. The Judgment Fund statute sets out four requirements for accessing the Fund. First, the Fund may only be used to pay judgments or settlements involving money judgments. For example, if a court ordered an agency to hire a consultant to implement fair employment practices, the Judgment Fund could not be used to pay costs and fees associated with fulfilling this requirement. The judgment must also be final, so that payments are not made from the Fund when there is a chance the award could be changed or overturned. This has been interpreted to mean that the judgment must come out of action by the court of last resort or that the parties have declined to seek further review. Most often, the time for appeal simply expires before payment from the Judgment Fund. However, the statute exempts payment for an "irreducible minimum amount," meaning an amount that has been assessed as final. For example, in Trout v. Garrett , the D.C. Circuit Court of Appeals found that payment from the Judgment Fund was proper for interim attorneys' fees in a Title VII employment discrimination action against the government. The court found that the Judgment Fund statute was intended to serve as a mechanism for payment rather than to interfere with the ordinary course of litigation. The Judgment Fund may not be used for payments if the award is otherwise provided for, by appropriation or statute. For example, courts have held that annual appropriations to the Land and Water Conservation Fund must be used where there is a land condemnation judgment against the U.S. Park Service. Courts look for an appropriation that has programmatic specificity, regardless of the agency's use of the funds. The actual funding level is irrelevant; so long as the appropriation exists, it precludes payment from the Judgment Fund. For example, if an agency had already spent an appropriated sum on other litigation or expended the money elsewhere, the Judgment Fund still could not be used. Under these circumstances, the agency would have to seek an additional appropriation from Congress. Lastly, the Judgment Fund is limited to litigative awards, meaning awards that were or could have been made in a court. Litigative awards are distinguished from administrative awards because the latter are provided for by statute and are paid from the agency's appropriation. These include EEOC claims, awards under the Military Claims Act, and Merit Systems Protection Board matters. The primary exception to this rule is claims under the Federal Tort Claims Act that are over $2,500, which Congress exempted in the statute. Permissible awards include the principal amount, some attorneys' fees, allowable costs, and interest as stated in the judgment or settlement. For settlement awards to be considered litigative, the settlement must be negotiated by the Department of Justice (or any person authorized by the Attorney General) and based on a claim that could have resulted in a monetary judgment in court. There are nearly 100 statutes that impact payment from the Judgment Fund, 17 of which specifically dictate denial of payment from the Fund. For example, administrative awards less than $2,500 arising under the Federal Tort Claims Act may not be paid from the Judgment Fund. When there is a specific appropriation, the Judgment Fund may not be used. The most common example of an award against the United States to which the Judgment Fund is inapplicable is tax judgments. Congress makes special, term-limited appropriations to pay tax refunds and judgments, and therefore, they may not be paid out of the Judgment Fund. Neither judgments against the Postal Service, nor those against government corporations, such as the P ension Benefit Guaranty Corporation, are payable from the Judgment Fund. This is in part because government corporations segregate their revenues from the general fund and operate largely without appropriated funds. Therefore, the rationale for using the Judgment Fund, which was intended to reduce the need for Congress to make appropriations, would be inapplicable. In addition, the Judgment Fund may not be used for land condemnation judgments or certain court-awarded contempt citation awards. Since 1996 , the Judgment Fund has been administered by the Financial Management Service (FMS) in the Treasury Department. Once a party has received a final court judgment or negotiated settlement, FMS requires the responsible agency to submit a request for certification of payment from the Fund. FMS considers the proposed payment in light of the aforementioned rules, d etermining whether payment out of the Fu nd is proper or whether it is an obligation chargeable to agency funds. In this respect, FMS is the primary enforcer for the limits on the Judgment Fund 's use. FMS also determines whether the judgment is final, and calculates interest subject to the above limitations. If the payee is indebted to the United States, FMS may offset that amount before payment. Generally, unless the claim arises under the Contract Disputes Act (CDA) or the No FEAR Act, the agency does not reimburse the Judgment Fund; therefore, payment ends the process. The certification and payment is pr imarily a ministerial function. A t no point in the process does FMS consider the nature or merit of the underlying action except to the extent necessary to determine the propriety of payment from the Fund . FMS makes a payment directly to the plaintiff, without an intermediary. This substantially ends the agency's involvement. However, if FMS does not render payment to the correct party, this does not discharge the United States' obligation. In the event FMS refuses to make payment, the submitting agency is notified , and it may alter and resubmit claims as appropriate. Most commonly, rejections result from errors in the submission forms, absence of underlying documents , or other technical issues. A claim is only denied if, during administration, FMS determines that payment from the Judgment Fund is not proper. Claims are most commonly denied because payment has been provided for by a specific appropriation or the award is less than the legal thresholds for statutes such as the Military Justice Act. Federal courts have some discretion when deciding at the end of litigation whether to charge the losing party with costs for the prevailing party . However, the categories of costs that may be awarded are strictly circumscribed and the subject of considerable debate . Under 28 U.S.C. § 1920, the clerk of the court may award costs for court fees, transcripts, fees related to witnesses, materials for presentation in the case, compensation for court-appointed experts , and docket fees. To obtain costs for suc h items in payment fro m the Judgment Fund, the submitting agency must include a bi ll of costs or the c ourt's order awarding costs with the request for payment. Courts have limited payment to the enumerated items in §1920 and the specific exemptions in applicable statutory authority when awarding costs. Payments of interest and attorneys' fees have caused considerable debate with respect to this issue. As a preliminary matter, the U.S. legal system does not generally allow recovery of attorneys' fees by the prevailing party. Termed the "American Rule," this approach distinguishes the U.S. system, making each party responsible for payment of their own legal fees, regardless of the result, unless specifically authorized by statute or contract. In most legal systems around the world, the losing party pays the prevailing party's legal fees as part of the damages award. The American Rule applies with two major common law exceptions and numerous statutory provisions exempting certain classes of cases. The common benefit rule allows federal courts to award attorneys' fees when a party prevails in a suit at his own expense that benefits a large class of other persons. This shifts the cost of attorneys' fees to those who benefit from the suit, not the opposing party. This allows for so-called private attorneys general to effectuate policy in litigation, benefitting a large class of people, with the added incentive that attorneys' fees will be paid if they prevail. The bad faith exception allows a federal court to award counsel fees to a successful party when his opponent acted vexatious or for oppressive reasons, making the award of fees punitive. This requires proof of malice and a showing that the claim had virtually no chance of success. Specific statutory exemptions, called fee-shifting provisions, make the federal government responsible for attorneys' fees in a wide variety of suits. Statutes that allow for award of attorneys' fees often do so with an eye towards equalizing two unevenly matched parties, and often apply to environmental and consumer protection litigation. This has the effect of implementing public policy through private litigation. In some instances, statutes specifically limit the awards of attorneys' fees. For example, the Federal Tort Claims Act allows for attorneys' fees up to 20% for administrative settlements and up to 25% for judicial awards . The Freedom of Information Act statute limits attorneys ' fees to actual litigation (as opposed to administrative remedies). When attorneys ' fees are statutorily authorized, payment may generally be authorized from the Judgment Fund , unless otherwise provided by law. The parties may not alter the source of payment by stipulation or other agreements in the settlement. Payment from the Judgment Fund includes principal awards and, in limited cases, post-judgment interest. However, payment of interest must be considered in light of special considerations for awards entered against the United States. In Library of Congress v. Shaw , the Supreme Court held that interest cannot be recovered in a suit against the government unless Congress has expressly waived sovereign immunity for an award, and has specifically contemplated an award of interest on damages. Prejudgment interest is considered in the calculation of damages, and is not awarded separately. Historically, courts have treated post-judgment interest as a separate element of damages unrelated to the substantive claim, and therefore awarded only upon agreement of the parties. Because the United States is immune from suit absent its consent, this rule especially applies in awards against the government. With respect to the Judgment Fund, payment of interest is authorized in certain instances. If a district court award is awaiting appeal by the government, the Judgment Fund statute authorizes payment of interest if the plaintiff sends a trial transcript to the Treasury Department and payment is limited to the period from the date Treasury receives the transcript until judgment is mandated or affirmed. In Library of Congress v. Shaw , the Court also identified two widely recognized exceptions to the no-interest rule, which are not drawn from specific statutes but have been found to be a constitutional waiver of sovereign immunity. The Fifth Amendment provides that private property shall not be taken for public use without "just compensation." Courts have determined that this exception inherently recognizes interest in order to make the person whole. However, courts have not been receptive to the Fifth Amendment as a means to obtain interest when a takings claim is not otherwise involved. The second constitutional exception where interest may be allowed is the commercial venture exception, set out in Standard Oil Company v. United States , whereby a plaintiff may recover attorneys' fees from a commercial government enterprise. The commercial venture exception requires that the government entity involved in the suit have a sue-and-be-sued clause. Therefore, the commercial venture exception is limited to litigation where the agency has been opened to suit by statute and is engaged in a primarily commercial, as opposed to governmental, function. Therefore, to determine whether interest is payable from the Judgment Fund, a plaintiff bringing suit against the government must engage in a three-step analysis. First, the statute under which suit was brought should first be considered. If the statute authorizes payment of interest, then it may be payable from the Fund. For example, if a plaintiff prevailed under the Back Pay Act, the Fund would pay interest on the claim from the date of the withdrawal or reduction of pay, because this is specifically authorized in the statute. Second, if the case was pending appeal, the plaintiff should consider the interest allowance in 31 U.S.C. §1304(b). If a plaintiff won in district court, and filed a transcript of judgment with the Treasury Department, interest may be paid in the time between the judgment and when the government decides not to appeal. Finally, a plaintiff should determine whether the cause of action amounts to a taking under the Fifth Amendment or falls under the commercial venture exception. As discussed above, the Judgment Fund enabling statute limits an agency's ability to access the Fund. This section provides examples of statutes that prevent an agency from relying on the Judgment Fund as the source of payment, and briefly outlines the legislative intent of these statutes. The Equal Access to Justice Act (EAJA) provides for award of attorneys' fees for individuals and small entities that prevail in cases against the federal government. EAJA applies only when the claimants are the "prevailing party," or when they are successful on a significant issue in the litigation. The party must also show that the result of the lawsuit was not a gratuitous act by the government. The act also contains specific size requirements, so that larger entities may not recover under the act. Since the passage of EAJA, agencies have disputed whether payments under the act must be made out of their appropriations or whether attorneys' fees may be charged to the Judgment Fund. In Cienega Gardens v. United States , the Federal Circuit ordered an award for the plaintiffs, finding that amendments to the Department of Housing and Urban Development's (HUD's) low income housing program constituted a taking. EAJA provides for payment, by directing that a fee award "be paid by any agency over which the party prevails from any funds made available to the agency by appropriation or otherwise." However, the plaintiffs sued the United States, instead of the agency, and HUD argued that they should not be liable because the Department of Justice did not seek review on a facially questionable ruling. HUD proposed that no agency should be responsible under these rare facts, and therefore, payment under EAJA should be made from the Judgment Fund instead of the agency's appropriations. The Treasury Department countered that the Judgment Fund is not responsible for payment when the party prevails over the agency, and denied payment. In an opinion by its Office of Legal Counsel (OLC), the Justice Department concluded that the Judgment Fund could not pay the award for attorneys' fees, because HUD was the agency over which the party prevailed. OLC had previously concluded that an agency could only seek payment from the Judgment Fund when payment of attorneys' fees would constitute a heavy financial blow to the agency, a loophole that was closed in a subsequent version of EAJA. The opinion looked to congressional intent underlying EAJA, which was in part to create agency accountability when taking a regulatory or adverse action which was not substantially justified. In addition, Congress left no statutory mechanisms for payment of EAJA claims from the Judgment Fund. The opinion did not leave open the possibility that agencies could be reimbursed for awards made pursuant to EAJA from the Judgment Fund and strongly suggested they would have to use their own appropriations. Congress has passed two statutes that require agencies to reimburse the Judgment Fund for payment of claims. The Contract Disputes Act of 1978 (CDA) allows payment from the Judgment Fund when a contractor for an agency wins a judgment from a court or a contract appeals board, or reaches a settlement with an agency on a contract dispute. The agency must then reimburse the Judgment Fund from its operating appropriations. If the agency has insufficient funds available to reimburse the Funds, CDA requires that the agency seek additional funding from Congress. Congress wanted to incentivize agencies to engage in settlement talks and keep them accountable for the costs of judgments. The Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002 (No FEAR Act) covers whistleblower and employment discrimination suits for federal employees, creating a cause of action for federal employees who have been subjected to harassment or discrimination in the workplace. The act requires the agency to reimburse the Judgment Fund within a reasonable time. In 2008, the GAO released a report on reimbursements to the Judgment Fund from CDA and No FEAR payments. The report concluded that, while virtually all agencies have reimbursed the Fund for No FEAR payments since it was made mandatory in 2002, CDA payments are considerably less consistent. Typically, CDA payments are much larger, perhaps keeping agencies from reimbursing the Fund. GAO recommended that the FMS take steps to make agency payments more transparent, and that it report to Congress periodically on the status of payments. Congress created a separate but similar system for payment of judgments awarded to tribes under Title XXV of the U.S. Code. The Indian Tribal Judgment Funds Use or Distribution Act created a trust to be administered by the Secretary of the Interior, which would distribute all funds appropriated in judgments in favor of tribes. Courts have held this is the exclusive trust for all such payments, and that no additional congressional action is necessary. The Interior Department holds funds in trust until Congress makes an appropriation to the tribe. When two or more tribes benefit from a single judgment, the Bureau of Indian Affairs submits a plan to Congress recommending a division of the funds, prior to the appropriation. The Judgment Fund has changed many times in its over-50-year history, and recent legislative proposals in Congress could again alter certain payments and processes. In the 113 th Congress, the Judgment Fund Transparency Act of 2013 has been introduced to amend the Judgment Fund enabling statute. The act would require the Secretary of the Treasury to post on a publicly accessible website the claimant, agency, fact summary, and payment amount for each claim from the Judgment Fund, within 30 days after the payment was made, unless a law or court order otherwise prohibits the disclosure of such information. Recently, FMS released its 2011 Fiscal Report, which included all of the information from the Transparency Act except for fact summaries, pursuant to the House Appropriations Committee's recommendations that accompanied the Financial Services and General Government Appropriations Act of 2012. The committee instructed FMS to report online each claim paid from the Judgment Fund in the given fiscal year. In the 112 th Congress, the Government Transparency and Recordkeeping Act of 2012 was introduced but not enacted. The bill would have amended the Judgment Fund enabling statute to require the Secretary of the Treasury to publicly report all Judgment Fund payments since 2003, and report all future payments from EAJA. The bill's provisions called for the disclosures to be made online and include those required under the Judgment Fund Transparency Act, as well as specific details about attorneys' fees and interest paid from the Judgment Fund. Legislation in the 110 th and 111 th Congress would have amended the No FEAR Act to require agencies to reimburse the Judgment Fund for payments for claims within two years of a final finding of discrimination. Claims under the No FEAR Act are paid from the Judgment Fund; however, the law does not specify a definitive period for agencies to reimburse the Fund. The stated purpose of the legislation was to "encourage timely resolution or settlement of complaints." These bills saw no action.
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The Judgment Fund is a permanent, indefinite appropriation that was created by Congress in 1956 to pay judgments entered against the United States. Generally, the United States cannot be sued unless it has waived its sovereign immunity. Originally, such waivers were rare, so individual claims were assigned to congressional committees, which in turn appropriated funds to satisfy the judgments. Prior to the creation of the Judgment Fund, the number of claims grew rapidly, taking up an increasing amount of Congress's time and resources. Eventually, the Judgment Fund was created to reduce Congress's workload, so that individual appropriations were not needed for each award entered. The Fund's administration has changed substantially since its inception, with varying degrees of control and oversight by Congress, the Government Accountability Office, and the Treasury Department. Originally, the Fund was limited to claims of less than $100,000, entered by the Court of Federal Claims or a U.S. District Court. As payments grew in size, Congress transferred authority to the Justice Department to make payments on behalf of the United States, as certified by the Attorney General. Today, the Fund is administered by the Financial Management Service in the Treasury Department and is only accessible when certain closely circumscribed statutory requirements are met. Most importantly, an agency may not access the Fund when there is another appropriation that may be applied or when the plaintiff prevailed through an administrative remedy. In addition, the fund can only be used for monetary awards that are final, meaning the award cannot be changed or overturned. The awards must result from claims that were or could have been litigated in court. This report sets out specific instances in which the Fund can be accessed and illustrates the procedural mechanisms for obtaining payment under certain statutory causes of action. Although primarily used for the payment of principal awards, attorneys' fees and interest on awards may also be paid from the Fund. At the court's discretion, certain costs enumerated in 28 U.S.C. §1920 may be awarded to the prevailing party. In addition, certain statutes, such as the Federal Tort Claims Act, provide that attorneys' fees may be recovered by the prevailing party. In addition, interest that accrues after the judgment may also be payable from the Fund. This report provides examples of how the payments from the Fund may be made under the Equal Access to Justice Act, Contract Disputes Act, Notification and Federal Employee Antidiscrimination and Retaliation Act of 2002 (No FEAR Act), and through tribe-specific judgment funds. In addition, this report will briefly highlight several recently proposed changes to the Judgment Fund's administration. In the 113th Congress, the Judgment Fund Transparency Act of 2013 (H.R. 317) would require the Secretary of the Treasury to post on a public website the claimant, agency, fact summary, and payment amount for each claim paid out of the Fund. Introduced but not enacted in the 112th Congress, the Government Transparency and Recordkeeping Act of 2012 (S. 3415) would have required the Treasury Secretary to publicly report all payments from the Fund under the Equal Access to Justice Act since 2003 and all future claims. Amendments to the No FEAR Act that were proposed in H.R. 6780 (110th Congress) and H.R. 67 (111th Congress) would have impacted reimbursement of the Fund for payments under the No FEAR Act.
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I n 2006, the Supreme Court decided Rapanos v. United States, the most recent and well-known of three Supreme Court decisions wrestling with the question of which wetlands are covered by the wetlands permitting program in the Clean Water Act (CWA). Since then, numerous decisions from the lower federal courts have sought to divine what criteria to draw from the fractured opinions in Rapanos as to which wetlands are "jurisdictional" (within the CWA's reach), and which are not. At the same time, the agencies charged with administering the wetlands permitting program, the U.S. Army Corps of Engineers and Environmental Protection Agency (EPA), issued several guidance documents seeking to explain their view of their +regulations that define "waters of the United States" for purposes of determining CWA jurisdictional waters. In 2015 the agencies issued revised regulations intended to clarify the scope of waters protected under the CWA. This report provides background including the pre- Rapanos Supreme Court opinions, then moves on to Rapanos itself and the Corps/EPA guidance documents. The 2015 rule is discussed briefly; it also is discussed in a separate CRS report (CRS Report R43455, EPA and the Army Corps' Rule to Define "Waters of the United States" , by [author name scrubbed]) . From the earliest days, Congress has grappled with where to set the line between federal and state authority over the nation's waterways. Typically, this debate occurred in the context of federal legislation restricting uses of waterways that impaired navigation and commerce. The phrase Congress often used to specify waterways over which the federal government had authority was "navigable waters of the United States." This "navigable waters" concept proved an elastic one: in Supreme Court decisions from the early to mid-20 th century, "navigability" underwent a substantial expansion "from waters in actual use to those which used to be navigable to those which by reasonable improvements could be made navigable to nonnavigable tributaries affecting navigable streams." Notwithstanding the Court's enlargement of "navigability," Congress considering the legislation that became the CWA of 1972 felt that the term was too constricted to define the reach of a law whose purpose was not maintaining navigability, as in the past, but rather preventing pollution. Accordingly, Congress in the CWA retained the traditional term "navigable waters," but defined it to mean "waters of the United States" —seemingly minimizing the constraint of navigability. The conference report said that the new phrase was intended to be given "the broadest possible constitutional interpretation." Among the provisions in the 1972 clean water legislation was Section 404, which together with Section 301(a) requires persons wishing to discharge dredged or fill material into "navigable waters," as newly defined, to obtain a permit from the U.S. Army Corps of Engineers. The Corps' initial response to Section 404 was to apply it solely to waters traditionally deemed navigable (which included few wetland areas), despite the broadening "waters of the United States" definition and conference report language. Under a 1975 court order, however, the Corps issued new regulations that swept in a range of wetlands. This broadening ushered in a debate, continuing today, as to which wetlands Congress meant to reach in the Section 404 permit program. At one time or another, the debate has occupied all three branches of the federal government. Wetlands, with a variety of physical characteristics, are found throughout the country. They are known in different regions as swamps, marshes, fens, potholes, playa lakes, or bogs. Although these places can differ greatly, they all have distinctive vegetative assemblages because of the wetness of the soil. Some wetland areas may be continuously inundated by water, while other areas may not be flooded at all. In coastal areas, flooding may occur on a daily basis as tides rise and fall. The Supreme Court's first foray into the Section 404 jurisdictional quagmire came in 1985, in Riverside Bayview Homes, Inc. v. United States. There, the Court unanimously upheld as reasonable the Corps' extension of its Section 404 jurisdiction to "adjacent wetlands"—as one component of the agency's definition of "waters of the United States." Under the Corps regulations, adjacent wetlands are wetlands adjacent to any non-wetland waterbody that constitutes a water of the United States—such as navigable bodies of water or interstate waters, or their tributaries. The Court reasoned that the water-quality objectives of the CWA were broad and sensitive to the fact that water moves in hydrologic cycles. Due to the frequent difficulties in defining where water ends and land begins, the Court could not say that the Corps' conclusion that adjacent wetlands are inseparably bound up with "waters of the United States" was unreasonable, particularly given the deference owed by courts to the Corps' and EPA's ecological expertise. Also persuasive was the fact that in considering the 1977 amendments to the CWA, Congress vigorously debated but ultimately rejected amendments that would have narrowed the Corps' asserted jurisdiction under Section 404. In 2001, the Court returned to the geographic reach of Section 404. The decision in Solid Waste Agency of Northern Cook County v. U.S. Army Corps of Engineers ( SWANCC ) directly involved the "isolated waters" component of the Corps' definition of "waters of the United States," rather than the "adjacent wetlands" component at issue in Riverside Bayview Homes . "Isolated waters," in CWA parlance (the regulations do not actually use the phrase), are waters that are not traditional navigable waters, are not interstate, are not tributaries of the foregoing, and are not hydrologically connected to navigable or interstate waters or their tributaries—but whose "use, degradation, or destruction [nonetheless] could affect interstate commerce." Illustrative examples listed in the regulations include "intrastate lakes, rivers, streams (including intermittent streams), mudflats, sandflats, wetlands , sloughs, [or] prairie potholes" with an interstate commerce nexus, or connection. The issue before the Court was whether "waters of the United States" is broad enough to embrace the Corps' assertion of jurisdiction over such "isolated waters" purely on the ground that they are or might be used by migratory birds that cross state lines—known as the Migratory Bird Rule. In a 5-4 ruling, the Court held that the Migratory Bird Rule was not authorized by the CWA. The decision's rationale was much broader, however, appearing to preclude federal assertion of 404 jurisdiction over isolated, nonnavigable, intrastate waters on any basis—indeed, over wetlands not adjacent to "open water." This disparity between the Court's holding and its rationale occasioned considerable litigation in the lower courts, the majority of which opted for a narrow reading of SWANCC , hence a broad reading of remaining Corps jurisdiction under Section 404. Such uncertainties as to the Corps' isolated waters jurisdiction after SWANCC focused attention on the alternative bases in Corps regulations for asserting 404 jurisdiction—such as the existence of "adjacent wetlands." Neither the Corps of Engineers nor EPA, however, has modified its Section 404 regulations since SWANCC . The new spotlight on the concept of "adjacent wetlands" became the backdrop for the Supreme Court's Rapanos decision, the Court's second encounter with this phrase after Riverside Bayview Homes. Rapanos was actually a consolidation of two cases, Rapanos and Carabell , on appeal from the Sixth Circuit. Though both cases involved issues as to what constitutes "adjacent wetlands," the issues in each are different. Rapano s in the Sixth Circuit involved the Corps' assertion of 404 jurisdiction over a wetland adjacent to a tributary (man-made ditch) that ultimately flowed, miles later, into a traditional navigable water. As in Riverside Bayview , the issue was the Corps' jurisdiction under the "adjacent wetlands" component of its regulations defining "waters of the United States." In particular, plaintiffs argued that SWANCC did more than throw out the Migratory Bird Rule; it also barred Section 404 regulation of wetlands that do not physically abut a traditional navigable water. In ruling that Section 404 reached the Rapanos's wetlands, the Sixth Circuit held that immediate adjacency of the wetland to a traditional navigable water is not required. Rather, what is needed is a "significant nexus"—a ubiquitous phrase in Section 404 court decisions lifted from SWANCC 's explanation of Riverside Bayview —between the wetlands and traditional navigable waters. "Significant nexus," in turn, can be satisfied by the presence of a "hydrological connection." Thus, the fact that the Rapanos's wetlands had surface water connections to nearby tributaries of traditional navigable waters was sufficient for Section 404 jurisdiction. Nor did it seem to matter to the court that the hydrological connection to traditional navigable waters was, for at least one of the Rapanos wetlands, distant—surface waters from this wetland flow into a man-made drain immediately north of the site, which empties into a creek, which flows into a navigable river. According to the record, this wetland is between 11 and 20 miles from the nearest navigable-in-fact water. In ruling that a surface water connection to a tributary of a navigable water was enough, the circuit aligned itself with the large majority of appellate courts to rule on this issue since SWANCC . In its petition for certiorari to the Supreme Court, the Rapanoses asked whether the CWA's reach extends to nonnavigable wetlands "that do not even abut a navigable water." Carabell in the Sixth Circuit involved the Corps' assertion of jurisdiction over a wetland adjacent to a tributary (man-made ditch) that ultimately flowed into traditional navigable waters—but the wetland was separated from the tributary by a manmade berm. The Sixth Circuit held that "adjacent wetlands" jurisdiction existed under the Corps regulations, even though the wetland was separated from a tributary of "waters of the United States" by a four-foot-wide manmade berm that blocked immediate drainage of surface water from the parcel to the tributary. The existence of the berm meant, critically, that unlike the wetlands in Rapanos , the wetlands here lacked any hydrological connection to navigable waters at all . Parenthetically, the fact that the "tributary" was merely a man-made ditch (which emptied into a creek, which flowed into a navigable lake) did not appear to be an issue in the case, as it was in Rapanos . Finally, the court endorsed the view of the majority of courts addressing the question that SWANCC spoke only to the Corps' "isolated waters" jurisdiction; it did not narrow the agency's "adjacent wetlands" authority involved here and broadly construed in Riverside Bayview . In its petition for certiorari, the Carabells asked whether Section 404 extends to "wetlands that are hydrologically isolated from any of the 'waters of the United States.'" For many who had waited so long to have "waters of the United States" clarified, the Rapanos decision (addressing the Sixth Circuit decisions in both Rapanos and Carabell ) was a disappointment. In three major opinions, the Court split 4-1-4 as to whether the Corps' assertions of 404 jurisdiction in the two cases before it comported with the CWA—that is, involved "waters of the United States." Justice Scalia wrote a four-Justice plurality opinion, ruling that the Corps had overreached and thus the Sixth Circuit decisions must be vacated and remanded for further proceedings applying the plurality's rule. Justice Kennedy, in a lone concurrence, also disagreed with the Corps' interpretation of the CWA, but would have applied a different approach than the plurality. He supplied the fifth vote supporting the vacation and remand, making that the judgment of the Court. (Five votes is a majority on the Supreme Court.) Finally, Justice Stevens wrote a four-Justice dissent upholding the Corps' reading of its jurisdiction. Accordingly, he would have affirmed the decisions below. The problem is that no single rationale in these three opinions commands the support of a majority of the Justices. Thus, lower courts addressing challenges to Corps 404 jurisdiction since Rapanos have struggled with what rule of decision to extract from the decision. Does the Scalia plurality decision control? Or does the Kennedy concurrence provide the test? Or is satisfying either of these adequate to support jurisdiction? Justice Scalia's plurality opinion asserts what is probably the narrowest view of 404 jurisdiction in the three major opinions, at least in most circumstances. His opening paragraphs set the tone by describing the substantial costs of applying for 404 permits, and the "immense expansion of federal regulation of land use that has occurred under the Clean Water Act." This critical tone continues with the opinion's description of how the lower courts, "[e]ven after SWANCC ," have continued to uphold the "sweeping" assertions of jurisdiction by the Corps over tributaries and adjacent wetlands. Justice Scalia goes on to construe "waters" in "waters of the United States" to mean only relatively permanent, standing or flowing bodies of water , such as streams, rivers, lakes, and other bodies of water "forming geographic features." This definition leads him to exclude "channels containing merely intermittent or ephemeral flow." Wetlands, our topic here, are included as "waters of the United States"—that is, are "adjacent" in the Corps' language—only when they have a "continuous surface connection" to bodies that are "waters of the United States" in their own right. By contrast, wetlands with only an intermittent, physically remote hydrological connection to "waters of the United States" are not covered by Section 404, according to the Scalia opinion. Importantly, the plurality sought to calm concerns that a narrow reading of Section 404 would eviscerate other sections of the CWA, particularly the point-source permitting program under Section 402 that is the heart of the act. That section, the plurality explained, does not require that the point source discharge directly into a jurisdictional water. It is enough that the discharged pollutant is likely to ultimately be carried downstream to such a jurisdictional water. Thus, unlike with Section 404, discharges into non-covered waters could still be regulated. Justice Kennedy's concurring opinion , in contrast to the absolute rules proposed by the plurality, offers a case-by-case test. He picks up on the "significant nexus" test used by the Sixth Circuit and many other courts—but while the lower courts defined significant nexus as having a hydrological connection with traditional navigable waters, Justice Kennedy used an ambiguous ecological test. A wetland, he declared, has the requisite significant nexus if, alone or in combination with similarly situated lands in the region, it significantly affects the chemical, physical, and biological integrity of traditional navigable waters. These ecological functions include flood retention, pollutant trapping, and filtration. Under Kennedy's opinion, the waters that perform these functions may be intermittent or ephemeral, and they need not have a surface hydrological connection to other waters. When, in contrast, their effects on water quality are speculative or insubstantial, the wetland is beyond Section 404's reach. This formulation, Justice Kennedy explained, allows that when the Corps seeks to regulate wetlands adjacent to navigable-in-fact waters, adjacency is enough for jurisdiction. In contrast, for wetlands sought to be regulated based on adjacency to non-navigable tributaries , a significant nexus must be shown on a case-by-case basis. Importantly, however, the Justice did allow that the Corps might adopt regulations at some point declaring certain categories of wetlands to have a significant nexus per se, obviating the case-by-case approach for those wetlands. Each of the foregoing views—the plurality's and Justice Kennedy's—rejects the hitherto prevailing view that any hydrological connection to a traditionally navigable water, no matter how distant, is sufficient for coverage. This "any hydrological connection" test had been a key element of the United States' assertions of "adjacent wetlands" jurisdiction. The four dissenters found the Corps' assertion of jurisdiction reasonable in both cases. The Court's earlier decision in Riverside Bayview , the dissenters argued, was not confined to wetlands having continuous surface flow with traditional navigable waters or their tributaries. Rather it had endorsed jurisdiction over non-isolated wetlands generally, without case-by-case analysis. The plurality's concerns about the costs of applying for a permit, they continued, are more properly addressed to Congress, not to a court. The jurisdictional questions raised by Rapanos and Carabell presented the Supreme Court with a "perfect storm" of hot-button issues. First, there is the federalism matter: Where do CWA Section 404 and the Constitution's Commerce Clause draw the line between federal and state authority over wetlands? Second, there are property rights concerns. Some 75% of jurisdictional wetlands in the lower 48 states are on private property, with the result that protests from property owners denied Section 404 permits (or subjected to unacceptable conditions on same) are often heard, sometimes in the courts through Fifth Amendment takings suits. Third, Rapanos and Carabell have pervasive significance within the CWA itself, since "waters of the United States" governs not only the Section 404 wetlands permitting program, but also multiple other provisions and requirements of that law (see discussion below under " Policy Implications "). In addition, the Corps' broad reading of its jurisdiction created novel semantics (such as viewing dry arroyos as "waters," and manmade ditches as "tributaries") that Justices inclined to more literal readings of statutory language would have a hard time accepting. It was not surprising in light of the above themes that the Justices split as they did: the four more "conservative" Justices rejecting the Corps' expansive view of its adjacent wetland jurisdiction, the four "liberal/moderates" upholding it, and Justice Kennedy coming down in between (as he often does) with a case-by-case test, at least until the Corps adopts new rules. The question, as noted earlier, is what rule of decision the lower courts will discern in Rapanos , with its absence of a majority rationale, for use in future cases. In practice, courts often look for common approaches supported by a majority of the Justices, looking both to the views of plurality Justices (supporting the judgment of the court in the case) and those of the dissenters (who do not support the judgment). Thus far, lower courts applying Rapanos have drawn different tests from the decision, as was predicted based on its fractured nature. Nine of the thirteen federal circuits have ruled so far, an indication of the frequency with which CWA jurisdictional questions arise. Two federal circuits held that the Kennedy "significant nexus" test alone controls; two applied the Kennedy test but reserved for another day the question whether the plurality test as well is valid; three accepted Justice Stevens's suggestion that a wetland satisfying either the Kennedy or plurality tests is jurisdictional; and two avoided the issue altogether by finding that the Kennedy test and plurality test were both satisfied by the particular wetland in the case. (See Figure A-1 in the Appendix to this report.) No circuit decision has opted for the plurality test alone. As the footnotes below show, the Supreme Court has declined to review every one of these circuit decisions where a petition for certiorari has been filed. The likely reason for these consistent denials is that with no change in the Justices since Rapanos that is likely to make a difference in their voting pattern, the Court may see little point to taking another case in the area. District court decisions, at least the reported ones, seem to all follow either the Kennedy test alone or the Kennedy-or-plurality test view. As with the appellate decisions, there appears to be no reported district-court decision squarely holding that the plurality test alone governs. To a considerable extent, the court decisions turn on how the courts read Supreme Court guidance on what rule of law may be inferred from decisions of the Court in which no rationale commands the support of five or more Justices. The United States, for its part, has consistently taken the Kennedy-or-plurality position in litigation, as it did in congressional testimony soon after the Rapanos decision and in the Corps/EPA guidance on interpreting Rapanos (discussed below). In the wake of Rapanos , several factors arguably put pressure on the Corps and EPA to do a rulemaking on the scope of "adjacent wetlands" permitting jurisdiction under the CWA (assuming Congress does not act). One is the fact that no fewer than three of the opinions in Rapanos urged the agencies to do so. A second factor is the labor-intensive nature (and vagueness) of the Kennedy case-by-case approach, requiring empirical study of each wetland near a non-navigable tributary. The third factor is the divergence of the lower courts as to the rule to be applied after Rapanos . One can be confident, however, that anything the Corps and EPA promulgate will find its way into the courts. The agencies stated in guidance issued in 2008 that "further consideration of jurisdictional issues, including clarification and definition of key terminology, may be appropriate in the future, either through issuance of additional guidance or through rulemaking." All of the Rapanos opinions that mention SWANCC seem to accept, without discussion, that SWANCC eliminates jurisdictional coverage of all isolated, intrastate, nonnavigable waters—not just those isolated, intrastate, nonnavigable waters where the sole basis for asserting jurisdiction was the Migratory Bird Rule. Most lower court decisions to broach this issue had adopted the latter narrower reading of SWANCC . Thus, although only adjacent wetlands were directly involved in Rapanos , there may be impacts on the Corps' authority over isolated, intrastate, nonnavigable waters also. Finally, although both petitions for certiorari in Rapanos raised the Commerce Clause issue, the decision in Rapanos , as expected, was on purely statutory grounds. The plurality, however, did assert that the Corps view of its adjacent wetlands jurisdiction "stretches the outer limits of Congress' commerce power," using this as one of several reasons for adopting a narrow reading of that jurisdiction. This plurality view is plainly relevant to congressional bills seeking to overturn SWANCC and Rapanos by amending the CWA to explicitly assert jurisdiction over waters to the fullest extent consistent with the Constitution (see " Legislative Consideration "). In December 2008, EPA and the Corps of Engineers issued guidance to their field offices on how Rapanos should be interpreted in jurisdictional determinations, agency enforcement actions, and other agency actions. The guidance does not impose legally binding requirements on EPA or the Corps, and may not apply in a particular circumstance. The Corps and EPA had previously issued other guidance, attempting to clarify the Court's rulings on the jurisdictional issues discussed here. Following the Rapanos ruling, the agencies first issued informal guidance in 2006; it was replaced by formal guidance in June 2007. The December 2008 guidance made limited changes to the 2007 guidance and supersedes it. The 2008 revisions were made after review of public comments on the 2007 guidance and evaluation of the agencies' own implementation of the guidance. However, they noted in 2008, "The agencies will continue to monitor implementation of the Rapanos Guidance and, as we gain experience, consider appropriate opportunities to provide additional guidance or to initiate rulemaking." This statement encouraged those who argue that revised regulations are needed to resolve lingering interpretive questions. Others contend that a legislative remedy is required. The 2008 guidance generally adopts the Kennedy-test-or-plurality-test view, with the addition of agency interpretation of vague phrases in the Kennedy and plurality opinions. It has three parts, addressing waters that are (1) categorically within the scope of "waters of the United States"; (2) within "waters of the United States" or not, to be evaluated on a case-by-case basis; or (3) categorically outside the scope of "waters of the United States." (1) Waters categorically labeled "waters of the United States"—that is, without a case-by-case inquiry into whether there is a "significant nexus" with a traditional navigable water—are first, traditional navigable waters and their adjacent wetlands. Under this test, the existence of a continuous surface connection, as demanded by the plurality, but not Kennedy or the dissenters, is required to establish adjacency. Categorical "waters of the United States" also include non-navigable tributaries of traditional navigable waters, where such tributaries are "relatively permanent waters" (i.e., typically flowing year-round or at least seasonally) and adjacent wetlands with a continuous surface connection to such tributaries (not separated by uplands, berms, etc.). The 2008 guidance states that a wetland is adjacent if it has an unbroken hydrologic connection to jurisdictional waters, or is separated from those waters by a berm or similar feature, or if it is in reasonably close proximity to a jurisdictional water. (2) Waterbodies that are "waters of the United States" on a case-by-case basis are those dependent on a finding of a "significant nexus" with a traditional navigable water, per the Kennedy concurrence. They include non-navigable tributaries that are not relatively permanent (such as intermittent and ephemeral streams) and their adjacent wetlands, and wetlands adjacent to but that do not directly abut a relatively permanent non-navigable tributary. The 2008 guidance states that, in making the site- and fact-specific analysis to determine "significant nexus," the agencies will evaluate hydrology (e.g., proximity to traditional navigable waters), ecologic factors (e.g., ability of wetlands to trap and filter pollutants or store flood waters), and flow characteristics (flow and functions of the tributary and adjacent wetlands). The purpose of these tests is to demonstrate a connection and the role of a tributary and any adjacent wetlands in protecting the chemical, physical, and biological integrity of downstream traditional navigable waters. (3) Waterbodies not generally considered "waters of the United States" are swales or erosional features (e.g., gullies) and ditches (including roadside ditches) excavated wholly in and draining only uplands, and that do not carry a relatively permanent flow of water. The agencies generally will not assert jurisdiction over these waterbodies. To provide greater transparency of decisionmaking, the 2007 guidance required the Corps and EPA to be more thorough in documenting their jurisdictional determinations than in the past. To meet this requirement, which continues under the 2008 guidance, the Corps uses a standardized documentation form and posts results on its District websites. These steps respond to criticism, such as detailed in a GAO report, that Corps district offices have used differing practices in making jurisdictional determinations and that few districts made their documentation public. Overall, stakeholder groups, including industry, environmental advocates, and states, expressed disappointment or frustration with the 2007 guidance and the 2008 revision—some believing that it goes too far in narrowing protection of wetlands and U.S. waters, others believing that it does not go far enough. Generally, most agree that implementing the "significant nexus" test is especially difficult, because the guidance is complicated and vague. Industry groups said that because there are no clear guideposts on this key point, the guidance fails to provide the certainty desired by the regulated community. Environmentalists said that the "significant nexus" test in the guidance is more limited than the standard described by Justice Kennedy, because although his opinion recognizes the impact of losing wetlands or other small tributaries on large waters, the guidance does not account for cumulative effects. In evaluating "significant nexus," the guidance focuses only on a tributary and wetlands adjacent to that tributary. The 2008 revised guidance did not modify the 2007 guidance with respect to evaluating "significant nexus." Overall, industry groups reportedly believe that the 2008 revisions provided modest improvement over the earlier guidance and could make some jurisdictional determinations easier, but environmental advocates asserted that the guidance substantially limits waters protected by the CWA. One issue that has caused considerable confusion following the Rapanos ruling concerns CWA jurisdiction over wetlands not immediately adjacent to traditional navigable waters—including how jurisdiction will be applied in states within the Fourth, Seventh, Ninth, and Eleventh Circuits, where appellate courts have subsequently said that the Kennedy test alone is controlling. As noted, the 2008 guidance adds some clarification about determining adjacency, but questions about this and other interpretive issues have continued to arise. Since the initial 2007 guidance was issued, the CWA permitting process has become more complex and is slower, according to many participants and observers. A revealing EPA memorandum in March 2008 reports that since July 2006 (shortly after Rapanos was decided), the Rapanos ruling or the 2007 guidance negatively affected approximately 500 enforcement cases, a "significant portion" of the CWA enforcement docket. The breakdown identified in the EPA memo is 304 instances in which EPA regions decided not to pursue formal enforcement because of jurisdictional uncertainty, 147 instances where the enforcement priority of a case was lowered due to jurisdictional concerns, and 61 cases where lack of CWA jurisdiction has been asserted as an affirmative defense in an enforcement case. The memorandum goes on to say the greatest burden on the government results from "the implied presumption of non-jurisdiction [in the plurality test] for the most common types of waters in our country, intermittent and ephemeral tributaries to traditionally navigable waters and headwater wetlands. This presumptive exclusion can only be overcome by a resource-intensive 'significant nexus analysis' [the Kennedy test] described in the Guidance." The memorandum recommended "a few targeted revisions" to the guidance that OECA believed would address these issues, while remaining consistent with the Rapanos decision. For example, it recommended revising the guidance to incorporate Justice Kennedy's suggestions that, when evaluating jurisdiction, it is appropriate to consider wetlands either alone or in combination with other similarly situated lands in the region. The 2008 revised guidance did not address this recommendation. Echoing the EPA memorandum, a Corps official stated at a 2008 conference that making jurisdictional determinations is 8 to 10 times more resource-intensive for Corps staff who must consider a multitude of factors to determine what constitutes a "significant nexus." Representatives of developers and environmental advocates concurred that the joint guidance exacerbates permitting delays. Concern about this reported impact on CWA enforcement drew the attention of two House committee chairmen in 2008. Their staffs reviewed a large number of EPA and Corps documents and concluded that there had been a significant decline in CWA inspections, investigations, and enforcement actions since the Rapanos ruling and the 2007 guidance. In 2009, the EPA Inspector General (IG) reported that Rapanos has created a lot of uncertainty regarding Corps permitting and EPA's compliance and enforcement activities, because of jurisdictional issues, extensive analytical and data needs in more instances, and difficulty in interpreting waters based on "isolation," "adjacency," "neighboring," and related key terms. The IG's report was based on interviews with EPA and Army Corps staff in Washington, DC, and regional offices. In 2011, the Obama Administration weighed into the CWA jurisdiction debate as EPA and the Corps proposed new joint agency guidance to clarify regulatory jurisdiction over U.S. waters and wetlands and to replace the agencies' 2003 and 2008 guidance. The proposed revisions were built on the existing guidance with modifications that the agencies believed were consistent with the CWA, the Court's rulings, and science. According to the agencies, the guidance was focused on protecting smaller waters that feed into larger ones, to keep downstream water safe from upstream pollutants. Like the 2008 guidance, the 2011 revisions proposed to adopt the Kennedy-test-or-plurality-test view of Rapanos . However, the agencies believed that a wider evaluation of jurisdiction is possible than the 2008 guidance suggests, stating, "after careful review of these opinions, the agencies concluded that previous guidance did not make full use of the authority provided by the CWA to include waters within the scope of the Act, as interpreted by the Court." EPA and the Corps acknowledged that, compared with the existing guidance, the proposed revisions were likely to increase the number of waters identified as protected by the CWA. EPA and Corps officials believed that the likely increase in jurisdictional waters would occur because, in their view, the existing guidance under-protects waters and has created uncertainty about many gray areas of jurisdiction, which the revised guidance was intended to clarify. Although there still would be need for case-by-case determination of "significant nexus" waters (i.e., to demonstrate potential hydrologic or ecological connections to jurisdictional waters), the proposed revisions were intended to make such evaluations clearer. Critical reaction to the proposed revisions began even before release of the document. Industry criticism focused on two issues: (1) the revised guidance would broaden the number and kinds of waters subject to regulation, in their view beyond what the CWA and the Supreme Court's rulings permit; and (2) government was attempting to effect policy change through non-binding guidance that generally is not reviewable by courts. EPA and Corps officials responded that the guidance would not extend federal protection to any waters not historically protected under the Clean Water Act and would be fully consistent with the law, including decisions of the Supreme Court. Most state and local officials were supportive of clarifying the scope of CWA-regulated waters, but some were concerned that expanding the CWA's scope could impose costs on states and localities as their own actions (e.g., transportation projects) become subject to new requirements. Environmental advocacy groups welcomed the new guidance. The proposed guidance drew congressional attention, as well, both before and after its release. Some Members wrote letters supporting issuance of new guidance to address the confusion resulting from the Supreme Court's rulings. Others criticized the revised guidance as going beyond clarification and thus amounting to a de facto rule, instead of advisory guidelines. Legislative provisions to prohibit the agencies from funding activities related to revising the guidance were included in several appropriations bills in the 112 th and 113 th Congresses, but none of these provisions was enacted. As noted, the uncertainties resulting from the Rapanos decision led to widespread anticipation that the Corps and EPA would take administrative action to clarify how they interpret the ruling and its impact on waters that are protected by the CWA. Corps and EPA officials testified before a Senate subcommittee in 2006 that the agencies were working on substantive interpretive guidance to clarify CWA jurisdiction in light of the decision —the guidance that was eventually released in 2007 and was revised in 2008. While most observers acknowledged that guidance was useful, many urged the Corps and EPA to initiate a rulemaking to revise their regulations—especially since three Justices in some fashion suggested doing so. This view is, in fact, widely held by many diverse stakeholders—environmental groups, industry, and states—who, at the same time, disagreed on the substance of regulatory or other changes. Because the 2011 proposed guidance was not finalized (it was withdrawn from interagency review in September 2013), the existing 2003 and 2008 guidance remained in effect. However, in May 2015, EPA and the Corps jointly announced a rule to revise regulations that define "waters of the United States," that is, waters protected under the CWA. The revised rule would replace the SWANCC and Rapanos guidance and existing EPA-Corps rules. According to the agencies, the new rule—which they now refer to as the Clean Water Rule—revises the existing administrative definition of "waters of the United States" in regulations consistent with legal rulings—especially the recent Supreme Court cases—and science concerning the interconnectedness of tributaries, wetlands, and other waters to downstream waters and effects of these connections on the chemical, physical, and biological integrity of downstream waters. The agencies assert that the rule also reflects their expertise and experience in administering the CWA, including making more than 120,000 case-specific jurisdictional determinations since 2008. The rule is particularly focused on clarifying the regulatory status of surface waters located in isolated places in a landscape (the types of waters with ambiguous jurisdictional status following the Supreme Court's 2001 ruling in SWANCC ) and small streams, rivers that flow for part of the year, and nearby wetlands (the types of waters affected by the Court's 2006 ruling in Rapanos ). In developing the rule, EPA and the Corps relied on a synthesis prepared by EPA's Office of Research and Development of more than 1,200 published and peer-reviewed scientific reports; the synthesis discusses the current scientific understanding of the connections or isolation of streams and wetlands relative to large water bodies such as rivers, lakes, estuaries, and oceans. The purpose of the scientific synthesis report was to summarize current understanding of these connections, the factors that influence them, and the mechanisms by which connected waters affect the function or condition of downstream waters. The document was reviewed by EPA's Science Advisory Board (SAB), which provides independent engineering and scientific advice to the agency and which completed its review in October 2014. The final rule retains much of the structure of the agencies' existing definition of "waters of the United States." Like the 2003 and 2008 guidance, it identifies categories of waters that are and are not jurisdictional, as well as categories of waters that require a case-specific evaluation. Overall, EPA and the Corps say that their intent in the Clean Water Rule was to clarify their jurisdiction, in light of the Supreme Court's ruling, not to expand it. The agencies acknowledge that the rule would increase the asserted geographic scope of CWA jurisdiction, when compared to a baseline of current practices under the previous regulations and guidance. They believe, however, that the rule does not protect any new types of waters that have not been protected historically (i.e., prior to the SWANCC and Rapanos rulings) or exceed the CWA's coverage. That is, while it would enlarge jurisdiction beyond that under the 2008 EPA/Corps guidance, which the agencies believe was narrower than is justified by science and the law, they believe that it would not enlarge jurisdiction beyond what is consistent with the Supreme Court's narrow reading of jurisdiction. The rule was controversial even before it was proposed in March 2014, and controversies have persisted since the final rule was issued, including among Members of Congress. Officials of the Corps and EPA have vigorously defended it. In changing the regulatory definition of "waters of the United States," there may be instances in which the CWA applies categorically for the first time, and there also may be instances in which the CWA no longer applies (i.e., as a result of exemptions and exclusions). The agencies intend that the rule will result in less ambiguity about whether the CWA applies than under existing regulations, legal rulings, and guidance. Industries that are the primary applicants for CWA permits and agriculture groups (although farms are exempt from most permitting) object to how broadly they fear that the rule will be interpreted and have been concerned that existing exemptions for agriculture, which the rule did not affect, would be modified. Some local governments raised concerns that the rule would increase the number of locally owned ditches under federal jurisdiction. Many states and state environmental agencies expressed support for a rule to clarify the scope of CWA jurisdiction, but there is no state consensus on the revised rule. Some are generally supportive, but others believe that the agencies did insufficient consultation with the states prior to proposing the rule. States, they point out, are co-regulators of the CWA with EPA, making questions of federal jurisdiction equally important to state interests. Environmental groups defend the agencies' efforts to protect U.S. waters and reduce frustration resulting from unclear jurisdiction of the CWA. Still, some of them argued that the proposed rule should have been strengthened, for example by designating additional categories of waters and wetlands such as prairie potholes as categorically jurisdictional. The final rule did not do so; instead, such waters will require case-specific analysis to determine if jurisdiction applies. New regulations may clarify many current questions, but they are unlikely to please all of the competing interests, as one environmental advocate observed. However, a rulemaking would only benefit wetlands if it did not reduce the jurisdiction offered by current regulations and if the Administration remained faithful to sound science. If politics were to trump science in the rulemaking process, the likelihood of such a protective rule would not be promising. Also, rules are subject to legal challenge and can be tied up in court for years before they are implemented. The revised rule became effective August 28, 2015. However, legal challenges to the Clean Water Rule were filed in multiple federal courts soon after it was announced. These lawsuits, filed by industry groups, more than half of the states, and several environmental groups (nearly 90 plaintiffs so far), will test whether the agencies' interpretation of CWA jurisdiction is consistent with the Supreme Court's rulings and whether the rule complies with substantive and procedural requirements of the CWA and other laws. Because of uncertainty about the correct judicial venue for challenging the rule, petitions for review have been filed both in federal district courts and courts of appeals. The petitions for review of the rule in courts of appeals have been consolidated in the U.S. Court of Appeals for the Sixth Circuit. On October 9, a three-judge panel of the Sixth Circuit placed a nationwide stay on the rule, pending further developments, including the need to determine the court's own jurisdictional authority. On February 22, 2016, the Sixth Circuit ruled that it had jurisdiction to hear consolidated challenges to the final rule. The central question before the court hinged on interpretation and application of the appellate judicial review provision of the CWA. The petitioners and intervenors challenging the rule had argued that the rule did not fall into the categories of actions described in the CWA for direct review in appellate courts, and therefore that the challenges to the rule should be heard in the district courts. The Sixth Circuit, in a 2-1 ruling, ultimately agreed with the federal government that the rule was reviewable exclusively in the circuit courts. Other legal complexities remain, however, including continuing district court cases over the rule in other circuits and a pending decision on the same issue in an appeal before the U.S. Court of Appeals for the Eleventh Circuit. As a result of the court's October 2015 order and February 22 ruling, the Corps and EPA will continue to make CWA jurisdictional determinations based on the 2008 guidance, as they did before promulgation of the 2015 rule. As with the legal questions, the policy questions associated with the Supreme Court cases—what should be the outer limit of CWA regulatory jurisdiction and what are the consequences of restricting that jurisdiction—also have challenged regulators, landowners and developers, and policymakers since passage of the act in 1972. The act prohibits the discharge of dredged or fill material into navigable waters without a permit, and it also prohibits discharges of pollutants from any point source to navigable waters without a permit. Disputes have centered on whether wetlands and other waters are "navigable waters," a legal term of art. The answer to this question is important, because it may determine the extent of federal CWA regulatory authority not only for the Section 404 program, but also for purposes of implementing other CWA programs. Critics of the Section 404 regulatory program, such as land developers and agriculture interests, argue that the Corps' wetlands program has gradually and illegally expanded its asserted jurisdiction since 1972. They want the Corps and EPA to give up jurisdiction over most non-navigable tributaries and allow other federal and state programs to fill whatever gap is created. Waters that are jurisdictional are subject to the multiple regulatory requirements of the CWA: standards, discharge limitations, permits, and enforcement. Non-jurisdictional waters, in contrast, do not have the federal legal protection of those requirements. The act has one definition of "navigable waters" that applies to the entire law. In particular, the definition applies to federal prohibition on discharges of pollutants (§301), requirements to obtain a permit prior to discharge (§§402 and 404), water quality standards and measures to attain them (§303), oil spill liability and oil spill prevention and control measures (§311), certification that federally permitted activities comply with state water quality standards (§401), and enforcement (§309). It impacts the Oil Pollution Act and other environmental laws, as well. For example, the reach of the Endangered Species Act (ESA) is affected, because of that act's requirement for consultation by federal agencies over impacts on threatened or endangered species is triggered through the issuance of federal permits. Thus, by removing the need for a CWA permit, a non-jurisdictional determination would eliminate ESA consultation, as well. As discussed above, the Scalia plurality opinion in Rapanos concluded that a narrow interpretation of the Corps' 404 jurisdiction would not impact these other provisions, but many observers contend that the question is not fully resolved. For example, a number of EPA regional staffers cited in a 2009 EPA Inspector General's report stated that some of the most challenging enforcement cases in the post- Rapanos world have involved non-404 issues. EPA said that it might issue additional guidance concerning the effect of Rapanos on other CWA programs that use the common "waters of the United States" definition, but it has not done so. In March 2008, EPA officials reportedly asked states to assist in developing guidance to govern CWA jurisdiction decisions under Section 402, because of continuing uncertainty on the law's scope, especially in western states that have a preponderance of intermittent and ephemeral streams. It is unclear whether this guidance was developed. SWANCC found invalid the assertion of CWA jurisdiction over isolated, non-navigable intrastate waters solely on the basis of their use (or potential use) as habitat by migratory birds. Most of the post- SWANCC cases have instead addressed tributaries and adjacent wetlands, asking which of these have the "significant nexus" to navigable waters that SWANCC was interpreted to say is necessary to establish federal jurisdiction. Wetlands are an important part of the total aquatic ecosystem, with many recognized functions and values, including water storage (mitigating the effects of floods and droughts), water purification and filtering, recreation, habitat for plants and animals, food production, and open space and aesthetic values. Functional values, both ecological and economic, at each wetland depend on its location, size, and relationship to adjacent land and water areas. To the layman, many of these values are more obvious for wetlands adjacent to large rivers and streams than they are for wetlands and small streams that are isolated in the landscape from other waters. Many of the functions and values of wetlands have been recognized only recently. Historically, many federal programs encouraged wetlands to be drained or altered because they were seen as having little value. Even today, while more federal laws either encourage wetland protection or regulate their modification, pressure exists to modify, drain, or develop wetlands for uses that some see as more economically beneficial. While regulators and the regulated community debate the legal dimensions of federal jurisdiction, scientists contend that there are no discrete, scientifically supportable boundaries or criteria along the continuum of waters/wetlands to separate them into meaningful ecological or hydrological compartments. Numerous scientific studies define and describe the importance of the functions and values of wetlands, in support of their significant nexus to navigable waters. In all but some very narrow instances, scientists say, terms such as "isolated waters" and "adjacent wetlands" are artificial legal or regulatory constructs, not valid scientific classifications. From this perspective, even waters and wetlands that lack a direct surface connection to navigable waters or that only flow intermittently are connected to the larger aquatic ecosystem via subsurface or overflow hydrologic connections. Wetland scientists believe that all such waters/wetlands are critical for protecting the integrity of waters, habitat, and wildlife downstream. In SWANCC , the Supreme Court did not draw a bright line for purposes of determining the limits of federal jurisdiction (many wetland scientists do not believe that a bright line is possible, in any case). While the ruling reduced federal jurisdiction over some previously regulated wetlands, even more than a decade later it remains difficult to determine the precise effect of that decision. Many affected interests (states and the regulated community) contend that the 2003 guidance from the Corps and EPA did not adequately define the scope of regulated areas and wetlands affected by SWANCC and subsequent court rulings. The Rapanoses and the Carabells had hoped that the Supreme Court would clarify the jurisdiction issue and that the Court would further narrow the program's geographic reach. Other interest groups disagreed with the petitioners' views on the issues, but also had hoped for clarity. Most say that the 4-1-4 ruling, in which the three main opinions did not agree on what constitutes "waters of the United States," did not bring the desired clarity of meaning in legal and policy terms. Estimates of the types of wetlands and amounts of acreage affected by SWANCC, Rapanos , and subsequent lower court rulings depend on interpretation of the cases and on assumptions about defining key terms such as "adjacent," "tributary," and "significant nexus." Because in its regulations before SWANCC the Corps had broadly defined "waters of the United States," including those encompassed by the Migratory Bird Rule, nearly all U.S. wetlands and waters were subject to CWA jurisdiction, since practically all are used to a greater or lesser extent by migratory birds. Depending on how key terms are defined, reduced federal jurisdiction could affect very small or very large categories of waters and wetlands. Reflecting the uncertainties about how broadly or narrowly SWANCC would be interpreted, one estimate made after that decision found that the possible changes in jurisdiction could range from 20% to 80% of the nation's total estimated 100 million acres of wetlands. Following the Rapanos decision, concern was expressed particularly about that ruling's impacts in arid and semi-arid western states to exclude intermittent or ephemeral streams and adjacent wetlands and riparian areas from CWA jurisdiction. A reduction in CWA jurisdiction affects implementation of the 404 and possibly other CWA programs. Early in 2006, EPA estimated conservatively that the extent of non-navigable tributaries and adjacent wetlands that could be affected by the narrow reading of the Clean Water Act that was advocated by the Rapanos and Carabell petitioners was up to 59% of the total length of streams in the United States, excluding Alaska. EPA also estimated that 34% of industrial and municipal dischargers that are subject to CWA Section 402 permits are located on these stream segments and that public drinking water systems which use intakes on these segments provide drinking water to over 110 million people. Because there is no national database of non-navigable tributaries, EPA analyzed surrogate data on the linear extent of intermittent/ephemeral streams and stream segments that lie at the head of tributary systems and have no other streams flowing into them. Some estimate that the smallest, or headwater, first- and second-order streams represent more than 75% of the nation's stream network and provide drinking water for 117 million people—one in three Americans. These streams, if left unprotected by expansive interpretation of the Court's rulings, are at risk from a variety of polluting activities due to urbanization, construction, and channelization for flood control purposes. Whatever gaps in wetland regulation result from reduced federal jurisdiction arguably could be filled, at least in part, by other federal or state and local programs and actions. For example, some assert that wetland restoration and creation programs, such as the Wetlands Reserve Program and the Coastal Wetlands Restoration Program, or private conservation efforts can provide protection, even if the wetland is no longer jurisdictional under federal law. However, others respond that such programs are likely to be incomplete in filling gaps, since they apply primarily to rural areas and do not apply to the one-third of the nation's lands in federal ownership. Moreover, they were never intended to be a seamless group that would fill all possible gaps. SWANCC, Rapanos , and the subsequent lower court decisions also highlight the role of states in protecting waters not addressed by federal law. From the states' perspective, the federal Section 404 program provides the basis for a consistent national approach to wetlands protection. But if a larger portion of wetlands are no longer federally jurisdictional, they say, it can be argued that the Section 404 program no longer provides a baseline for consistent, minimum standards to regulate wetlands. None of these court rulings prevents states from protecting non-jurisdictional waters through legislative or administrative action, but few states have done so. Prior to SWANCC , 15 states had programs that regulate isolated freshwater wetlands to some degree, but state officials acknowledge that these programs vary substantially from some that are comprehensive in scope to others that are limited by wetland size or have exemptions for agriculture and other activities. Since 2001, a few states have passed new legislation or updated water quality regulations; the issue remains under consideration in several states, where competing proposals that are viewed by some as strengthening and by others as weakening wetland protection have been debated. Critics of broad assertion of federal jurisdiction over water resources point out that most states have authorities to regulate waters of their state, often beyond the scope of federal jurisdiction. In some cases, however, their ability to regulate effectively may be compromised, because state rules often are tied to federal definitions. The gap produced by reduced federal jurisdiction is most evident in the 32 states that have no independent wetlands programs and that typically have relied on CWA Section 401 water quality certification procedures to protect wetlands. Pursuant to Section 401, applicants for a federal permit must obtain a state certification that the project will comply with state water quality standards. Consequently, by conditioning certification, states have the ability to affect the federal permit and to exercise some regulatory control over wetlands without the expense of establishing independent state programs. However, as described previously, diminished CWA jurisdiction which affects the Section 404 program also limits the reach of other CWA programs, including Section 401. Analysts familiar with the political and fiscal environments of states believe that most states are either reluctant or unable "to step boldly into the breach in federal wetlands protection.... The Corps and the U.S. Environmental Protection Agency, not to mention Congress, have little cause to rely on the notion that states will effectively backstop federal protection for isolated wetlands." Many states are barred from enacting laws more stringent than federal rules, or are reluctant to take action, due to budgetary and resource concerns, as well as apprehension that regulation will be judged to involve "taking" of private property and require compensation. Some argue that what is needed—regardless of interpretive guidance or rulemaking by the Corps and EPA—is legislative action to affirm Congress's intention regarding CWA jurisdiction. Others contend that, although the Rapanos decision did not resolve the issues, it also did not substantially affect Congress's willingness or interest in acting on issues that have been pending for several years without congressional action. Related to this is the view that, because the current questions are highly technical in nature, a simple fix may not address the problem, or may create others, such as impacting rights that the CWA reserves to states. In the 109 th Congress, bills were introduced to address the CWA jurisdictional issues in different ways, but Congress took no action. One proposal (the Clean Water Authority Restoration Act of 2005) would have provided a broad statutory definition of "waters of the United States"; would have clarified that the CWA is intended to protect U.S. waters from pollution, not just maintain their navigability; and would have included a set of findings to assert constitutional authority over waters and wetlands. Other legislation intended to restrict regulatory jurisdiction also was introduced (the Federal Wetlands Jurisdiction Act of 2005). It would have narrowed the statutory definition of "navigable waters" and defined certain isolated wetlands that are not adjacent to navigable waters, or non-navigable tributaries and other areas (such as waters connected to jurisdictional waters by ephemeral waters, ditches or pipelines), as not being subject to federal regulatory jurisdiction. Legislation similar to the Clean Water Authority Restoration Act of 2005 was introduced in the 110 th Congress ( H.R. 2421 and S. 1870 , a slightly different bill). The House Transportation and Infrastructure Committee held hearings on H.R. 2421 and related jurisdictional issues in July 2007, and a third hearing in April 2008. The Senate Environment and Public Works Committee held a non-legislative hearing on issues related to the Rapanos and SWANCC rulings in December 2007, and a legislative hearing on S. 1870 in April 2008. Proponents of legislation contend that Congress must clarify the important issues left unsettled by the Supreme Court's 2001 and 2006 rulings and by the Corps/EPA guidance. Bill sponsors argued that the legislation would "reaffirm" what Congress intended when the CWA was enacted in 1972 and what EPA and the Corps had subsequently been practicing until recently, in terms of CWA jurisdiction. However, critics asserted that by making activities that affect waters of the United States (in addition to discharges) subject to the CWA's jurisdiction, the legislation would expand federal authority, and thus would have consequences that are likely to increase confusion, rather than settle it. Critics questioned the constitutionality of the bill, arguing that, by including all non-navigable waters in the jurisdiction of the CWA, it would exceed the limits of Congress's authority under the Commerce Clause. Supporters contended that the legislation is properly grounded in Congress's commerce power. The Bush Administration did not take a position on any legislation to clarify the scope of "waters of the United States" protected under the CWA. Congressional attention resumed in the 111 th Congress, especially after statements by Obama Administration officials supporting the need for legislative clarification of these issues. In May 2009, the heads of EPA, the Corps, the Department of Agriculture, the Department of the Interior, and the Council on Environmental Quality jointly wrote to congressional leaders to identify certain principles that might help guide legislative and other actions: Broadly protect the nation's waters; make the definition of covered waters predictable and manageable; promote consistency between CWA and agricultural wetlands programs; and recognize long-standing practices, such as exemptions now in effect only through regulations or guidance. A modified version of legislation from the previous Congress was introduced in the Senate ( S. 787 , the Clean Water Restoration Act), and in June 2009, the Senate Environment and Public Works approved it with an amendment in the nature of a full substitute to the bill as introduced. As approved by the committee, S. 787 would have deleted "navigable waters" from the CWA and use "waters of the United States" directly to define jurisdiction. It defined "waters of the United States" by a rewritten version of the regulatory definition in use by EPA and the Corps: The term "waters of the United States" means all waters subject to the ebb and flow of the tide, the territorial seas, and all interstate and intrastate waters including lakes, rivers, streams (including intermittent streams), mudflats, sandflats, wetlands, sloughs, prairie potholes, wet meadows, playa lakes, and natural ponds, all tributaries of any of the above waters, and all impoundments of the foregoing. In response to prior criticism, the definition did not encompass activities that affect waters of the United States (see above). The bill as reported also instructed that "waters of the United States" be construed consistently with (1) how EPA and the Corps interpreted and applied "waters of the United States prior to January 9, 2001, the day before SWANCC was decided, and (2) Congress's constitutional authority. The bill would have excluded, as in current EPA-Corps regulations, prior converted cropland and waste treatment systems. It also included a savings section that referenced without paraphrasing eight provisions in CWA Sections 402(l) and 404(f) which exempt certain types of discharges from CWA permits, such as discharges from normal farming activities, and discharges from maintenance of drainage ditches. The full Senate did not take up the bill. Legislation similar to the bills in the 111 th Congress has not been re-introduced, while bills were introduced to block EPA and the Corps from issuing revised "waters of the United States" guidance. In the 114 th Congress, bills to narrow the statutory definition of waters that are subject to CWA jurisdiction have been introduced, as has legislation to bar EPA and the Corps from issuing a revised "waters of the United States" rule or to require the agencies to re-start the rulemaking process for such a regulation. The Senate and House passed a resolution of disapproval under the Congressional Review Act ( S.J.Res. 22 ), which the President vetoed. The Senate was unable to override the veto. (For details, see CRS Report R43943, EPA and the Army Corps' "Waters of the United States" Rule: Congressional Response and Options , by [author name scrubbed].) In light of the widely differing views of proponents and opponents, future prospects for legislation on the geographic scope of CWA jurisdiction are highly uncertain. One difficulty of legislating changes to the CWA in order to specify which waters and wetlands are subject to the act's jurisdiction results from the fact that the complex scientific questions about such areas are not easily amenable to precise resolution in law. Debates over whether and how to revise the act highlight the challenges when debates over science, law, and policy intersect.
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In 1985 and 2001, the Supreme Court grappled with issues as to the geographic scope of the wetlands permitting program in the federal Clean Water Act (CWA). In 2006, the Supreme Court rendered a third decision, Rapanos v. United States, on appeal from two Sixth Circuit rulings. The Sixth Circuit rulings offered the Court a chance to clarify the reach of CWA jurisdiction over wetlands adjacent only to nonnavigable tributaries of traditional navigable waters—including tributaries such as drainage ditches and canals that may flow intermittently. (Jurisdiction over wetlands adjacent to traditional navigable waters was established in the 1985 decision.) The legal and policy questions associated with Rapanos—regarding the outer geographic limit of CWA jurisdiction and the consequences of restricting that scope—have challenged regulators, landowners and developers, and policymakers for 40 years. The answer may determine the reach of CWA regulatory authority for all CWA programs, since the CWA uses but one jurisdiction-defining phrase ("navigable waters") throughout the statute. The Court's decision provided little clarification, however, splitting 4-1-4. The four-Justice plurality decision, by Justice Scalia, said that the CWA covers only wetlands connected to relatively permanent bodies of water (streams, rivers, lakes) by a continuous surface connection. Justice Kennedy, writing alone, demanded a substantial nexus between the wetland and a traditional navigable water, using an ambiguous ecological test. Justice Stevens, for the four dissenters, would have upheld the existing broad reach of Corps of Engineers/EPA regulations. Because no rationale commanded the support of a majority of the Justices, lower courts are extracting different rules of decision from Rapanos for resolving future cases. Corps/EPA guidance issued in 2008 says that a wetland generally is jurisdictional if it satisfies either the plurality or Kennedy tests. In 2011, the agencies proposed revised guidance intended to clarify whether waters are protected by the CWA, but this proposal was controversial and was not finalized. The ambiguity of the Rapanos decision and questions about the agencies' guidance increased pressure on EPA and the Corps to initiate a rulemaking to promulgate new regulations, which they did with regulatory revisions to define "waters of the United States" that are subject to CWA jurisdiction, issued in May 2015. (For discussion of this rule, seeCRS Report R43455, EPA and the Army Corps' Rule to Define "Waters of the United States"). The rule has been very controversial, including among Members of Congress. (For discussion, see CRS Report R43943, EPA and the Army Corps' "Waters of the United States" Rule: Congressional Response and Options, by [author name scrubbed] ). Challenges to the rule, called the Clean Water Rule, have been brought in a number of federal courts, and the rule has been stayed for the duration of litigation. While regulators and the regulated community debate the legal dimensions of federal jurisdiction under the CWA, scientists contend that there are no discrete, scientifically supportable boundaries or criteria along the continuum of wetlands to separate them into meaningful ecological or hydrological compartments. Wetland scientists believe that all such waters are critical for protecting the integrity of waters, habitat, and wildlife downstream. Changes in the limits of federal jurisdiction highlight the role of states in protecting waters not addressed by federal law. From the states' perspective, federal programs provide a baseline for consistent, minimum standards to regulate wetlands and other waters. Most states are either reluctant or unable to take independent steps to protect non-jurisdictional waters through legislative or administrative action.
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When farm commodity prices fall and costs of production rise, farmers can get caught in a "farm price-cost squeeze." The potential for such a financial bind dates to the first half of the 20 th century when farmers began purchasing more of their farm inputs such as fertilizers, improved seeds, and feed concentrates. Since the 1930s, U.S. agriculture has been supported through the ups and downs of the market by federal farm policy, most recently set under the 2008 farm bill. In 2009, some farmers found themselves in difficult financial circumstances, following high farm prices and relatively prosperous times in 2007 and 2008. Livestock, dairy, and poultry producers faced particularly low or negative returns based in part on input prices, primarily for feedstuffs, that did not fall as fast as output prices. In order to survive, many farmers have been drawing on equity built up in recent years. Meanwhile, producers of crops, both federally supported ones such as grain, oilseeds, and cotton and non-program crops such as fruits and vegetables, continue to deal with volatile costs of energy and fertilizer, which are affecting their returns. In some instances, Members of Congress and policymakers in the U.S. Department of Agriculture (USDA) are being asked by farm groups to consider additional support to farmers. This report discusses the current farm price-cost squeeze, how it varies across commodities, and the factors behind the current situation. The report also considers the cyclical nature of agricultural markets, effects on producers, and the government's role in addressing the situation. The cyclical nature of agricultural markets plays a large role in the farm price-cost squeeze. The cause of short-term cycles is often weather. Periods of good weather can result in large crop yields that drive down prices. Conversely, widespread drought can create shortages that drive up farm prices. When prices rise and remain elevated, following poor weather or strong demand, for instance, periods of profitability typically ensue, eventually encouraging producers to add more acreage, increase inputs such as fertilizer, or buy additional cows to produce more milk. Once additional supplies enter the marketplace, prices tend to retreat. These cyclical price movements are captured in the commodity marketing adage that states "the cure for high prices is high prices." The saying makes the economic argument that the circumstance of high prices will eventually change once high prices attract additional production resources. Similar economic reasoning applies once the cycle turns down. In this case, as profitability declines or goes negative, farmers no longer have the economic incentive to produce as much, so they cut back on the volume or quality of inputs or, if financial conditions are bad enough, go out of business altogether. As economists, commodity marketers, and farmers alike have generally found, prices eventually turn higher, profitability returns, and the cycle repeats. Over the long run, farmers find ways to stay in business, sometimes by taking another job so they can continue to operate their farm enterprises even at a loss. Others, less willing or unable to find ways to survive unprofitable situations, will exit the industry. The farmers' role in the cyclical nature of commodity markets was noted more than 50 years ago by Agriculture Secretary Ezra T. Benson. After declaring that farmers were in a "serious price-cost squeeze," he said that farmers could work their way out of the situation by making production and marketing decisions that would solve the current surplus and low price problems. The role of government policy and farm commodity subsidies is also debated and advocated to respond to cycles in agricultural markets. Some say it preserves farms that otherwise would fail at the low point of a cycle; other say it disproportionately helps large farms to the detriment of small farms. These policy issues are addressed later in this report. Rising productivity has also contributed to the cyclical nature of agricultural markets. Over the decades, the adoption of new technology—both mechanical (e.g., better farm equipment) and biological (e.g., improved seed varieties)—and management approaches have resulted in farmers producing more commodities with relatively fewer inputs. As additional product arrives on the market, prices fall until consumer demand catches up with advances in supply. Along the way, weather can create short-term market disruptions and price volatility. In general, large economies of scale in U.S. agriculture encourage producers to expand their operations in order to spread fixed costs over more acreage, take advantage of technology, and reduce per-unit input costs through bulk purchasing. This boosts output and reduces profit margins (a phenomenon seen in many other industries as well). These technology-driven economies of scale put tremendous economic pressure on small operators who are unable to take advantage of them. Over time, the end result of continued advancements in farm productivity is declining farm prices, when adjusted for inflation. Consequently, farm profits are difficult to sustain. Under this repeated market volatility, farmers who are not able to reduce their costs struggle to remain viable as a business operation, causing some to go out of business. Farm sector performance, right down to the individual producer, depends to a large extent on supply and demand factors. Together these factors establish overall price levels, for commodities which farmers sell and for inputs they buy. Changes in agricultural supply and demand stem from many sources. Because U.S. agriculture is a major net exporter of agricultural products, developments in the international market help determine prices farmers receive for most products. Domestic market changes are also key, such as increased consumer demand for certain fruits and vegetables (e.g., avocados, berries, and peppers), income growth that affects demand for meat, or the demographics of an aging population. On the farm input side, energy costs, primarily for fuel and fertilizer, are determined largely in the global oil market. Prevailing wages can also dramatically affect costs for farms using large amounts of manual labor (e.g., fruits and vegetables). Finally, all farms likely incur costs, either directly or indirectly, associated with environmental compliance requirements. Overall price levels and other factors—such as technology, government policy, transportation, and marketing issues—together affect a farmer's decision to increase or decrease investments in his or her operation. Importantly, in the most difficult times, farm program payments and other support from the government, as well as off-farm income for the farm household, may prove decisive for farm profitability when business survival is at stake. Farm profitability is specific to a farm's cost structure and marketing ability. A small farm, for example, may have relatively high per-unit costs because overhead, such as buildings and maintenance, is spread over fewer units of output. Or, considering marketing skills, some farmers may be more adept than others at maximizing prices received from the market. When considering both the revenue and cost sides of a farm business, the range of per-unit costs and prices received can vary considerably by producer. Further complicating the assessment of financial prospects for an individual farm is its commodity mix, preferences for risk, and levels of equity and debt, among other financial variables. Because of the potential for differences across farms, a simplified measure is often needed by policymakers and analysts as a rough gauge of the farm price-cost squeeze, especially when market conditions are changing rapidly. The most basic way to measure the farm price-cost squeeze is to directly compare prices received by farmers with prices they pay for inputs. By ignoring the volume of a farm's sales and input purchases, the comparison only considers how current prices for each relate to one another, which can be particularly insightful for policymakers over a short period (e.g., less than three years) when financial fortunes reverse. Over longer periods of time, however, technology changes and efficiency gains make such comparisons less relevant. Determining whether or not a sector is actually encountering a price-cost squeeze can sometimes be a matter of opinion. Instead, knowing how much worse (or better) conditions are relative to the recent past can be helpful when policymakers are trying to get a sense of how particular groups of farmers are faring financially. Measuring the price-cost squeeze is simply a comparison of the price of the output (for example, a crop, animal, or animal product such as milk sold by a farmer) and the price of inputs used to grow the crop or raise the livestock. The comparison is often expressed as a ratio of the output price divided by the input price. Conceptually, the ratio describes how much input—measured in pounds or other unit of measure—can be purchased with a single pound of output. A higher number corresponds with a more favorable (profitable) relationship for farmers. For example, assume the farm price of milk is $0.12/lb. and the price of feed is $0.06/lb. The milk-feed price ratio is then 2 ($0.12/lb. divided by $0.06/lb.). The resultant number of 2 means that each pound of milk has the same value as 2 pounds of feed. Or stated another way, 2 pounds of feed can be purchased with 1 pound of milk. As a rule of thumb in the dairy industry, a ratio close to 3 is sufficient for profitability to encourage herd expansion. A ratio near or below 2 indicates low or negative profitability and hence a greater likelihood of herd liquidation and industry contraction. For livestock production, feed is often a leading and highly variable contributor to overall costs, making it the most relevant variable when considering farm financial prospects over the short run. Other charges are important as well, such as overhead costs, including buildings and equipment, but these costs are spread over a number of years and typically do not change rapidly from year to year. For the crop sector, no one single input dominates financial prospects as feed costs do for livestock production. As an alternative, a ratio of price indices can be used. Another way to measure the price-cost squeeze is to compare (1) an index of prices received (i.e., the current farm price divided by the farm price received in an earlier base period), and (2) an index of input prices paid by farmers. A comparison is made by dividing the first index by the second. Movements in this ratio (i.e., an index of prices received divided by index of prices paid) essentially measure output prices relative to input prices over a particular period. If a ratio increases over a certain period, farm prices are rising faster than the cost of inputs such as fuel and fertilizer. In the short run (e.g., less than three years), a declining ratio indicates a financially unfavorable circumstance for farmers. Over the long run, the ratio typically declines as improved yields (or other technological advances) result in greater output per unit of input and lower farm prices. Depending on how returns are changing for other crops a farmer produces, acreage for a particular crop may decline if returns are not as attractive as the previous year. A host of other factors, such as crop rotation for managing soil productivity, equipment availability, and management expertise, also play into farm profitability as well as a farmer's decision of what to plant. Output and input prices are captured in indices published each month by USDA's National Agricultural Statistics Service (NASS). For major livestock species, prices of livestock (or products such as milk and eggs) are reported relative to feed prices. These include the "milk-feed" price ratio (see above), as well as similar indices for broilers, eggs, hogs, steers and heifers, and turkeys. For some of the ratios, the price of feed is a composite price of several crops weighted by shares of a typical ration that add to 100% (e.g., for milk-feed price ratio, it is corn, 51%; soybeans, 8%; and alfalfa, 41%). For others, the livestock price is relative to the price of corn alone. For crops, output price indices for major categories published by NASS include food grains (primarily wheat and rice), feed grains (primarily corn and sorghum) and hay, cotton, oil-bearing crops, fruits and nuts, commercial vegetables, and potatoes and dry beans. An "other crop" category is also published. NASS constructs the published indices from the agency's estimates of farm prices, which are based on surveys of farmers and points of first sale. On the cost side, USDA publishes a "crop sector" index that represents the average cost of inputs purchased by farmers. Conceptually, USDA says the average price multiplied by the quantity purchased should equal total producer expenditures for the sector. The drawback with using these indices is that, as with all sector-wide measures, they represent industry averages that combine the actions of various production and marketing activities into a single number. As a result, some producers may be much better off or much worse off than the numbers would indicate. Also, some output categories are too aggregated for specific analysis (e.g., food grains instead of wheat or, even more specifically, hard red winter wheat). Similarly, the prices paid index for the crop sector covers all reported crops on an aggregated basis. Because the mix of inputs varies considerably across crops, such as a high labor share for vegetables compared with crops such as feed grains, the index reflects overall input prices without crop-specific adjustments. As a result, the crop-related ratios calculated in this report can be used only as a general indicator of the price-cost squeeze in the crop sector, while the livestock price-feed ratios more closely correspond with changes in economic prospects for producers. More detailed analyses, particularly for livestock, could be done at the state level using available data. While these ratios are clearly an overly simplified approach to gauging economic conditions in the farm sector, the measures do provide a quick snapshot of current economic conditions. In contrast, national farm income statistics and financial indicators such as the debt-to-equity ratio, also published by USDA, are updated only a few times per year and provide only an agricultural sector-wide view that can hide commodity-specific conditions. Concerned policymakers can monitor the economic situation of U.S. farmers on a monthly basis by observing the farm price-feed ratios and the prices received and prices paid indices. Across agriculture in 2009, the price-cost squeeze was most evident in the livestock sector, particularly dairy. Since 2007, the livestock sector has seen dramatic changes in its farm prices relative to input costs, in part because producer prices have fallen from record levels in late 2007 (milk) and mid-2008 (beef cattle and eggs), but also because feed costs, which also hit record highs in 2008, have been slower to recede. Prices in the feed complex, led by corn and soybeans, have risen since 2005 following sharp increases in demand for corn used for ethanol under the U.S. biofuels policy. Other factors have supported foreign demand for grains and oilseeds, including growth in global incomes (prior to being interrupted in fall 2008 following the economic crisis) and a weaker U.S. dollar exchange rate. Overall, farm prices of livestock, poultry, and milk generally have not kept pace with grain and feed prices during this time. Dairy is a prime example of the recent boom and bust of an agricultural market. Record milk prices in late 2007, stemming from high export demand, more than offset higher feed costs during that year. The milk-feed price ratio rose during 2007 and remained elevated for several months ( Figure 1 ). Once feed costs climbed in late 2007 and rose even higher in 2008, the ratio plummeted from 3.0 to below 2.0. In late 2008 and the first half of 2009, as demand for U.S. dairy products weakened and milk prices fell, the ratio plunged further, hitting bottom in mid-2009 as milk production remained greater than demand, creating significant financial stress for dairy farmers. Milk prices strengthened considerably during the second half of 2009 as production slowed and demand recovered somewhat. Recent movements in the farm price-cost ratios for hogs, poultry, and cattle have been similar ( Figure 2 , Figure 3 , Figure 4 ). However, the declines started earlier (2005). The broiler-feed index has seen some recovery after broiler prices adjusted upward following the sector's production pullback from sharply higher feed prices. Compared with cattle and hog production, changes in the poultry sector occur more quickly because the poultry production cycle is shorter than that for cattle and hogs. The crop story differs from that of livestock. In general, farm prices for crops relative to costs had been either steady or rising in years prior to the 2008 price spike, not falling. For most crop categories covered under federal farm programs, prices received by farmers at the end of 2009 relative to prices paid were near levels seen in 2007. Farm prices relative to costs were even higher during the price spike of mid-2008. The crop categories include food grains (e.g., wheat and rice) ( Figure 5 ), feed grains (e.g., corn and sorghum) and hay ( Figure 6 ), and oil-bearing crops ( Figure 7 ). The only exception for field crops is cotton ( Figure 8 ), which has seen a long-term decline in domestic mill use. Price index data for fruits and nuts ( Figure 9 ) and for commercial vegetables ( Figure 10 ) are also compiled by NASS. Farm prices relative to costs have held within historical ranges (since 2000), although the fruit and nut category has seen a downward trend since 2007 as costs climbed. Costs rose sharply in 2008 following a run-up in prices for fertilizer, fuel, and seeds. When farm prices fail to keep pace with the cost of inputs, individual farmers begin making business decisions that affect the farm's output. The collective decision by farmers translates into a sector-wide supply response which, because of substantial lags in the production cycle for both crops and livestock, plays a large part in prices that farmers receive in future months. U.S. agriculture is also governed in part by federal polices that affect the markets and farmers' production decisions. Finally, farmers often depend on off-farm income to help insulate their household from financial difficulties their farms may encounter. As with any business, farmers focus on both the revenue and cost sides of their operations when faced with declining returns. Because farmers are generally price takers, that is, commodity markets determine the price at which they can sell, farmers often focus on selling their products in ways that avoid seasonal lows and/or maximize potential revenue. This can be accomplished through forward pricing with a buyer who is willing to pay a small premium to secure future needs. A plethora of marketing options is also available through brokers and marketing companies who monitor the market, establish marketing plans with producers, and execute them with the intention of obtaining a higher per-unit price than if a farmer simply sells the crop at harvest time. Farmers also seek cost changes to improve their bottom lines. Cutting back on inputs (e.g., fertilizer for crops or high quality hay for dairy cows) is one option. Delaying equipment upgrades or other investments is another. Selling less productive assets, such as older beef or dairy cows, is yet another. All three actions save the farmer money, but from a farm management perspective, the farmer is attempting to reduce costs proportionately more than revenue and needs to pay attention to efficiency ratios when making these choices. Farmers may also draw on equity or savings built up in previous periods or generate more off-farm income (see section below). Once negative market signals are sufficient to encourage farmers to change their production plans, the collective action of farmers eventually manifests itself in lower sector-wide supplies. For crops, it may mean pulling out old grapefruit trees after a string of unprofitable years or shifting from cotton to soybean plantings in recent years as domestic cotton mill use and farm prices decline. For most crops, the positive price impact of reduced supplies shows up in the market as soon as traders sense that supplies will in fact decline. Sometimes this takes up to a year to unfold because planting and harvest generally occur once a year (or for an extended period during a year in the case of citrus, for example). Weather and other factors help determine the final level of supply and prices. On the livestock side, producers will either send animals to slaughter or feed less expensive rations. The former action, at least in the case of dairy operations, has an immediate impact on production because the cows are no longer producing milk. For other livestock markets, such as beef cattle or hogs, herd liquidation temporarily increases meat supplies, further driving prices down. But once the market works through the initial supply surge, prices tend to rise because those animals no longer generate product for the market. This is especially true when breeding animals are sent to slaughter because they will no longer produce offspring that would add to meat or dairy supplies in future months or years. Feeding less expensive (and hence less nutritious) rations can also reduce production because animals convert lower quality feed into meat and milk less efficiently. The federal government provides a number of programs to help farmers. Most of these, however, focus on specific crops that have a long history of federal support. Farmers who plant wheat, corn, cotton, rice, and a number of other "program crops" receive payments and other forms of support through programs under the 2008 farm bill, which has roots in farm legislation from the 1930s and 1940s. The support comes primarily in the form of program payments to agricultural landowners who have elected to participate, plus additional payments that depend in part on current levels of farm prices. Total price and income support payments to agriculture averaged $15.5 billion per year in FY2001-FY2009. The sugar industry is supported primarily through domestic supply control and import barriers. In contrast to program crops, federal program support for fruits, vegetables, and horticulture crops is generally limited to crop insurance, disaster assistance, and funding for research, marketing, and promotion projects. Similarly, in the livestock sector, the only extensive federal policy is for dairy, with price supports, direct payments to producers, and milk pricing regulations under federal milk marketing orders. However, policy analysts and observers have commented that crop subsidies over the years have encouraged grain production, thereby benefiting livestock producers through lower feed prices, although increases in crop prices and feed costs in recent years may raise doubts among livestock producers about prospective "pass through" benefits from crop subsidies. Concerning the impact of federal policies on agricultural production, some analysts suggest that government efforts can be counterproductive when federal policies attempt to stabilize markets by providing support to producers. Altering or overriding market signals, they say, can distort production incentives that originate from consumers. The result is a disconnect between what consumers want and what farmers produce, which can lead to surplus production and low prices. In addition, critics say that government programs likely keep inefficient resources in the sector and work against the underlying natural forces motivated by technology and economies of scale that are inherent in most of production agriculture. Further government intervention might be needed that is otherwise contrary to economic rationale, such as paying for surplus commodity storage, giving away commodities the market does not want, or subsidizing exports to move product out of the domestic market (in the case of dairy). The counterpoint to limited or no government intervention is that markets are, at times, too volatile and can unnecessarily destroy farms that otherwise benefit society. Supporters of government intervention in agriculture, particularly for small- and medium-sized farms, argue that these operations that tend to have higher costs, and thus are more susceptible to financial losses, are better suited to carry out conservation and other environmental measures because those operators have greater concern for the long-term productivity of their land. Off-farm income can be key to farm survival during a farm price-cost squeeze. As technological advancements have reduced labor requirements on farms, farmers and/or their spouses have sought part-time or full-time jobs off the farm in an effort to make productive use of the available labor time and supplement household income. The overall level of off-farm income received by U.S. farmers is quite high, and it has been for a long time. At the national level, off-farm income as a share of total household income has been at least 80%, on average, for the past 20 years. In some years, it exceeds 90%. For commercial farms (sales of $250,000 or more), farm income accounts for about 75% of household income. For other farms, farm income as a share of household income is often in the single digits or negative. Given these statistics, farming activities, in many cases, assume the role of a "hobby" rather than an income-generating activity, and farming can be considered a lifestyle choice rather than a business. Some farming enterprises lend themselves well to farmers adding an off-farm job to supplement household income. The seasonal nature of crop production, for example, can leave winter months available for a farmer to work "in town." In contrast, livestock producers often need to tend animals daily, leaving only part-time work as an option. Farmers on diversified operations or those without labor contributions from family members may need to focus nearly all of their efforts on the farm. U.S. farm numbers declined from more than 6 million farms in the early 20 th century to just 2 million in recent decades ( Figure 11 ). The transition was most apparent in the 1950s. Farm numbers dropped sharply as mechanization continued to reduce the need for farm labor, efficiency gains from large farm size increased dramatically, and off-farm employment became more available and relatively more attractive. As policymakers developed farm programs to support the farm sector, technological gains over time have resulted in farm production in excess of market demand, leading to a farm price-cost squeeze and a decline in farm numbers. Some would say the price-cost squeeze is essentially due to keeping the same amount of land in production, but with yield-enhancing technology boosting production. Economics would dictate that resources (e.g., people) need to exit the sector if supply is out of balance. The evidence would suggest that this has occurred. While overall U.S. farm numbers have stabilized since the late 1980s, there has been a shift away from the medium-sized farms considered to be modest family operations (sales between $10,000 and $99,999) ( Figure 12 ). Offsetting this decline is growth in the numbers of larger farms (sales at least $100,000), which can push their costs even lower from gains in economies of scale, and small operations with sales less than $10,000—referred to as "hobby" or "lifestyle" farms—that are not as dependent on farm income because ample off-farm income supports their farm lifestyle. Today, relatively large, economically efficient farms provide the bulk of U.S. production. In 2007, according to the Census of Agriculture's definition of a farm (any place from which $1,000 or more of agricultural products were produced and sold), the total number of farms was 2.2 million, while less than half a million farms had sales of $50,000 or greater. The trend has been a declining number of commercial farms driven by economies of scale and technology. In 2007, only about 125,000 of the largest farms (5.7% of total farms) accounted for 75% of the nation's farm sales. Just five years earlier, in 2002, 144,000 farms accounted for 75% of farm sales. In 1992, more than 232,000 farms accounted for 75% of farm sales ( Table 1 ). Since the Great Depression, federal farm policy has attempted to help farmers weather financial difficulties inherent in the industry. More than 75 years ago, when the federal government started addressing low returns in farming, the political thrust was to enact legislation that would offset some of the volatility of agricultural markets and prop up income for a rural population that was highly dependent on the farm economy. In general, the goal has been to help farmers survive market downturns. All the while, farmers have adopted technology that has resulted in a sector-wide transition from a large number of producers, some being high-cost, to a smaller number of lower-cost producers. Most public support for agricultural subsidies stems from the public's desire to help "family farmers." Historically, public support for farm programs has benefited from the country's agrarian roots and generally favorable perception of farmers as being hard workers, honest, and subject to market forces and weather that are beyond their control. However, recent farm bill debates, which occur roughly every five years, have seen heated discussions over levels of payments and eligibility. As for public opinion, a poll by Program on International Policy Attitudes at the University of Maryland indicates that while the public would oppose eliminating farm subsidies in general, the desired scope of subsidies is more narrow than provided under current policy, with a preference for payments to small farmers rather than large farmers. While there are exceptions, government programs for farmers, as currently designed, generally benefit farmers in proportion to their production. Some large operations continue to receive payments even though they may not necessarily need them for economic survival. This in turn creates an economic incentive for a farm to either become a larger commercial operation in order to survive, or contract in size to one that is more manageable, with household income possibly supplemented by off-farm income so the farm can remain in operation regardless of its financial circumstances. Simultaneously, there are general economic and technological pressures—separate from government intervention—that encourage farms to consolidate or become larger, as discussed earlier in this report. When farmers are caught in farm price-cost squeeze, the question for policymakers has been couched, perhaps incorrectly, critics say, in terms of preserving the nation's ability to produce food. This assumes that poor economic returns will result in less overall food production. While some portions of agriculture undoubtedly decline during these times, or would contract substantially if government policy would no longer be protecting it, a wholesale departure from current food production levels is not necessarily at risk, according to agricultural economists. Instead, most resources in agriculture—land, labor, and capital—generally remain in the sector because these resources are relatively abundant in the United States (with the exception of labor, to a certain degree) and do not have a better alternative use. Unless these resources are diminished, say by soil erosion, the nation's capacity for producing food remains intact. Resources continue to shift, though, among the subsectors as well as in and out of the sector as economics and government policies allow. Importantly, gains in productivity mean resources can leave the sector without resulting in an overall reduction in food output. Another concern—and major farm policy question—is one of industry structure. Should federal policy address the long-term trend of large farms producing an increasing share of U.S. agricultural production? More pointedly, who will or should farm? Should the United States government let family farmers fail financially, or should the federal government support them in a way that slows the transition to farms that may be more economically efficient? Shaping this issue is a belief, at least historically, that agriculture is a special segment of the U.S. economy, elevated by its rich history, dedicated people, and role in rural communities. In contrast, others recognize that commercial farming is a business like any other, and federal policy should treat it accordingly. Farm programs fit into a larger policy context that has changed since farm policy was first developed. In the early- and mid-20 th century, farm policy was rural policy because of the importance of agriculture in the rural economy. Now, growth in other rural industries has reduced farming's relative importance in the rural economy. That leaves the larger policy question for both critics and advocates of current farm policy: how does farm policy complement or contradict the goals policymakers have with respect to rural communities and life in what has historically been important agricultural areas? Some critics have questioned whether current farm policy is reinforcing or accelerating trends in U.S. farm structure, intensifying the farm price-cost squeeze that some farmers are experiencing. Others say government assistance is critical in supporting agriculture so that farms can continue operating even when economic conditions are poor and before market prices turn higher.
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When farm commodity prices fall and costs of production rise, farmers can get caught in a "farm price-cost squeeze." The potential for such a financial bind dates to the first half of the 20th century when farmers began purchasing more of their farm inputs such as fertilizers, improved seeds, and feed concentrates. Since the 1930s, U.S. agriculture has been supported through the ups and downs of the market by federal farm policy, most recently set under the 2008 farm bill. In 2009, some farmers found themselves in difficult financial circumstances, following high farm prices and relatively prosperous times in 2007 and 2008. Some livestock, dairy, and poultry producers faced particularly low or negative returns in 2009 based in part on input prices, primarily for feedstuffs, that did not fall as fast as output prices. In order to survive, many farmers have been drawing on equity built up in recent years. Meanwhile, producers of crops, both federally supported ones such as grain and cotton and non-program crops such as fruits and vegetables, continue to deal with volatile costs of energy and fertilizer, which are affecting their returns. In some instances, Members of Congress and policymakers in the U.S. Department of Agriculture (USDA) are being asked by farm groups to consider additional support. The cyclical nature of agricultural markets plays a large role in the farm price-cost squeeze. When prices rise and remain elevated, following poor weather or strong demand, for instance, periods of profitability typically ensue, eventually encouraging producers to add more acreage or increase inputs such as fertilizer. Once additional supplies enter the marketplace, prices tend to retreat. Similar economic reasoning applies once the cycle turns down. In this case, as profitability declines or goes negative, farmers no longer have the economic incentive to produce as much, so they cut back on the volume or quality of inputs or, if financial conditions are bad enough, go out of business all together. As economists, commodity marketers, and farmers alike have generally found, prices eventually turn higher, profitability returns, and the cycle repeats. The most basic way to measure the farm price-cost squeeze is to directly compare prices received by farmers with prices they pay for inputs in the form of price ratios. These ratios provide a relatively current indication of economic conditions, and concerned policymakers can monitor them on a monthly basis as USDA releases the data. Across agriculture in 2009, the price-cost squeeze was most evident in the livestock sector, particularly dairy. When farm prices fail to keep pace with the cost of inputs, the collective decision by farmers to reduce output translates into a sector-wide supply response which, because of substantial lags in the production cycles for both crops and livestock, plays a large part in prices that farmers receive in future months. U.S. agriculture is also governed in part by federal polices that affect the markets and farmers' production decisions. Finally, farmers often depend on off-farm income to help insulate their household from financial difficulties. Most public support for agricultural subsidies stems from the public's desire to help "family farmers." Historically, public support for farm programs has benefited from the country's agrarian roots and generally favorable perception of farmers. As Congress developed farm programs to support the farm sector, technological gains over time have generally led to farm production in excess of market demand, creating a farm price-cost squeeze on a periodic basis. To survive, farms often seek lower per-unit costs by expanding the size of their operation. As large farms produce an increasing share of U.S. agricultural production, some critics have questioned whether current farm policy is reinforcing or accelerating this process.
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Monthly Social Security payments for retired workers, disabled workers, and all other beneficiaries are generally increased annually by a cost-of-living adjustment (COLA) that is based on the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W). The COLA applies beginning with the second year that a person is eligible to receive benefits. The first-year benefit is based on a formula that is linked to overall wage growth. Under current law, the COLA equals the percentage increase in the average CPI-W from the third quarter of the base year (the last year for which a COLA was applied) to the third quarter of the current year. The Bureau of Labor Statistics (BLS) generally releases the September CPI-W by mid-October, and the Social Security Administration (SSA) then computes and announces the COLA. The COLA becomes effective in December of the current year and is payable in January of the following year. Social Security payments always reflect the benefits due for the preceding month. For example, the payment that a beneficiary received in January 2015 reflected the benefit for December 2014. Since 1975, a COLA has been paid in every year except 2010 and 2011. Because the average inflation as measured by the CPI-W for the third quarter of 2015 as compared with 2014 was negative (-0.4%), the SSA has announced there will be no COLA for 2016. A COLA of 1.7% was payable in January 2015. Inflation is generally measured by computing the increase in the cost of the goods that an average person purchases. The CPI-W is an estimate of the average change in prices of the goods and services purchased by households whose income comes primarily from a clerical or wage occupation. In general, BLS measures the price change of each item in the "basket" of goods, and then computes overall inflation, weighting each of those price changes by the item's share of spending. The consumer price index for all urban consumers (CPI-U) is more broadly used than the CPI-W. BLS uses the same price data and methodology to compute the CPI-W and the CPI-U, but the CPI-U is based on the expenditures of about 87% of the population, whereas the CPI-W reflects expenditures of about 32% of the population. BLS introduced the CPI-U in 1978 and renamed the existing inflation measure the CPI-W. The CPI-W continues to be used for the Social Security COLA even though it measures the inflation facing a population—urban wage earners and clerical workers—that by definition are employed, unlike most Social Security beneficiaries. However, the two measures tend to track each other closely. Some shortcomings of the CPI are inherent in any price measure. For example, the CPI is based on an average of all consumption in the nation, whereas actual purchases and prices paid vary by individual. Therefore, virtually everyone will experience inflation that is either higher or lower than the measured rate. Other shortcomings are technical and can be addressed by changes in methodology. In recent years, BLS has adjusted its processes to reduce an upward bias in the CPI. For example, they have improved the adjustments they make to the index to account for the introduction of new products and changes in the quality of existing products. They have also incorporated procedures that partially account for the "substitution effect"—the fact that consumers cushion themselves from the effect of relative price increases by adjusting their purchasing patterns, and they take advantage of relative price decreases. For example, if the price of apples grows much faster than the price of pears, people often buy more pears. Conversely, if apples go on sale and pears do not, sales of apples would increase. A price increase still reduces consumers' standards of living, but the reduction is smaller than it would be if they were forced to buy the same items every month. BLS has identified two factors that cause the CPI-W (and the CPI-U, which uses the same methodology) to overstate inflation. First, the CPI-W does not fully account for substitution. The BLS calculates price indexes for 211 categories of goods in 87 geographic areas. The CPI-W adjusts for the effects of substitution within those "item-area" categories, but not between them. Second, a "small-sample" bias arises because BLS can collect only a sample of the numerous prices in the economy. This bias is separate from the uncertainty that arises whenever an estimate is based on a limited sample; the small-sample bias causes inflation to be systematically overstated. In contrast, some analysts point out that the CPI-W may understate the average inflation experienced by Social Security beneficiaries because older Americans consume a greater than average share of goods whose prices tend to rise more rapidly than average, most importantly health care and housing. The CPI-W tracks the spending habits of urban wage and clerical workers, but about 80% of Social Security beneficiaries are aged 62 or older and therefore tend to have different spending patterns. Persons aged 62 and older spend around twice as much of their direct outlays on health care as does the rest of the population, a difference that accounts for about half of the difference in the growth rates of the CPI-W and the Experimental Consumer Price Index for Americans Aged 62 and Older (CPI-E), a price index for the elderly. Older Americans also spend more than average on other goods whose prices usually rise faster than average, such as housing. In August 2002, BLS introduced a supplemental index, the Chained CPI for All Urban Consumers (C-CPI-U). Although the series was first published in 2002, BLS has produced monthly values for the index beginning in December 1999. Unlike the CPI-W (and the traditional CPI-U), the C-CPI-U fully accounts for substitution by consumers and effectively eliminates small-sample bias. The weights used for the traditional versions of the CPI are updated every two years to reflect changes in spending patterns. It therefore does not fully incorporate the monthly effects of changing prices on spending patterns. In contrast, when BLS estimates the C-CPI-U, it estimates weights for each month separately, thus "chaining" the two months. The C-CPI-U tends to increase at a slower rate than the CPI-W. The Social Security Administration's Office of the Chief Actuary estimates that the C-CPI-U will grow an average of 0.3 percentage points more slowly than the CPI-W, which is equal to the average differential since 1999. The Congressional Budget Office (CBO) estimates that the differential will average 0.25 percentage points, slightly lower than the historical average, because it excludes some data from the early 2000s, before BLS made some methodological changes. Because data on actual spending patterns are collected every two years, the initial release of the C-CPI-U—which occurs several weeks after the end of the month for which inflation is being measured—is based on estimated spending patterns. Interim estimates are released in February of the next year. The final release, which is based entirely on actual spending data, is released the following February, as much as two years after price data are collected. The lag between the initial and final releases of the C-CPI-U would complicate COLA calculations. SSA announces next year's COLA in mid-October, soon after BLS releases the current year's September CPI-W figure, as described above. To address the issue of the long time lag between initial and final releases of the C-CPI-U for a given month, some have proposed basing the Social Security COLA on the initial release of the C-CPI-U (the initial C-CPI-U is published at the same time as the CPI-U and the CPI-W, i.e., just a few weeks after the end of the month for which price changes are being measured). The difference between the initial and final releases could be reflected in COLAs for subsequent years. Some argue that the low-income elderly have less ability than the average consumer to change what they buy when prices change because they spend most of their income on essential items, such as housing, food, health care, and utilities. These essential items are not good substitutes for each other. For example, if the price of electricity rises, some low-income elderly might not be in a position to reduce electricity purchases, particularly if they are already purchasing little electricity. If it is true that some low-income elderly have less ability to substitute among items in response to relative price changes than other consumers, then the C-CPI-U would not capture the full impact of relative price changes on the low-income elderly. That is, the C-CPI-U would underestimate the impact of inflation facing the low-income elderly. However, there is little research on this question. In response to concerns about how effectively the CPI-W tracks the spending patterns of older consumers, in 1987 Congress directed BLS to introduce an index for the elderly. BLS developed the CPI-E and constructed values for the series for 1982 and later. However, a fully developed price index for the elderly might differ from the CPI-E, which is computed using price data from the same geographic areas and retail outlets as the CPI-W and CPI-U; only the consumption weights differ. BLS commissioner Erica Groshen testified, "We recognize that elderly households live in different places, shop at different retail outlets, buy a different mix of products, and even in many cases qualify for different prices than other urban consumers." The experimental CPI-E index also may not be appropriate for Social Security COLAs because the over-62 population differs from the population of Social Security beneficiaries. Many Social Security beneficiaries are under the age of 62, such as surviving children and most disabled workers. And some people over 62 are not Social Security beneficiaries, such as the substantial portion of persons aged 62 to 64 who have not yet claimed benefits. On average, the CPI-E has increased by an average of about 0.2 percentage points faster than the CPI-W or CPI-U since 1982. SSA's Office of the Chief Actuary expects the differential to remain at that level. Several bills to set Social Security COLAs equal to growth in a CPI for the elderly have been introduced in the 114 th Congress, such as H.R. 1391 , H.R. 1811 , H.R. 1984 , H.R. 3351 , H.R. 3588 , S. 731 , S. 960 , S. 1904 , S. 1940 . This section discusses issues that may inform the debate about whether to base the Social Security COLA on either the C-CPI-U or the CPI-E instead of the CPI-W. It first discusses how the cumulative impact of such a change would grow as individuals aged and how Social Security becomes an increasingly important source of income for older beneficiaries. It then discusses the projected impact on Social Security's overall finances of a change in the COLA. The effect of higher or lower COLAs would be cumulative; that is, the impact on benefits would grow with each additional year of benefit receipt. Benefits for people who had just become entitled, such as 62-year-old retired workers or newly disabled workers, would be unaffected, because first-year benefits are not affected by COLAs. The changes would always be small for people who had only been entitled to benefits for a few years, and they would be small for all beneficiaries in the first few years after a policy change, because those groups would have been subjected to the higher or lower COLAs for only a short time. The changes would be largest for people who received COLAs under the new policy for many years, such as the very old or people who had been disabled for a long period. For example, if the COLA was based on the C-CPI-U and it grew 0.3 percentage points more slowly than the CPI-W, as projected by the SSA, then the benefits of 65-year-olds—who will have experienced three years of COLAs—would be reduced by 0.9% (see Figure 1 ). The reduction would increase as the worker aged: to 3.7% at age 75 and 6.5% at 85. That is, beginning 23 years after the policy was changed, scheduled monthly benefit payments for 85-year-old beneficiaries would be 6.5% lower than they would be under current law. And if, for example, the CPI-E or a similar measure were used to compute the COLA and it grew 0.2 percentage points faster than the CPI-W, as projected by the SSA, then benefits would be 0.6% higher for retirees at age 65, 2.6% higher at 75, and 4.6% higher at 85. Although the cumulative effect of a change in the COLA is largest for people who have been subject to the change for many years, the number of people affected declines with age as people die. For example, only about half of 62-year-olds live to age 84 (see Figure 1 ). Because benefit changes cumulate, the effect of a change in COLAs on lifetime benefits would depend on how long a retiree lives. On average, people who had higher earnings over their lifetime live longer, so they would be most affected. However, older beneficiaries tend to have lower current income and to depend more on their Social Security benefits than younger groups. At advanced ages, most beneficiaries are no longer able to work, and many beneficiaries who had savings at retirement have depleted those savings. For the minority of the elderly with defined benefit pensions, the purchasing power of those payments generally declines over time because it is not usually indexed to inflation. As a result, poverty rates increase with age. Among beneficiaries aged 65 to 69, 5.7% were poor in 2012; the poverty rate for those 80 or older was 9.2%. As shown in Figure 2 , older beneficiaries depend more on their Social Security benefits than do younger ones. For example, for more than half of those aged 80 and older (54%), Social Security benefits are at least 80% of total income. In contrast, for only 29% of the 65-69 age group do Social Security benefits represent at least 80% of total income. Changing how the COLA is computed is one of the few recent Social Security proposals that would affect current beneficiaries. Many options to reduce Social Security benefits would change the way benefits are calculated for new beneficiaries, and many proposals would reduce benefits only for people currently aged 55 or younger. One measure of Social Security's long-term financial status is the system's annual income and cost rates. Under current law, the Social Security cost rate—spending as a share of taxable payroll—is projected to grow from about 14% today to around 17% in 2035 and later. (Taxable payroll is all earnings subject to the Social Security payroll tax.) The income rate, which is all tax revenue as a share of taxable payroll—is projected to remain around its current level of 13%. If the COLA were based on the C-CPI-U beginning in 2016, the Social Security actuary projects that future Social Security benefits that are based on current law would ultimately decline by about 4%, or 0.7% of taxable payroll (see Figure 3 ). Switching to the CPI-E would ultimately increase spending by about 3%, or 0.5% of taxable payroll. A second measure of Social Security's long-term financial status is the system's summarized income and cost rates. The Social Security trustees project the 75-year summarized cost rate to be 16.77% of taxable payroll and the summarized income rate to be 13.89%, resulting in a deficit of 2.88%. Basing the COLA on the C-CPI-U beginning in 2015 would reduce the deficit by 0.56% of taxable payroll, according to the Social Security actuaries (see Table 1 ). Using the CPI-E beginning in 2016 would increase the deficit by 0.38%, according to the Social Security actuaries. Setting the COLA equal to the C-CPI-U for benefits paid in 2016 and later would reduce spending by $116 billion from FY2016 through FY2024, according to CBO. (CBO assumes that the C-CPI-U will grow 0.25 percentage points slower than the CPI-W.) Budget estimates for using the CPI-E are not available, but under the assumption that the CPI-E will grow 0.2 percentage points faster than the CPI-W, basing the COLA on it would increase Social Security outlays by about $93 billion over the same period ($116 billion x (0.2/0.25)=$93 billion). The President's 2014 budget proposed basing the Social Security COLA on the C-CPI-U, but it would also shelter older beneficiaries from the full effect of that change. That proposal was not included in either of the two subsequent proposed budgets. In 2010, similar proposals were made by the National Commission on Fiscal Responsibility and Reform (chaired by former Senator Alan Simpson and Erskine Bowles, hereinafter the "Fiscal Commission") and the Bipartisan Policy Center (chaired by former Senator Pete Domenici and Alice Rivlin). The President's 2014 Budget proposal included a separate provision that would in isolation increase benefits for older beneficiaries. The increase would begin at the age of 76 for retired workers and in the 15 th year of benefit eligibility for disabled workers. The increase would be phased in over 10 years, so it would increase benefits for 85-year-olds by 5% of the average retiree benefit. Because everyone would have the same increase, benefits would increase by more than 5% for people with lower benefits and by less for those with higher benefits. A second benefit increase would apply beginning at the age of 95, although that would affect relatively few people; less than 10% of people aged 62 live until 95. On net, people with the lowest benefits would experience a slight increase in benefits at some ages, because that provision would more than offset the expected effects of the lower COLA. The Fiscal Commission proposed a similar measure; their "20-year benefit bump up" would increase benefits by 5% of the national average benefit for persons who have been eligible for benefits for 20 years (eligibility is defined as a determination of disability, or the earliest eligibility age for retirement benefits, which would rise gradually from the age of 62 to 64 under the commission's proposal). The enhancement would be phased in over the five years from the 20 th through 24 th years after eligibility, in increments of 1% per year. The total 5% increase would continue to apply in all subsequent years of benefit receipt. Both the Fiscal Commission and the Bipartisan Policy Center also include measures that would increase initial benefits for people with lower lifetime earnings. COLAs need not be linked directly to any measure of inflation. Another option would be to have COLAs be greater than inflation, for example by linking them to wage growth, which is on average higher than price inflation. Currently, initial retirement benefits, which workers can claim beginning at age 62, are linked to wage growth through the age of 60. Because COLAs are linked to prices, retirees do not share in any of the increase in the purchasing power of wages that occurs after they are 60 years old. In isolation, such a change would increase Social Security spending, which would ultimately have to be offset either by an increase in taxes or a reduction in initial benefits. Under current law, all beneficiaries receive the same COLA (i.e., the percentage increase), but some proposals would means-test COLAs. People with more income or higher benefit levels would receive a lower COLA than people with lower income or benefits. Other Social Security Provisions Affected by the Social Security COLA Computation The Social Security COLA affects other provisions of the Social Security program. By law, if there is no change over the relevant measuring period in the CPI-W, and consequently no COLA, there can be no change in the following program parameters: The taxable wage base, which is the amount of covered wages subject to the Social Security payroll tax. The taxable wage base is $118,500 in 2015. Exempt wage and salary amounts under the retirement earnings test, which reduces the monthly benefit of Social Security beneficiaries who are below the full retirement age and have earnings that exceed an annual threshold. The exempt amounts are $15,720 for workers under full retirement age in 2015 and $41,880 for workers who reach their full retirement age in 2015. Substantial gainful activity (SGA) amounts for blind individuals who receive Social Security disability benefits. The threshold for these individuals is $1,820 in 2015. (The SGA amount for nonblind individuals may increase even when there is no COLA.) These program elements are adjusted annually based on the increase in the national average wage index only if there is a COLA. As a result, these program elements remained at their 2009 levels in 2010 and 2011, but they were adjusted upwards in subsequent years, when COLAs were paid. Likewise, these program elements will remain at their 2015 levels in January 2016. Other Programs Affected by the Social Security COLA Computation Beneficiaries of other programs are also affected by the absence of a Social Security COLA, including low-income elderly and disabled persons, veterans, and federal civil service annuitants. As a result, beneficiaries of the programs listed below did not receive COLAs in January 2010 and January 2011 and will not receive a COLA in 2016. The Social Security COLA triggers an increase in benefits paid under Supplemental Security Income (SSI), Veterans' Pension Benefit Programs, and Railroad Retirement Board (RRB) Programs. The absence of a COLA increase may impact certain Medicare Part B enrollees. Most Medicare Part B enrollees have their Part B premiums withheld from their monthly Social Security benefits. For these individuals, a hold-harmless provision in the Social Security Act (§1839(f)) ensures that their benefits will not decrease as a result of an increase in the Part B premium. In most years, the hold-harmless provision has little impact; however, in a year in which there is a 0% Social Security COLA and a Part B premium increase, such as happened in 2010 and 2011, the hold-harmless provision may apply to a much larger number of people. As a result of a 0% Social Security COLA in 2016, an estimated 70% of Medicare beneficiaries would be protected by this provision in the event of an increase in the Part B premium, and their 2016 premiums would be the same as in 2015. However, about 30% of beneficiaries are not protected by this provision. This includes higher-income enrollees, new Medicare Part B enrollees, individuals who do not receive Social Security benefits, and low-income enrollees whose premiums are paid by Medicaid. To ensure that the Part B program has sufficient income from premiums and general revenue contributions, the premiums paid by those not held harmless may be significantly higher than if the hold harmless provision were not in effect. COLAs under the following programs are not triggered by the Social Security COLA, but they use the same measurement period and formula for computing COLAs as the Social Security program: Civil Service Retirement System (CSRS) and Military Retirement System. The Federal Employees Retirement System (FERS) uses the same measurement period for computing its COLA as the Social Security program, although a modified formula is used to limit the COLA. Benefits paid to disabled veterans and to survivors of certain service members and veterans under the following programs are not automatically indexed for inflation. However, Congress enacts legislation each year to provide a COLA equal to the Social Security COLA for Veterans' Disability Compensation and Dependency and Indemnity Compensation (DIC) for Survivors.
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Monthly Social Security payments for retired workers, disabled workers, and all other beneficiaries are generally increased annually by a cost-of-living adjustment (COLA), which is based on growth in the Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W), a measure of inflation calculated by the Bureau of Labor Statistics (BLS). Several proposals would base the COLA on other measures of inflation produced by the BLS. Some would set the Social Security COLA equal to growth in the Chained CPI for All Urban Consumers (C-CPI-U), which is projected to reduce Social Security COLAs. Other proposals would use a measure of inflation experienced by older consumers, which is projected to increase benefits. Proponents of using the C-CPI-U have included the 2010 National Commission on Fiscal Responsibility and Reform (chaired by former Senator Alan Simpson and Erskine Bowles) and the Bipartisan Policy Center's 2010 Debt Reduction Task Force (chaired by former Senator Pete Domenici and Alice Rivlin). The President's 2014 budget (but not subsequent budgets) proposed using the C-CPI-U to compute COLAs for Social Security and in some other federal spending programs; it also proposed indexing the tax code to the C-CPI-U, which would increase federal revenues. Proponents of basing the COLA on the C-CPI-U argue that it is a more accurate measure of changes in the cost of living because it more fully accounts for how consumers adjust their purchases as relative prices of various items change and, unlike the traditional CPI, does not have a statistical bias that increases measured inflation. Using the C-CPI-U to compute COLAs is projected to reduce overall Social Security outlays by the government, because the C-CPI-U tends to grow more slowly than does the CPI-W, which in turn would result in lower Social Security COLAs. Other proposals would link the Social Security COLA to a measure of inflation that is based on purchasing patterns of the elderly, such as the BLS's Experimental Consumer Price Index for Americans Aged 62 and Older (CPI-E). The CPI-E grows faster than the CPI-W, on average, because a larger portion of spending by the elderly goes toward health care expenditures and other items whose prices tend to rise more rapidly. As a result, switching to such a measure is projected to result in larger COLAs and higher Social Security benefits. This report explains how the Social Security COLA is computed under current law and explains some criticisms of using the CPI-W to compute COLAs. It discusses two alternative measures of inflation, the C-CPI-U and the CPI-E. The report then explains how using those alternative measures would affect different groups and how it would affect Social Security's finances. It concludes with a review of key recent proposals to change COLA computations and other possible changes to the COLA.
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The United States has a strong economic interest in ensuring energy security, bolstering exports, and reducing barriers to U.S. trade and investment. The United States also has a national security and an economic interest in ensuring that Mexico, a key ally and top trade partner with which the United States shares a nearly 2,000 mile border, is economically vibrant and politically stable. U.S.-Mexico energy trade and cooperation plays an important role in achieving those goals. Energy cooperation has become a priority of bilateral economic cooperation under the U.S.-Mexico High Level Economic Dialogue as well as a focus of trilateral research, planning, and coordination among the energy secretaries of the United States, Canada, and Mexico. U.S. policymakers are closely monitoring the implementation of the December 2013 constitutional reforms and August 2014 implementing laws that, among other things, allow Mexico's Petroleos Mexicanos (Pemex) to partner with international companies and other industry entrants to boost Mexican production. Hailed by many analysts as the most significant economic reform undertaken by Mexico since its entrance into the North American Free Trade Agreement (NAFTA) in 1994, the energy reforms are expected to boost investment, growth, and eventually oil and gas production in the country. The reforms also opened Mexico's electricity sector to private generators, although that is not addressed in this report. If power sector reforms can help reduce Mexico's high electricity costs, then Mexico's manufacturing sector—a dynamic sector that is highly integrated with U.S. industry—should become more competitive. There is a danger, however, that the Mexican government may have oversold the benefits of the reforms. Investors initially appeared to have maintained interest in Mexico's energy sector despite declines in oil prices, but the results of Mexico's first round of public bidding announced in July 2015 proved disappointing. At a House hearing held on July 23, 2015, witnesses cited the limited size and production potential of the blocks offered, the high minimum bid required, and investors' concerns about corruption and insecurity as possible reasons for the lack of interest in the tender. Mexico has sought to assuage those concerns prior to the September 30 bidding round that will include nine large shallow-water production blocks. This report provides an overview of Pemex and the content and prospects for Mexico's energy reforms, before discussing specific issues facing Mexico's oil and gas industry. It then examines the U.S.-Mexico energy relationship through the lenses of trade and energy cooperation. It concludes by suggesting several oversight issues for Congress related to what the enactment of energy reform might portend for Mexico's economic development, the U.S. energy matrix, and bilateral or North American energy cooperation. Foreign investment in Mexico's oil industry has had a tumultuous history. After oil was discovered in Mexico at the turn of the 20 th century, foreign investors—primarily from Britain and the United States—played a significant role in helping the country become the world's second-largest oil producer by the early 1920s. However, political unrest during and after Mexico's bloody revolution (1910-1920) and the country's 1917 constitution, which established national ownership of all hydrocarbons resources, caused investment in Mexico's oil and natural gas sectors to gradually decline. By the 1930s, reduced foreign investment had resulted in dramatic declines in production levels, and fraught relations between U.S. oil companies and successive post-revolutionary presidents had damaged U.S.-Mexican relations. Tensions culminated in President Lázaro Cárdenas' historic 1938 decision to abandon efforts to mediate a bitter labor dispute between Mexican oil workers and foreign companies and instead follow through on his threat to expropriate all U.S. and other foreign oil assets in Mexico. Upon its creation in 1938, Pemex became a symbol of national pride and a rallying point around which Cárdenas and what became the Institutional Revolutionary Party (PRI)—the party of President Enrique Peña Nieto—united a disparate Mexican society against foreign intervention. Oil remains deeply tied to Mexican nationalism. Nevertheless, Pemex continued to pursue service contracts with some U.S. oil companies until the practice was definitively outlawed by a 1958 regulatory law implementing Article 27 of the constitution. From then on, Pemex retained a monopoly over Mexico's oil and natural gas sector and the Mexican Finance Ministry kept tight control over the company's finances and management. In 2013, 75 years after its founding, Pemex found itself facing significant challenges. Pemex had its heyday in the late 1970s following the discovery of the huge shallow water Cantarell oil field, but the company's long-term performance had been hindered by a number of factors. For years, Pemex sustained itself on the revenue produced from its relatively easy-to-exploit shallow water fields without investing the capital necessary to replace those reserves with new fields or even maintain its infrastructure. Pemex had a high percentage of losses, low worker productivity, and facilities that are in significant need of repair; 37 people were killed in January 2013 after an explosion occurred at one of the company's offices in Mexico City. In part because of the Mexican government's heavy tax demands, Pemex had operated at a loss since 1998 and significantly increased its debt burden. Until recently, the government had also prevented the company from reinvesting its profits into maintenance and new exploration. Pemex's pension liabilities, negotiated by the company's powerful and, for some observers, corrupt workers union, had become an unsustainable drain on its finances. Each year, Pemex had been losing hundreds of millions of dollars due to criminal groups illegally tapping into its pipelines. Pemex's inability to partner with other companies arguably inhibited it from benefitting from new expertise and techniques, particularly in deep water drilling and hydraulic fracturing (fracking). President Enrique Peña Nieto of the nationalistic PRI assumed the Mexican presidency on December 1, 2012, after 12 years of rule by the conservative National Action Party (PAN). Even though Peña Nieto hailed from the PRI, the party that had nationalized the oil industry and watered down previous PAN-led reform efforts, he campaigned on an economic platform that prioritized allowing Pemex to form joint ventures with private companies. At his inauguration, President Peña Nieto announced a reformist agenda aimed at bolstering Mexico's competitiveness that included energy sector reform. In order to implement his agenda, President Peña Nieto and leaders of the PRI concluded a "Pact for Mexico" agreement with the PAN and the leftist Party of the Democratic Revolution (PRD) that facilitated the passage of financial, education, telecommunications, and fiscal reforms. Many of those reforms required constitutional changes. As with the other constitutional reforms enacted in 2013, the energy reforms that Peña Nieto proposed in August of that year required a two-thirds vote in the Mexican Congress and approval by a majority of the country's 32 state legislatures. As discussed below, a PRI-PAN alliance enabled the December 2013 approval of constitutional reforms on energy, but led the PRD to leave the Pact for Mexico. The Peña Nieto Administration's August 2013 energy reform proposal would have removed hydrocarbons from the list of strategic sectors that can only be developed by the government and allowed Pemex to form "profit-sharing" partnerships with international companies in exploration and production. The reform would also have allowed Pemex to sign agreements with private companies for transporting oil and gas, refining, and producing petrochemicals. In secondary legislation, the President pledged to introduce reforms to give the company budget autonomy, improve its transparency, and change its fiscal structure, among other measures. The PAN put forward deeper reforms than the PRI that would permit private concessions in upstream and downstream operations and production-sharing agreements between Pemex and private companies. Former PAN President Felipe Calderón tried to enact far-reaching energy reforms in 2008, but his proposal was watered down by the PRI-led Congress. The PAN also sought to establish a strong regulatory body and a sovereign wealth fund to support social needs. Some PAN legislators reportedly conditioned their support for energy reforms on the PRI backing political reforms, which were also approved in December 2013. The PRD vigorously opposed allowing private involvement in Pemex. Instead the PRD proposal focused on reforming the company while simultaneously granting it greater budget autonomy and a less onerous tax burden. Past and present PRD party leaders joined forces to oppose the PRI and PAN versions of energy reform. In the end, the reforms approved by the Mexican Congress and a majority of state legislatures and then signed into law by President Peña Nieto on December 20, 2013, bore most in common with the PAN proposal, but contain elements of all three parties' energy reform propositions. Key elements of the reforms include Maintaining state ownership of subsoil hydrocarbons resources, but allowing companies to take ownership of those resources once they are extracted and to book reserves for accounting purposes; Creating four types of contracts for exploration and production: service contracts (companies are paid for activities done on behalf of the state), profit-sharing contracts, production sharing contracts, and licenses (enabling a company to obtain ownership of the oil or gas at the wellhead after it has paid taxes); Opening refining, transport, storage, natural gas processing, and petrochemicals sectors to private investment; Transforming Pemex into a productive state enterprise with an autonomous budget and a board of directors that does not include union representatives; Strengthening four federal entities with regulatory roles in the hydrocarbons industry (the Ministries of Energy and Finance, the National Hydrocarbons Commission or CNH, and the Energy Regulatory Commission) and creating a National Agency for Industrial Safety and Environmental Protection; and Establishing a sovereign wealth fund, the Mexican Petroleum Fund for Stabilization and Development, to be managed by the Central Bank. (See Figure 1 below.) While the constitutional reforms outlined the broad contours of Mexico's oil and gas reform, many details were left to be defined in secondary laws needed to implement those reforms. Those laws had to pass Congress by a simple majority and technically had to be enacted within 120 days of the signing of the energy reforms (December 20, 2013). However, due to a variety of factors, including the PAN's internal elections held in May 2014, the Mexican Congress did not consider the energy laws until a special section convened in July. The Senate and Chamber of Deputies debated and made minor modifications to the Peña Nieto Administration's original proposals that were then approved with broad support from the PRI, PAN, and smaller parties. Key provisions dealing with the hydrocarbons sector not mentioned above include Pemex: is more independent of the state, but must adopt internal reforms; is to pay a tax rate of roughly 65% (rather than 79% now); and is permitted to keep some of its existing fields through a "Round Zero" process as deemed appropriate by the Secretariat of Energy; Pemex's monopoly on retail gasoline and diesel sales ends in 2016; Companies will pay royalties and taxes varying with the price of oil; Companies must respect national content requirements of 25% in 2015, rising to 35% in 2025 (excluding deep water activities); Companies may not expropriate land from communities for exploration and development, but rather temporarily occupy land and compensate its owners; and, The National Hydrocarbons Commission (CNH) is strengthened and established as a constitutionally coordinated entity to gather and manage information on the energy sector; issue regulations and monitor compliance; and manage the bidding rounds, award contracts, and supervise those contracts. The institutions in charge of Mexico's hydrocarbon industry now include Ministry of Energy (SENER): develops Mexico's upstream policy; determines areas to be made available and the schedule for public bidding; chooses which of the contract models to apply to which contract; and approves the non-fiscal terms of the contract. Ministry of Finance (SHCP): determines the fiscal terms to apply to each contract and participates in audits. National Hydrocarbons Commission (CNH): interfaces with Pemex and private companies, conducts and manages contracts, and oversees the industry. Energy Regulatory Commission (CRE): grant permits for transportation, storage, distribution, compression, liquefaction, decompression, regasification, marketing, and sale of crude oil, oil products, and natural gas. National Agency for Industrial Safety and Environmental Protection (new) : regulates environmental and safety concerns. National Natural Gas Control Center (CENAGAS): manages system for gas distribution and storage. On August 13, 2014, the Mexican government announced the results of Round Zero a month earlier than had been required by the legislation. The Secretariat of Energy awarded Pemex 83% of Mexico's probable reserves and 21% of its prospective reserves. Pemex had requested to retain 31% of the country's prospective reserves, but its limited capacity to explore and produce in deep water and unconventional areas may be why it was not awarded that large a share. Even though Round Zero did not open up new fields for private companies to bid on, it did increase the opportunities for private involvement in exploration and production in Mexico. Pemex is in the process of changing some existing service contracts it has with oil companies (as allowed under the 2008 reforms) into profit-sharing contracts, as well as seeking new partners to help it develop some of the other probable and prospective fields. New companies interested in investing in Mexico may first seek to partner with Pemex before submitting independent bids. In the past year, Pemex has been undergoing restructuring; all of the regulatory agencies empowered or created by the energy reforms have begun hiring and training their staffs; regulations have been released; and the priorities for the Mexican Petroleum Fund have been defined. U.S. companies are closely watching the degree to which Mexico establishes sound environmental and safety standards, recruits qualified individuals to staff regulatory agencies, fosters transparency, and conducts fair and transparent bidding processes. These efforts have arguably been made more difficult in recent months due to the fact that Mexico's 2015 budget—including funding for those energy-related entities—has been cut by some $8 billion due to declining oil prices (and therefore declining government revenue). On December 14, 2014, the Mexican government announced the terms under which companies already incorporated in the country could bid on production-sharing contracts to explore 14 shallow-water fields of prospective light crude in the Gulf of Mexico. The Mexican government has maintained that the fields would be profitable even if oil prices were to fall below $50 per barrel; average production costs for Pemex hover around $22/barrel. On July 15, 2015, Mexico's Energy Ministry announced the bidding results. The results have been deemed disappointing by energy analysts, as only 2 of the 14 blocks available were awarded. While analysts concur that there is still interest in Mexico's remaining "round one" offerings even though oil prices are low, they predict that the government will have to offer more competitive terms in order to garner greater interest. Foreign investment is particularly needed for exploration as Pemex's proposed budget for 2016 is being cut by some 20%. Prior to the upcoming September 30 bidding round for nine large shallow-water production blocks, the government lowered the fees required to bid, announced the terms to be offered, and guaranteed companies access to arbitration should disagreements with the government arise, among other modifications. Mexico is the world's 10 th -largest producer of oil and holds approximately 11.1 billion barrels of oil reserves—the 18 th largest in the world. Mexico may also have the 8 th -largest tight oil resources globally, about another 13 billion barrels. With these reserves, Mexico has the potential to halt its decade-long decline in oil production. Mexico's oil production declined by some 20% from 2005 through 2009; production has fallen by roughly 1% per year since that time (see Figure 2 ) due, in part, to aging and inefficient infrastructure (see Figure 3 ). Nevertheless, Mexico lags only behind Russia, the United States, China, and Canada as an important non-OPEC oil producer. Most of Mexico's production (75%) is found offshore in the shallow waters of the Bay of Campeche, which is part of the Gulf of Mexico, and concentrated in two fields—Ku-Maloob-Zaap (KMZ) and Cantarell. KMZ production has been on the rise since 2006, reaching almost 864,000 barrels per day (b/d) at the end of 2013, and has replaced part of Cantarell's decline. Cantarell was once one of the largest producing fields in the world, but started having pressure problems in the mid-1990s. Efforts to reverse the decreasing production were successful for a while and the field reached its peak in 2004 at 2.1 million b/d (63% of Mexico's production). By 2013, Cantarell produced only about 440,000 b/d (17% of Mexico's production). The U.S. Energy Information Administration (EIA) has estimated that the recently enacted energy reforms could boost Mexico's long-term oil production potential to 3.7 million b/d by 2040 from the 2.9 million b/d produced in 2013. That estimate is 75% higher than the EIA's 2013 forecast for Mexico's long-term oil production that was issued prior to the enactment of energy reforms. There may also be significant deep water resources in the Gulf of Mexico yet to be discovered. As can be seen below in Figure 4 , Mexico has undertaken very little activity in its portion of the Gulf of Mexico, particularly compared to the United States, in part because Mexico does not yet have the technical capacity to effectively explore or produce its deep water areas. This is one of the reasons that international companies, particularly those with deep water expertise, are excited about the reforms in Mexico. Additionally, the U.S.-Mexico Transboundary Agreement (see below) may play an important role in raising Mexico's standards of operation in deep water. Mexico's natural gas production capacity is higher than in 2000, but has not been able to keep up with demand (see Figure 5 ), which increased about 123% between 2000 and 2014. Most of Mexico's natural gas consumption supports its oil operations and national electricity generation. Mexico's proven gas reserves are on the decline due to underinvestment in exploration. Production has also begun to decline in recent years as price differentials have made it more profitable for Pemex to produce oil than gas. And, although Mexico may have significant unconventional natural gas resources, it is further behind in developing these resources than other countries, such as Canada. Mexico's energy reforms seek to attract private investment in exploration and production of both conventional and unconventional natural gas resources, but also to accelerate investment in much-needed infrastructure for storage, transportation, and distribution. As a consequence of demand rising faster than production, Mexico's imports of natural gas have also been increasing, accounting for about 35% of consumption today compared to less than 10% in 2000. In 2000, Mexico imported 30% of U.S. natural gas exports, which accounted for 100% of Mexico's natural gas imports. In 2006, Mexico started importing liquefied natural gas (LNG) at very high costs from Qatar, Nigeria, and Peru to help meet its growing demand for gas. Mexico has three LNG import terminals, two on the Pacific side and one on the Atlantic. As a free trade partner, exports of U.S. natural gas to Mexico are assumed in the public interest by U.S. statute and permitted without delay, which has spurred U.S. natural gas exports to Mexico. In 2014, U.S. natural gas exports accounted for approximately 69% of Mexican natural gas imports, and 24% of its natural gas consumption. Between 2008 and 2013, U.S. pipelines to Mexico doubled their capacity. Current U.S. export capacity to Mexico is 4.9 billion cubic feet (bcf) per day. By the end of 2016, that capacity should reach 8.4 bcf/d. It would appear that for the immediate future Mexico will likely remain dependent on U.S. supplies of natural gas to meet its growing demand. One of the areas gathering interest with the opening of Mexico's oil and natural gas industry has been shale development. The EIA has assessed Mexico's shale gas resources to be significant (the sixth highest globally). The proximity of some formations in northern Mexico to U.S. developments makes them attractive to some U.S. companies. As an example, the Eagle Ford basin in Texas, one of the fastest growing shale producing areas in the United States, may extend down into Mexico. Mexico, through Pemex, has already started exploring some of its unconventional formations. A limited number of test wells have been drilled, but Pemex has ambitious plans for scaling up development and production over the next 10 years. However, Mexico will need to implement reforms to attract outside investment to strengthen regulatory and environmental protection measures; expand pipelines, roads, and other infrastructure; address water management issues; and deal with security concerns. Some of the states in northeastern Mexico where shale formations are located have experienced significant violence in recent years, possibly deterring additional business opportunities. The impact of government efforts to quell that violence and criminality in those states has been limited. Potential disputes with individuals and communities over access to land for exploration and development, as well as opposition to fracking in some areas, could also deter would-be investors. The United States has already been working with Mexico in some of the more technical areas such as resource assessment, environmental protection, and regulatory policies. Although Mexico is a large exporter of crude oil, it is a net importer of refined petroleum products, such as gasoline and diesel fuel. Mexico does not have enough refining capacity of its own to meet its domestic demand for refined products, nor has it made the investment to process heavy crudes like its Maya crude. Mexico has six refineries with a total capacity of 1.54 million barrels per day, but in recent years has operated below capacity because of operating mishaps. As in many other countries throughout Latin America, Mexico's refineries are in need of major repairs and upgrades and often operate at below their stated capacity. Mishaps and other losses are expected to result in a $7.7 billion loss for the company in 2013. Mexico and the United States already have a close relationship in the refining sector. Much of the U.S. Gulf Coast refining capacity is designed to process heavy crudes, which require more sophisticated and expensive technologies than Mexican refineries currently possess. Mexico exports its heavy crude to U.S. refineries on the Gulf Coast, which then sends some of the refined products back to Mexico. Pemex, which operates all of the refineries in Mexico, also owns 50% of a refinery in Texas. The refining relationship between Mexico and the United States could potentially be expanded even further as the reforms fully open up Mexico's downstream (marketing and refining) hydrocarbons market to international companies. The bilateral economic relationship with Mexico is of key interest to the United States because of Mexico's proximity, the high volume of trade with Mexico, and the strong economic ties between the two countries. The United States is, by far, Mexico's leading partner in merchandise trade, while Mexico is the United States' third-largest trade partner in total trade after China and Canada. Mexico is the United States' second-largest export market after Canada and ranks third as a supplier of U.S. imports. Since NAFTA took effect in 1994, the United States and Mexico have become more economically integrated with strong trade and supply chain linkages. U.S. exports to Mexico increased rapidly since NAFTA, increasing from $41.6 billion in 1993 to $240.3 billion in 2014, an increase of 478%. U.S. imports from Mexico increased from $39.9 billion in 1993 to $294.2 billion in 2014, an increase of 637%. In most sectors, NAFTA removed significant trade and investment barriers, ensured basic protections for NAFTA investors, and provided a mechanism for the settlement of disputes between investors and a NAFTA country. The agreement, however, included explicit country-specific exceptions and reservations. Under Chapter 6 of NAFTA, the Mexican government reserved to itself strategic activities, including investment and provisions in such activities, related to the exploration and exploitation of crude oil and natural gas. Despite these exclusions from NAFTA, energy remains a central component of U.S.-Mexico trade, as discussed below. Mexico has been trading oil and natural gas with the United States since the turn of the last century. It is typically among the top three exporters of oil to the United States. Mexico's crude oil exports to the United States increased steadily in the 1980s and the 1990s, reaching a peak in 2004 of 1.6 million b/d. Since 2006, U.S. crude oil imports from Mexico have generally declined, reflecting Mexico's drop in production and rising internal demand. In 2014, the United States imported 842,000 b/d of crude oil from Mexico, behind Canada and Saudi Arabia. As shown in Table 1 , Canada accounted for 34% of the dollar value of U.S. crude oil imports in 2014, followed by Saudi Arabia (18% of the total), and Mexico (11% of the total). The United States is the destination for approximately 71% of Mexico's oil exports, which arrive via tanker. Although Mexico has an extensive pipeline network that connects major production centers with domestic refineries and export terminals, it does not have any international oil pipeline connections. Exports leave the country via tanker from three Gulf Coast export terminals. The majority of Mexico's crude oil exports are of the heavy Maya blend (approximately 82% of exports), while the lighter crude oil produced offshore is mostly retained for domestic consumption. Most of Mexico's crude oil exports will likely continue to be exported to the United States because of its close proximity and also because the U.S. Gulf Coast possesses the sophisticated refineries necessary to process the heavier Maya crude oil. The leading U.S. import item from Mexico is crude petroleum oil. The value of crude oil imports from Mexico in 2014 totaled $27.7 billion, nearly 30% higher than the value of automobile imports, the second leading import item. As shown in Figure 6 , crude petroleum oil imports from Mexico have been considerably higher than other top imports from Mexico over the past 10 years. The drop in oil prices, however, caused the value of Mexican oil imports in 2014 to reach its lowest level since 2006, declining from a high of $39.6 billion in 2011 to $31.9 billion in 2013 and $27.7 billion in 2014. Although Mexico is one of the world's largest crude oil exporters, it is a net importer of refined petroleum products. In 2012, Mexico's imports of refined petroleum products from all countries totaled $29.6 billion. Mexico was the destination for 44% of U.S. exports of motor gasoline in 2013, although imports from the United States have declined since 2011. The United States has been Mexico's largest supplier of natural gas and Mexico continues to be a growing market for additional U.S. natural gas exports. As previously mentioned, Mexico's natural gas production has failed to keep pace with rising domestic demand, making U.S. gas exports an important source of energy. The value of Mexico's natural gas imports increased from $995.7 million in 2007 to $2.5 billion in 2013. Mexico imported a total of 779 billion cubic feet (Bcf) of natural gas in 2012, out of which 620 Bcf came from the United States. The United States imports a very small amount of natural gas from Mexico. The surplus in natural gas trade with Mexico is expected to widen as recent supply and demand trends in both countries are expected to continue. U.S.-Mexico trade in natural gas is done exclusively via pipeline. In addition to the burgeoning energy trade between the United States and Mexico, energy cooperation has gradually risen to the top of the U.S.-Mexican political agenda as well. The United States and Mexico have been working on geothermal energy projects since the 1970s, but the possibility of expanding joint efforts to produce renewable energy sources, as well as conventional and unconventional hydrocarbons resources, has also entered the bilateral agenda. On April 16, 2009, President Obama and then-Mexican President Calderón announced the Bilateral Framework on Clean Energy and Climate Change to jointly develop clean energy sources and encourage investment in climate-friendly technologies. Among others, its goals include enhancing renewable energy, combating climate change, and strengthening the reliability of cross-border electricity grids. Four bilateral meetings have thus far been held to advance the Framework. Since Mexico remains a top U.S. crude oil supplier and many of its untapped resources lie in deep waters in the Gulf of Mexico and in shale formations abutting the U.S. border, the countries want to ensure that Pemex (or other companies) develop those resources in an environmentally responsible way. The U.S. and Mexican governments share a mutual interest in developing renewable energy sources, particularly those capable of serving rapidly growing population centers along the U.S.-Mexico border. As part of that effort, since 2011 the North American Development Bank has provided loans worth at least $677 million for projects related to wind and solar energy. The U.S. Agency for International Development (USAID) and Mexico have also expanded cooperation on environmental issues with the Mexico Global Climate Change (GCC) Program , a five-year, approximately $70 million program. The program seeks to help Mexico reduce emissions from deforestation, implement a low emissions development plan, and create a system for monitoring greenhouse gas emissions. Although Mexico is trying to diversify its energy sources, it, like the United States, is likely to continue relying on oil and natural gas from traditional and unconventional (i.e., shale) sources. In the wake of the 2010 Deepwater Horizon spill in the Gulf of Mexico and amid concerns about the impact of hydraulic fracturing of shale oil in the United States, both governments have an interest in ensuring that hydrocarbons resources are developed in an environmentally responsible way. For example, as Pemex begins to partner with U.S. companies in the Gulf, it could benefit from participation in the Marine Well Containment Company that was created by U.S. companies to deal with spills. Should Pemex pursue contracts with U.S. companies who have years of expertise in hydraulic fracturing, they could complement the environmental and regulatory advice that Mexico is already receiving from the U.S. Departments of State and the Interior. In 2012, the United States and Mexico signed an agreement known as the U.S.-Mexico Transboundary Hydrocarbons Agreement (the Agreement). The Agreement could mark the start of an energy partnership in an area of the Gulf of Mexico that the U.S. Department of the Interior estimates to contain as much as 172 million barrels of oil and 304 billion cubic feet of natural gas. Although it concerns relatively little oil and natural gas, a main purpose of the partnership is to lift a moratorium on development in that region that had been in effect since 2000. In addition, the Agreement gives Pemex and U.S. companies options for jointly developing oil and gas reservoirs, referred to as "transboundary resources," that exist in areas straddling the marine border of both countries. Prior to the expected expiration date for the moratorium, the Mexican and U.S. Congresses reviewed and accepted the Agreement. Congress enacted legislation approving the Agreement on December 18, 2013 ( H.J.Res 59 ). Now that the United States and Mexico have approved the Agreement, the moratorium is considered moot. The Department of the Interior's Bureau of Ocean Energy Management awarded the first leases subject to the Agreement in May 2014. Mexico's long-term economic outlook depends largely on the energy sector. Economic growth in Mexico has been sluggish for several years, expanding just 2.4% in 2014 and 1.4% in 2013. Growth is forecast to drop slightly in 2015 to 2.1%. Since the Mexican government's reliance on oil income is very high, any decline in oil revenue has fiscal and economic implications. The decline in oil production combined with the drop in oil prices has resulted in lower export earnings, prompting foreign-exchange market volatility and causing the peso to depreciate. Energy reform is the centerpiece of the President Peña Nieto administration's attempts to overhaul the economy, attract greater foreign investment, and generate more jobs. Numerous observers and government officials have laid out high expectations for the potential of Mexico's energy reforms to improve economic conditions. One study suggests that the reform "offers the prospect of enormous wealth generation over the next five years." According to some industry experts, the importance of energy reform in Mexico cannot be understated because of the additional opportunities for unconventional or shale oil and gas production. While it is difficult to predict how increasing private participation in Mexico's oil and gas sectors may affect the country's economic development, skeptics see reason to doubt the government's positive predictions. Some argue that multinational companies and large Mexican conglomerates stand more to gain from the energy reform than the Mexican people. Other critics question the government's claim that the reforms will create thousands of jobs, and, maintain that because Pemex is a bloated company with too many employees, it would likely shed workers as a result of the reform. Others are concerned that the oil revenue will be mishandled by corrupt Pemex or government officials rather than invested in strategic ways that will benefit the country as a whole. The opening of Mexico's oil and natural gas sector to foreign investors poses significant changes in the U.S.-Mexico energy relationship that may have advantages and disadvantages for both sides. Reversing Mexico's production decline would add more oil to the global market and enhance U.S. energy security. Having a neighbor who is a growing oil producer to the south, as the United States has to the north with Canada, could provide a reliable supplier for the long term and it would also contribute to North American energy independence. Some predict that the region could produce surpluses of oil and gas in the coming decades, as well as expanded renewable energy: wind, solar, biofuels, and hydro-power. U.S. companies that are able to enter the Mexican upstream sector are likely to benefit from the opening of Mexican resources to foreign investment, depending upon the terms of the contracts that are offered. Significant opportunities for infrastructure development, oil services companies, and downstream industries are also likely to open up. This would be true for both the oil and natural gas sectors, but U.S. natural gas producers who export to Mexico might, over the long term, potentially lose some of their market. U.S. crude oil exports generally are prohibited under U.S. law. The Energy Policy and Conservation Act of 1975 ( P.L. 94-163 , EPCA) directs the President to restrict the export of crude oil. There are certain cases where crude oil exports are permitted in statute, including if it is shipped to Canada for use therein, is shipped on the Trans-Alaska Pipeline, is of foreign origin, or is from the Strategic Petroleum Reserve if such export will directly result in import of refined products not otherwise available. Additionally, crude oil export regulations allow for exchanges with adjacent and non-adjacent countries as long as certain criteria are met. EPCA and other statutes permit crude oil exports in circumstances where the President determines that such exports are in the national interest. There have been some efforts to encourage the President to issue a national interest finding that would allow for unlimited crude oil exports from the United States to Mexico, as has been permitted for Canada since 1985. Under current laws and regulations, unlimited oil exports from the United States to Canada are allowed, although an application must be approved for each export transaction. As a result of this exemption, Canada is the primary destination for U.S. crude oil exports, with exports exceeding 570,000 bbl/d in May 2015. The President could make a similar national interest determination for export to Mexico, and, arguably, such a determination would allow crude oil to be traded freely between the countries as economic conditions justified. Congressional debate about potential changes to crude oil export restrictions is ongoing. Numerous economic studies from various government and industry organizations have been published. During the 114 th Congress, there have been numerous hearings held by various House and Senate committees that have explored aspects of U.S. crude oil export policy. Furthermore, at least seven bills have been proposed during the 114 th Congress, in addition to various Senate amendments that have been filed. As of the date of this report, bills have been advanced in the energy committees of both the House and Senate that would allow for unrestricted crude oil exports. S. 2012 , the "Offshore Production and Energizing National Security Act of 2015," was advanced by the Senate Committee on Energy and Natural Resources in July 2015. H.R. 702 , "To Adapt to Changing Crude Oil Market Conditions," was advanced by the House Energy and Commerce Committee in September 2015. Under the Export Administration Act of 1979, the Bureau of Industry and Security (BIS) provides export licenses for crude oil exports under so-called short supply controls. Its licensing decisions are based on the statutory prohibitions and exemptions previously noted. However, it will review other applications to export crude oil on a case-by-case basis to determine whether they are in the national interest and consistent with the EPCA. The BIS crude oil export regulations allow for exchanges with adjacent and non-adjacent foreign states as long as certain criteria are met. It is important to recognize that exchanges with adjacent and non-adjacent foreign states are distinct types of crude oil export transactions, and each has different criteria. Generally, crude oil export licenses for non-adjacent foreign state exchanges are much more difficult to obtain than those for adjacent foreign states. Adjacent foreign state exchanges could be approved based on "convenience and increased efficiency of transportation," terms that are not defined in the regulations. Crude oil exported as part of an adjacent foreign state transaction may not be reexported to another country. In a move that could potentially enhance the efficiency of refinery utilization in both the United States and Mexico, the Mexican government proposed an exchange transaction whereby heavy, sour crude oil from Mexico would be exchanged for light, sweet crude oil from the United States. On January 8, 2015, the chief executive officer of Pemex announced that the company wants to increase Mexico's production of gasoline for domestic use by importing and refining light crude from the United States. U.S. Commerce Secretary Penny Pritzker has confirmed that the United States is engaged in ongoing discussions with Mexican officials over whether to export light crude oil to Mexico. In August 2015, the Department of Commerce Bureau of Industry and Security stated that it "is acting favorably on license applications for the exchange of U.S. crude oil for similar quantities of Mexican crude oil." Details of the approved applications were not disclosed. While some analysts suggest that the approval of oil exchanges with Mexico represents a shift in U.S. policy, as discussed above existing crude oil export regulations provide the opportunity for exchange transactions with adjacent countries. Cross-border natural gas pipelines are authorized by the Federal Energy Regulatory Commission (FERC) in the United States. More than 20 natural gas pipelines linking the United States and Mexico are operating. Their approval by FERC has generally proceeded with little opposition, although concerns about environmental impacts from "induced" gas production in the United States may become a factor in the future. Between 2008 and 2013, U.S. pipelines to Mexico doubled their capacity. Current U.S. export capacity to Mexico is 4.9 billion cubic feet per day (bcf/d). By the end of 2016, that capacity should reach 8.4 bcf/d. Private companies have, for the most part, not complained about the speed of the current pipeline approval process, although they have voiced concern about delays for specific projects. Unlike natural gas pipelines, cross-border oil pipelines require authorization from the U.S. Department of State in the form of a Presidential Permit. Although there are no crude oil pipelines between the United States and Mexico, there are two cross-border pipelines for refined petroleum products. The review and issuance of Presidential Permits by the State Department has become contentious in recent years, as illustrated by the protracted review of the proposed Keystone XL pipeline between the United States and Canada. A number of legislative proposals in the 113 th Congress sought to modify the State Department's oil pipeline permitting authority to encourage pipeline development, but none have been enacted. The House approved a related bill on January 21, 2015 ( H.R. 161 ). As energy moves to the forefront of U.S.-Mexican relations, opportunities may exist for greater bilateral or trilateral (with Canada) energy cooperation. Those advocating a trilateral approach generally highlight the need for regulatory harmonization, regional planning, reduced investment and export restrictions, and strategic investments in new infrastructure. Within the U.S.-Mexico context, analysts have urged the United States to offer more technical assistance to Mexico if it is requested. Another area that could be expanded involves efforts to ensure that hydrocarbons resources are developed without unduly damaging the environment, possibly through collaboration between Mexican entities and U.S. federal or state regulatory entities. In terms of capacity-building, the University of Texas system has recently expanded educational exchanges and training opportunities for Mexicans working in the petroleum sector. Other U.S. universities could also follow suit, potentially with support from the Obama Administration's "100,000 Strong in the Americas" effort to boost educational exchanges. Many others have also urged the United States and Mexico to work together to provide oil and natural gas resources to help reduce expensive energy costs in Central America as well. While the North American Free Trade Agreement (NAFTA) removed significant investment barriers and ensured basic protections for U.S., Canadian, and Mexican investors in other NAFTA countries, it did not open the Mexican energy sector to foreign investment. The recent opening of Mexico's energy sector to foreign investors may have implications for the ongoing trade negotiations for a Trans-Pacific Partnership agreement (TPP). The United States, Mexico, and Canada are all participating in the talks and, while a TPP is not likely to change NAFTA, an agreement may change the rules governing North American investment and trade. During an October 2014 visit to Washington, DC, Mexico's Economic Secretary Ildefonso Guajardo suggested that the TPP talks should reflect the opening of Mexico's energy sector to private investors and include updates in the investment provisions of NAFTA to deter trade and investment disputes among North American investors. Since taking office, President Peña Nieto has shepherded a number of significant constitutional reforms through the fractious Mexican Congress that had eluded the past two PAN Administrations. The most important of those reforms may be the energy reforms promulgated on December 20, 2013, and implemented by secondary laws signed on August 11, 2014, that allow for private participation in Mexico's oil and gas sector in ways not possible since the sector was nationalized in 1938. The recently enacted energy reforms have the potential to boost energy production and improve economic competitiveness in Mexico, but implementing them in a meaningful way may prove difficult. The next six months could prove critical for the success or failure of Mexico's energy reforms. Amid strong opposition from the political left, the Mexican government will have to manage popular expectations about the benefits of the reforms, many of which may not be felt immediately. Pemex will need to restructure its workforce and investment priorities as it seeks to become a productive state enterprise that can compete with other companies. The National Hydrocarbons Commission (CNH) will need to complete the first rounds of public bidding in an efficient and transparent fashion and to offer contracts with terms that are attractive to international companies. At the same time, the executive will need to create strong regulators to oversee the hydrocarbons sector in a time of budget austerity. This report will be updated periodically to inform the U.S. Congress on the implementation of oil and gas reforms in Mexico and to analyze how the reforms may impact Mexico's economic performance, the U.S. oil and natural gas sector, and bilateral energy relations.
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The future of oil and natural gas production in Mexico is of importance for both Mexico's economic growth, as well as for U.S. energy security, a key congressional interest. Mexico is a top trade partner and the third-largest crude oil supplier to the United States. Mexico's state oil company, Petroleos Mexicanos (Pemex) remains an important source of government revenue even as it is struggling to counter declining oil production and reserves. Due to an inability to meet rising demand, Mexico has also significantly increased natural gas imports from the United States. Still, gas shortages have hindered the country's economic performance. On December 20, 2013, Mexican President Enrique Peña Nieto signed historic constitutional reforms related to Mexico's energy sector aimed at reversing oil and gas production declines. On August 11, 2014, secondary laws to implement those reforms officially opened Mexico's oil, natural gas, and power sectors to private investment. As a result, Pemex can now partner with international companies that have the experience and capital required for exploring Mexico's vast deep water and shale resources. Leftist parties and others remain opposed to the reforms. The energy reforms transform Pemex into a "productive state enterprise" with more autonomy and a lower tax burden than before, but make it subject to competition with private investors. They create different types of contracts for private companies interested in investing in Mexico, including production-sharing and licensing; allow companies to post reserves for accounting purposes; establish a sovereign wealth fund; and create new regulators. In December 2014, the Mexican government announced the terms of part one of Round 1, under which shallow-water offshore exploratory blocks available for public bidding would be auctioned. On July 15, 2015, Mexico's Energy Ministry announced that only 2 of the 14 blocks available were awarded to successful bidders. The government has altered the terms of the second round of bidding on September 30, including lowering the amount of upfront investment required by companies to bid and increasing the size of the blocks available, in order to attract more interest. The U.S. Congress has legislative and oversight interests in examining the implications of Mexico's oil and natural gas reforms on U.S. hydrocarbon imports and exports, bilateral trade and investment, and economic conditions in Mexico. In December 2013, Congress approved the U.S.-Mexico Transboundary Hydrocarbons Agreement (P.L. 113-67), which aims to facilitate joint development of oil and natural gas in part of the Gulf of Mexico. The 114th Congress is likely to consider legislative proposals to speed up energy infrastructure development, including cross-border natural gas pipelines, as was approved by the House on January 21, 2015 (H.R. 161). Congress may also consider proposals to revise U.S. crude oil export policy. See also CRS Report R43442, U.S. Crude Oil Export Policy: Background and Considerations, by [author name scrubbed] et al. The opening of Mexico's oil and natural gas sector could expand U.S.-Mexico energy trade and provide opportunities for U.S. companies involved in the hydrocarbons sector, as well as infrastructure and other oil field services. If these reforms accelerate growth and investment in Mexico (as the government has stated), they could also benefit North American competitiveness. Industry analysts maintain that the reforms are generally well-designed, but that the way they are implemented will likely determine their impact. The success of the reforms may also depend on trends in global oil prices. Should oil prices remain at current levels, shale resources and other unconventional fields may not be feasible to develop at this time.
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November 15 - 18, 2009 — President Obama made his first official visit to China. During the visit, President Obama and PRC President Hu Jintao released a Joint Statement on U.S. and PRC interests in the 21 st century. October 5, 2009 —The Dalai Lama arrived in Washington as part of a U.S. visit which will not include a meeting with President Barack Obama. According to the White House, a meeting with the Dalai Lama will be postponed until after the President's November trip to China to meet with PRC President Hu Jintao. October 4, 2009 —PRC Premier Wen Jiabao began a three-day, high-profile "goodwill" visit to North Korea. October 1, 2009 —The PRC celebrated the 60 th anniversary of its founding, with celebrations including a massive military parade showcasing the latest military technology. September 26, 2009 —Beijing announced it would ease restrictions on foreign investments in the culture industry, to include film, publishing, entertainment, online games, and multi-media. The Administration of President Barack Obama has inherited from the George W. Bush Administration a relationship with China that is smoother than in the past, but also has grown significantly more complex, multifaceted, and intertwined. During the Bush Administration, Washington and Beijing cultivated regular high-level visits and exchanges of working level officials, resumed military-to-military relations, cooperated on anti-terror initiatives, and worked closely on the Six Party Talks to restrain and eliminate North Korea's nuclear weapons activities. These and other initiatives of engagement are likely to continue in some fashion under the Obama Administration. In addition, the Obama Administration has indicated that it would like to forge greater cooperation with China on the international financial crisis, global climate change, and a range of security interests. These issues were the points of focus during Secretary of State Hillary Clinton's first official trip to China in February 2009. Despite these new avenues of cooperation, ongoing bilateral issues provide a constant set of challenges for U.S. policymakers. They include difficulties over the status and well-being of Taiwan, ongoing disputes over China's failure to protect U.S. intellectual property rights, China's economic and trade policies, and growing concerns about the quality and safety of exported PRC products. The PRC's more assertive foreign policy and continued military development also have significant long-term implications for U.S. global power and influence and have been of concern to U.S. policymakers. Some U.S. lawmakers have suggested that U.S. policies toward the PRC perhaps should be reassessed in light of these trends. Many U.S. observers have become increasingly concerned about China's growing economic and political reach in the world, often referred to as "China's rise," and what it means for global U.S. economic and political interests. Some in this debate believe China's growing global power and influence is a malign threat that needs to be thwarted; others believe that it is an inevitable phenomenon that needs to be guided and managed. Complicating this debate are the effects of globalization, which have bound together U.S. and PRC interests much more closely than in the 1990s. These extensive inter-linkages make it increasingly difficult for either government to take unilateral actions without inviting far-reaching, unintended consequences that could adversely affect other policy interests. Like the 110 th Congress before it, the 111 th Congress is facing recurring issues involving this debate and what policies and approaches may best serve and protect a broad range of U.S. interests. This policy debate is animated by continuing uncertainty over how China ultimately may choose to wield its rising capabilities. According to one school of thought, China's economic and political rise in the world is inevitable and needs to be accommodated and managed. In this view, as China becomes more economically interdependent with the international community, it will have a greater stake in pursuing stable international economic relationships. China has a vested interest, for instance, in cooperating on ways to address the global economic crisis by helping to craft a new international financial system. Growing wealth in the PRC also is likely to encourage Chinese society to move in directions that will develop a materially better-off, more educated, and cosmopolitan populace. Such a populace, according to this view, is likely to be more conservative and more desirous of avoiding conflict with the United States. Already, say such proponents, these developments have led China's population to press its government for greater political pluralism, transparency, and inclusiveness—key U.S. objectives—and this trend is likely to continue as China's capabilities grow. From this perspective, U.S. policy should seek to work more closely with the PRC, not only to encourage these positive long-term trends, but to seek ways to mutually benefit by cooperating on important global issues such as the international financial system, alternative energy sources, climate change, and medical research. Ultimately, some proponents of this view say, the United States simply will have to make room for the economic and political appetites of the superpower that China is likely to become. Viewing the PRC as a "threat" or attempting to contain it, these proponents say, could produce disastrous policy consequences. In addition to possible military conflict with the PRC, these consequences could include the possible creation of greater Chinese nationalism with a strong anti-American bias, a breakdown in PRC governance, the bolstering of party power and subsequent retrenchment of reforms, and/or an increasingly isolated United States that the international community may see as out of step with global trends. Other proponents of the "inevitability" of China's rise especially stress the extreme competitive challenges of China's growing power. They say these challenges, even if benign, pose potentially huge consequences for U.S. global interests. Beijing officials, say this group, view the world as a state-centered, competitive environment where power is respected, and are determined to use the means at their disposal to increase their nation's wealth, power, and influence in a largely opportunistic fashion. A militarily muscular China with substantial international economic ties will be able to exercise considerable political power that could prompt U.S. friends and allies to make different choices, eroding U.S. influence around the world. These observers charge that the PRC already is exploiting the international financial crisis to strengthen its access to international energy sources and other commodities. The United States, they argue, should develop a comprehensive strategic plan in order to counter China's growing power by strengthening its existing regional alliances and making new ones, expanding overseas investments, sharpening American global competitiveness, and maintaining a robust military presence in Asia and elsewhere as a counterweight to growing PRC power and influence. Others in the American policy debate see malign factors at work in China's growing power. PRC leaders, they argue, may be portraying their growth as a "peaceful rise" with no harmful consequences, but actually they are biding their time, simply conforming to many international norms as a strategy while China is still weak. In reality, these proponents say, Beijing seeks at least to erode and at best to supplant U.S. international power and influence. In conducting their international relations, they maintain, Chinese leaders seek to cause rifts in U.S. alliances, create economic interdependence with U.S. friends, and arm U.S. enemies. Despite the statements of support for the U.S. anti-terrorism campaign, according to this view, the PRC's repeated violations of its non-proliferation commitments actually have contributed to strengthening nations that harbor global terrorists. Furthermore, they maintain that the PRC under its current authoritarian form of government is inherently a threat to U.S. interests, and that the PRC political system needs to change dramatically before the United States has any real hope of reaching a constructive relationship with it. From this perspective, U.S. policy should focus on mechanisms to change the PRC from within while remaining vigilant and attempting to contain PRC foreign policy actions and economic relationships around the world where these threaten U.S. interests. With this broad array of difficult and challenging policy choices in mind, U.S.-China relations today are defined by a comprehensive list of bilateral and multilateral issues. Some of these remain key irritants in the relationship, while others are rooted in significant inter-dependence and mutual benefit. Likewise, some are characterized by vigorous competition, while others are founded on bilateral and multilateral cooperation. President Barack Obama made his first official state visit to China on November 15-18, 2009. The visit resulted in a U.S.-China Joint Statement discussing the importance of the relationship, highlighting its key accomplishments, and enumerating in what areas the two sides seek further cooperation. These last areas included cooperation on increased educational exchanges; global economic recovery; and climate change, energy, and the environment. U.S. officials described the President's discussions in China as having achieved progress on many issues, and some officials appeared frustrated that the visit did not receive more uniformly positive press coverage. Some human rights activists and Chinese dissidents expressed disappointment that the visit had not met their expectations. They criticized the discussion agenda, for instance, for focusing on economic and financial issues and by-passing human rights issues, Iran's nuclear program, and progress on North Korea. According to one news account, several dissidents in China said they had been detained by police after seeking a meeting with President Obama in Beijing. According to another press account, President Obama did raise human rights issues in his discussions, in particular the case of American geologist Xue Feng who had been detained several years earlier, charged with stealing state secrets, for signing a contract to purchase a commercial geological database. On September 11, 2009, the White House, on the June 2009 recommendation of the International Trade Commission (ITC), imposed increased tariffs on Chinese tires for three years effective September 26, 2009, at rates of 35% in the first year, 30% in the second year, and 25% in the third year. This decision represents a departure from the previous administration of President George W. Bush, which denied import relief in six previous cases of petitions filed under section 421. The petition for import relief was first filed on April 20, 2009, by the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied Industrial and Service Workers International Union. China has requested consultations with the United States under the World Trade Organization's (WTO) Dispute Settlement Understanding. With the continued troubles in the U.S. financial system, the PRC is positioned to play a crucial role in any policy that Congress and the Obama Administration design to address the U.S. economic problems. China has amassed a huge supply of foreign exchange reserves, totaling $1.9 trillion as of December 2008, and the Chinese central government has become an ever more important purchaser of U.S. Treasuries and other U.S. debt. The financial rescue and economic stimulus program thus far enacted—and any further program that may be needed for the U.S. economy—will require a substantial level of new U.S. government borrowing, with China positioned to be a major purchaser of this new U.S. government debt. Some U.S. policymakers have expressed concern that this poses an economic risk to the United States should China's foreign exchange purchase patterns change, and a political risk should China use this position to seek advantages on other bilateral issues. Some are worried that China may be re-thinking its policy on purchasing U.S. Treasuries. In a January 2009 statement in London, PRC Premier Wen Jiabao said, "Whether we will buy more U.S. Treasuries, and if so, how much—we should make that decision according to China's own needs ... " U.S. observers and Members of Congress also have raised concerns that other PRC initiatives, such as the new sovereign wealth fund it established in 2007, signal that PRC officials may be interested in changing their investment strategies. The PRC also is implementing a $586 billion stimulus package for its own slowing economy, ostensibly designed to build major infrastructure projects, which may draw investment away from U.S. Treasuries. The plan has been criticized by some in China who say that its lack of project details or spending safeguards is an invitation for corruption, misuse, and malfeasance. According to one western news account, a group of Party elders has pressed the senior leadership on the need to establish oversight and accountability for the recovery spending program. China's stimulus plans pose other complications for U.S. officials, who have long pushed Beijing to stimulate Chinese domestic consumption, but now have the added complication of needing Chinese capital. The scope of the current financial crisis suggests that global economic decision-making in the future is moving beyond the confines of the smaller "G" groups and into the broader arena of the Group of 20 (G20) countries, where China and other growing economies participate. PRC President Hu Jintao participated in a G20 summit meeting in Washington, DC, on November 15, 2008, held to discuss the financial crisis, and also in the G20 meeting in London on April 2, 2009. (Hu cancelled his plans to attend the G8 meeting in Italy in July 2009 because of unrest in China's Xinjiang-Uighur Autonomous Region.) There are reports of increasing demands in PRC publications that China be a key player in helping to shape a new international financial system. Nevertheless, China's broad approach to global economic policy remains unclear. For years, the PRC government has maintained repressive security measures and policies restricting religious and ethnic practice in the Xinjiang-Uighur Autonomous Region. These are directed primarily against members of a Muslim ethnic minority, the Uighurs. The PRC government has sought to justify such policies by arguing that some Uighur groups seek to establish an independent state in Xinjiang, and that these groups are acting as part of the global anti-terrorism campaign. U.S. officials have warned that the anti-terror campaign should not be used to persecute Uighurs or other minorities with political grievances against Beijing, although the U.S. government appeared to make a concession to Beijing on August 26, 2002, when it announced that it was placing one small group, the East Turkestan Islamic Movement, on the U.S. list of terrorist groups. The most serious Chinese confrontation with its Uighur minority to date occurred over a period of days beginning July 5, 2009, when a group of 1,000 Uighurs reportedly began to demonstrate peacefully in Xinjiang's capital, Urumchi, to protest PRC policies toward Uighurs. Among other things, the protesters were objecting to the way PRC authorities handled a June 2009 incident at a factory in Guangdong Province in which ethnic Han Chinese workers allegedly attacked Uighur workers, killing at least two. Amidst an increasingly heavy police presence, the protests turned violent, resulting ultimately in the reported deaths of 156 people and the injury of 1,000. In the ensuing days, additional incidents were reported that indicated long-simmering ethnic tensions were boiling over, including a reported march by large numbers of armed Han Chinese vigilantes apparently intent on revenge for the initial protests. PRC authorities have reacted aggressively to counter the demonstrations and further unrest. All the protest efforts reportedly have been countered by paramilitary troops and riot police. According to unconfirmed reports, PRC authorities have arrested over a thousand people, imposed curfews, and cut Internet access and other information sources to major parts of Urumchi. Citing the intensity and apparent spread of the protests to other cities such as Kashgar, and Yili, PRC President, Hu Jintao cancelled his plans to attend the G-8 summit in Italy and instead returned to China. At least one U.S. China analyst has found Hu's decision to return to China a worrisome sign about the state of political decision-making, crisis-management abilities, and civilian control of the military in China. The July 2009 protests highlight increasing tensions and resentments between the majority Han Chinese population and its ethnic Uighur and other minorities – tensions which some observers believe the PRC exacerbates by its harsh responses to such expressions of social disaffection. PRC officials see the aspirations of ethnic minorities for greater autonomy to be expressions of outright separatism or even advocacy for independence from China. Consequently, PRC officials impose restrictive policies in Xinjiang at which many Uighurs chafe, including the enforcement of limits on religious practice, emphasis of education instruction in the Chinese language instead of the Uighur language, and perceived greater employment preferences and economic benefit for Han Chinese immigrants over the local Uighur population. Many Han Chinese, however, see Uighurs and other ethnic minorities in China as being given unfair advantages over the ethnic Chinese majority, including affirmative action in determining university placement, provision of housing benefits at remote job sites, and waivers of the "one-child" policy that applies to the majority Chinese population. For some years, U.S. officials in the executive branch and in Congress have voiced both private and public concerns about China's expanding military budget, and other issues potentially involving U.S. national security. U.S. security concerns include the ultimate focus of China's military build-up; lack of PRC military transparency; recurring instances of apparent PRC attempts to gain U.S. military secrets; evidence of improving PRC military and technological prowess; and PRC military and technological assistance to rogue states and other international bad actors. Although the United States and PRC maintain some degree of high-level dialogue on military matters—and in fact resumed deputy-ministerial defense consultations in June 2009 after an 18-month hiatus—this is the aspect of the relationship that is most marked by lack of communication and mistrust of each others' motives. On March 9, 2009, the Pentagon reported that PRC ships and aircraft operating in the South China Sea had been acting in increasingly aggressive ways toward two U.S. Navy ocean surveillance ships operating in the area, the USNS Impeccable and the USNS Victorious. The U.S. vessels reportedly were operating about 75 miles south of Hainan Island, home to the PRC's Yulin Naval Base, where China has been operating new ballistic missile and nuclear attack submarines. According to reports, the PRC ships at one point approached to within 25 feet of the USNS Impeccable, halted abruptly in its path forcing an emergency stop, and dropped pieces of wood in the U.S. ship's path. Some observers were particularly troubled that such a confrontation occurred just a week after military negotiations with the PRC on February 27-28, 2009, that the Under-Secretary of Defense for East Asia, David Sedney, described as the best negotiations in which he had participated. The United States lodged a protest with the PRC government about the harassment, saying the USNS Impeccable ship had been operating in international waters. The Pentagon reported it had dispatched a guided-missile destroyer, the USS Chung-Hoon, to the South China Sea to escort the USNS Impeccable as it continued its surveillance. Under the 1982 U.N. Convention on the Law of the Sea, a country's territorial waters extend 12 nautical miles and its "Exclusive Economic Zone" (EEZ) extends 200 nautical miles from its coast. Under the U.N. Convention, vessels from other countries are allowed free navigation in a country's EEZ, including freedom to fish, lay pipelines and cables, and conduct scientific research. It is within this EEZ that the USNS Impeccable was operating. In the March 2009 incident, PRC officials claimed that as a military vessel, the USNS Impeccable's activities violate the U.N. Convention's EEZ provisions. Appearing before the Senate Armed Services Committee on March 10, 2009, Director of National Intelligence Dennis C. Blair testified that in recent years, the PRC has become " ... more aggressive in asserting claims for the EEZ which are excessive under almost any international code." The March 2009 maritime incidents reflect the increasing potential dangers of China's expanding military operations in areas where U.S. military forces routinely operate. In its annual, congressionally mandated report on China's Military Power (most recently released on March 25, 2009) the Pentagon concluded that the pace and scope of China's military modernization has increased in recent years, and includes "acquisition of advanced foreign weapons, continued high rates of investment in its domestic defense and science and technology industries, and far-reaching organizational and doctrinal reforms ... " In March 2009, the PRC announced that it would increase its military budget during the year by 14.9% over 2008 (to 480.69 billion RMB, or about $70.2 billion), making this the 21 st year of double digit increases in PRC military spending. U.S. military planners and other American military specialists maintain that PRC improvements appear largely focused on a Taiwan contingency and on strategies to "deny access" to the military forces of a third party—most probably the United States—in the event of a conflict over Taiwan. The report maintains that this build-up poses a long-term threat to Taiwan and ultimately to the U.S. military presence in Asia. The report also highlights U.S. concerns about how little is known of the motivations, decision-making processes, or capabilities of the PRC's military. The PRC released its most recent defense white paper, entitled China's National Defense in 2008, on January 20, 2009. ( Appendix B of this CRS report contains a list, legislative authority, and text links for selected mandated U.S. government reports on China, including the report on China's Military Power.) On January 11, 2007, the PRC carried out its first successful anti-satellite (ASAT) test by destroying one of its moribund orbiting weather satellites with a ballistic missile fired from the ground. Previously, only the United States and the Soviet Union had conducted successful ASAT tests—tests both countries reportedly halted more than 20 years ago because of resulting space debris that could endanger other orbiting satellites. U.S. officials reportedly received no advance notice from Beijing, nor did Chinese officials publicly confirm the ASAT test until January 24, 2007, 13 days after the event and almost a week after the U.S. government had publicly revealed the PRC test. China's ASAT test is illustrative of the country's ambitious and growing space program. In the 21 st century, China has become only the third country, after Russia and the United States, to send manned flights into space—the first on October 15, 2003 (Shenzhou 5), with a single astronaut orbiting the earth; the second on October 11, 2005 (Shenzhou 6), with two astronauts; and the third on September 25, 2008 (Shenzhou 7) with three astronauts after the 2008 Olympic Games. This latter mission included a space walk and the reported release of a small "companion" satellite into orbit, a move with potential military implications. Meanwhile, China's official space plans include a three-stage lunar program, to include landing a rover on the moon by 2012 and launching a manned lunar mission by 2020. China completed the first of the three stages on October 24, 2007, launching its first unmanned lunar probe, the Chang'e 1 orbiter, aboard a Long March 3A rocket. Noted American space experts have suggested that China's space program should not be viewed in isolation, but as part of a comprehensive drive to achieve "great power status." In addition to serving national security needs, China's space activities act as a multiplier for science and technological innovation, a vehicle for generating high-tech jobs, a diplomatic tool internationally, and a growing source of nationalist pride. China is emerging as an international competitor in the market for satellite sales, satellite data-sharing, and launch services. The U.S.-China Joint Statement issued during President Barack Obama's state visit to China in November 2009 included a reference to expanding discussions on space science cooperation and "starting a dialogue on human space flight and space exploration." Economic and trade issues remain extremely complicated and are a lingering source of contention in U.S.-China relations. The PRC remains the second-largest U.S. trading partner, with total U.S.-China trade in 2008 at $409 billion. In addition to the substantial and growing U.S. trade deficit with China (which climbed to $266 billion in 2008), bilateral issues include repeated PRC inability or unwillingness to protect U.S. intellectual property rights and the PRC's trade and currency policies. Issues involving allegations about tainted or faulty PRC exports to the United States are dealt with elsewhere in this report. On April 15, 2009, the U.S. Treasury Department released its latest, congressionally mandated, semi-annual report on international exchange rates. As in previous reports, the report concluded that China's economy was out of balance—overly dependent on exports and with weak consumer spending at home—but that the country's large new fiscal stimulus package is aimed at rebalancing the economy by encouraging domestic consumption. Treasury declined to cite China as a currency manipulator. This was a significant departure from the statement made by Secretary of the Treasury-designate Timothy Geithner during his confirmation hearing on January 21, 2009, when he stated that China is " manipulating its currency ... "—a more loaded term than previous U.S. administration officials had used. Both Vice President Biden and President Obama later backed away from Geithner's assertion. U.S. concern about China's exchange rate policies have been building for several years. Formerly, the PRC pegged its currency, the renminbi (RMB), to the U.S. dollar at a rate of about 8.3 RMB to the dollar—a valuation that many U.S. policymakers concluded kept the PRC's currency undervalued, making PRC exports artificially cheap and making it hard for U.S. producers to compete. U.S. critics of the PRC's currency peg charged that the PRC unfairly manipulated its currency, and they urged Beijing either to raise the RMB's value or to make it freely convertible subject to market forces. On July 1, 2005, the PRC changed its currency valuation method, allowing the RMB to float within a specified range against a basket of currencies. The resulting 22% appreciation in the RMB, which traded at 6.8 RMB to the dollar in early March 2009, from this action have not been sufficient to assuage ongoing U.S. congressional concerns. Since August 1, 2007, both the Senate Finance Committee and the Senate Banking, Housing, and Urban Affairs Committee have reported legislation addressing currency exchange rate issues. U.S. allegations that the PRC unfairly subsidizes some of its exports also have led to contentious bilateral trade issues. The U.S. Trade Representative (USTR) filed a case against China in the WTO in December 2008 charging that the PRC's "Famous Chinese" brand program amounted to unfair export subsidies to promote PRC products overseas. On March 20, 2007, the U.S. Department of Commerce announced a preliminary decision to apply countervailing duties (an anti-subsidy remedy) to two PRC companies exporting "coated free sheet" (glossy) paper to the United States. The announcement broke with a 23-year U.S. policy, adopted in 1984, of not applying U.S. countervailing duty laws to non-market economies. Citing a 177% increase in imports of PRC glossy paper products from 2005-2006, then-Secretary of Commerce Carlos M. Gutierrez said that the PRC economy had evolved significantly in the last two decades and that U.S. tools to address unfair competition needed to evolve in response. The move signaled a new U.S. willingness to be assertive in challenging PRC trade policies and suggests that other American industries affected by the PRC's exports, such as textiles, steel, and plastics, may soon be seeking similar remedies. Beijing sharply criticized the U.S. move. China's failure to live up to many of its World Trade Organization (WTO) commitments to protect intellectual property rights (IPR) has become one of the most important issues in U.S.-China bilateral trade. According to calculations from U.S. industry sources, IPR piracy cost U.S. firms $3 billion in lost sales in 2007, and the IPR piracy rate in China for software products was estimated at around 82% in 2006 – compared with 92% in 2003. The Motion Pictures Association of America, Inc. has charged that China may be blocking the import of American films, creating more opportunities for pirated versions to circulate in China. On April 25, 2008, the U.S. Trade Representative issued its Special 301 report stating that many counterfeit products from China, including pharmaceuticals, electronics, and toys, posed a threat to U.S. and global consumers. In 2007, the USTR filed several cases in the WTO: one alleging that the PRC had failed to comply with its commitments under the WTO's Trade-Related Aspects of Intellectual Property Rights agreement (TRIPS); and one charging that the PRC failed to provide adequate market access to U.S. products. Since early 2007, China has been plagued with reports of tainted and unsafe food and consumer products. New complaints emerged in March 2009 about PRC-made drywall which is suspected to be emitting corrosive gases. In September 2008, concerns began to mount about infant formula and milk powder in China tainted with melamine, an industrial chemical that makes products appear more protein-rich. Amid an extensive public outcry after some babies died and an estimated 294,000 babies were sickened by the milk products, the PRC government took increasingly assertive measures to close down suspect producers and make arrests. On October 9, 2008, Beijing announced it was imposing limits of 1 milligram of melamine per kilogram in infant formula and 2.5 milligrams per kilogram in liquid milk. Among other related actions, PRC officials have initiated nation-wide inspections of various products and have arrested officials found to have violated product safety standards, sentencing at least two to death. On December 16, 2008, the PRC government issued a list of 17 additional banned food additives, including lye, boric acid, and formaldehyde. Leaders in Beijing appear concerned about the implications that product recalls may have regarding the reputation of PRC products, and new policies have been announced periodically to address consumer product safety concerns. Initial questions about the safety of imported products from China surfaced in March and April 2007, when an investigation by the U.S. Food and Drug Administration (FDA) linked tainted PRC exports of pet food with wheat gluten to reports of pet deaths from kidney failure in the United States. The pet food contamination was the beginning of a series of well publicized recalls of PRC imported products including fish, tires, toothpaste, and toys. Bilateral efforts on the quality of Chinese exports to the United States have been underway for several years. In 2004, the Consumer Product Safety Commission (CPSC) and China's General Administration of Quality Supervision, Inspection, and Quarantine (AQSIQ) signed a memorandum of understanding (MOU) to cooperate on increasing the public safety of specific consumer products, including clothing, toys, cigarette and multipurpose lighters, home appliances, hazardous chemical consumer products, and bicycle helmets. The two agencies held their first biennial Consumer Product Safety Summit (CPSS) in Beijing in 2005, and the second biennial CPSS meeting in Washington on September 11, 2007. The tentative target time-frame for the third meeting, to be held in China, is October 2009. In November 2008, the U.S. Department of Health and Human Services opened its first Food and Drug Administration (FDA) offices in China, in Beijing, Guangzhou, and Shanghai. March 10, 2009, marked the 50 th anniversary of the Tibetan National Uprising against PRC rule in 1959, the year the current Dalai Lama fled to Dharamsala. Important anniversaries tend to be focal points for protests in China. The PRC dramatically increased its security presence in Tibetan regions of the country, maintaining special vigilance and a high alert level in Tibet for the anniversary date. On February 18, 2009, PRC officials announced that all tourist travel to Tibet would be restricted for the foreseeable future; in March 2009 officials announced Tibet would be reopened to tourists on April 5, 2009. The Dalai Lama used the occasion of the 50 th anniversary of the Tibetan National Uprising to deliver an especially harsh statement, saying that the PRC had turned Tibet into a "hell on earth" and that " ... the religion, culture, language, and identity [of Tibetans] ... is nearing extinction." The 111 th Congress also may use the 2009 anniversary year as a vehicle for reviewing U.S. policy toward Tibet and the state of Sino-Tibetan relations. Tibet remains an issue of concern for Congress and a sensitive issue in U.S.-China relations. Controversy continues over Tibet's current political status as part of China, the role of the Dalai Lama and his Tibetan government-in-exile, and the impact of Chinese control on Tibetan culture and religious traditions. The U.S. government recognizes Tibet as part of China and has always done so, although some dispute the historical consistency of this U.S. position. But the Dalai Lama, Tibet's exiled spiritual leader, has long had strong supporters in the U.S. Congress who have continued to pressure the White House to protect Tibetan culture and give Tibet greater status in U.S. law. It was largely because of this congressional pressure that in 1997, U.S. officials created the position of Special Coordinator for Tibetan issues. Paula Dobriansky, Under Secretary of State for Global Affairs, served as the Special Coordinator in the Bush Administration, and was the highest-ranking U.S. official to date to have held this position. As of the date of this report, the Obama Administration had not yet named a new Special Coordinator. An enhanced PRC security presence in Tibet has existed since March 2008, when a series of confrontations involving Tibetans and Chinese officials marked the 49 th anniversary of the 1959 uprising. In those demonstrations, the most serious in Tibet since the 1980s, a peaceful protest launched by Buddhist monks in Lhasa expanded to other places in Tibet over the ensuing days, escalating to clashes between Tibetan protestors and Chinese riot police. By March 14, 2008, mobs of angry people were burning and looting establishments in downtown Lhasa. Authorities of the People's Republic of China (PRC) responded by sealing off Tibet and moving in large-scale security forces. On April 1, 2009, on the sidelines of the G-20 Financial Summit in London, President Obama and China's President Hu Jintao announced the initiation of a new annual high-level dialogue, to be called the U.S.-China Strategic and Economic Dialogue (S&ED), designed to focus on economic, security, and other issues. The S&ED is a broad diplomatic mechanism that brings together senior officials from the United States and the People's Republic of China (PRC) on an annual basis to discuss a range of issues including bilateral economic and trade relations, security and international development, climate change, energy, public health, and others. It has two diplomatic "tracks" – a "Strategic Track" co-chaired by U.S. Secretary of State Hillary Clinton and Chinese State Councilor Dai Bingguo, and an "Economic Track" co-chaired by U.S. Treasury Secretary Timothy Geithner and Chinese Vice Premier Wang Qishan. The first round of the new S&ED was held in Washington, DC, on July 27-28, 2009, and featured the participation of senior officials from the State Department, Treasury, the White House, and other agencies. The S&ED instituted by the Obama Administration emerged from two high-level U.S.-China dialogues formed during the George W. Bush Administration: the U.S.-China Strategic Economic Dialogue (SED), coordinated under the auspices of the Treasury Department; and the U.S.-China Senior Dialogue (SD) under the auspices of the State Department. Splitting coordination of the S&ED between the State and Treasury Departments brings the Secretary of State formally into the S&ED process—thereby granting the dialogue greater diplomatic prestige—but it also risks creating rivalries and overlapping responsibilities that critics say could impede substantive progress on some issues. The U.S. State and Treasury Departments have each appointed S&ED coordinators. There are also a range of officials coordinating U.S. (and PRC) approaches to the substantive issues. According to officials associated with the process, the Departments of State and Treasury are attempting to act jointly on matters involving the S&ED, including the provision of both internal and cross-departmental procedures of inquiry on S&ED matters. There appears to be less "jointness" on the PRC side, where government bureaucracies traditionally have been "stove-piped" with little inter-departmental interaction or coordination. U.S. officials associated with the SED, the predecessor to the S&ED, have stated that the SED process was one of the few venues in which PRC ministers interacted with each other across departmental jurisdictions. U.S. policymakers appear to consider this one of the incidental benefits of the SED/S&ED process. At the end of the July 2009 S&ED meeting, the two sides signed a memorandum of understanding reaffirming their commitment to cooperate on addressing climate change, and said they would work to reform the governance of the International Monetary Fund (IMF) and the World Bank to better reflect China's growing economic status. The meeting also resulted in an announcement by Admiral Timothy Keating, commander of U.S. forces in the Pacific, that the United States and China would resume routine military contacts and high-level military exchanges. The Administration emphasized that the goal for this initial round was to lay the groundwork for future dialogues. Critics, however, argued that the concrete achievements of this first round were modest, and that substantial time and effort had gone into the event's coordination without producing major policy agreements. The new S&ED joins dozens of other recurring official U.S.-China dialogues that hold regular meetings and have endured through multiple U.S. administrations. Generally these have been held on either an annual or biennial basis. These include the following: The Joint Commission on Commerce and Trade (JCCT), initiated in 1983 and elevated in 2003 to a senior level. Participating agencies are the U.S. Department of Commerce, the U.S. Trade Representative, and the PRC Vice Premier responsible for trade. The 18 th session was held in Beijing in December 2007. The U.S.-China Joint Economic Committe e (JEC), initiated in 1979. Participating agencies are the U.S. Department of the Treasury and the PRC Ministry of Finance. The U.S.-China Joint Commission on Science and Technology (JCM), initiated in 1979. Participating agencies are the Office of Science and Technology Policy (White House), the State Department's Office of Science and Technology Cooperation, and the PRC Ministry of Science and Technology. The U.S.-China Economic Development and Reform Dialogue (State-NDRC Dialogue), initiated in 2003. Participating agencies are the U.S. Department of State and the PRC National Development and Reform Commission. The U.S.-China Energy Policy Dialogue (EPD), negotiated in 2004 and initiated in 2005. Participating agencies are the U.S. Department of Energy and China's National Development and Reform Commission. The Global Issues Forum (GIF), negotiated in 2004 and initiated in 2005. Participating agencies include the U.S. Department of State's Bureau for Global Affairs and the PRC Ministry of Foreign Affairs. The U.S.-China Healthcare Forum (HCF), initiated in July 2005. Participating agencies are the U.S. Department of Commerce and the Department of Health and Human Services and the PRC Ministry of Health and Ministry of Commerce. Notably absent from the robust U.S.-China dialogue process has been an official U.S.-China military or defense dialogue at a comparable level of intensity or public scrutiny. The primary mechanism that had existed to date, the Defense Consultative Talks (DCT), has been intermittent, plagued with recurring setbacks, and of dubious value for a number of reasons. Senior-level military talks periodically were suspended in protest to a perceived offense, such as in October 2008, when the PRC suspended talks in protest to the Bush Administration's approval of a $6.5 billion arms sale to Taiwan. Admiral William Fallon, attempting to revitalize U.S.-China military ties as Commander of the U.S. Pacific Command, was quoted in 2006 as saying that there had been so much decline in U.S.-China military ties in recent years that he was "starting from virtually zero" in trying to rebuild contacts. Still, this intermittent process has resulted in a number of agreements and understandings with the PRC military over the years. These have included signing of a Military Maritime Consultative Agreement (1998); agreement to establish a military "hotline" (November 2007); participation in several search-and-rescue joint exercises; and an understanding to plan for joint military exercises (July 2008). As indicated by the announcement at the first S&ED meeting that Sino-U.S. military exchanges would resume, U.S.-China military relations look to be improving under the Obama Administration. President Obama and President Hu announced a shared commitment to better military-to-military relations on the sidelines of the March 2009 G-20 Financial Summit in London. Several high-level military exchanges have taken place, and in June 2009, both sides resumed deputy-ministerial defense consultations, concluding the 10 th annual round of Defense Consultative Talks. The two sides reportedly discussed U.S. arms sales to Taiwan, anti-terrorism efforts, the North Korea nuclear issue, the overall security situation in the Asia-Pacific, and the travel of U.S. planes and ships through China's 200-mile exclusive economic zone, to which Beijing objects. The two sides agreed to discuss issues involving military security at sea in Beijing. (At that meeting, held in August 2009, Beijing renewed its objections to U.S. military surveillance operations in its coastal waters, a policy U.S. officials said remained unchanged.) Finally, the two sides announced in late July 2009 that they soon would be resuming routine military contacts and high-level military exchanges. The island democracy of Taiwan remains the most sensitive and complex issue that U.S. policymakers face in bilateral Sino-U.S. relations. It is the issue that many observers most fear could lead to potential U.S.-China conflict. Beijing continues to lay sovereign claim to Taiwan and vows that one day Taiwan will be reunified with China either peacefully or by force. Beijing has long maintained that it has the option to use force should Taiwan declare independence from China. Chinese leaders support these long-standing claims with a continuing build-up of hundreds of missiles deployed opposite Taiwan's coast and with a program of military modernization and training that defense specialists believe is based on a "Taiwan scenario." Until May 2008, China watchers had been especially concerned with potential cross-strait conflict because of Taiwan's unpredictable political environment, where the balance of political power had teetered precipitously between two contending political party coalitions of nearly equal strength. One of these—the "Pan-Green" coalition led by the Democratic Progressive Party (DPP), controlled the presidency for eight years and is closely associated with advocates of Taiwan independence. Fears of cross-strait contention were eased on March 22, 2008, when, in a large turnout, voters in Taiwan elected Ma Ying-jeou of the KMT Party as president. Ma out-polled rival DPP candidate Frank Hsieh by a 2.2 million vote margin of 58% to 42%. Coming on the heels of the KMT's sweeping victory in January's legislative elections, the presidential election result appeared to be a further repudiation of former President Chen Shui-bian's eight-year record of governance. President Ma, who began his tenure on May 20, 2008, moved quickly to implement improvements in cross-strait relations, expanding on foundations laid by the previous Chen administration. Official talks reopened on June 12-13, 2008, in Beijing, resulting in groundbreaking new agreements to allow regular weekend direct charter flights, to open permanent offices in each other's territories, and to boost PRC tourism to Taiwan, among others. The second round, held on November 4–7, 2008, produced four agreements on food safety, direct air and sea transportation, and direct postal links. The third round, which began in Nanjing, mainland China on April 26, 2009, resulted in a number of agreements and a consensus on jointly promoting, for the first time, mainland investment in Taiwan. Some China-watchers have speculated on whether U.S. policy toward Taiwan will continue along its current path in the Obama Administration or whether the White House will undertake a reassessment similar to the Taiwan Policy Review that the Bill Clinton Administration conducted in 1993-1994. Such a prospect has support among some American scholars and policymakers, who suggest that there are a variety of reasons why the original U.S. policy framework on Taiwan should be revisited. Some cite, for instance, the need to support Taiwan's evolution as a full democracy since 1994; others cite concerns about what U.S. policy should be if Taiwan's Ma Administration should choose closer relations, or even alignment, with the PRC. Along with these new potential policy challenges, the Obama Administration will be faced with other challenges familiar from past years, including decisions on new arms sales; how to accommodate requests for visits to the United States by President Ma and other senior Taiwan officials; the level of U.S. relations with the Ma government; whether to pursue closer economic ties with Taiwan; what role, if any, Washington should play in cross-strait relations; and more broadly, what form of defense assurances to offer Taiwan. On October 3, 2008, the George W. Bush Administration notified Congress of its intention to sell a package of defense articles and services, worth as much as $6.4 billion, to Taiwan. The announcement marked the end of a period where no arms sales were made—what some suggested was a U.S. arms sales "freeze" to Taiwan prior to the 2008 Olympic Games (as Admiral Timothy Keating appeared to confirm in a briefing on July 16, 2008). Barack Obama, then a U.S. Senator, expressed support for this arms sale decision, suggesting that U.S. arms sales policies will not change in the Obama Administration: Senator Obama welcomes the Bush Administration's decision to notify Congress concerning the package of weapons systems for Taiwan. This package represents an important response to Taiwan's defense needs. In 2009, it became apparent that Beijing has reassessed its past efforts to keep Taiwan from participating more meaningfully in U.N. organizations. On January 13, 2009, the WHO sent a letter to Taiwan stating that the island henceforth would be included in the International Health Regulations (IHR), a set of legally binding rules governing international commitment to disease surveillance, alert, and response. As an IHR participant, Taiwan will be included in the Global Outbreak and Alert Response Network, receiving the latest updates directly from the WHO on global epidemics. On April 29, 2009, Taiwan authorities announced that the World Health Organization (WHO) had invited Taiwan to attend the 2009 World Health Assembly meeting from May 18-27 as an observer. The invitation marked the first time that Taiwan has been permitted to participate in an activity of U.N. specialized agency since it lost its U.N. seat to the PRC in 1971. The invitation came in a letter to "the Department of Health, Chinese Taipei" and signed by WHO Director-General Margaret Chan of Hong Kong, a Special Administrative Region of the PRC. Taiwan's Department of Health sent a 15-member delegation to the meeting, led by Yeh Ching-chuan, Taiwan's health minister. Taiwan President Ma Ying-jeou attributed the 2009 invitation to his moderate and flexible approach toward Beijing during the first year of his tenure. In its first WHO bid on August 14, 2008, the Ma Administration submitted a proposal to the U.N. Secretariat asking to be allowed to have "meaningful participation" in U.N. special organizations such as the WHO. The PRC had raised objections on August 18, 2008, saying that as a non-state, Taiwan was not qualified to participate in U.N. activities. Because of these objections, on September 19, 2008, a U.N. subcommittee decided not to include Taiwan's request for "meaningful participation" in U.N. activities on the agenda for the 63 rd General Assembly. Some observers in Taiwan have bristled at the suggestion that PRC officials essentially had given "permission" for Taiwan to participate in 2009 by negotiating directly with the WHO to include Taiwan. Taiwan's Foreign Minister, Francisco H.L. Ou, earlier had said that Taiwan would only accept an invitation extended directly by the WHO Secretariat, not one routed through Beijing. Taiwan had been unsuccessful in 15 previous attempts to gain either membership or non-member status in the U.N. and its affiliates such as the WHO. Taiwan's efforts under the DPP Administration of President Chen included an application both for full U.N. membership as well as for use of either the name "Republic of China" or "Taiwan." These applications had been of particular concern to both China and the United States. U.S. government officials, on record in the past as supporting Taiwan's membership in organizations "where statehood is not an issue," had been unusually blunt and outspoken in opposition to some of Taiwan's past U.N. application efforts under President Chen. In August 2007, for instance, a senior U.S. officials said: We are very supportive of Taiwan on many many fronts.... However, membership in the United Nations requires statehood. Taiwan, or the Republic of China, is not at this point a state in the international community. The position of the United States government is that the ROC ... is an issue undecided, and it has been left undecided ... for many, many years. In response to the 2009 announcement, however, the U.S. State Department issued a statement saying that the United States has "long supported Taiwan's meaningful participation in the WHO, including observers status at the WHA." With PRC-Taiwan talks having resumed for the first time in a decade in 2008, U.S.-China relations under the Obama Administration are positioned to benefit from the resulting easing of cross-strait tensions. As a presidential candidate in Taiwan, Ma Ying-jeou had sought to reduce tensions with the PRC by pledging adherence to a "three no's" approach: no unification, no independence, and no use of force—a pledge he repeated in his inaugural address. He called for a "diplomatic truce" with the PRC and pledged to stop using "dollar diplomacy" to win foreign country recognition. President Ma has moved quickly to implement his new cross-strait approach, signaling greater flexibility. In an unprecedented move, Taiwan in May 2008 worked jointly with the PRC in providing disaster relief after the Sichuan earthquake. By late May 2008, Taiwan had accepted a PRC invitation to resume official talks in Beijing for the first time since October 1998. The chairman of the KMT, Wu Poh-hsiung, met with PRC President Hu Jintao on May 28, 2008, the highest-level encounter between the two sides since 1949. Since then, Taiwan and China have had three rounds of direct talks, with a fourth expected in Taichung City, Taiwan, in mid- to late December, 2009: A first round in Beijing on June 12-13, 2008, resulting in groundbreaking new agreements to allow weekend direct charter flights and boost PRC tourism to Taiwan. A second round in Taiwan on November 4-7, 2008, resulting in four agreements on direct sea transportation, air transportation, food safety, and direct postal links. A third round in Nanjing on April 26-28, 2009, resulting in agreements on cross-strait crime fighting, mutual judicial assistance, and others, plus a consensus, for the first time, on promoting mainland investment in Taiwan. Taiwan also has undertaken several unilateral initiatives, including: June 26—Taiwan announced a number of financial liberalization measures, including allowing conversion of the RMB into Taiwan dollars; allowing Chinese companies on the Hong Kong stock exchange to have secondary listings on Taiwan's stock exchange; allowing PRC-backed mutual funds to invest in Taiwan's stock market; and allowing Taiwan brokerage houses to double their investments in PRC counterparts. June 30—Taiwan's Government Information Office announced that two major PRC media outlets would be allowed to station reporters in Taiwan effective immediately. July 8—Taiwan's Ministry of Economics announced it would ease investment restrictions with the PRC in three broad steps over the coming six months: raising the cap on Taiwan companies' investment in the PRC from 40% to 60%; lifting restrictions preventing Taiwan companies in certain sensitive sectors (such as advanced semiconductors) from investing in the PRC; and lifting restrictions preventing PRC companies from investing in Taiwan. PRC President Hu Jintao in a speech on December 31, 2008, suggested a further avenue for improvements in cross-strait ties, offering six proposals. Among these was a new proposal to establish military contacts and a "mechanism of mutual military and security trust" within the context of the formal ending of hostilities between the two sides. As President Hu was quoted, ... the two sides may start pragmatic discussions on the political relations in the special circumstance of absence of unification. And in order to stabilize the situation in the Taiwan Straits and reduce military and security concerns, the two sides may have contacts and exchanges regarding military issues in due course to explore the topic of establishing a mechanism of mutual military and security trust. We, again, call for consultation between the two sides on formally ending hostility, reaching a peace agreement and conceiving a framework for the peaceful development of the cross-Straits relations on the basis of the one China principle. China's robust international engagement since 2000 has caught some by surprise and has prompted growing American debate over the PRC's motivations and objectives. The fact that much of this international engagement has expanded while the United States has been preoccupied with its military involvement in Iraq and Afghanistan has caused a certain degree of American introspection. Of particular concern are the implications that China's growing international engagement could have for its "soft power" projection around the world, and consequently what this means for U.S. economic and strategic interests. Experience shows that abrupt, unexplained shifts in policy still occur with a fair degree of regularity in the PRC system. Still, some fundamental objectives appear to be motivating Beijing's foreign policy outreach. These include an imperative to promote and enhance China's economic development, particularly its voracious appetite for energy resources and raw materials to sustain its impressive annual growth rate; an effort to separate Taiwan from its 23 remaining official relationships; and a desire to increase China's international stature and compete more successfully with U.S. supremacy. To achieve these ends, China in recent years has crafted multiple bilateral agreements and partnerships, joined and become more active in existing multilateral organizations, and founded new multilateral institutions that tend to exclude the United States. China's foreign policy approach has several competitive advantages over the United States. The unrestricted nature of Beijing's overseas loans and investments is attractive to foreign governments wanting solutions to their development problems that in many cases are swifter, more efficient, and less intrusive than western lenders can offer. Beijing's large state-owned companies, with deep pockets and no shareholders to answer to, also can afford short-term losses in pursuit of longer-term, more strategic gains. But China's approach also has structural limitations in areas where the United States is strong. Beijing's foreign development policy operates from a narrower base, with China's "win-win" approach tackling easy issues first and postponing difficult issues, perhaps indefinitely. Acquiring an international presence also brings certain complications that are new to the PRC, including multiple opportunities for international misunderstanding, resentment, and cultural backlash. Finally, unlike the United States, China lacks the advantage of a substantial private-sector investment presence overseas. Still, it is clear that China increasingly is competing more directly with the United States both economically and politically in the international arena. For instance, in 2005, China took part in the first East Asia Summit (EAS), a fledgling grouping of 16 Asian and Pacific nations including China, the ten members of the Association of Southeast Asian Nations (ASEAN), Japan, South Korea, India, Australia, and New Zealand, but excluding the United States. The fourth EAS summit, scheduled to be held in Thailand in 2009, has been rescheduled several times due to political unrest. It now is expected to be held late in October 2009. China also has pursued both economic and security arrangements with the Central Asian countries of the former Soviet Union, including Russia, through the Shanghai Cooperation Organization (SCO), founded in 2001. Within the SCO context, China has cooperated on border enforcement, signed pipeline and rail link agreements, and conducted joint military maneuvers. The PRC held joint military exercises with Russia in 2005 ("Peace Mission 2005") and with Russia and the other members of the SCO ("Peace Mission 2007"). China also is becoming an increasing competitor to the United States for influence and access to energy resources in the Middle East. PRC President Hu Jintao made an official state visit to Saudi Arabia February 10-12, 2009, in a move to strengthen Sino-Saudi Arabian energy ties. In addition, China's trade with the six Gulf Cooperation Council (GCC) countries has steadily increased in recent years, reportedly reaching $32 billion in 2005 (although this is still small by comparison with the United States, whose total trade with Saudi Arabia alone in 2005 was approximately $34 billion). In January 2009, PRC Foreign Minister Yang Jiechi met with Oman's Foreign Minister, Yousuf bin Alawi bin Abdullah, to discuss China's willingness to improve Sino-Arab cooperation, including efforts to resolve Palestinian-Israeli conflicts. In addition, the PRC in December 2008 began to provide navy task forces to protect its commercial ships navigating the Gulf of Aden from Somali pirate attacks. This is the first time in modern history that the PRC has deployed its navy for an operational mission. PRC relations with some countries considered to be "bad actors" have been particularly nettlesome for U.S. policy. China has cultivated resource-rich African nations such as Sudan and Angola for energy-related development, for instance, despite increasing U.S. and international pressure on Beijing to influence the Sudanese government to do more to resolve the humanitarian crisis in Darfur. U.S. officials also find PRC relations with Iran problematic, seeing U.S.-sponsored diplomatic pressure against Iran's suspected nuclear weapons program as being hampered by PRC opposition to U.N. Security Council sanctions against Iran. The PRC's growing international outreach also extends to U.S. allies. China has been courting the European Union (EU) intensively. PRC Premier Wen Jiabao made an early visit in 2009 to six countries in Europe (excluding France, reportedly because of French President Nicolas Sarkozy's decision in December 2008 to meet with the Dalai Lama). On October 24, 2006, the European Commission released a new paper to the European Parliament entitled "EU-China: Closer Partners, Growing Responsibilities." The document reinforced the trends once remarked upon by then-European Commission President Jose Manuel Barroso—that the EU considers China a "strategic partner" and has made developing Sino-EU ties "one of our top foreign policy objectives in the years to come." Finally, China has expanded its economic and trade relationships with Latin American and Caribbean countries. In September 2004, China sent a "special police" contingent to Haiti, marking Beijing's first deployment of forces ever in the Western Hemisphere. The PRC signed a Free Trade Agreement (FTA) with Chile in 2005, and in 2007 surpassed the United States as Chile's largest trading partner. Beijing built upon this foundation in November 2008, signing another FTA with Peru, a mineral-rich country with large deposits of copper and iron ore. China's economic development and need for greater energy resources is having a rapidly increasing impact on the environment, both within China and for its regional and global neighbors. Although China alone has been the source of 40% of the world's oil demand growth since 2000, its continued heavy dependence on soft coal in recent years has ranked it with the United States as the world's largest contributors to global carbon-dioxide (CO2) emissions. According to the U.S. Department of Energy, carbon emissions related to China's energy use more than doubled between 1980 and 2003, an increase that had a corresponding impact on air and water quality, agriculture, human health, and climate change. PRC leaders have recognized that this trend is not sustainable and have undertaken efforts to address environmental quality, including establishment in 1998 of the State Environmental Protection Administration, adoption of a series of environmental laws and regulations, and mandatory conversion of many government vehicles to non-polluting liquefied petroleum and natural gas. Despite this, PRC efforts to date have been unable to keep up with the extensive and worsening pollution from China's growing economic development. Beijing's push to meet more of its development needs through the cleaner technology of hydro-power has exacerbated other long-term environmental problems in China. To generate electric power, the government has launched massive dam construction projects, continuing an effort that has occurred throughout centuries of Chinese history to tame recurring floods. Projects such as the Three Gorges Dam on the Yangtze River have been criticized heavily by environmental scientists who blame this and other such construction for significantly contributing to the country's worsening desertification and flood damage woes. Moreover, since some of the region's most significant rivers originate in the mountains of Tibet, China's hydro-power development programs are increasingly affecting its neighbors. China began multiple dam construction on the upper Mekong River in Yunnan Province with little thought to the resulting impact on Burma, Thailand, Laos, Cambodia, and Vietnam, the dams' downstream neighbors. Other important regional rivers originating in Tibet include the Brahmaputra (India and Bangladesh); Irrawaddy (Burma); the Indus (Pakistan); and the Salween (Burma and Thailand). The United States and China engage in energy and environment-related dialogue through the U.S.-China SED (Strategic Economic Dialogue). As an outgrowth of that dialogue, on December 15, 2006, both countries announced that China would become the third country to join the United States in the FutureGen International Partnership, a collaborative effort to reduce carbon emissions. The two countries also signed an Energy Efficiency and Renewable Energy Protocol, an effort to promote clean, renewable energy technology. The third SED, which ended on December 13, 2007, produced an agreement to establish a working group to explore cooperation in energy and environmental fields. Despite China's rapid economic advances and its expanded international influence, its internal political and institutional development have not kept comparable pace. Increasing social and economic inequities have led to growing strains in China's political and societal fabric—between the central government in Beijing and the provincial and municipal governments in the interior; between the socialist left and the increasingly capitalist right; between those arguing for economic growth at all costs and those advocating more sustainable and equitable development; and between the few newly wealthy who have thrived under economic liberalism and the many desperately poor who have not. Civil society remains hobbled by stern regulations on organizations, and the press is constrained from aggressive reporting in many areas. Leaders in Beijing are thought to be deeply concerned about the political and social implications of these internal strains and deficiencies, and increasing debate on and maneuvering around these issues is likely to continue affecting the political environment in China in the foreseeable future. In addition to grievances and resulting demonstrations by Uighurs in the Xinjiang-Uighur Autonomous Region and Tibetans in the Tibetan Autonomous Region, the 2008 Sichuan earthquake and the 2008-2009 global financial crisis provided potential opportunities for public dissatisfaction with the PRC government—the latter focusing on the government's plans to reverse the rising unemployment among China's rural migrant workforce and export-oriented industries, and the former focusing on the issue of shoddy construction that led to more earthquake deaths than might have occurred with sturdier buildings. The far-reaching economic changes the PRC continues to undergo have led to increasing disgruntlement among a number of social groups. Peasants and farmers in rapidly developing parts of China have labored under heavy tax burdens and fallen farther behind their urban contemporaries in income. Some have had their farmland confiscated by local government and Party officials. Officials then sell the confiscated land for development, often reportedly offering little or no compensation to the peasants from which the land was seized, resulting in sometimes sizable protests. One widely publicized case occurred on December 6, 2005, in the southern Chinese city of Dongzhou (Shanwei), when paramilitary forces opened fire on villagers demonstrating against the confiscation of their land for the construction of a new power plant, killing an unknown number of villagers. In an effort to address rising rural complaints, the government early in 2005 proposed a new measure, the "2005 Number 1 Document," to reduce taxes on rural peasants, increase farm subsidies, and address the widening income gap between urban and rural residents. Rising labor unrest, particularly in northern and interior cities, is another particularly troubling issue for Beijing, a regime founded on communist-inspired notions of a workers' paradise. Increasing labor unrest also has placed greater pressure on the authority and credibility of the All-China Federation of Trade Unions (ACFTU), China's only legal labor organization. In October 2008, the government issued new measures allowing farmers to lease and transfer or sell rights to the property allocated to them by the state, in order to help strengthen their control over their land. The effect of the global financial crisis, which has closed factories in China and thrown many migrant workers out of work, suggests that rising social unrest will grow as a problem for PRC policymakers. During her first trip to China in February 2009, Secretary of State Hillary Clinton generated some controversy when she downplayed the issue of human rights in her discussion of the three key challenges for U.S.-China relations: the global financial crisis, climate change, and a range of security issues. In response to a press question about human rights and other issues on February 20, 2009, the Secretary said, " ... our pressing on those issues [Taiwan, Tibet, and human rights] can't interfere with the global economic crisis, the global climate change crisis, and the security crisis." The Bush Administration generally favored selective, intense pressure on individual human rights cases and on rule of law issues rather than the broader approach adopted by previous American administrations. There has been little sign that the U.S. position on human rights has had much affect on PRC policies, although there is growing evidence of increasing social demands within China for greater accountability, transparency, and responsiveness in government. The PRC continues to crack down on unauthorized religious groups and to restrict the freedoms of ethnic communities that seek greater religious autonomy. Some of this repression focuses on what PRC officials have classified as illegal religious "cults" such as the Falun Gong. Reports about religious freedom in China suggest that state persecution of some religious and spiritual groups will likely continue as long as the Chinese Communist Party perceives these groups to be threatening to its political control. However, religions in the PRC have also attracted increasing numbers of adherents as well. Tibetan Buddhists and Uighur Muslims, two PRC ethnic minorities, are particularly vulnerable to official religious persecution because of the extent to which Beijing links their religious beliefs to ethnic separatist sentiments. In the China section of its most recent annual International Religious Freedom Report , released September 19, 2008, the U.S. Department of State judged China's record on religious freedom to remain poor and substantially the same as during previous years. The State Administration for Religious Affairs, SARA, (formerly known as the Religious Affairs Bureau, or RAB) continues to require churches to register with the government. Churches that are unregistered, so-called house churches, continue to be technically illegal and often repressed by the government, but still they reportedly attract tens of millions of adherents. Treatment of unregistered churches varies widely from locality to locality, with some local officials highly repressive and others surprisingly tolerant. Communist Party officials continue to stress that religious belief is incompatible with Party membership. Because of allegations of coercion in PRC family planning programs, direct and indirect U.S. funding for family planning practices in China is prohibited in provisions of several U.S. laws. In addition, legislation in recent years has expanded these restrictions to include U.S. funding for international and multilateral family planning programs, such as the U.N. Population Fund (UNFPA), that have programs in China. Section 7077(c) of the House-passed version of H.R. 3081 , the FY2010 State, Foreign Operations, and Related Programs Appropriations Bill, prohibits funds for a UNFPA country program in China, requires the Secretary of State to report on the UNFPA China program, and requires a dollar-for-dollar deduction of U.S. contributions if UNFPA proceeds with a program in China. The House passed the measure on July 9, 2009, by a vote of 318 – 106. The Obama Administration has pledged to work with Congress to restore these UNFPA contributions. Although the PRC has maintained its restrictive and at times coercive "one-child" program for several decades, there are indications that the government may be re-thinking this policy. Early in 2004, China's new leadership appointed a task force to study the country's demographic trends and their implications for economic development. In October 2004, reports surfaced that Beijing was considering at least one proposal to eventually scrap the one-child policy because of currently low PRC birth rates and the economic implications this has for supporting China's huge aging population. On January 6, 2005, the director of China's National Population and Family Planning Commission stated that the government intended to modify criminal law to make it illegal to selectively identify and abort female fetuses. There also is growing evidence that citizens of the PRC are becoming more assertive about their reproductive rights. In mid-May 2007, news accounts reported violent public protests in Guangxi Province (Bobai County) over the "savage implementation" of family planning policies by local authorities, including the retroactive imposition of extraordinarily heavy fines and the confiscation or destruction of household goods and food. Revision of the "one-child" policy has also been mentioned in connection with the Sichuan earthquake of May 12, 2008, where the widespread destruction of schools meant that many parents lost their only child. H.R. 2647 / S. 1390 (Skelton/Levin)— P.L. 111-84 National Defense Authorization Act for FY2010. Section 828 of the bill requires the Department of Defense to report by April 1, 2010, on the value that foreign nations, specifically including China, place on rare earth materials and the importance that rare earth materials have in the U.S. defense supply chain. Section 1223 of the bill also expanded the annual reporting requirement on military and security developments in the PRC. Introduced June 2, 2009, and referred to the Committee on Armed Services. The Committee reported the bill in two segments: H.Rept. 111-166 (Part I) on June 18, 2009; and a supplemental report, H.Rept. 111-166 (Part II) on June 23, 2009. The House passed the bill on June 29, 2009, by a vote of 389-22. The measure was referred to the Senate on July 6, 2009. On July 23, 2009, the Senate substituted the language of its own version, of S. 1390 (introduced on July 2, 2009). The Senate version contained no similar provision on rare earth minerals, but does contain a provision requiring a report assessing the current state of Taiwan's air force. On October 6, 2009, the House by voice vote agreed to disagree to the Senate amendment, asked for a conference, and chose conferees. The final version that passed both houses and was signed into law omitted the House language on rare earth minerals and the Senate language requiring a report on the Taiwan Air Force. The expanded reporting requirements on military and security developments in the PRC remained. The House agreed to the conference report ( H.Rept. 111-288 ) on October 8, 2009, by a vote of 281-146. The Senate agreed to the conference report on October 22 by a vote of 68-29. The bill became P.L. 111-84 on October 28, 2009. H.R. 2997 (DeLauro)— P.L. 111-279 Agriculture, Rural Development, Food and Drug, and Related Agencies Appropriations Act, 2010. Section 723 of the act prohibits funds from being used to allow poultry imports from the PRC. The House Appropriations Committee reported an original measure on June 23, 2009 ( H.Rept. 111-181 ). The full House passed the bill July 9, 2009, by a vote of 266-160. The Senate considered the bill on August 4, 2009, and passed it, amended, by a vote of 80-17. The House disagreed to the Senate amendment and on September 29, 2009, voted to instruct conferees (359-41). Conference Report 111-279 was filed on September 30, 2009. The House agreed to the conference report on October 7, 2009 (263-162) and the Senate agreed on October 8, 2009 (76-22). The final public law contained the poultry import prohibition. H.R. 471 (Altmire) The Supporting America's Manufacturers Act. The bill would limit the President's discretion to deny relief under the special China safeguard provision of the Trade Act of 1974. Introduced January 13, 2009, and referred to the House Ways and Means Committee and the House Rules Committee. H.R. 2312 (Israel) The U.S.-China Energy Cooperation Act. The bill authorizes the Secretary of Energy to make grants encouraging cooperation between the United States and China on joint research, development, or commercialization of carbon capture and sequestration technology, improve energy efficiency, or renewable energy sources. Introduced on May 7, 2009, and referred to the House Energy and Commerce and House Science and Technology Committees. H.R. 2410 (Berman) Foreign Relations Authorization Act, FY2010 and FY2011. Section 237 of the bill deals with Tibet, proposing amendments to the Tibetan Policy Act of 2002. The bill requires that U.S. policy on Tibet be coordinated among and communicated to all U.S. Executive Branch Agencies dealing with China; strengthens the authority and resources of the U.S. Special Coordinator for Tibet; and established a Tibet section within the U.S Embassy in Beijing. Section 618 of the bill requires the Secretary of State to seek to establish a U.S. consulate in Lhasa. The bill was introduced on May 14, 2009, and referred to the House Foreign Affairs Committee. The Committee reported the bill on June 4, 2009 ( H.Rept. 111-136 ), and the House passed the measure on June 10, 2009, by a vote of 235-187. The bill was referred to the Senate and its Committee on Foreign Relations on June 22, 2009. H.R. 2454 (Waxman) American Clean Energy and Security Act of 2009. As reported from Committee, the bill's Section 3 requires an annual report to Congress on whether China and India have adopted greenhouse gas emissions standards at least as stringent as those in the act. Introduced on May 12, 2009, and referred to the House Committee on Energy and Commerce and multiple other committees. After several other committees were discharged, the House Energy and Commerce Committee ordered the bill reported on May 21, 2009. The House considered and passed the bill on June 26, 2009, by a vote of 219-212. The bill was received in the Senate on July 6, 2009. H.R. 3012 (Michaud) The Trade Act of 2009. Requires a review (and potential renegotiation) of existing trade agreements to evaluate their economic, environmental, national security, health, safety, and other effects. Introduced June 24, 2009, and referred to the House Ways and Means Committee. H.R. 3081 (Lowey) Department of State, Foreign Operations, and Related Agencies Appropriations Act, 2010. The bill authorizes funds for expenses for both the Congressional-Executive Commission on China and the U.S.-China Economic and Security Review Commission. Section 7070(a) of the bill concerns Tibet, including provisions that the United States should support projects in international financial institutions that preserve and protect Tibet's culture and environment, and provides $7.3 million in funds for NGOs supporting Tibetan culture and sustainable development. Section 7070(e) of the bill prohibits funds for export licenses for U.S. satellites for launch in China unless the Appropriations Committee is notified 15 days in advance; and provides funding restrictions for any activities of the People's Liberation Army or its affiliates. The House Appropriations Committee reported an original measure on June 26, 2009 ( H.Rept. 111-187 ), and the House passed the bill on July 9, 2009, by a vote of 318-106. Received in the Senate July 13, 2009. H.R. 3237 (Conyers) A bill to enact laws relating to national and commercial space programs. Section 30701 of the bill requires certification 15 days in advance of any agreement with the PRC concerning space programs, spacecraft, launch systems, or scientific and technical information, that such an agreement is not detrimental to the U.S. space launch industry and will not improve PRC space or missile launch capabilities. The bill was introduced on July 16, 2009, and referred to the House Committee on the Judiciary, which marked up the bill on October 21, 2009 . The Committee reported the bill on November 2, 2009 ( H.Rept. 111-325 ). A page further explaining the bill is available from the Office of the Law Revision Counsel at http://uscode.house.gov/cod/t51/ . H.R. 4094 (Melancon) Drywall Victims Insurance Protection Act of 2009. A bill to prohibit insurers from cancelling or refusing to renew homeowners insurance for homes containing toxic drywall made in China. Introduced November 17, 2009, and referred to the House Committee on Financial Services. H.Con.Res. 18 (Linder) A resolution expressing the sense of Congress that the United States resume diplomatic relations with Taiwan and abandon the "One-China Policy." Introduced on January 9, 2009, and referred to the House Foreign Affairs Committee. H.Con.Res. 55 (Berkley) Recognizing the 30 th anniversary of the Taiwan Relations Act. Introduced February 23, 2009 and referred to the House Foreign Affairs Committee (Subcommittee on Asia) and the Senate Foreign Relations Committee. The House Subcommittee held markup on March 19, 2009, and forwarded the bill, amended, to the full Committee. The full House considered the measure on the suspension calendar, passing it by voice vote on March 24, 2009. The bill was referred to the Senate on March 26, 2009. H.Con.Res. 72 (Forbes) A resolution condemning any action of the PRC that unnecessarily escalates bilateral tensions, including the incidents in the South China Sea against the USNS Impeccable in March 2009. Introduced on March 12, 2009, and referred to the House Foreign Affairs Committee. H.Res. 44 (Poe) A resolution condemning the PRC for unacceptable business practices, including manufacturing unsafe products, disregard for environmental concerns, and exploitative employment practices. Introduced January 9, 2009, and referred to the House Foreign Affairs Committee. H.Res. 156 (McCotter) A resolution supporting Charter 08 and the ideals of the Charter 08 movement. Introduced on February 11, 2009, and referred to the House Foreign Affairs Committee. H.Res. 226 (Holt) A resolution calling for a peaceful and durable solution to the Tibet issue and for a sustained U.S. effort consistent with the Tibetan Policy Act of 2002. Introduced on March 9, 2009, and referred to the House Foreign Affairs Committee. The full House considered the bill on March 11, 2009, on the suspension calendar; the measure passed on March 11 by a vote of 422-1. H.Res. 590 (Wu) Introduced June 26, 2009, and referred to the House Foreign Affairs Committee. The measure expresses grave concerns about the sweeping censorship, privacy, and cyber-security implications of China's Green Dam filtering software, urging U.S. high-tech companies to promote the Internet as a tool for transparency and freedom of expression. H.Res. 604 (Ros-Lehtinen) The measure recognizes the vital role of the Proliferation Security Initiative (PSI), and urges non-participating countries, specifically including China, to cooperate with U.N. Security Council resolutions 1718 and 1874 to prevent dangerous exports from North Korea to countries posing a threat to the United States. Introduced June 26, 2009, and referred to the House Foreign Affairs Committee. H.Res. 877 (Wu) A measure calling on China to adhere to the principles contained in its own Human Rights Action Plan, and expressing support for two Chinese activists under detention for seeking answers from the government for the parents of children killed in the collapse of schools during the Sichuan earthquake. Introduced October 29, 2009, and referred to the House Foreign Affairs Committee. Passed the House on November 7, 2009, by a vote of 426–1. S.Res. 91 (Nelson) A resolution calling on the Consumer Product Safety Commission, the Secretary of the Treasury, and the Secretary of Housing and Urban Development to take action on issues relating to drywall imported from China. Introduced March 30, 2009, and referred to the Committee on Commerce, Science, and Transportation. 11/15/09 — President Barack Obama began his first state visit to China. 10/0 5 / 09 —The Dalai Lama arrived in Washington as part of a U.S. visit which will not include a meeting with President Barack Obama. According to the White House, a meeting with the Dalai Lama will be postponed until after the President's November trip to China to meet with PRC President Hu Jintao. 10/04/09 —PRC Premier Wen Jiabao began a three-day, high-profile "goodwill" visit to North Korea. 10/01/09 —The PRC celebrated the 60 th anniversary of its founding, with celebrations including a massive military parade showcasing the latest military technology. 09/26/09 —Beijing announced it would ease restrictions on foreign investments in the culture industry, to include film, publishing, entertainment, online games, and multi-media. 09/25/09 —Taiwan refused a visa for Uighur activist and former PRC resident Rebiya Kadeer. Taiwan officials cited fears of terrorist links to Ms. Kadeer's World Uyghur Congress. Ms. Kadeer said that Taiwan was caving in to opposition from Beijing. 09/11/09 —The White House announced the imposition of a 35% tariff on imports of automobile and light-truck tires imported from China. 07/ 27-28 / 09 —The first U.S.-China Strategic and Economic Dialogue was held in Washington, DC. The two sides signed a memorandum of understanding reaffirming their commitment to cooperate on addressing climate change, and said they would work to reform the governance of the International Monetary Fund and the World Bank to better reflect China's growing economic status. 07/27/09 —China criticized Japan for permitting a visit by exiled Uighur businesswoman Rebiya Kadeer. 07/17/09 —The PRC government shut down the Open Constitution Initiative, an NGO legal aid group working on sensitive cases against the government. The group was shut down allegedly because it was improperly registered. 07/13/09 —The Beijing Bureau for Legal Affairs instructed lawyers representing Uighurs charged with July 2009 Xinjiang protests to accept guidance and monitoring from government-controlled legal associations. 07/09/09 — The Beijing Justice Bureau cancelled the annual licenses of 53 lawyers who had been involved in litigating high-profile cases against the government. The licenses were cancelled allegedly because they had failed to reapply for re-registration. 07/07/09 —Utah Governor Jon Huntsman was nominated formally to become the next U.S. Ambassador to China. 07/05/09 — A riot involving a reported 1,000 or more people broke out in Urumqi, the capital city of China's Xinjiang Province. The riots reportedly began when police confronted a protest march conducted by ethnic Uighurs, a Muslim minority in China. News accounts reported that the riots left 140 people dead and more than 800 injured. 07/05/09 — Several employees of Australia's mining company, Rio Tinto Ltd., reportedly were detained in China allegedly for revealing state secrets. Rio Tinto at the time had been in difficult negotiations with the China Iron and Steel Association over the pricing of the iron ore it would sell to China. 07/04/09 —In defiance of a U.N. Security Council resolution, North Korea fired 7 ballistic missiles into the sea between the Korean peninsula and Japan. The United States, South Korea, and Japan protested the firings; Beijing and Russia issued statements counseling restraint by all parties. 05/13/09 —A civilian DOD employee was arrested on espionage charges that he sold sensitive information to a spy for the PRC government. 05/12/09 —PRC officials and citizens held vigils and services in memory of those who died in the Sichuan earthquake on this date in 2008. 04/26/09 —The third round of cross-strait talks took place in Nanjing between mainland China and Taiwan. The talks resulted in a consensus to promote, for the first time, mainland investment in Taiwan. 04/01/09 —On the eve of the G-20 Summit in London, President Obama announced the initiation of a new high-level dialogue with the PRC: the Strategic and Economic Dialogue. The dialogue is expected to focus on economic, security, and other issues, and will follow a two-track approach: an "Economic Track" and a "Strategic Track." 03/31/09 —According to news reports (Xinhua, NYT), the PRC will reopen Tibet to tourists on April 5, 2009. 03/29/09 —The Information Warfare Monitor published findings showing the existence of a cyber-espionage network based in China. 03/25/09 —The Pentagon released its annual report on China's Military Power. 03/18/09 —The World Bank lowered its forecast for economic growth in China in 2009 to 6.5%—down from its earlier forecast of 7.5% and well below the 8% growth forecast by the PRC government. 03/18/09 —Shanghai's Food and Drug Administration announced an investigation into baby products made by Johnson & Johnson due to allegations that some chemicals in the products could cause cancer. 03/18/09 —U.S. American Institute in Taiwan (AIT) chairman Ray Burghardt said that the United States was "comfortable with what's happening" in Taiwan-PRC engagement. The same day, former President Chen Shui-bian appeared at his final pre-trial hearing before going on trial for corruption, scheduled to begin March 26, 2009. 03/09/09 —The Pentagon reported that PRC ships and aircraft operating in the South China Sea had been acting in increasingly aggressive ways toward two U.S. Navy ocean surveillance ships operating in the area, the USNS Impeccable and the USNS Victorious. In an unrelated visit the same day, PRC Foreign Minister Yang Jiechi arrived in the United States for official meetings. 03/05/09 —China's national legislature, the National People's Congress, began its annual meeting in Beijing. The meeting focused on the government's economic stimulus package and other economic issues. 03/04/09 —An article in the Los Angeles Times reported that China's highest court for the first time had agreed to accept lawsuits against companies whose milk products had sickened tens of thousands of children. 01/31/09 —Premier Wen Jiabao cast doubt on the PRC's willingness to continue to buy U.S. Treasuries, saying that it would depend on China's own needs and the security of PRC Treasury holdings. 01/26/09 —The WTO ruled that China had failed to protect and enforce copyrights and trademarks in a wide range of goods. Appendix A. Selected Visits by U.S. and PRC Officials November 15 - 18, 2009 —President Barack Obama made his first state visit to China. While there, he and PRC President Hu Jintao issued a U.S.-China Joint Statement discussing the importance of the relationship, highlighting its key accomplishments, and seeking further cooperation on increased educational exchanges; global economic recovery; and climate change, energy, and the environment. October 24- 31, 2009 —General Xu Caihou, vice chairman of the PRC's Central Military Commission, visited the United States. In addition to meeting with Secretary of Defense Robert Gates, General Xu visited U.S. military facilities, including the U.S. Naval Academy in Annapolis, Maryland; the U.S. Strategic Command in Nebraska; Nellis Air Force Base in Nevada; Fort Benning, Georgia; the North Island Naval Station in San Diego, California; and the U.S. Pacific Command in Hawaii. September 4-5, 2009 —Stephen Bosworth, the U.S. Special Envoy to North Korea, visited China for two days, meeting with Foreign Minister Yang Jiechi and Vice Foreign Minister Wu Dawei. September 6, 2009 —PRC National People's Congress Chairman Wu Bangguo arrived for a week-long U.S. visit. While in Washington, he met with President Barack Obama, Vice President Joseph Biden, and Speaker Nancy Pelosi, among others. July 27-28, 2009 —The first meeting of the new Strategic and Economic Dialogue (S&ED) in Washington DC, comprised of senior U.S. and PRC officials, including Secretary Hillary Clinton, Secretary Timothy Geithner. Councilor Dai Bingguo, and Vice Premier Wang Qishan. July 14-17, 2009 —Secretary of Energy Steven Chu and Secretary of Commerce Gary Locke visited China to discuss, among other things, clean energy issues. July 3, 2009 —Deputy U.S. Trade Representative Demetrios Marantis began a five-day visit to China to discuss U.S. poultry exports. May 3 1 , 2009 — U.S. Treasury Secretary Timothy Geithner made a three-day official visit to China to discuss plans for the new Strategic and Economic Dialogue scheduled for July 2009. April 16 , 2009 —U.S. Chief of Naval Operations Admiral Gary Roughead began a six-day visit to China to discuss U.S.-China navy and military relations. During his visit, Roughead acknowledged China's efforts to help combat piracy off the coast of Somalia. April 2, 2009 —U.S. Treasury Secretary Timothy Geithner and PRC Vice Premier Wang Qishan met in London after the G-20 Financial Summit closed. April 1, 2009 —President Barack Obama and PRC President Hu Jintao met for an hour on the eve of the G-20 Financial Summit meeting in London. They agreed to build a more cooperative and comprehensive relationship, to increase exchanges at all levels, and to establish the U.S.-China Strategic and Economic Dialogue. February 27, 2009 —The Under-Secretary of Defense for East Asia, David Sedney, held two days of military consultations in Beijing with counterpart PRC Major General Qian Luhua. February 20 - 22 , 2009 —Secretary of State Hillary Clinton made her first official visit to China as Secretary. The visit was part of a larger visit to Asia beginning on February 15, with stops in Japan, Indonesia, and South Korea. Appendix B. Selected U.S. Government Reporting Requirements International Report on Economic and Exchange Rate Policies ( s emiannual report ) Most recent date available : April 15, 2009 Agency : U.S. Department of the Treasury Legislative authority : P.L. 100-418 , the Omnibus Trade & Competitive Act of 1988 Full text : http://www.ustreas.gov/press/releases/reports/fxreportfinalfor%20webapril152009.pdf International Religious Freedom Report , China ( a nnual report ) Most recent date available : October 26, 2009 Agency : U.S. Department of State Legislative authority : P.L. 105-292 , the International Religious Freedom Act (IRFA) of 1998, Section 203 Full text : http://www.state.gov/g/drl/rls/irf/2009/127268.htm U.S. Commission on International Religious Freedom ( annual repor t) M ost recent date available : May 2009 Agency : U.S. Commission on International Religious Freedom (USCIRF) Legislative authority : P.L. 105-292 , the International Religious Freedom Act (IRFA) of 1998, Section 203 Full text : http://www.uscirf.gov/images/AR2009/final%20ar2009%20with%20cover.pdf Reports on Human Rights Practices, China ( annual report ) Most recent date available : February 25, 2009 Agency : U.S. Department of State Legislative authority : The Foreign Assistance Act of 1961 (FAA), as amended, Sections 116(d) and 502(b); and the Trade Act of 1974, as amended, Section 504 Full text : http://www.state.gov/g/drl/rls/hrrpt/2008/eap/119037.htm Military Power of the People's Republic of China ( annual report ) Most recent date available : March 25, 2009 Agency : U.S. Department of Defense Legislative authority : P.L. 106-65 , the National Defense Authorization Act for FY2000, Section 1202 Full text : http://www.defenselink.mil/pubs/pdfs/China_Military_Power_Report_2009.pdf Unclassified Report to Congress on the Acquisition of Technology Relating to Weapons of Mass Destruction and Advanced Conventional Munitions ( annual report ) Most recent date available : January 1-December 31, 2008 Agency : Director of Central Intelligence Legislative authority : FY1997 Intelligence Authorization Act, Section 721 Full text : http://www.fas.org/irp/threat/wmd-acq2008.pdf International Narcotics Control Strategy Report ( annual report) Most recent date available: February 2009 Agency: U.S. Department of State, Bureau for International Narcotics and Law Enforcement Matters Legislative authority : Section 489 of the Foreign Assistance Act of 1961, as amended (the "FAA," 22 U.S.C. § 2291); sections 481(d)(2) and 484(c) of the FAA; and section 804 of the Narcotics Control Trade Act of 1974, as amended). Also provides the factual basis for designations in the President's report to Congress on major drug transit or major illicit drug producing countries pursuant to P.L. 107-115 , the Kenneth M. Ludden Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2002, Section 591. Full text Volume I: http://www.state.gov/p/inl/rls/nrcrpt/2009/vol1/index.htm Full text Volume II: http://www.state.gov/p/inl/rls/nrcrpt/2009/vol2/index.htm Report to Congress on China 's WTO Compliance ( annual report) Most recent date available: December 11, 2008 Agency: United States Trade Representative Legislative authority: P.L. 106-286 , the U.S.-China Relations act of 2000, authorizing extension of Permanent Normal Trade Relations to the PRC, Section 421. Full text: http://www.ustr.gov/sites/default/files/asset_upload_file192_15258.pdf Report Monitoring to Congress on Implementation of the 1979 U.S.-PRC Agreement on Cooperation in Science and Technology ( biannual report) Most recent date available : April 15, 2005 Agency : U.S. Department of State, Office of Science and Technology Cooperation Legislative Authority : P.L. 107-314 , Bob Stump National Defense Authorization Act Section for FY2003, Section 1207 Full text : http://www.state.gov/g/oes/rls/or/44681.htm Report on Tibet Negotiations ( annual report ) Most recent date available : March 2009 Agency : U.S. Department of State, Bureau of East Asian and Pacific Affairs Legislative Authority : P.L. 107-228 , Foreign Relations Authorization Act, 2003, Section 613 Full text : http://www.tibetpolicy.eu/attachments/278_2009%20Tibet%20Negotiations%20report.pdf Congressional-Executive Commission Report ( annual report ) Most recent date available : October 10, 2009 Agency : Congressional-Executive Commission on China Legislative Authority : P.L. 106-286 , Normal Trade Relations with the People's Republic of China, 2000 Full text : http://www.cecc.gov/pages/annualRpt/annualRpt09/CECCannRpt2009.pdf
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The bilateral relationship between the U.S. and the People's Republic of China (PRC) is vitally important, touching on a wide range of areas including, among others, economic policy, security, foreign relations, and human rights. U.S. interests with China are bound together much more closely now than even a few years ago. These extensive inter-linkages have made it increasingly difficult for either government to take unilateral actions without inviting far-reaching, unintended consequences. The Administration of President Barack Obama has inherited from the George W. Bush Administration not only a greater array of policy mechanisms for pursuing U.S.-China policy, but a more complex and multifaceted U.S.-China relationship where the stakes are higher and where U.S. action may increasingly be constrained. Economically, the United States and China have become symbiotically intertwined. China is the second-largest U.S. trading partner, with total U.S.-China trade in 2008 reaching an estimated $409 billion. It also is the second largest holder of U.S. securities and the largest holder of U.S. Treasuries used to finance the federal budget deficit, positioning China to play a crucial role, for good or ill, in the Obama Administration's plans to address the recession and the deteriorating U.S. financial system. At the same time, China's own substantial levels of economic growth have depended heavily on continued U.S. investment and trade, making China's economy highly vulnerable to a significant economic slowdown in the United States. Meanwhile, other bilateral problems provide a continuing set of diverse challenges. They include difficulties over the status and well-being of Taiwan, ongoing disputes over China's failure to protect U.S. intellectual property rights, the economic advantage China gains from not floating its currency, and growing concerns about the quality and safety of products exported by China. China's more assertive foreign policy and continued military development also have significant long-term implications for U.S. global power and influence. Some U.S. lawmakers have suggested that U.S. policies toward China should be reassessed in light of these trends. During the Bush Administration, the U.S. and China cultivated regular high-level visits and exchanges of working level officials, resumed military-to-military relations, cooperated on anti-terror initiatives, and worked closely on the Six Party Talks to restrain and eliminate North Korea's nuclear weapons activities. These and other initiatives of engagement are likely to continue in some fashion during the Obama presidency. Obama Administration officials already have made known their views about China's importance for U.S. interests. Secretary of State Hillary Clinton included China in her first official trip abroad as Secretary in February 2009, which included stops in Japan, Indonesia, South Korea, and China (February 20-22). In addition, the Administration established a new Strategic and Economic Dialogue with the PRC in 2009, and President Obama in November 2009 made his first official visit to China. This report addresses relevant policy questions in current U.S.-China relations, discusses trends and key legislation in the current Congress, and provides a chronology of developments and high-level exchanges. It will be updated as events warrant. Additional details on the issues discussed here are available in other CRS products, noted throughout this report. For background information and legislative action during the 110th Congress, see CRS Report RL33877, China-U.S. Relations in the 110th Congress: Issues and Implications for U.S. Policy, by [author name scrubbed]. CRS products can be found on the CRS website at http://www.crs.gov/.
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On April 19, 2007, the Senate Committee on Armed Services Subcommittee on Strategic Forces held open and closed hearings on military space programs in review of the defense authorization request for fiscal 2008 and the Future Years Defense Program. The 1958 National Aeronautics and Space Act specified that military space activities be conducted by the Department of Defense (DOD). The Undersecretary of the Air Force is DOD's executive agent for space. The intelligence community makes significant use of space-based intelligence collection capabilities. The National Reconnaissance Office (NRO), an agency within DOD, builds and operates intelligence-collection satellites and collects and processes the resulting data, which are provided to users such as the National Geospatial-Intelligence Agency (NGA) and the National Security Agency (NSA). NRO, NGA, and NSA are all under the oversight of the Director of National Intelligence (DNI). DOD and the intelligence community manage a broad array of space activities, including launch vehicle development, communications satellites, navigation satellites (the Global Positioning System—GPS), early warning satellites to alert the United States to foreign missile launches, weather satellites, reconnaissance satellites, and developing capabilities to protect U.S. satellite systems and to deny the use of space to adversaries (called "space control" or "counterspace systems"). The 1990-1991 Persian Gulf War is dubbed by some as the first "space war" because support from space displayed great improvement over what was available during the previous major conflict, Vietnam. These systems continue to play significant roles in U.S. military operations. How to organize DOD and the intelligence community to work effectively on space programs has been an issue for many years. Congress established commissions to review the NRO in the FY2000 intelligence authorization act, P.L. 106-120 ; NGA (then called NIMA, the National Imagery and Mapping Agency) in the classified annex to the FY2000 DOD appropriations act, P.L. 106-79 ; and overall U.S. national security space management and organization in the FY2000 DOD authorization act, P.L. 106-65 . The NRO, NGA/NIMA, and "Rumsfeld Space Commission" reports are discussed below. Although U.S. military and civilian space programs are separated organizationally, the functions performed by satellites and the vehicles that launch them are not easily divided. Both sectors use communications, navigation, weather, and remote sensing/reconnaissance satellites, which may operate at different frequencies or have different capabilities, but have similar technology. The same launch vehicles can be used to launch any type of military, civilian, or commercial satellite. DOD uses some civilian satellites and vice versa. After the Cold War, interest in space weapons to attack satellites (antisatellite, or ASAT, weapons) or ballistic missiles declined initially, but was rekindled beginning with the 104 th Congress. Using satellites to attack ballistic missiles has been controversial since President Reagan's 1983 announcement of a Strategic Defense Initiative to study the viability of building a ballistic missile defense system to protect the United States and its allies. The Clinton Administration changed the name of the Strategic Defense Initiative Organization to the Ballistic Missile Defense Organization to reflect a new focus on theater missile defense in the wake of the Persian Gulf War, rather than national missile defense. The George W. Bush Administration changed the name to the Missile Defense Agency (MDA) to reflect its interest in broad missile defense goals. The concept of placing weapons in space, as part of a missile defense system or otherwise, remains controversial. A May 18, 2005, New York Times article reported that the new national space policy being developed by the Bush Administration would "move the United States closer to fielding offensive and defensive space weapons." Then-White House Press Secretary Scott McClellan, responding to questions at a White House press briefing, stressed that the new policy, still being developed, does not represent a substantial shift in U.S. policy. The same day, Representative Kucinich introduced a bill ( H.R. 2420 ) that would have banned weapons in space and the use of such weapons to damage or destroy objects in orbit. The House rejected (124-302) a Kucinich amendment to the Foreign Relations Authorization Act ( H.R. 2601 ) on July 20, 2005, that was similar to his bill. The issue of using weapons to destroy satellites has received renewed attention after the Chinese successfully destroyed a defunct weather satellite on January 11, 2007. Since the orbit of that satellite was approximately where the United States has many of its reconnaissance satellites, China's actions have caused a great deal of concern. Space is not a line item in the DOD budget and DOD's annual budget justifications do not include a figure for "space activities"; therefore, DOD funding figures must be used cautiously. DOD sometimes releases only partial information or will release without explanation new figures for prior years that are quite different from what was previously reported. A breakdown by program acquisition costs for individual weapon systems in the DOD budget request for FY2008 is available online at http://www.dod.mil/comptroller/defbudget/fy2008/fy2008_weabook.pdf . The FY2007 authorization and appropriations bills contain the authority and funding for DOD space activities, but, as mentioned, do not specify figures for those activities. The House and Senate passed conference agreements on both the FY2007 national defense authorization bill, H.R. 5122 , and the FY2007 defense appropriations bill, H.R. 5631 . The President signed the appropriations bill into law, P.L. 109-289 , on September 29, 2006, and he signed the authorization bill into law, P.L. 109-364 , on October 17, 2006. For many years, questions have arisen about whether DOD effectively manages its space activities, and several commissions and task forces have studied the issue. Congress created a commission in the FY2000 DOD authorization bill to make recommendations on the overall management of national security space programs. Chaired by Donald Rumsfeld, the commission released its report on January 11, 2001, shortly after Mr. Rumsfeld became Secretary of Defense. The "Rumsfeld Space Commission" made sweeping recommendations for management of DOD and intelligence community space programs. According to two reports by the Government Accountability Office (GAO), DOD intended to implement 10 of the 13 organizational recommendations, although no additional updates have been provided. Several DOD space programs have experienced significant cost overruns and schedule delays, raising concerns about DOD's acquisition process for space systems. The Defense Science Board (DSB) and Air Force Scientific Advisory Board (AFSAB) commissioned a task force chaired by retired Lockheed Martin executive Tom Young to review DOD space program acquisition because of significant cost increases in several programs; its May 2003 report was publicly released in September 2003. Four key findings of the report were that cost has replaced mission success as the primary driver in managing acquisition processes, creating excessive technical and schedule risk; the space acquisition system is strongly biased to produce unrealistically low cost estimates; government capabilities to lead and manage the acquisition process have seriously eroded; and there are long term concerns about the space industrial base. According to press reports, the task force produced an update in August 2004 that concluded that some of the space programs it criticized were making progress but still required close review, and that better coordination is needed between the military and intelligence agencies in setting requirements. On April 6, 2006, the Senate Committee on Armed Forces held a hearing on space acquisitions. At that hearing, Cristina T. Chaplain, GAO's Acting Director of Acquisition and Sourcing, testified that DOD's space acquisition programs continue to face substantial cost and schedule overruns. In some cases, according to Ms. Chaplain, cost growth has come close to or exceeded 100%, causing DOD to nearly double its investment with no corresponding increase in functionality. Additionally, many programs have experienced significant schedule delays—as much as six years—postponing delivery of promised capabilities to the warfighter. SBIRS-High is designed as a constellation of five satellites above the equator in geostationary orbit (GEO) plus sensors on two other satellites in highly-elliptical orbits (HEO). DOD still plans to launch the sensors on the two HEO satellites, but will procure, at most, three of the GEO satellites. The funds that would have been spent for the fourth and fifth GEO satellites reportedly will be used instead to design an alternative system using state-of-the-art technologies. Launch is scheduled for 2009. SBIRS-High will eventually replace the DOD's Defense Support Program series of early warning satellites that alert the National Command Authority to foreign missile launches; however, the program has encountered significant schedule delays and cost growth, breaching "Nunn-McCurdy" cost-growth limits several times. The May 2003 report of the Defense Science Board and Air Force Scientific Advisory Board criticized early program management of SBIRS-High and took a cautious attitude concerning whether the restructured program would succeed. An October 2003 GAO report concluded the program remained at "substantial risk of cost and schedule increases." Even though test delays and technical difficulties have become commonplace within SBIRS-High, Congress has continued to acknowledge the program's importance, and has therefore maintained high levels of funding. The President's FY2008 budget request of $1.07 billion represents a total increase of $400.9 million from FY2007, with $587 million reserved for RDT&E and $483 million for procurement. The proposal provides for the continued assembly, integration, and testing of the first two SBIRS geosynchronous (GEO) satellites as well as to the procurement of one SBIRS GEO satellite and two highly elliptical orbit (HEO) satellite payloads. First launch is expected in 2009. The Transformational Communications Satellite program is planned to be a follow-on to the Advanced Extremely High Frequency (AEHF) program, which, in turn, is a follow-on to the current series of Milstar satellites. AEHF itself is controversial because of cost overruns and changing satellite and constellation specifications. TSAT is expected to "transform" DOD communications by providing vastly greater capacity than is available today by operating at much higher (optical) frequencies. If TSAT is delayed, some observers suggest that additional AEHF satellites may be needed. In May 2006, GAO released a report outlining the ongoing issues and problems, in the development and deployment of the TSAT system. Specifically, GAO stated that DOD was not meeting original cost, schedule, and performance goals established for the TSAT program. However, GAO noted that DOD is taking positive steps to lower risk in the TSAT program so it can enter the product development phase with greater chance of success. The FY2007 appropriation for TSAT is $737.1 million, $130 million below the $867 million budget request. Congress also directed the Secretary of the Air Force to submit a report to the congressional defense committees explaining what actions the Air Force has taken to address the remaining concerns raised by the TSAT Program Review Group and the GAO, including (1) the need to significantly refine requirements so that program content can be matched to budget constraints, and how the Department plans to control requirements to prevent problems associated with 'requirements creep'; (2) the need to adequately staff the TSAT program office with experienced space acquisition professionals; (3) the status of refining key performance parameters so they provide specificity and validation metrics; and (4) the implications for other programs, such as Space Radar and Future Combat System, of a less capable initial block of TSAT satellites. This report was delivered February 15, 2007, as required. For FY2008, the President has requested a budget for research and development of $963.6 million—an increase of nearly $234 million over FY2007 funding levels. The total appropriation of $729.9 million in 2007 was a net increase of 43% from FY2006. The first TSAT was planned to launch in late 2014, but the Air Force pushed that date to early 2016. Space Radar is planned to consist of a yet-to-be-determined number of satellites that would track mobile targets (as opposed to fixed targets) on the ground. As of January 2007, the Air Force had not yet decided on the final design of the satellites or the final architecture of the constellation. The House Appropriations Committee has sharply criticized the program for the past several years due to ongoing cost overruns and missed R&D milestones. Congress also directed the Secretary of Defense and the Director of National Intelligence (DNI) to submit a joint report to the congressional defense and intelligence committees describing (1) the respective roles and responsibilities of the intelligence community and the DOD with respect to the development of the Space Radar program, including an updated Memorandum of Agreement between the Secretary and the DNI; (2) the process by which the intelligence community and the DOD coordinate joint development efforts and requirements definition; and (3) the plans for achieving a cost-share agreement between the intelligence community and the Department for the development and acquisition of a Space Radar capability. Congress also asked for a commitment from the Secretary and the DNI that Space Radar would be a single system responsive to the requirements of each organization. This report was due March 1, 2007, but has not yet been submitted. Beginning in FY2008, funding for the Space Based Radar will transfer to the Defense Reconnaissance Support Activities Program and funding amounts have been classified for the FY2008 budget request because of the program's integration into the National Intelligence Community. For FY2007, Congress appropriated $186.4 million for the Space Radar program, nearly twice the FY2006 budget of $98.3 million. The first satellite launch is scheduled for FY2016. Additional information about Space Radar is available in the January 2007 Congressional Budget Office report, "Alternatives for Military Space Radar." This report outlines four alternative system/constellation architectures that would meet the mission requirements of the Air Force. The Space Tracking and Surveillance System (STSS, previously SBIRS-Low) is designed to support missile defense. The goal of an operational STSS is to track missiles through all three phases; discriminate between warheads and decoys; transmit data to other systems that will be used to cue radars and provide intercept handovers; and provide data for intercept hit/kill assessments. Tracking missiles during the mid-course phase is more difficult than during boost, because the missile is no longer firing its engines and hence does not have a strong infrared (heat) signature, making it necessary to track a cold object against the cold background of space. Similarly, tracking warheads after they have been deployed, and discriminating between warheads and decoys, is a technically challenging task. Cost estimates are problematic because there is no final system architecture and the schedule is in flux. In March 2005, GAO reported that DOD's estimate for the program between 2002 and 2011 is approximately $4.5 billion; a life cycle cost was not provided. For FY2008, the president requested a budget of $331 million for the STSS program, an increase from the FY2007 budget of $322 million. Launch information was not available.
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The 1958 National Aeronautics and Space Act specified that military space activities be conducted by the Department of Defense (DOD). DOD and the intelligence community manage a broad array of space activities, including launch vehicle development, communications satellites, navigation satellites (the Global Positioning System—GPS), early warning satellites to alert the United States to foreign missile launches, weather satellites, reconnaissance satellites, and developing capabilities to protect U.S. satellite systems and to deny the use of space to adversaries (called "space control" or "counterspace systems"). The 1990-1991 Persian Gulf War is dubbed by some as the first "space war" because support from space displayed great improvement over what was available during the previous major conflict, Vietnam. These systems continue to play significant roles in U.S. military operations. How to organize DOD and the intelligence community to work effectively on space programs has been an issue for many years. Tracking the DOD space budget is extremely difficult since space is not identified as a separate line item in the DOD budget. Additionally, DOD sometimes releases only partial information (omitting funding for classified programs) or will suddenly release without explanation new figures for prior years that are quite different from what was previously reported. A breakdown by program acquisition costs for individual weapon systems in the DOD budget request for FY2008 is available online at http://www.dod.mil/comptroller/defbudget/fy2008/fy2008_weabook.pdf. The FY2007 authorization and appropriations bills contain the authority and funding for DOD space activities, but, as mentioned, do not specify figures for those activities. The House and Senate passed conference agreements on both the FY2007 national defense authorization bill, H.R. 5122, and the FY2007 defense appropriations bill, H.R. 5631. The President signed the appropriations bill into law, P.L. 109-289, (H.Rept. 109-504; S.Rept. 109-292; H.Rept. 109-676: in Congressional Record H6996-7309) on September 29, 2006, and he signed the authorization bill into law, P.L. 109-364, (H.Rept. 109-452; H.Rept. 109-702: in Congressional Record H8061-8540) on October 17, 2006. Specific figures for the programs included in this report are contained in those sections.
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U.S. assistance to Colombia, virtually all of it related to counternarcotics efforts, has increased steadily sinceFY1995 (see Tables 1 and 6 ). The United States hasprovided equipment, supplies, and other aid for the counternarcotics efforts, initially largely to the ColombianNational Police (CNP), but recently increasingly tothe Colombian military. As of FY2000, more is being provided to the military. Most of the funding has supportedthe tracking, interdiction and arrest oftraffickers, the destruction of laboratories, and eradication efforts. Of pre-Plan Colombia assistance, a small amountsupported reforms to the judicial system, andalternative development. This amount was increased greatly in the Plan Colombia legislation. The State Department Bureau of International Narcotics and Law Enforcement (INL) has been the primary agency in counternarcotics efforts. INL runs the airwing which supplies aircraft for the narcotics crop eradication program in South America, in which Colombia isa major participant. INL also coordinates theactivities of other civilian agencies, such as the Drug Enforcement Administration (DEA), the Agency forInternational Development, and the Federal Bureau ofInvestigation (FBI), providing them with funds from the State Department's International Narcotics Control (INC)account. These agencies have worked withColombia's judicial system to improve law enforcement capabilities, criminal justice procedures, and theaccessibility and fairness of the justice system. Theyalso have assisted Colombia's eradication and interdiction efforts. The Department of Defense (DOD) also has been a major source of funding and support for Colombian counternarcotics efforts, mainly through programs whichare not considered "traditional foreign aid" programs. (1) Under defense legislation, DOD provides support for efforts to detect and monitor illicit narcoticsoperations, principally the maintenance of five radar sites in Colombia. DOD also conducts surveillance overflightsfrom locations outside Colombia. During1999, DOD helped establish, train and equip the first special Colombian Army counternarcotics battalion (CACB)of some 950 troops, which commencedoperations towards the end of that year. (2) Thebattalion was set up to conduct its own CN missions, as well as to provide security for the police counternarcoticsforces in their operations. DOD also sponsors a riverine CN program, training personnel of the Colombian Navyand Marines to control narcotics traffickingalong Colombia's extensive network of rivers. (3) Thenumbers of U.S. uniformed military personnel assisting in these efforts has varied in the low hundreds. The U.S. military and other agencies also have provided other support to the Colombian military and police. Through Section 506 (a) of the Foreign AssistanceAct of 1961, as amended, DOD and other agencies (see Tables 1 and 6 ) have provided substantialamounts of equipment to the Colombian military and police. (4) In addition, the United States has funded the construction of the Joint Intelligence Center (JIC) at TresEsquinas in southwest Colombia to strengthen police andmilitary intelligence gathering and analysis capabilities, and to encourage them to share intelligence. Many of the critics of military assistance have argued that although the aid is provided for counternarcotics purposes, it can be used to further counterinsurgencyefforts. News reports in the summer of 1998 alleged that the United States had provided covert assistance to theColombian military for counternarcotics andcounterinsurgency operations, including the participation of active duty military personnel and private contractors. (5) At the same time, the press reported thepresence of U.S. special operations forces who were training with Colombian military units under the JointCombined Exchange Training program (U.S.C. Title10, Section 2011), (6) which some interpreted asproviding de facto counterinsurgency aid. Although the Clinton Administration denied that the United States was providing counterinsurgency assistance, analysts acknowledged that some types of U.S.counternarcotics training provide lessons that can also be applied to counterinsurgency operations. The ClintonAdministration had also held that assistanceprovided to police and military forces in operations targeted at guerrilla drug production or protection activities fitwithin the definition of counternarcotics aid. InMarch 1999, however, the Clinton Administration expanded the conditions under which it provided intelligenceto Colombian security forces, routinely providinga Colombian police-military Joint Task Force with intelligence information related to the guerrillas. Although theUnited States provided the information to assistwith counternarcotics operations, the General Accounting Office reported that the U.S. Embassy in Colombia didnot have a system to ensure that the informationwas used only for counternarcotics purposes. (7) Table 1. U.S. Assistance to Colombia, FY1999-FY2001 (Obligations and authorizations, $ millions) Sources : General Accounting Office (GAO -01-26), Department of State, Congressional BudgetJustification for Foreign Operations for FY2001; U.S. Agencyfor International Development Budget Justification for FY2001, Annex IV; and information provided by Department of State and Department of Defenseofficials. This chart includes direct U.S. foreign assistance (i.e., the categories usually counted as U.S. foreign aid,which are in italics), as well as the costs of goods and services provided to Colombia from other U.S. government programs supporting counternarcotics effortsin Colombia. The United States alsoprovides a small amount of DOD Excess Defense Articles (EDA) to Colombia. Other funds are spent in Colombiaon counternarcotics and other activities thatare considered part of U.S. programs: for instance, the Drug Enforcement Administration (DEA) spends its ownfunds on joint operations in Colombia. Figureson FY2000 and FY2001 State Department INC funding provided January 10-11, 2001. Figures on DOD Sections1004, 124, 1004/124, and 1033 fundingprovided June 29, 2001; some $10.9 million of funds in the DOD accounts was planned for an FY2001 obligation,but as of July 5, 2001 had not actually beenobligated. * DOD Sections 124, 1004, and 1033 funding is taken from regional accounts and the tentative allocations forColombia can be shifted to respond to developingneeds in other areas. (Section 124 covers U.S. operated radar systems in Colombia and elsewhere, and other costsof U.S. detection and monitoring of drugflights.) a For FY1999, includes $173.2 million in Congressionally-mandated supplemental appropriationsfunding for helicopters, helicopter and aircraft upgrades, radar,and police assistance. FY2000 non-DOD Plan Colombia supplemental funds were all assigned to the StateDepartment INC account; the State Department istransferring them to the other agencies carrying out programs in Colombia with those funds. b The AID FY1999 figure includes $10.0 million in disaster relief funding and $3.0 million inEconomic Support Funds (ESF). AID pipeline funding of $5.0million in development funding authorized in previous years was expended in FY1999. The AID FY2000 andFY2001 figures are all ESF. These AID figures donot include funds provided to AID from the INC account. c FMF pipeline funding of $13 million authorized prior to FY1995 and funding available from theFY1995 FMF authorization was intended to be expended frommid-FY1997 through FY1999. As presented to the 106th Congress, initially on January 11, 2000, and then with the annual budget request on February 7, 2000, the Clinton Administration aidproposal to support the Colombian government's "Plan Colombia" contained over $954 million in supplementalFY2000 funding and over $318 million forFY2001 spending. (This was in addition to about $150 million allocated and planned for existing programs in eachfiscal year.) The proposal's centerpiece wasthe "Push into Southern Colombia" program, which was intended to enable the Colombian government to extendCN activities throughout southern Colombia. There, coca cultivation was expanding rapidly throughout areas where the Colombian guerrillas have operated. Thecore of the Southern Colombia programincluded training and equipping two new army CN battalions, and purchasing Blackhawk and Huey helicopters totransport them. According to DOD sources, thetwo new battalions could complete training for operations within seven months of the date funding was approved;the Black Hawk helicopters requested for theirtransportation could be provided, and pilots trained to operate them, about 18 months from the funding date. Totalfunding for the Southern Colombia (SC)program requested by the Administration was $512 million in FY2000 and $88 million in FY2001. Of this, AIDwould receive $31 million to resettle and fundalternative economic opportunities for peasants who would be deprived of their livelihood by operations in SouthernColombia. The remaining proposedassistance, to be administered by six agencies, was divided into five other categories: (1) drug traffickinginterdiction, (2) improving CNP eradication capabilities,(3) economic development, (4) "boosting government capacity," i.e., funding to support human rights monitors andimprove the justice system and the rule of law;and (5) other economic assistance and assistance for the peace process. According to Administration sources, the Push into Southern Colombia program was the first part of a planned six-year counternarcotics effort. In testimonybefore the House Armed Services Committee on March 23, 2000, Gen Charles E. Wilhelm, Commander in Chiefof the U.S. Southern Command, outlined asix-year plan for attacking the cultivation and production of illegal narcotics. He testified that the efforts in SouthernColombia are the first phase of a three phasecounternarcotics plan of the Colombian security forces. In the second two-year phase, efforts would be concentratedon the Meta and Guaviare provinces to theeast. The third two-year phase would "move to the north to Santander and other provinces." At the same hearing,Rand Beers, the Assistance Secretary of Statefor International Narcotics and Law Enforcement Affairs, stated that "we can reasonably expect to have a seriouslook at success in four to six years." OtherAdministration witnesses, in other hearings, have stated that it would take one to two years for the program to showresults. House Action. On March 9, 2000, the House Appropriations Committee approved an emergency supplementalappropriations act ( H.R. 3908 , reported March 14, H.Rept. 106-521 ), that included some $1.418 billion infunding for FY2000 and FY2001counternarcotics efforts in Colombia, its neighbors, and other parts of Latin America and the Caribbean. (This wasout of a total of $1.7 billion in the bill forcounternarcotics purposes; the other $282 million is for a domestic program.) This amounted to about $146 millionmore than the Administration included forsuch purposes. This figure included, however, funds for items that were not included in the President's calculationand that it was anticipated would have beenaddressed elsewhere in FY2001 appropriations, i.e., almost $79 million more for DOD military construction fundingfor the Aruba and Curaçao ForwardOperating locations (FOLs) in FY2000 and FY2001, and for the Ecuador FOL in FY2001. Among the House Appropriations Committee's increases over the President's proposal were: $42 million more for alternative development activities in Bolivia,Peru, and Ecuador; $19 million more for interdiction efforts in Bolivia, Peru, Ecuador, and other countries; $25million more for U.S. classified activities; and$10.5 million more for U.S. Drug Enforcement Administration (DEA) programs directly related to the Andeanregion. The committee reallocated $26 million fortwo Blackhawk helicopters from support for the Colombian Army Counternarcotics Battalions (CACBs) to supportfor the Colombian National Police (CNP). Among the decreases were almost $20 million less for the CACBs (in addition to the reallocationof Blackhawks), and $11 million less for riverine interdictionprograms. (See Table 4 for a breakdown of the funding.) The House Appropriations Committee passed two amendments to the mark-up bill dealing with illegal rightist "self-defense" groups. One was a sense of theCongress resolution that the Secretary of State "should immediately" place the United Self-Defense Forces ofColombia (AUC) on the list of foreign terroristorganizations. The other provided that any helicopter provided to the Colombia army should be returned to theUnited States if it is used "to aid or abet theoperations of an illegal self-defense group or security cooperative..." On March 30, the House approved the same funding levels in its action on the bill. The House rejected three amendments to cut counternarcotics funding.These were: the Ramstad amendment (rejected 158-262) to delete all $1.7 billion ofcounternarcotics funding in the bill; the Pelosi amendment ( rejected by voice vote) to cut $51 million from DODfunding, i.e., the amount allocated for the DOD contributionto the Push into Southern Colombia initiative; and the Paul amendment (rejected 45-367) to cut counternarcotics and other Kosovoand East Timor funding. It also rejected, 186-239, the Obey Amendment to cut $551 million in military funding, but to provide an expedited procedure for its consideration in July. The House approved, 380-39, the Gilman/Goss/Delahunt/Farr amendment which would condition the funding, but included a provision for the President towaive those conditions if "required by extraordinary circumstances." The amendment also allocated $2 million forspecific human rights purposes, including U.S.monitoring of the armed forces, guerrillas, and paramilitary groups, and prohibited the State Department fromissuing a visa to any person who was "crediblyalleged to have provided direct or indirect support for the Revolutionary Armed Forces of Colombia (FARC), theNational Liberation Army (ELN), or the UnitedColombian Self-Defense organization (AUC), including conspiracy to allow, facilitate, or promote the illegalactivities of such groups." The visa prohibitioncould be waived deemed "in the national interest." The House also approved by voice vote the Sawyer amendment to earmark $50 million for assistance to displaced persons; the House Appropriations Committeeversion of the bill had allocated $24.5 million to assist currently displaced persons. The House acted on two similar Taylor amendments . The first was ruled out of order because it would have affected existing legislation in an appropriations,rather than an authorization act. That amendment would have limited the total number of U.S. troops in Colombiaat any one time to 300, excepting those presenton an emergency rescue mission or stationed as attaches or with the Marine guard at the U.S. Embassy. The second,approved by voice vote, would limit to 300the number of U.S. military personnel that could be supported by funds appropriated by the bill. On May 10, the House Armed Services Committee approved conditions on the deployment of U.S. troops to Colombia as it reported its version of the FY2001National Defense Authorization bill, H.R. 4205 . Section 1204 would limit to 500 the number of U.S. troopsthat could be deployed there at any onetime, except for diplomatic and emergency purposes. The Senate FY2001 authorization bill, S. 2549 , did notcontain such a limitation. Senate Action. On May 9, the Senate Appropriations Committee included Plan Colombia funding in itsversions of the FY2001 Military Construction ( S. 2521 , S.Rept. 106-290 ) and FY2001 Foreign Operations( S. 2522 , S.Rept. 106-291 )appropriations bills, reported that day. Funding in these bills for the Plan Colombia items requested by theAdministration and/or approved by the House in H.R. 3908 would total some $1,138.0 million in FY2000 emergency supplemental funds. The greatestdifference between the Senate AppropriationsCommittee action and H.R. 3908 was the elimination of the $388 million that the House provided for theacquisition of 30 Blackhawk helicopters. Instead, the Senate Appropriations Committee approved $118.5 million for the acquisition of 60 Huey II helicoptersfor the use of Colombian ArmyCounternarcotics Battalions. (The military construction bill also included additional counternarcotics items that could be considered as related to Plan Colombia. These were $30 million toreplace an a reconnaissance aircraft that crashed in Colombia in 1999, and $44 million for Coast Guard procurementpreviously authorized in Section 812(b) ofthe Western Hemisphere Drug Elimination Act as contained in P.L. 105-277 . A total of $74.9 million was includedin S. 2521 for Coast Guard druginterdiction activities.) The Military Construction bill ( S. 2521 ) would provide $85.7 million in FY2000 emergency funding for DOD support of Colombian Armycounternarcotics battalions, and for other support for Colombian and U.S. counternarcotics efforts. It also wouldprovided $116.5 million for the construction ofForward Operating Locations in Ecuador, and Aruba/Curacao. The Foreign Operations bill ( S. 2522 ) wouldprovide $934.1 million, also in FY2000emergency funding, in support for the Colombian Army Counternarcotics Battalions (CACBs) and other activities.No FY2001 funding was included under thePlan Colombia categories in either of the bills, although the bill seems to indicate that the funding can be used ineither fiscal year. (See Table 4 for a breakdownof the funding.) On May 18, the full Senate approved S. 2521 , with funding and conditions for PlanColombia unchanged. ( S. 2521 wasthen incorporated as a substitute amendment into H.R. 4425 , the House version of the bill which containedno Plan Colombia funding, and the Senatepassed its amended version of H.R. 4425 in lieu of S. 2521 .) Senate Conditions on Assistance. The Military Construction bill limited the amount of funding that could beprovided to the government of Colombia in support for its counternarcotics programs to $45 million. The Senate appropriations committee version of the Foreign Operations bill placed extensive conditions on funding. These included: a requirement for the trial by civilian courts of Colombian military personnel credibly alleged to be guilty of gross violations of humanrights, and their suspension from duty pending trial for such offenses or if they have been credibly alleged to haveassisted paramilitary groups, and the fullcooperation of the Colombian Armed Forces with civilian authorities in investigating, prosecuting and punishingsuch personnel (Section 6101). To obligatefunds for FY2000 and FY2001, the Secretary of State must first certify that these conditions have been met, and thatthe government of Colombia is vigorouslyprosecuting leaders and members of the paramilitaries; a prohibition on the use of funds to support aerial herbicide spraying unless the Surgeon General reports to the appropriate congressionalcommittees that the herbicide is safe and nontoxic to human health, and the Environmental Protection Agencyreports that it does not contaminate water or leachin soil (Section 6105); a limit of 250 on the number of U.S. military personnel that could be assigned to temporary or permanent duty in Colombia (exclusive ofthose assigned to the U.S. diplomatic mission there), and a limit of 100 on the number of U.S. civilian contractorsin Colombia in support of Plan Colombia. ThePresident can request that Congress waive this provision, which it could do by enacting a joint resolution. Theprovision could also be waived for a single 90-dayperiod if the President determines that U.S. troops "are involved in hostilities" or that such involvement "is clearlyindicated by circumstances;" (Section6106); a prohibition on the use of any funds other than those made available by this bill or by FY2001 military construction appropriations for PlanColombia, unless Congress approves a presidential request to use other available funding by enacting a jointresolution (Section 6106). The bill also would have required that (1) the President report to designated Congressional committees on theobjectives of U.S. counternarcotics strategy inColombia and neighboring countries, the benchmarks by which progress could be measured, and other elementsregarding U.S. policy; and (2) the Secretary ofState report within six months of enactment and every six months after regarding the status of U.S. requests forextradition to countries receiving U.S.counternarcotics aid (Section 6102). It contained a three-point statement of the Sense of Congress on counternarcotics measures (Section 6103). The "PlanColombia" title specifically incorporated "Leahy Amendment" human rights conditions contained in previouslegislation (Section 564 of P.L. 106-113 , andSection 8098 of P.L. 106-79 , see above). Senate Action on S. 2522. In June 21-22 action on S. 2522 , which was approved by theSenate on June 22, the Senate either tabled or rejected three amendments to reduce or condition funding forColombia. These were: a Senator Wellstone amendment to eliminate the $225 million Push into Southern Colombia program and instead use the funds for domesticsubstance abuse and mental health services, tabled 89-11; a Senator Gorton amendment to reduce total Plan Colombia funding to $200 million, which could be spent in Colombia and otherCaribbean, Central and South American countries at the discretion of the Secretary of State, rejected19-79; a Senator Dodd amendment to provide not less than $110 million for procurement and support of helicopters, but to permit the Departmentof Defense to decide in consultation with the Colombian military which model or models should be purchased,rejected 47-51. By voice vote, the Senate approved several amendments on Colombia. These included a Senator Shelby amendment to exempt certain intelligence andintelligence-related activities from the limitation on the assignment of U.S. personnel in Colombia; a Senator InhofeSense of the Senate condemnation of thepresumed FARC kidnapping of three Americans; Senators Sessions and Leahy amendments adding and clarifyingreporting and certification requirements; aSenator Byrd amendment loosening conditions and limitations on funds for and personnel in Colombia; and aSenator Harkin clarification of an earmark for childsoldiers. The chair tabled a Senator Boxer amendment to prohibit the use of funds from the act and from Departmentof Defense funds for four purposes related toU.S. support for and participation in counterinsurgency, law enforcement, and counternarcotics operations inColombia. Some $1.289 billion in emergency supplemental appropriations was included for Plan Colombia in the conference version of H.R. 4425 ( H.Rept.106-710 , filed June 29,) Military Construction appropriations for FY2001. The report was passed by the House onJune 29 and by the Senate on June 30, andsigned into law on July 13 ( P.L. 106-246 ). The conference committee version of Plan Colombia included some $154.06 million in Department of Defense counternarcotics funding (compared to $185.8million provided in the House and $85.7 million provided in the Senate. The Senate and conference version alsoincluded $30 million under the DODsupplemental title for an Airborne Reconnaissance Low aircraft, in addition to Plan Colombia funding.) Theconference report also included some $1,018.5million in State Department funding for the Plan (compared to $1,099.0 million in the House and $934.1 millionin the Senate). Under a contingent emergencysupplemental funding military construction provision, the conference report included $116.5 million for threeforward operating locations, as did the Senate,compared to $38.6 million in the House. Some $860.2 million or 67% was appropriated to support programs in Colombia. The largest sum - some $416.9 million - was for helicopter, training, andother assistance to three Colombian Army counternarcotics battalions. Some $115.6 million was provided for theanti-drug operations of the Colombian NationalPolice, and $99.8 million for Colombian interdiction efforts. Other assistance included $58.5 million in economicand alternative development and employmentassistance; $47.5 million in assistance to displaced persons (included $25 million for persons who would be affectedby the Push into Southern Colombiaprogram); $53.5 million for human rights; $65.5 million for administration of justice, rule of law, and othergovernance programs; and $3.0 million for the peaceprocess. On the most controversial issues or disparate points, the conference report: Provided a total of $294.0 million for helicopter procurement and sustainment for the Army counternarcotics battalions and police, comparedto the Administration request and House action of $388.0 million and the Senate action of $118.5; Fully funded House and Senate increases in funding for human rights in Colombia, but cuts funding for other governanceaccounts; Contained the Senate's human rights conditionality on funding, but also provides a national security waiver; and Earmarked in regional funding $110 million for Bolivia, of which at least $85.0 million is to be used for alternative development, and $20million for Ecuador, of which at least $8.0 million is to be used for regional development but provides no earmarkedfunding for Peru, unlike the House andSenate bills. These and other salient provisions are compared with House and Senate legislation in Tables 4 and 5 , below. Six new limitations were placed on funding for Plan Colombia, and one restriction was placed on the use of other funds for Plan Colombia. Under Section3201(a)(3), the law also conditioned the assistance provided through the Department of State funding on theprovisions of the two existing Leahy amendments(Section 564 of the Foreign Operations, Export Financing, and Related Programs Appropriations Act, 2000, P.L.106-113 , and Section 8098 of the Department ofDefense Appropriations Act, 2000, P.L.106-79 , as cited above). Limitation on Use of Helicopters. The law provided for the return to the United States of any helicopter procured with its funding that is used to aid or abet the operations of an illegal self-defense group or securitycooperative. ( H.Rept. 106-710 , p. 63.) Personnel Caps. In order to assign more than 500 U.S. military personnel for temporary or permanent duty insupport of Plan Colombia, or hire more than 300 individual civilian contractors for the same purpose, the lawprovided that Congress' approval must be securedthrough the enactment of a joint resolution, as specified in Section 3203. This condition can be waived once, in theevent that U.S. Armed Forces are involved inor facing imminent hostilities. The joint explanatory statement of the conferees stated that the caps did not applyto military personnel who are not directlysupporting Plan Colombia. ( H.Rept. 106-710 , p. 171.) Funding Cap on Department of Defense Assistance. Section 3101(a) set a cap of $45 million from DOD fundsfor the types of counternarcotics support detailed in Section 1033 of the P.L. 105-85 for programs of theGovernment of Colombia. Limitations on Use of Department of Defense Assistance. Section 3101(b) limited the use of DOD funds to thetypes of support allowable under Section 1033 (c)(1) of P.L.105-85 , the National Defense Authorization Act forFY1998. (This, in turn, referred to Section1031(b)(1) and (2) of P.L.104-201 , the National Defense Authorization Act for FY1997.) The allowable aid waslimited to various types of non-lethal assistance,including protective and utility personnel equipment; specialized equipment; navigation, communications, photo,radar and night vision repairs, equipment andparts; and components, accessories, parts, firmware, software for aircraft and patrol boats, and related radarequipment. Restriction on Visas. Section 3205 prohibited the State Department from issuing a visa to any person "credibly alleged to have provided direct or indirect support for the Revolutionary Armed Forces of Colombia(FARC), the National Liberation Army (ELN), orthe United Colombian Self-Defense organization (AUC), including conspiracy to allow, facilitate, or promote theillegal activities of such groups." The Presidentcan waive this condition on national interest grounds. Exemptions were provided for medical reasons, prosecutionin the United States, and cooperation withinvestigations of crimes committed by FARC, ELN or AUC members. Population Planning Restriction. Section 3206 made all funding appropriated under Plan Colombia "or anyother provision of law for fiscal year 2000" subject to the population planning restrictions of Section 599(d) of TitleII of the Foreign Operations, ExportFinancing, and Related Programs Appropriations Act, 2000 ( H.R. 3422 ), as enacted into law by reference insection 1000(a)(2) of P.L.106-113 , theConsolidated Appropriations Act for FY2000. Overall Limitation on Funding. Section 3204 prohibited the use of any funds for Plan Colombia other thanthose specifically appropriated by this act or by other specified FY2001 appropriations acts or those taken fromunobligated balances for other programs servingsimilar purposes, unless specifically allowed by an Act of Congress. As enacted, Plan Colombia required four Administration certifications and three reports to Congress prior to the obligation of fund for each FY2000 and FY2001,and six subsequent one-time or periodic reports. In approximate chronological order, the certification and reportingrequirements are: Initial Reports on the Proposed Uses of Funds. Within 30 days of enactment, i.e., by August 12, 2000 , andprior to any obligation of funds, the Administration must provide two reports on the proposed use of funds. Underthe State Department funding provisions, TitleIII, Chapter 2, the Secretary of State, in consultation with the Secretary of Defense and the AID Administrator mustreport to the appropriations committees on theproposed uses, by country for each program, project, or activity, of all funds provided through the Department ofState. ( H.Rept. 106-710 , Title III, Chapter 2, p.63.) The Conferees' explanatory statement directed the Secretary of Defense to report to the appropriationscommittees no later than 30 days after enactment, i.e., August 12, 2000 , on the proposed uses for Department of Defense funds provided under TitleIII, Chapter 1, and steps taken to ensure maximum force protection,including the rules of engagement. It also directed the Under Secretary of Defense (Comptroller) to report todefense committees 15 days before any obligation ortransfer of funds for uses not consistent with the specific purposes of the Administration request and the statementof the managers. ( H.Rept. 106-710 , p. 165.) Clinton Administration Action. The State Department submitted this report to Congress on July 27, 2000. (Postedby the Center for International Policy at http://www.ciponline.org/colombia/080102.htm . Initial Human Rights Certifications and Subsequent Reports. Prior to the obligation of FY2000 and of FY2001assistance provided through the State Department funding (Title III, Chapter 2), Section 3201 required the Secretaryof State to certify to the appropriations andforeign affairs committees that the Colombian government and the Colombian armed forces have met six humanrights criteria. These were: that the President of Colombia has directed in writing that Colombian Armed Forces personnel who are credibly alleged to have committedgross violations of human rights be brought to justice in Colombia's civilian courts; that the Colombian Armed Forces Commander General promptly suspend from duty any ColombianArmed Forces personnel who werecredibly alleged to have committed gross violations of human rights or to have aided or abetted paramilitarygroups; that the Colombian Armed Forces and its Commander General were fully complying with the abovepresidential directive and with the abovesuspension criterion; that the Colombian Armed Forces and its Commander General were cooperating fully with civilianauthorities in investigating, prosecuting,and punishing in civilian courts Colombian military personnel who are credibly alleged to have committed grossviolations of human rights; that the Colombian government vigorously prosecuted in civilian courts the leaders and members ofparamilitary groups and militarypersonnel assisting them; and that the Colombian Armed Forces developed and deployed in their field units a Judge AdvocateGeneral Corps to investigate ColombianArmed Forces personnel for misconduct. Another condition required a statement regarding the Colombian government counternarcotics strategy, as cited in the next section, below. The President couldwaive compliance with these conditions if he deemed it in the national interest. Before issuing this certification,the Secretary must have consulted withinternationally-recognized human rights groups on these matters. In addition, in the joint explanatory statement, the conferees stated that they expected subsequent reports on compliance with these and related specified humanrights conditions regarding members of the military and paramilitary, and on other matters within 60 days afterenactment, i.e., September 11, 2000, and every180 days thereafter . The three additional subjects to be covered were: (1) the extent to whichinvestigations and prosecutions are proceeding of thoseresponsible for attacks against human rights defenders, government prosecutors and investigators, and officials ofthe civilian judicial system in Colombia; (2) thenumber of civilian displaced by the Push into Southern Colombia and the actions taken to address their social andeconomic needs; and (3) the actions taken bythe United States and the Colombian government to promote a negotiated settlement of the Colombian conflict.( H.Rept. 106-710 , pp. 171-172.) Clinton Administration Action. On August 22, 2000, President Clinton waived five of the six human rightscertification requirements, after the State Department had determined that the only criteria met by the Colombiangovernment was the issuance of the requiredpresidential directive on August 17. In an August 18 certification issued by the acting Secretary of State, the actingSecretary determined that while theColombian government was "actively taking steps to meet the other conditions on assistance...more work needs tobe done before the Administration can certifythe six remaining conditions of Section 3201, five of which address human rights-related criteria." (For furtherinformation, see the State Department pressstatement at http://secretary.state.gov/www/briefings/statements/2000/ps000823.html , available as of August 24,2000. The lengthy Memorandum ofJustification released in connection with the Presidential waiver detailed the progress made in the criteria areas andthe Administration's continuing concernsabout them. On September 11, 2000, the Clinton Administration submitted the 60-day report. Available at http://www.ciponline.org/colombia/091101.htm . In January 2001, the Clinton Administration determined that a second certification was not required. (All State Department funding had been obligated inFY2000.) However, on January 19, President Clinton issued a White House report on progress towards thecertification requirement, which found that whileprogress had been made, "more needs to be done." Available at http://www.ciponline.org/colombia/011902.htm .As with the August certification, human rightsgroups issued their own, less favorable perspective on the situation. For their reports, see the websites of AmnestyInternational, Human Rights Watch, or theWashington Office on Latin America.) Bush Administration Action. As of the date of this report, the Bush Administration was still processing the reportrequired in March 2001, according to a State Department official. Initial Certification on Colombian Drug Strategy. Section 3201 also prohibited the obligation or expenditure offunds provided under the State Department funding in Title III, Chapter 2, until the President certified to theappropriations and foreign affairs committees thatColombia had agreed to and was implementing a strategy to eliminate coca and opium poppy production by 2005through a mix of alternative developmentprograms; manual eradication; aerial spraying of chemical herbicides; tested, environmentally safe mycoherbicides;and the destruction of illicit narcoticslaboratories. Clinton Administration Action. The President waived this requirement in his August 22 action on Plan Colombia. The Memorandum of Justification accompanying the presidential waiver determination stated that the"Administration does not believe that this criterion can bemet. The Colombian Government in Plan Colombia has set a goal of eliminating 50 percent of the drug cropcultivation within five years (October 2005). Thistarget is in keeping with the much-heralded reductions achieved in Peru and Bolivia. A 50 percent reduction issignificant, realistic, and obtainable." Thedetermination also stated that the total elimination of coca and poppy production by 2005 would require moreresources than contemplated under Plan Colombia. Initial Certification of U.S. Support for Negotiated Settlement, and Subsequent Reports. Prior to the obligationof any funds for FY2000, and then again for FY2001, under Section 3207 the Secretary of State must have certifiedthat the United States government supportedColombia's military and political efforts to be "consistent with human rights conditions in section 3101, necessaryto effectively resolve the conflicts with theguerrillas and paramilitaries that threaten the territorial integrity, economic prosperity, and rule of law in Colombia." As referred to under the section above on theinitial human rights certifications, the conferees also wanted a discussion of the actions taken by the United Statesand the Colombian government to promote anegotiated settlement of the Colombian conflict, as part of the follow-up reports on human rights conditions "expected" on September 11, 2000 and every 180days thereafter. ( H.Rept. 106-710 , p. 172.) Clinton Administration Action. Certification submitted mid-August, 2000, with a memorandum of justification. Initial Certification Regarding Preparedness Effects and the Uses of Equipment and Materiel. Fifteen daysprior to the initial obligation of Title III, Chapter 1 Department of Defense funds for FY2000, Sections 3101(c) and(d) required that the Secretary of Defense mustcertify to the defense and foreign affairs committees on several matters in accordance with provisions of Section1033 (f)(1) and (g) of P.L.105-85 (the NationalDefense Authorization Act for FY1998). This certification have must stated (1) that the provision of support wouldnot adversely affect the preparedness of theU.S. Armed Forces, (2) the equipment and materiel provided would only be used by officials and employees of thegovernment who have undergone backgroundinvestigations by the Colombian government and been approved by that government to perform counter-drugactivities on the basis of those investigations, (3) thatsuch equipment and materiel would not be transferred by sale gift, or otherwise to unauthorized persons or entities,and will only be used for the United States'intended purposes, (4) that the recipient government had put in place a system to account for and inventory suchequipment and personnel, (5) that the recipientgovernment would grant U.S. personnel access to the equipment and personnel and the right of continuousobservation and review, and (5) that it would providethe same security as would the U.S. government. Clinton Administration Action. Certification submitted August 21, 2000. Initial Report on Department of Defense Contracts. No funds appropriated under Title III, Chapter 1, could beobligated or spent "for training, logistics, support, planning or assistance contracts for any overseas activity until15 days after the Assistant Secretary of Defensefor Special Operations and Low-Intensity Conflict reports to the congressional defense committees on the value,duration and purpose of such contracts." ( H.Rept. 106-710 , p. 61.) Clinton Administration Action. Numerous reports submitted, one for each contract signed, beginning August 29,2000. Initially, at least, the contracts were unclassified. Reports on Private Contractors. The conferees' joint explanatory statement directed the Assistant Secretary ofDefense for Special Operations and Low-Intensity Conflict to report monthly to the defensecommittees (1) identifying all private firms providing support to PlanColombia, (2) specifying the number of American citizens located abroad to execute supporting contracts, and (3)specifying the number of military personnel andU.S. government employees operating in Colombia and the surrounding region in support of Plan Colombia. ( H.Rept. 106-710 , p. 165.) Clinton Administration Action. These reports are classified, but according to a State Department official, the firstreport was submitted in January 2001, and subsequent reports were prepared. Report on U.S. Regional Counternarcotics Strategy. Within 60 days of enactment, i.e., by September 11,2000 , the President was to have submitted to the foreign affairs and appropriations committees, underSection 3202, a report on current U.S. strategy regardingU.S. counternarcotics assistance for Colombia and neighboring countries. This were to include: (1) key objectivesand benchmarks for measuring theirachievement, and the actions required to advance the objectives; (2) the role of the United States in the Colombiangovernment's counternarcotics efforts andefforts to combat the leftist counterinsurgent groups and the rightist paramilitary forces; (3) the relationship of U.S.counternarcotics strategy in Colombia to theU.S. counternarcotics strategy towards Colombia's neighbors and U.S. global counternarcotics strategy; (4) aschedule for providing material, technological, andlogistical support to defend the rule of law and achieve counternarcotics aims; and a schedule for making theForward Operating Locations operational. Clinton Administration Action. Submitted October 26, 2000. Available at http://www.ciponline.org/colombia/102601.htm . Report on the Effects of Herbicides. The conferee's explanatory statement directed the Secretary of State, afterconsulting with heads of other relevant U.S. agencies, to report to the Congressional appropriations committeeswithin 60 days of enactment, i.e., by September11, 2000 , on the effects on human health and safety of the herbicides used under the provisions of TitleIII of the bill. ( H.Rept. 106-710 , p. 172) Clinton Administration Action. State Department report submitted January 23, 2001. The report indicates thatglyphosate and other the ingredients in the mixture sprayed on coca crops in Colombia are safe when used accordingto label instructions. It notes that theColombian government has approved two of the additives, while classifying them as "lightly toxic." The report isavailable at http://www.ciponline.org/colombia/012301.htm . Report on Status of Requested Extraditions. No later than 6 months after enactment, i.e., by March 13, 2001 ,and every six months after that during which Plan Colombia funds are made available, the Secretary of State mustsubmit to foreign affairs and appropriationscommittees under Section 3202 a report on the status of persons whose extradition has been requested from anycountry receiving counternarcotics assistance fromthe United States. Bush Administration Action. This report is being prepared, according to a State Department official. Report on Costs of Support for Plan Colombia. No later than June 1, 2001 , and no later than December 1 andJune 1 of the next four fiscal years , the President must submit a report to Congress detailing the costs, bydepartment, agency, or other entity, of support for PlanColombia under Section 3204 (e). Bush Administration Action. This report has been prepared and is awaiting the President's approval as of early July2001, according to an official of the Office of National Drug Control Policy (ONDCP). Report on Presence of Military Personnel and Contractors If Specified Caps are Exceeded. A report would berequired if Congress were to allow the Administration to exceed specified caps on the placement of U.S. militarypersonnel and U.S. individual citizen contractorsin Colombia in support of Plan Colombia. If such a joint resolution were passed, the President would have to reportto Congress under section 3204 (f) within 90days of enactment, and every 60 days thereafter, on the aggregate number of all such military personnel andcontractors, their locations, activities, and lengths ofassignment. Provisions of the FY2001 National Defense Authorization Act (P.L. 106-398, H.R. 4205/H.R.5408). The conference version, signed into law October 20, 2000, extends DOD authority to providecounternarcotics assistance toColombia under Section 1033 of P.L. 105-85 (the DOD authorization act for FY1998 and FY1999) from FY2002through FY2006. This extension was containedin the Senate version ( S. 2549 as incorporated in H.R. 4205 as a substitute amendment). (Both Senateand conference versionsmaintained an expiration date of FY2002 for Peru, the other country covered under Section 1033.) The conferenceversion did not, however, raise the cap on theamount that could be spent under that section. While the Senate would have set a cap of assistance in any one fiscalyear at $10 million for Peru and $40 millionfor Colombia, the conference version retained the cap of $20 million for both countries combined. The conferees also set three reporting requirements regarding counterdrug assistance. Section 1022 required a report, due, and submitted, by January 1,2001 , detailing FY2000 expenditures in direct or indirect support of the counterdrug activities of foreigngovernments. Two others were due February 1, 2001 . Section 1023 required a recommendation on whether to expand Section 1033 authority to other countries. Section1024 required a report on the Section 1033riverine program. The conferees did not include a limitation, contained in the House version, capping at 500 the number of armed forces personnel supported by funds from and onduty in Colombia at any one time, with four exceptions. These were: those participating in the emergency rescueof U.S. military or U.S. government civilianpersonnel; those participating in natural disaster relief efforts; those assigned to the U.S. embassy as an attache,security assistance officer, or serving as a memberof the Marine security contingent; transient personnel; and transient personnel. Provisions of the "Leahy Amendments". Since FY1997, Congress has restricted funding in foreign operationsappropriations acts through the "Leahy Amendment," prohibiting assistance to units of foreign security forces whichhave committed gross violations of humanrights, unless the responsible members are brought to justice. This provision was included in the House, Senate,and conference versions of the FY2001 ForeignOperations appropriations bill (Section 563, P.L. 106-429 , H.R. 4811 , signed into law November 16, 2000). Congress first attached another "Leahy Amendment" restriction to Department of Defense appropriations enacted in FY1999, and extended it in FY2000 andFY2001 legislation (Section 8092 of the DOD appropriations for FY2001, P.L.106-259 , H.R. 4576 , signedinto law August 9, 2000). This prohibitsthe use of any funds appropriated by the act to support training programs for units of security forces of which amember has committed a gross violation of humanrights, unless "corrective steps have been taken." Both provisions have also been attached to the Plan Colombia aid,as noted above in the section on "ConditionsPlaced on Plan Colombia Assistance." Text of the Foreign Operations Appropriations Leahy Amendment. "None of the funds made available by this Actmay be provided to any unit of the security forces of a foreign country if the Secretary of State has credible evidenceto believe such unit has committed grossviolations of human rights, unless the Secretary determines and reports to the Committees on Appropriations thatthe government of such country is takingeffective measures to bring the responsible members of the security forces unit to justice: Provided , Thatnothing in this section shall be construed to withholdfunds made available by this Act from any unit of the security forces of a foreign country not credibly alleged to beinvolved in gross violations of human rights: Provided further , That in the event that funds are withheld from any unit pursuant to this section, theSecretary of State shall promptly inform the foreigngovernment of the basis for such action and shall, to the maximum extent practicable, assist the foreign governmentin taking effective measures to bring theresponsible members of the security forces to justice." Text of the Defense Appropriations Leahy Amendment. "SEC. 8092. TRAINING AND OTHER PROGRAMS. (a)PROHIBITION- None of the funds made available by this Act may be used to support any training programinvolving a unit of the security forces of a foreigncountry if the Secretary of Defense has received credible information from the Department of State that the unit hascommitted a gross violation of human rights,unless all necessary corrective steps have been taken. (b) MONITORING- The Secretary of Defense, in consultationwith the Secretary of State, shall ensure thatprior to a decision to conduct any training program referred to in subsection (a), full consideration is given to allcredible information available to the Departmentof State relating to human rights violations by foreign security forces. (c) WAIVER- The Secretary of Defense, afterconsultation with the Secretary of State, maywaive the prohibition in subsection (a) if he determines that such waiver is required by extraordinary circumstances.(d) REPORT- Not more than 15 days after theexercise of any waiver under subsection (c), the Secretary of Defense shall submit a report to the congressionaldefense committees describing the extraordinarycircumstances, the purpose and duration of the training program, the United States forces and the foreign securityforces involved in the training program, and theinformation relating to human rights violations that necessitates the waiver." On July 18, 2000, five days after President Clinton signed the Plan Colombia legislation into law, the chairmen of three House committees and 14 otherrepresentatives wrote House Speaker Hastert and Foreign Operations Appropriations Subcommittee ChairmanSonny Callahan requesting that additionalassistance to the Colombian National Police be added during conference action on the FY2001 Foreign Operationsappropriations bill ( P.L. 106-429 , H.R. 4811 ). Chairmen Burton (Government Reform), Goss (Intelligence), and Gilman (InternationalRelations) and the other members asked for$99.5 million for additional aircraft and helicopters, spare parts, equipment, weapons, and ammunition for CNPanti-drug operations. Funding was added inconference to the bill for counternarcotics assistance; according to a State Department official some $13 million isto be allocated for support to Colombia,including helicopter-related assistance. In October 2000, the GAO reported that the United States was still developing implementation plans for Plan Colombia, and as a result "agencies do not expect tohave many of the programs to support Plan Colombia in place until late 2001." (8) As of February 2001, U.S. agencies reported that assistance was flowing, withmuch hardware already delivered. Assistance delivered, in the case of military and police equipment, and otherwiseactually received in Colombia or committedthrough signed contracts with providers breaks down as follows: Delivery of Assistance to Army and Police Forces. The delivery of helicopters to the Colombian army andpolice is underway. Assistance for the army is being provided to the three counternarcotics battalions establishedwith U.S. assistance. The first began operationsin December 1999, and the second in December 2000, and the third in May 2001. Assistance to the police is beingprovided to the special counternarcotics unit. Colombia will receive in total under Plan Colombia funding 33 UH-1Ns, 30 Huey IIs, and 16 UH-60s (Blackhawks). Of these, all 33 UH -1Ns have beendelivered to the Colombian Army, 18 of them in October 2000, and 15 on February 2, 2001. Of the UH-60s, 14 willbe provided to the army and two to thepolice. The first three are scheduled for delivery in July 2001, the rest will be delivered in several tranches throughthe end of 2001. Of the Huey IIs, three arescheduled for delivery in December 2001, the remainder will be delivered through May 2002. All weaponry hasbeen delivered to the Army counternarcoticsbattalions (i.e., 120 M-60 machine guns, 36 M-24 sniper rifles, 12 Mark-19 automatic grenade launchers, and 2460 mm mortars). Delivery of other equipmentand ammunition proceeds. Commitment of Plan Colombia Funds. By mid-2001, a substantial amount of Plan Colombia funding hadbeen not only obligated to through the signing of an agreement with the Colombian government, but also actuallycommitted through the signing of a contract withthe organization or company which would actually provide a service or good. The follow is a breakdown of theamounts of such contractual commitments enteredinto as of mid-2001. In virtually all cases where a commitment has been made, at least some of the funding hasactually been spent. Department of State Funding. By May 31, 2000, just over 84% of the funding for Colombia administered by theDepartment of State had been committed: $543.1 million of $645 million appropriated, according to informationprovided by the Bureau of InternationalNarcotics and Law Enforcement Affairs. Of this, the largest amount committed is for Push into Southern Colombiaprograms: some $327.6 million - or 88% -of the $372.5 million appropriated. (Of this, $365.5 million is for the purchase of helicopters and other assistancefor the Colombian Army counternarcoticsbattalions, and $7 million for the emergency resettlement and employment of persons displaced in the program area;of the $7 million, all had been committed.) Aside from a small amount of money ($3 million) with which the State Dept. is responsible for alternative andeconomic development, which was 100%committed, the category in which the highest percentage of funds has been committed is for human rights andjudicial reform. There, some 92% of the funds, or$87.6 million of $94.5 million appropriated, have been committed. (Of the appropriated amount, some $88 millionis managed by the Department of the Treasuryand the Department of Justice, which jointly coordinate 12 administration of justice programs.) For interdictionactivities funded by the State Department, 78%, or$46.4 million, of the $59.4 million appropriated has been committed, and for the Colombian National Police, 68%,or $78.4 of the $115.6 million appropriated,has been committed. The Agency for International Development Assistance (AID) is responsible for some $119.5 million in funding for the Colombia programs, as appropriatedunder the State Department sections of the bill. Of this, some 74%, or $88.7 million, had been committed bymid-April 2001, according to figures provided byAID. In addition, AID had committed half of the $4 million appropriated for AID operating expenses by PlanColombia legislation, and all $5 million foralternative development and $4 million for the administration of justice and human rights programs appropriatedin the FY2000 core (i.e. regular appropriations)budget. Under the rubric of alternative development , all $42.5 million of the Plan Colombia funding administered by AID had been committed. This includes all of theenvironmental programs ($2.5 million), the voluntary eradication programs ($30.0 million), and the alternativedevelopment in southern Colombia ($10.0million). In category of human rights and judicial reform , some 43% or $21.2 million of $49.5 million administered by AID had been committed. The largest amountsappropriated in this area were the least committed: only $2.7 million of the $10 million appropriated forcommunity-level alternative development was committedas of that point, and all $12 million of the assistance to local governments was scheduled to be appropriated inSeptember 2001. For six judicial assistanceprograms, all $11 million appropriated had been committed. (These were programs for judicial system policyreform, criminal code reform, and judges training,and for the casas de justicia , the public defender, and the prevention of corruption programs.) For theprotection of human rights workers program, half of the $4million appropriated had been committed, and 43% or $3 million of the $7 million appropriated for thestrengthening of human rights institutions had beencommitted. Only $1 million of the $3 million appropriated for conflict management and the peace process had beencommitted. The full $2.5 million for therehabilitation of child soldiers had been obligated. Almost 91% of the $27.5 million handled by AID for programs related to displaced persons had been committed. This included all $19.5 million appropriatedfor assistance for internally displaced persons, and $5.5 million of the $8.0 million handled by AID for thetemporary emergency resettlement and employment ofpersons displaced by the Push into Southern Colombia program. Department of Defense Funds. Some $91.8 million was allocated to the Department of Defense for training andother assistance to the Push into Southern Colombia program, and for support for Colombian interdiction efforts. As of July 5, 2001, all but $10.9 million of thathad been obligated, and the remainder is expected to be obligated by the end of FY2001. Because of DODaccounting and disbursement procedures, however, theamounts that have actually been committed through signed contracts or other methods are not available. In addition, as indicated by figures provided by the Department of Defense (See Table 1 ), some of the $62.3 million appropriated for classified programs isapparently being used for purposes that support both U.S. and Colombian activities. Table 2. Overview of Plan Colombia Funding for Colombia and Status of Commitment* of Funds Provided in the StateDepartment Sections of P.L. 106-246 ($ millions) * "Commitments" are funds for which the United States actually has signed a contract with the provider of a good or service. a Percents based on combined DOS/DOD. On April 9, 2001, the Bush Administration requested $731 million in FY2002 funding for a broader regionalstrategy called the Andean Counterdrug Initiative(ACI) that would include funding from the International Narcotics Control account (INC) for not only Colombia,but also Bolivia, Brazil, Ecuador, Panama, Peru,and Venezuela. Subsequently, the Bush Administration referred to this and funding from other specified accountsfor these countries as the Andean RegionalInitiative (ARI), which totals some $882.29 million. (This does not include Department of Defense funding, whichhas yet to be announced.) For Colombia, the Bush Administration request for FY2002 will provide continued support for Plan Colombia legislation programs. (Note it is anticipated thatfunding provided through the Plan Colombia legislative will continue to be expended through FY2002.) The $399million requested for Colombia includes$146.5 million for economic, social and governance programs, and $252.5 million for counternarcotics and securityprograms. The $146.5 million for social, economic, and governance programs in Colombia includes: $61.5 million for programs to improve the justice system and the rule of law, to promote human rights,and to assist with anti-corruptionefforts and the peace process; $60.5 million for the voluntary eradication of coca and heroin poppy crops, and for local governanceand civil societyprograms; $22.0 million for displaced persons, including $7 million in emergency relief and $15 million tosupport the education, health, and housingprograms of international organizations and non-governmental organizations; and $2.5 million for other program support. The $252.5 million for counternarcotics and security programs in Colombia includes: $87.5 million for support to the Colombian National Police, including funds for eradication, foraviation support, training, equipment andinfrastructure, and for logistical support; $79.5 million to training, operational support, logistical support, and capital investment for the Army'sHuey II and UH-60helicopters; $26.5 million to improve the infrastructure supporting counternarcotics operations, particularly forforce protectionpurposes; $13.5 million for Colombian Army units involved in counternarcotics operations; $43.0 million in support for air, maritime, riverine, and ground interdiction; $2.5 million in program support. The following table provides a breakdown by purpose and by funding account for the $882.29 million Andean Regional Initiative. Table 3. President Bush's Andean Regional Initiative (ARI),incorporating the Andean Counterdrug Initiative(ACI) ($ millions) Source: ARI Reference Sheet, 150 Account, provided by the Department of State, May 14, 2001. Table 4. Comparative Chart of Plan Colombia Legislation (The Administration Request; the HouseFY2000 Supplemental Appropriations bill (H.R. 3908); the Senate Foreign Operations Appropriations (S.2522) and Senate AppropriationsCommittee FY2001 Military Construction Appropriations (S. 2521) bills; and the enacting legislation, theMilitary Construction Appropriations Actfor FY2001, P.L. 106-246.) * Subtotals and totals may not add due to rounding. For a further breakdown of all categories of Plan Colombia assistance, see: http://www.ciponline.org/colombia/aidcompare.htm . Table 5. Comparison of Salient Legislative Provisions Regarding Colombia Table 6. U.S. Aid to Colombia FY1989-FY1998 (Obligations and Authorizations, $ millions) Source Note: Data is drawn from a number of sources, not all of which are consistent, includingvarious editions of the U.S. Overseas Loans and Grants andAssistance from International Organizations "Green Book", prepared by the AID budget office, the Foreign MilitarySales, Foreign Military Construction Sales,and Military Assistance Facts book, prepared by the Department of Defense Security Cooperation Agency, withdata as of September 30, 1998, informationprovided directly by the departments of State and Defense that are not recorded in these publications, and by theGeneral Accounting Office (GAO) for1996-1998. (See GAO report GAO-01-26.) Where contradictions existed, GAO data was preferred, and then otherprinted data was used. In particular, GAO useddata on the amounts of DOD drawdown assistance actually delivered in FY1996 through FY1998; other sourcesshow the amount authorized, i.e., $40.5 million inFY1996, $14.2 million in FY1997, and $41.1 million in FY1998. Because of a possible lack of data or inaccuracies,some yearly totals may be understated oroverstated, particularly prior to FY1996. Note: This chart includes direct U.S. foreign assistance (i.e., the categories usually counted as U.S. foreign aid, which are in italics), as well as the costs of goodsand services provided to Colombia from other U.S. government programs supporting counternarcotics efforts inColombia. The United States also provides asmall amount of DOD Excess Defense Articles (EDA) to Colombia. Other funds are spent in Colombia oncounternarcotics and other activities that areconsidered part of U.S. programs: for instance, the Drug Enforcement Administration (DEA) spends its own fundson joint operations in Colombia. DOD Section124 detection and monitoring funds cover U.S. operated radar systems in Colombia and elsewhere, and other costsof U.S. detection and monitoring of drugflights. a In these years, there was assistance in this category of less than $50,000. House Appropriations Committee. Subcommittee on Foreign Operations, Export Financing and Related Programs. Hearing on Colombia CounternarcoticsFunding. February 29, 2000. House Appropriations Committee. Subcommittee on Foreign Operations, Export Financing and Related Programs. Hearing on Emergency SupplementalAppropriations Request for Plan Colombia. March 2, 2000. House Armed Services Committee. Hearing on Southcom/U.S. Policy Towards Colombia. March 23, 2000. House Government Reform Committee. Subcommittee on Criminal Justice, Drug Policy and Human Resources. Hearing on Department of Defense's DrugInterdiction Program, January 27, 2000. House Government Reform Committee. Subcommittee on Criminal Justice, Drug Policy and Human Resources. Hearing on Narcotics Crisis in Colombia. February 15, 2000. House Government Reform Committee. Subcommittee on Criminal Justice, Drug Policy and Human Resources. Hearing on Getting U.S. Aid to Colombia.October 12, 2000. House International Relations Committee. Subcommittee on Western Hemisphere Affairs. Hearing On Plan Colombia. September 21, 2000. Senate Appropriations Committee. Subcommittees on Defense and on Military Construction. Hearing on Colombia Supplemental Request. February 24, 2000. Senate Armed Services Committee. Hearing on U.S. Support for Counter-narcotics Activities in the Andean Region and Neighboring Countries. April 4, 2000. Senate Caucus on International Narcotics Control, and Senate Finance Committee, Subcommittee on International Trade. Hearing on Illegal Drug Trade in theAndes. February 22, 2000. Senate Foreign Relations Committee. Subcommittee on Western Hemisphere, Peace Corps Affairs, Narcotics and Terrorism. Hearing on Proposed EmergencyAnti-Drug Assistance to Colombia. February 25, 2000.
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On February 7, 2000, the Clinton Administration, as part of its annual budget request, asked Congress for FY2000 supplemental appropriations of $954 millionfor assistance to Colombia and other Andean counternarcotics efforts. FY2000 allocated funding for Colombia,from appropriations made in 1999, already totalssome $164.0 million. At the same time, the Administration requested $318 million for FY2001 assistance toColombia and other regional efforts, in addition tothe $150 million that it previously indicated it had planned to allocate to Colombia in FY2001. The Clinton Administration's "Plan Colombia" program, as it became known, was intended to substantially increase the assistance provided to Colombia. Theproposal's centerpiece was funding for the "Push into Southern Colombia" program, which would include trainingand equipping two new army CN battalions,and providing funding to purchase new and sustain existing Blackhawk and Huey helicopters to transport them.Other assistance was included for interdiction,resettlement of displaced persons, economic development, and programs to improve Colombian National Police(CNP) eradication capabilities and to supporthuman rights monitors, improve the justice system and strengthen the rule of law. The 106th Congress commenced action on the request on March 9, 2000, when the House Appropriations Committee approved an emergency supplementalappropriations bill ( H.R. 3908 , H.Rept. 106-521 ) that included some $1.4 billion in funding for FY2000 andFY2001 counternarcotics efforts inColombia, its neighbors, and other parts of Latin America and the Caribbean. On March 30, the House approvedthat amount, placing conditions on the militaryassistance. On May 9, the Senate Appropriations Committee included $1.1 billion in FY2000 emergencysupplemental Plan Colombia funding in its FY2001Military Construction ( S. 2521 ) and Foreign Operations ( S. 2522 ) bills, placing extensive conditionson the assistance in both bills. These three measures were dealt with in the conference on the military construction appropriations bill ( H.R. 4425 , H.Rept. 106-710 ) with some $1.3billion in emergency supplemental appropriations for Plan Colombia. As approved and signed into law ( P.L.106-246 ) on July 13, the bill included five humanrights and two other conditions on aid to Colombia. Certification that these conditions had been met was required before the obligation of FY2000 and FY2001funds, but the President could waive them on national security grounds. President Clinton waived six of the sevencertification criteria on August 22, 2000, andhe determined a second certification was not required on January 19, 2001, but submitted a report on progressregarding certification criteria. On April 9, 2001, the Bush Administration requested $731 million in FY2002 funding for a broader regional strategy called the Andean Counterdrug Initiativethat would include funding from the International Narcotics Control account (INC) for not only Colombia, but alsoBolivia, Brazil, Ecuador, Panama, Peru, andVenezuela. In later references, the Bush Administration included other funding for those countries in a AndeanRegional Initiative. As a result, total funding forthe regional initiative, including the ACI, now stands at some $882.29 million.
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This report considers population longevity in the United States, as measured by life expectancy. Life expectancy is the expected number of years to be lived, on average, by a particular cohort, if current mortality trends continue for the rest of that cohort's life. It most commonly refers to life expectancy at birth , the median number of years that a population born in a particular year could expect to live. For instance, based on recently released final data, life expectancy at birth in 2003 was 77.5 years. This tells us that, for those born in calendar year 2003 in the United States, 50% will die before that age; the other half will live longer. Life expectancy is also routinely calculated for other ages. Life expectancy at age 60, for instance, refers to the additional number of years that a person who has already attained age 60 will live beyond age 60. Life expectancy at age 60 in the year 2003 was 22.2 years in the United States. A person who reached age 60 in 2003 was expected to live an additional 22.2 years, on average, and would die at age 82.2. While this report concentrates on trends and differentials in life expectancy at birth , Appendix B Table B -2 provides estimates of life expectancy at selected additional ages in 2003 (the most recent final data available). Measures of life expectancy are published in official life tables, which are based on age-specific death rates. In the United States, data on mortality are collected and compiled through the vital statistics system by the Centers for Disease Control and Prevention (CDC)/National Center for Health Statistics (NCHS). The most recently released final data on deaths and mortality are for calendar year 2003; preliminary estimates are often released by NCHS but are generally not referred to in this report. The concept of life expectancy , which considers the average experience for a population, is distinct from the concept of life span , which considers the upper limit of human life that could be reached by an individual. According to the U.S. Census Bureau, International Data Base, the highest attained life expectancy to date for a national population was that of Andorra in 2006, when life expectancy was 83.5 years for the total population (86.6 years for females; 80.6 years for males). The oldest authenticated female life span thus far recorded was for J. Calment of France, who died at age 122 years, 164 days, and, for a man, C. Mortensen (a Danish immigrant to the U.S.), who died at age 115 years, 252 days. There is a lively debate among researchers regarding whether the biological limits of life spans have been reached or whether future increases are probable. Life spans are not considered further in this report. This report documents the improvements in life expectancy that have occurred, analyzing both the underlying factors that contributed to mortality reductions as well as the continuing longevity differentials by sex and race. In addition, it considers whether life expectancy will continue to increase in future years. While this report focuses on describing the demographic context of longevity change in the United States, these trends have implications for a wide range of social and economic issues that are likely to be considered by Congress. For instance, one consequence of lengthening life expectancies is that the older population's needs for careâassistance with daily tasks to allow continued community-living for high-functioning seniors, institutions for those with more severe disabilities or cognitive impairments, training of a specialized work force in geriatric careâare likely to increase, particularly for the oldest-old. There are also questions with respect to ensuring basic income support, medical care, and housing for the older population. At the same time, there is the recognition that government programs, such as Social Security and Medicare, will face financial pressures to meet the increasing needs. What program changes are required to ensure the continued viability of such programs as the number of beneficiaries increases? What will be the federal government's role in an environment of competing demands for limited resources? As seen in Table 1 and Appendix B Table B -1 , life expectancy at birth increased dramatically over the past century in the United Statesâfrom 49.2 years (the average for 1900-1902) to 77.5 years in 2003, the most recent year for which official data have been released by the Centers for Disease Control (CDC)/National Center for Health Statistics (NCHS). Gains in longevity were fastest in the first half of the 20 th century. These advances were largely attributed to "an enormous scientific breakthroughâthe germ theory of disease" which led to the eradication and control of numerous infectious and parasitic diseases, especially among infants and children . The new theory led to an entirely new approach to preventative medicine, practiced both by departments of public health and by individuals. Interventions included boiling bottles and milk, washing hands, protecting food from flies, isolating sick children, ventilating rooms, and improving water supply and sewage disposal. Beginning in the 1940s, the control of infectious diseases was also aided by the increasing distribution and usage of antibiotics, including penicillin and sulfa drugs. Since mid-century, advances in life expectancy have largely been attributable to improvements in the prevention and control of the chronic diseases of adulthood . In particular, death rates from two of the three major causes of death in 1950âdiseases of the heart (i.e., coronary heart disease, hypertensive heart disease, and rheumatic heart disease) and cerebrovascular diseases (stroke)âhave fallen by approximately 60% and 70%, respectively, on an age-adjusted basis since 1950 (see Table 2 ), improvements that the CDC has characterized as "one of the most important public health achievements of the 20 th century." The CDC attributes the declines in diseases of the heart and cerebrovascular diseases to a combination of medical advances , including âdiscoveries in diagnosing and treating heart disease and stroke; âdevelopment of effective medications for treatment of hypertension and hypercholesterolemia; âgreater numbers of specialists and health-care providers focusing on cardiovascular diseases; âan increase in emergency medical services for heart attack and stroke; and âan increase in coronary-care units. changes in individually controlled behaviors , including âdeclines in cigarette smoking; âdecreases in mean blood pressure levels; âan increase in persons with hypertension who have the condition treated and controlled; âa decrease in mean blood cholesterol levels; and âchanges in the American diet (reductions in the consumption of saturated fat and cholesterol). Beyond medical interventions, public health measures, and individual behaviors, a number of additional factors are known to be associated with mortality decline. They are briefly mentioned here, but it is beyond the scope of this report to discuss them in detail or to disentangle them from the factors already described: Socioeconomic status (SES) . Higher SES persons tend to be better educated, have higher incomes, and practice better individual behaviors (less smoking, healthier diets, etc.), and are more likely to have financial resources or health insurance to ensure access to medical care. Social policies . Some social policies, such as Medicare and Medicaid, are oriented to health improvements. Both programs were designed to increase access to health care for vulnerable populations, the elderly and the poor, with the ultimate goal of improving health for these groups. Other social policies, such as Social Security, affect income, and may affect health and well-being through that channel. Finally, some social policies may affect health by changing the access that people have to already-established resources. An example is the combination of civil rights legislation and improved health programs for the poor during the mid-1960s, especially through Medicaid. Life expectancy in the United States, for both men and women, is significantly higher than the global average but is only slightly higher than the average for more developed countries (see Table 3 ). Life expectancy surpasses that of the United States in a large number of countries, including but not limited to Japan, Andorra, Canada, Hong Kong, Macau S.A.R, Singapore, Sweden, Australia, Martinique, Greece, Israel, Aruba, Italy, Netherlands, Norway, France, Liechtenstein, Monaco, Spain, and more. Estimates are provided for a non-comprehensive list of selected counties in Table 3 . The United States was ranked 48 th among 227 countries and territories for both sexes. The Social Security Trustees report to Congress on the actuarial status of the Trust Funds annually. The long-range projections needed for this assessment depend critically on assumptions for the future course of longevity. According to Steven Goss, chief actuary of the Social Security Administration (SSA), their future mortality assumptions are based on the recorded average annual mortality decline for the total U.S. population aged 65 and older between 1900 and 2000. He asserted that assuming future mortality improvement at nearly the same rate as for the last centuryâa little more than 0.7% annuallyâis a reasonable assumption, with a roughly equal likelihood of doing better or worse. This rate of improvement is more optimisticâabout twice as largeâas experienced during the last 18 years of the 20 th century. Goss further suggested that "matching the accomplishments of the past century will not be easy. AIDS, SARS, and antibiotic resistant microbes, along with increasing obesity and declining levels of exercise, remind us that mortality improvements will not be automatic. Gains from replacement organs and genetic engineering will be expensive, and may be difficult to provide for the population as a whole." SSA's projections of period life expectancy are shown in Table 4 . A benefit of the statistical methods that have emerged to extrapolate historical mortality trends to the future is that they have worked well and are relatively simple and efficient. In addition to being utilized by SSA, similar approaches are also used in Canada and in the United Kingdom (UK). Canada's approach assumes that economic productivity is the overall driving factor for sustained longevity improvements, and projects a relationship between future mortality decline and future real growth in employment earnings. The UK extrapolates trends from 15 years of past data to help define base starting points and establish initial rates of mortality improvement for projections. An assumption is also made that there will be a gradual slowing of rates of improvement after the first 10 years. Future mortality and survival are, however, difficult to predict and specialists disagree on not only the level but also the direction of future trends. James Vaupel, director of the Max Planck Institute for Demographic Research, argues that the Social Security projections are too pessimistic. He notes that SSA's forecast is that female life expectancy in the United States will gradually rise from 79.5 years today to 83.4 years in 2050. SSA's projected level of life expectancy in 2050, half-a-century from today, is less than current life expectancy in Japan and France, and is 13 to 14 years less than likely Japanese and French female life expectancy in 2050. Vaupel further suggests that it is unrealistic for SSA to assume that the United States will be unable to match the level of life expectancy in half-a-century that is already attained in other countries today. A number of articles suggested that current models may be too pessimistic in their assumptions about mortality and survival probabilities (i.e., Americans may live longer than currently projected). Two of these studies showed that there has been a tendency for international life expectancy to rise linearly by more than two years per decade over the past 40 years or the last 160 years, a more rapid pace than suggested by current models. Also, useful analyses of the contributions of smoking behavior to mortality trends in the United States suggests that slow female gains in life expectancy over the past few decades may be temporary, and that the pace may pick up fairly soon. Technological advances also have the potential to expand life. The National Institute on Aging supports extensive analyses of genetic contributions to longevity in diverse species, as well as on the diseases and conditions that are responsible for premature death. Life expectancy worldwide is generally higher for females than for their male counterparts. The United States is no exception; female life expectancy exceeded that of males in all years of the past century (see Figure 1 ). The average girl born at the turn of the 20 th century in the United States could expect to live 50.7 years, roughly three years more than an American boy born at the same time. From 1900 to 1975, the difference in life expectancy increased from 2.0 years to 7.8 years, with females continuing to have the longevity advantage. In the absence of war, such large differences between the sexes in life expectancyâwhich were also being recorded in other developed countriesâare a relatively recent phenomenon in demographic history. For the United States, NCHS attributed the increasing gap during these years to increases in male mortality due to ischemic heart disease and lung cancer, which were largely the result of men's early and widespread adoption of cigarette smoking. In the mid- to late 1970s, the average gap in life expectancy approximated the average gap seen in developed countries todayâroughly seven years. The gap has been recorded as great as 13 years, as seen in parts of the former Soviet Union in recent years as a result of unusually high levels of current adult male mortality. Since 1979, the "female advantage" in life expectancy between the sexes in the United States has narrowed from 7.8 to 5.3 years, reflecting proportionately greater increases in lung cancer mortality for women than for men and proportionately larger decreases in heart disease mortality among men. The average girl born in 2003 in the United States could expect to live 80.1 years compared to 74.8 years for a boy born in the same year. A now dated, but still informative, study evaluated the contributions of various causes of death to the size of sex differentials in life expectancy in developed countries for the early 1980s. Diseases of the circulatory system were found to account for nearly 40% of the mean sex differential in life expectancy; neoplasms (cancer) for 18%, accidents, suicide, and violence for 19%, and diseases of the respiratory system for nearly 10%. In general, why is life expectancy longer for women? The answer, which is still being investigated, involves the complicated interplay of a host of biological, social, and behavioral conditions. In addition, it differs according to age and to the underlying disease and mortality profiles for men and women. At birth, boys have a clear advantage. In the United States, 104.9 boys were born for every 100.0 girls in 2003. But, male mortality exceeds that of females in every age group and for most major causes of death, beginning in infancy and continuing through the oldest-old age groups. One researcher has suggested that the male advantage at birth is moderated by higher male mortality to "ensure that the number of men and women will be about the same at reproductive age." It has long been argued that hormones play a role in longevity. As described by Desjardins, the female hormone estrogen helps to eliminate "bad" cholesterol (LDL) and thus may offer some protection against heart disease. In contrast, some say, testosterone, found in greater amounts in males, may make men more likely to engage in violence and risk-taking behavior, especially if reinforced by cultural influences. Women may also gain an additional biological advantage because of their two X chromosomes. If a gene mutation occurs on one X, a woman's second X chromosome may be able to compensate. In comparison, genes on men's sole X chromosome may be expressed, even if they are deleterious without compensation. Stindl, however, argues that these classic biological explanations do not withstand critical analysis. He offered an alternative hypothesis that has not yet been subject to long-term scientific scrutiny. He asserts that a strong positive correlation has been reported between sexual size dimorphism (SSD) and male-based mortality, with men being the larger/taller sex globally. A larger body requires more cell doublings, especially due to the ongoing regeneration of tissues over a lifetime. Accordingly, the replicative history of male cells might be longer than that of female cells, resulting in the exhaustion of the regeneration potential and the early onset of age-associated diseases predominantly in males. The underlying mechanism is the gradual erosion of chromosome ends (telomeres). Two recent studies confirm that men do have shorter telomeres than women at the same ages. Numerous studies also demonstrate links between chronic stress and indices of poor health, including risk factors for cardiovascular disease and poorer immune function. Many researchers believe that behavioral and social factors also contribute significantly to the sex differentials observed between men and women. Women's social status and life conditions (such as the hardships associated with childbirth) may have nullified American women's biological advantage at the beginning of the 20 th century but are no longer major factors in gender differentials in life expectancy in the United States, though these explanations are still relevant in a number of other countries. Higher male mortality rates have been attributed to greater male exposure to specific risk factors, such as alcohol consumption and occupational hazards. Life expectancy in Russia, for instance, fell by 6.3 years for Russian men during the period 1990 to 1995âa level of decline that was unprecedented both in Russia and in other industrialized countries. In investigating the cause of the sudden drop, a team of researchers from the London School of Economics and the Russian Academy of Sciences observed that excessive alcohol consumption contributed both directly and indirectly to the marked increases in deaths from fatal events (e.g. accidents, injuries, suicides, poisonings) and in deaths from cardiovascular disease. The most cited behavioral contributor to higher male mortality rates in the United Statesâand the subject of considerable research interestâhas been the greater male exposure to cigarette smoking. Smoking patterns are an obvious place to look for an explanation of sex mortality differences because the health risks are high and long-lasting; large fractions of the population have engaged in the habit; and smoking patterns differ between the sexes. More specifically, women's uptake of smoking lagged behind that of men. In the 1970s, when the sex differential in mortality was increasing, cigarette smoking was implicated. Now, as the sex differential is narrowing, a new body of research is evaluating the role of cigarette smoking in explaining the trend. Pampel, for instance, documented that the rate of decline in female mortality in the United States has slowed since 1980 or so, while that of males has returned to its earlier trend of relatively rapid improvementâthus resulting in a narrowing life expectancy differential by gender. He concludes that smoking behavior lies behind the changing pace of mortality decline not only in the United States, but also in 20 other industrial nations. Extending Pampel's analysis, Lee showed that the rate of decline for deaths not associated with smoking was actually faster for women (than men) while death rates associated with smoking actually increased for women while decreasing for men. Preston and Wang demonstrate that changes in sex mortality differences in the United States have been structured on a cohort rather than a period basis, and that the cohort imprint is closely related to histories of cigarette smoking. Allowance for the smoking histories of cohorts significantly affects the assessment of mortality trends: national mortality levels would have declined more rapidly in the absence of smoking, and they are likely to decline more rapidly in the future as smoking recedes. Life expectancy at birth for whites significantly exceeded that for blacks at the turn of the 20 th century (see Figure 2 and Appendix B Table B -1 ). At that time, the expected longevity of a white newborn girl exceeded that of a black newborn girl by about 16.0 years (with longevity measured at 51.1 years vs. 35.0 years, respectively). For newborn boys, the white advantage was 15.7 years (48.2 years vs. 32.5 years). The gap between whites and blacks in average longevity declined significantly over the past century ( Figure 3 ). For females , the improving situation for black women relative to their white counterparts was dramatic and mostly consistent throughout the century. From the height of the differential in 1904âwhen white women survived, on average, 17.9 years longer than black womenâthe gap fell to 4.4 years in 2003. A significant reduction in the life expectancy gap between American white and black men was also observed over the 20 th century. From its height of 17.8 years in 1904, the differential had fallen to 6.3 years in 2003. The improvement was most rapid in the first six decades of the past century. Since the mid-1950s, however, improvements for males have stagnated in the range of roughly 6.0 to 8.5 years. While the male gap has been falling over the past decade, this trend obscures the fact that the differential had already been at or near this level for most of the mid-1950s to mid-1960s. The gap in 1961 was narrower than that observed todayâat that time, the gap between white and black men was 5.8 years (as compared to 6.3 now). Factors that contribute to the differential are discussed in later sections of this report. In summary, mortality rates in the United States have declined dramatically over the past century. Black persons, however, still live, on average, 5.3 fewer years than their white counterparts. In 2003, the most recent year for which we have official data, the highest life expectancy was observed for white females, who will live, on average, 80.5 years. The values for black females and white males are quite similar to each otherâ76.1 years and 75.3 years, with black females having the slight advantage. Of the four race-sex groups considered, black males have the shortest average longevityâ69.0 years. Within-sex groupings, whites have the advantage for both females and males. What accounts for the higher mortality, and subsequent lower life expectancy for blacks, and especially for black men in the United States? This has been a subject of research by medical and social scientists for at least a century, and the issue stands at the heart of the current public health agenda in the United States. One of the two primary goals of Healthy People 2010 is to eliminate health disparities. Mortality from most, but not all, causes of death are higher for blacks, and a number of researchers have investigated which specific diseases contribute most to life expectancy differences between the races. Wong and colleagues, for instance, recently calculated potential years of life lost related to specific causes of deaths for blacks and whites in the United States ( Table 5 ). As seen in Table 5 , when considering the major categories of disease, deaths from cardiovascular disease contributed most to the racial disparity in mortality from any cause (34.0%), followed by infection (21.1%), and trauma (10.7%). When looking at specific diseases, the leading sources of the disparity were largely preventable causes of premature deathâhypertension (which contributed 15.0% to the disparity), followed by HIV disease (11.2%), diabetes (8.5%), and homicide (8.5%). Note that blacks had a lower mortality risk from respiratory diseases (lung disease), suicide, and certain types of cancer (breast, colon, uterus or ovary, bladder or kidney, and leukemia or lymphoma; figures are in the original source but are not shown in table). These results are consistent with findings from other studies, and are said to show that "most of the influential diseases are ones in which the rates vary based on avoidable risks such as smoking, exposure to HIV, and obesity. [And,] this adds to the credibility of public-health interventions aimed at reducing the exposure to these risk factors." The results may also offer hope for the elimination of racial disparities in health. Beyond describing gross health disparities, scientific inquiry has shifted to explaining the underlying factors that account for these differences in health outcomes. Understanding these underlying causes requires disentangling the complex web of factors connecting the nexus among race, socioeconomic status, behavioral factors, and health. Some have argued that, if pertinent differences between whites and blacks in their underlying social, demographic, familial, and economic circumstances were eliminated, racial differences in mortality would be significantly reduced. , Socioeconomic arguments cite the consequences of lifelong poverty. Relevant factors include both early-life differences, such as birth weight and childhood nutrition, and mid-life variables (such as access to employer-provided health insurance, the strain of physically demanding work, and exposure to a broad range of toxins, both behavioral (e.g., smoking) and environmental (e.g., workplace exposures). Over the life cycle, these factors combine to increase the demand for health care, while potentially limiting consumption of necessary health services. In late life, these factors may affect the age of onset of both morbidity and disability, the severity of symptoms, and ultimately the age at, and cause of death. In addition, Martin and Soldo note that there are differences between racial groups in norms regarding not only lifestyle and self-care behaviors, but also in access to health care providers and treatment compliance. Moreover, the experience of racial discrimination may have adverse psychological and physiological effects, in addition to limiting the quantity and quality of health care received. Some of these factors that contribute to the racial gap in life expectancy will be discussed briefly in the following paragraphs. In general, as income increases, mortality decreases, because high income provides access to high-quality health care, diet, housing, and health insurance. Black households had the lowest median income in the United States in 2003. Their median money income was about $30,000, which was 62% of the median for non-Hispanic White households (about $48,000). Poverty rates among African Americans are persistently higher than those of non-Hispanic whites. In 2003, 24.4% of blacks were poor, compared to 8.2% of non-Hispanic whites. Recent research also highlights the enduring effects of education. Increased education appears to lower the risks for some chronic diseasesâmost notably, coronary heart disease (which is the leading cause of death in the United States)âwhile retarding the pace of disease progression for other conditions. In 2003, the proportion of both blacks and non-Hispanic whites who had a high school diploma (of persons in the population aged 25 and over) reached record highs but at different levels for the two racial groupsâ80% and 89%, respectively. The gap in educational attainment is also apparent among recipients of bachelor's degreesâ30% of non-Hispanic whites aged 25 and older had attained a four-year college degree compared to 17% of blacks. Marriage is also a socioeconomic determinant that is related to health outcomes. Married people consistently exhibit lower levels of mortality than those who are not married. Marriage acts to select healthy individuals, but it also enhances social integration and encourages healthful behaviors. Race differences in marital and cohabitational stability are substantial, and may be increasing over time. About 91 percent of white women born in the 1950s are estimated to marry at some time in their lives, compared with 75% of black women. Black married couples are more likely to break up than white married couples, and black divorcees are less likely to remarry than white divorcees. The degree of attachment to marriage among black Americans is similar to that of white Americans as measured by attitudes toward marriage. One explanation offered by some researchers for the lower proportion of time spent in marriage among black Americans is the idea of a "marriage squeeze," in which the "marriageable pool" of black men is low due to high rates of joblessness, incarceration, and mortality. Employed men are more likely than unemployed men to marry. Prolific research over the past two decades has confirmed the link between certain diseases and health outcomes and various health-damaging (such as smoking, alcohol abuse) and health-promoting (exercise, low-fat diet) behaviors. And, some researchers have explored the extent to which health-damaging and health-promoting behaviors explain black-white differences in health status. Berkman and Mullen, for instance, found that, despite greater apparent concern on the part of blacks than whites about their health, blacks do not consistently adopt more beneficial behaviors than whites. Older blacks engage in less physical activity and are more likely to be obese (especially women), but they are less likely to consume alcohol than whites. Racial differences in smoking patterns are complex, with older blacks less likely to have smoked but, if they have, less likely to have quit. Lack of exercise and obesity are associated with hypertension and diabetes, both of which have been reported to be twice as common among blacks than among whites. The United States is the only developed country in the world that does not have national health coverage, and significant numbers of Americans, and especially African Americans, do not have sufficient health care coverage. More specifically, 21.0% of blacks under age 65 and 12.9% of whites of the same age lacked private health insurance in 2003. Beyond health insurance, Chandra and Skinner argue that there is differential access to health services in the United States, especially because of geographic variation in treatment and outcome patterns. Minorities tend to seek care from different hospitals and from different physicians than non-Hispanic whites, in large part a reflection of the general spatial distribution of the United States population with concentrations of minorities in certain hospital referral regions. Some research suggests that there are race-related genetic factors both for predisposing conditions, such as hypertension and diabetes mellitus, and for life-threatening conditions, such as aplastic anemia. As recently noted by the National Research Council, however, "Probably no aspect of the debate about the causes of racial differences in health is potentially more sensitive than the discussion about the extent to which genetic factors are in any way responsible. There are numerous historical examples of scientific mischief in the support of racism." Those in favor of using race assert that there is a useful degree of association between genetic differences and racial classifications, so that the use of race as a research variable is warranted. Opponents, however, argue that bundling the population into four or five categories based on skin color or other traits is not a useful way to summarize genetic variation when we know that there are at least 15 million genetic polymorphisms in humans, of which an unknown number underlie variation in (normal and) disease traits. Research in this area is still in its infancy and tends to reflect two ways that genes may be relevant to the study of health differentials. First , there are a small number of conditions with single-gene disorders in populations that have descended from a relatively small number of people and that remain endogamous (an example is Tay-Sachs Disease among Ashkenazi Jews). Second , genes may be relevant to the study of health differentials through environmental factors, which may vary by racial or ethnic group, and which might interact with genotype to produce different outcomes for different groups. One of the most important public health achievements of the 20 th century in the United States was the dramatic and widespread increase in life expectancy that occurred over the past century in the United Statesâfirst as a result of the control of the infectious and parasitic diseases that had plagued mostly infants and children in the early part of the century, and later because of medical advances that led to large decreases in adult mortality, especially from two of the most prevalent causes of deathâcardiovascular diseases and cerebrovascular diseases. A consequence of the improved survival, coupled with declining fertility rates, is that the United States is in the midst of a profound demographic change: rapid population aging, a phenomenon that is replacing the earlier "young" age-sex structure with that of an older population. Hastened by the retirement of the "Baby Boom" generation (the cohort born between 1946 and 1964), the inexorable demographic momentum will have important implications for a large number of essential economic and social domains, including work, retirement, and pensions, wealth and income security, and the health and well-being of the aging population. Whether the life expectancy improvements will continue is the subject of intense debate. The Social Security Administration (SSA) assumes that the rate of future mortality improvements will be nearly the same as for the last centuryâa little more than 0.7% annuallyâwhile asserting that it may be difficult to match the accomplishments of the past century, especially in light of increasing obesity, declining levels of exercise, and the introduction of new scourges, such as AIDS, SARS, antibiotic resistant microbes. Some demographers, on the other hand, feel that such projections are pessimistic, and argue, based on historical trends and evidence from other developed countries, that American survival will be longer than that projected by SSA. The outcome of the debate has important implications for determining the number of future beneficiaries and ultimately the financial soundness of the Social Security and the Medicare programs. This report also highlights the continuing differentials in life expectancy by race and sex in the United States, with black males continuing to be the most disadvantaged group on this measure. Life expectancy at birth in 2003 for black males measured 69.0 years, falling short of the comparable figure for white males by 6.3 years. The gap between black and white men has remained relatively stagnant since the mid-1950s. The sources of the racial disparities in life expectancy are complex and require disentangling the complex web of factors connecting the nexus among race, socioeconomic status, behavioral factors, and health. Differences exist on a wide variety of important variables including lifetime income and wealth, marriage patterns, birth weight and childhood nutrition, access to employer-provided health insurance, the strain of physically demanding work, exposure to toxins, risky behaviors (such as smoking, high saturated diet), adherence to preventative health measures (such as maintaining a healthy weight, exercise), and access to and quality of health care. In addition, the experience of racial discrimination may have adverse psychological and physiological effects, in addition to limiting the quantity and quality of health care received. Recent research, however, that shows that the leading specific diseases that are the main sources of the racial disparity in life expectancy are largely preventable causes of premature death offers hope that public-health interventions can reduce the racial disparities. Specifically, the leading causes of the racial disparity were hypertension (which contributed 15.0% to the disparity), followed by HIV disease (11.2%), diabetes (8.5%), and homicide (8.5%) in a recent analysis. Appendix A. Glossary of Terms Appendix B. Detailed Life Expectancy Tables
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As a result of falling age-specific mortality, life expectancy rose dramatically in the United States over the past century. Final data for 2003 (the most recent available) show that life expectancy at birth for the total population has reached an all-time American high level, 77.5 years, up from 49.2 years at the turn of the 20 th century. Record-high life expectancies were found for white females (80.5 years) and black females (76.1 years), as well as for white males (75.3 years) and black males (69.0 years). Life expectancy gaps between males and females and between whites and blacks persisted. In combination with decreasing fertility, the life expectancy gains have led to a rapid aging of the American population, as reflected by an increasing proportion of persons aged 65 and older. This report documents the improvements in longevity that have occurred, analyzing both the underlying factors that contributed to mortality reductions and the continuing longevity differentials by sex and race. In addition, it considers whether life expectancy will continue to increase in future years. Detailed statistics on life expectancy are provided. A brief comparison with other countries is also provided. While this report focuses on a description of the demographic context of life expectancy change in the United States, these trends have implications for a wide range of social and economic programs and issues that are likely to be considered by Congress. This report will be updated upon release of final data for 2004 by the National Center for Health Statistics (NCHS).
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The military construction appropriations bill became Public Law 105-237 onSeptember 20, 1998. The conference report ( H.Rept. 105-647 ) for H.R. 4059 was passed by the House on July 27 and the Senate on September 1. Theconference recommended $8.450B. The conference committee added $666M to the President's request. Even with the additional funds, the total for FY1999 is $759M less than what was enacted forFY1998. This is an additional $216M to the House bill and a reduction of $31Mfrom the Senate bill. Military construction accounts received emergency supplemental appropriations money for FY1999 in the Omnibus Consolidation bill( H.R. 4328 , H.Rept. 105-825 ) in October 1998. Due to monsoons inKorea and Hurricanes Georges & Bonnie, military construction projects secured anadditional $209 million in funding. The Department of Defense manages the world's largest dedicatedinfrastructure, covering over 40,000 square miles of land and a physical plant worthover $500 billion. The annual military construction appropriations bill provides mostof the funding to maintain and upgrade this infrastructure. The bill fundsconstruction projects and real property maintenance of the active Army, Navy &Marine Corps, Air Force, and their reserve components; defense-wide construction;U.S. contributions to the NATO Security Investment Program (formerly called theNATO Infrastructure Program); and military family housing operations andconstruction. The bill also provides funding for the Base Realignment and Closure(BRAC) account, which finances most base realignment and closure costs, includingconstruction of new facilities for transferred personnel and functions, andenvironmental cleanup at closing sites. The military construction appropriations bill is one of several annual pieces of legislation that provide funding for national defense. Other major legislationincludes (1) the defense appropriations bill, that provides funds for all militaryactivities of the Department of Defense, except for military construction; (2) thenational defense authorization bill, that authorizes appropriations for nationaldefense, (1) and (3) the energy and water developmentappropriations bill, that providesfunding for atomic energy defense activities of the Department of Energy. Threeother appropriations -- VA-HUD-Independent Agencies, Commerce-Justice-State,and Transportation -- also include small amounts for national defense. In addition,the energy and water development appropriations bill provides funds for civilprojects carried out by the U.S. Army Corps of Engineers. The annual defense authorization bill authorizes all the activities in the defense appropriations measures described above. Therefore, major debates over defensepolicy and funding issues, including military construction may also occur in actionon the authorization bill. Since issues in the defense authorization and appropriationsare so interwoven, this report highlights salient parts of the authorization bill, alongwith the military construction appropriations process. Military construction appropriations are the major, but not the sole, source of funds for facility investments by the military services and defense agencies. Thedefense appropriations bill provides some funds for real property maintenance inoperation and maintenance accounts. In addition, funds for construction andmaintenance of "Morale, Welfare, and Recreation (MWR)" facilities, are partiallyprovided through proceeds from commissaries, recreation user fees, and otherincome. Most funds appropriated by Congress each year must be obligated in that fiscal year. Military construction appropriations are an exception. (2) These funds aregenerally made available for obligation for five fiscal years. Consideration of the military construction budget starts when the President's budget is delivered to the Congress each year. For FY1999, the President requested$7.8 billion for military construction, 12% less than the $8.9 billion appropriated forFY1998. Table 1 shows the key legislative steps necessary for the enactment of theFY1999 military construction appropriations. 1. Status of Military Construction Appropriations, FY1999 Emergency Supplemental Appropriations for FY1999. Military construction accounts received emergencysupplemental appropriations money for FY1999 in the Omnibus Consolidation bill( H.R. 4328 , H.Rept. 105-825 ) in October 1998. Due to monsoons inKorea and Hurricanes Georges & Bonnie, military construction projects secured anadditional $209 million in funding. Conference Agreement. The military construction appropriations bill became Public Law 105-237 on September20, 1998. The conference report ( H.Rept. 105-647 ) for H.R. 4059 waspassed by the House by a vote of 417 - 1 on July 27 and the Senate on September 1by a vote of 87-3. The conference recommended $8.450B. The conference committee added $666M to the President's request. Even with the additional funds, the FY1999 totalis $759M less than what was enacted for FY1998. This is an additional $216M tothe House bill and a reduction of $31M from the Senate bill. The conference agreement included full funding of the requested chemical demilitarization program. However, the conference included a general reduction of$50.5M of unobligated prior year funds against the entire program, because of delaysin equipment and environmental & construction permits. The DOD Family Housing Improvement Fund was reduced to $2M from $242M in the House bill and $7M in the Senate bill. The large reduction in the House billreflects full funding of construction projects in traditional family housing accounts,rather than the Family Housing Improvement Fund. Transfer authority to the Fundis provided for qualified projects from regular family housing accounts. The conference committee noted that 90% of resources expended for the House Revitalization Support Office (HRSO) for FY1996-98 was for consultant support. Therefore, the conferees reduced support for Family Housing Improvement Fund to$2M, based on available balances and excessive allocation for consultative services. The conferees also noted the delay in execution of family housing projects, for possible privatization efforts. The conference expects from DOD, a revised,scaled-back, reasonable plan for the privatization effort by October 1, 1998 and anintegrated family housing strategy by December 1, 1998. The Homeowners Assistance Fund had no funds appropriated by the conference. Instead the conference adopted Section 127, which allows the transfer of funds fromthe Base Realignment and Closure account into the Homeowners Assistance Fund. House and Senate Actions. Based on the interim 302 (B) allocations (see Budget Agreement section below), themilitary construction appropriations subcommittees finished their work. The SenateAppropriations Committee (SAC) approved their version of the military constructionbill ( S. 2160 ) with report ( S.Rept. 105-213 ) on June 11. SAC approved$8.484 billion. The House Appropriations Committee finished their bill( H.R. 4059 ) with report ( H.Rept. 105-578 ) on June 16. HAC approved$8.235 billion. The House passed H.R. 4059 on June 2 with the HAC-approved total. The Senate passed their bill on June 25, with the SAC-approved total. Of the $8.2 billion appropriated in the House FY1999 Military Construction Appropriations Bill ( H.R. 4059 ), 43% is for family housing; 37% forgeneral military construction projects and 21% is to meet the obligations of the BaseRealignment and Closure (BRAC). In the $8.5 billion appropriated in the Senate( S. 2160 ), 42% is for family housing, 37% for general militaryconstruction projects, and 20% is to meet BRAC obligations. The military construction subcommittees had similar themes in their reports. Both subcommittees rejected Administration proposals for: advanced appropriations for Army military construction, citingthe difficulty to project future costs and that the requested advance appropriationsprojects were not identified in DOD justification documents; acquisition of either the leased building or additional land forU.S. Southern Command Headquarters, relocated from Panama to Miami, Florida;and devolution of chemical demilitarization construction fromOffice of the Secretary of Defense to the Army, because of the importance of thisactivity to overall national security. Both committees -- like their authorization counterparts -- lamented general underfunding by the DOD of military construction, especially for decreasingmaintenance backlogs and increasing quality of life projects. The House Appropriations Committee decided to put all requested privatization projects from the Family Housing Construction Account into the Family HousingImprovement Fund, increasing the budget request of $7 million to $242 million. Thisallocation will enforce the use of privatization authorities mechanisms for theseprojects. Budget Agreement. Usually, the budget resolution sets the stage for the appropriations process. However, the workon this year's agreement is not completed yet. The House and Senate are still inconference deliberations for the FY1999 budget resolution. While they wait for the completed budget agreements, the appropriations committees are beginning their work. Both committees have released tentative 302(B) allocations to their subcommittees. The Senate Appropriations Committee hasallocated $8.484 billion in budget authority for military construction, which is anadditional $700 million (an increase of 8.9% ) than the President's request of $7.8billion. The House Appropriations Committee gave $8.235 billion (an increase of400 million or 5%) to the Military Construction Appropriations Subcommittee forFY1999. On May 21, the House approved $8.2 billion for military construction in its FY1999 defense authorization bill ( H.R. 3616 ), which is $450 millionmore than the President's request. The House National Security Committee reportedthat 40% ($183 million) of the increase is dedicated to quality of life enhancements. The committee highlighted additions to family housing, troop housing, childdevelopment centers, and fitness centers. (For more detailed information on theFY1999 House authorization bill, see the press releases and committee reports andbill sections on the House National Security Home Page at http://www.house.gov./nsc/ . On May 7, the Senate Armed Services Committee (SASC) approved $500 million more than the Administration's FY1999 budget in S. 2057 . TheSASC designated $164 million of the additional money for unaccompanied personnelquarters, child development centers, dining facilities, education centers, and militaryfamily housing. The remaining $336 million is for high-priority projects submittedby the military services that were not funded in the President's request. The Senate passed S. 2057 on June 25. It added $200 million of quality of life military construction projects to the SASC bill, by amendment. TheSenate also made it harder for DOD to close military bases passing the Inhofeamendment. The amendment makes the DOD seek congressional approval forclosing bases if 225 jobs are at stake, instead of current law's 300 jobs limit. Also,the Inhofe amendment contained a Sense of the Senate statement that Congress willnot consider another round of base closures until the latest round is completed. The HNSC and SASC came to some similar decisions about the FY1999 President's military construction budget request. In their respective reports, both the HNSC ( H.Rept. 105-532 ) and the SASC ( S.Rept. 105-189 ) noted the low budget request compared to prioryears (15% less than the FY1998 enacted amount). Both defense authorizing committees rejected theAdministration's proposal for two more base closure rounds, and for acquiring aleased building or land in Miami, Florida for U.S. Southern CommandHeadquarters. Both committees rejected the Administration's proposal tomove funding for chemical demilitarization construction from the Office of Secretaryof Defense (OSD) to the Army. Because of the national importance of this issue, thecommittees believe that authority should stay within OSD. Each committee noteddelays in DOD's obligation of money for chemical demilitarization projects, oftenbecause of construction and environmental permit problems. The Senate cut $50million from the program because of the backlog of unobligatedfunds. The Senate authorizers noted the trend for the DOD to fund military construction projects with prior year savings instead of including full funding for themilitary construction budget. The trend started in the FY1997 and continued throughto the FY1999 proposal. The SASC denied the use of prior year savings and expectsthe DOD to fully fund military construction requests in future budgets. The defense authorization conference report ( H.Rept. 105-736 ) passed the House on September 24, and the Senate on October 1. The FY1999 authorizationbill became P.L. 105-261 on October 17, 1998. The Funding Pattern for Military Construction Budgets. In recent years, the Congress has added significantamounts to annual Administration's military construction budget requests. Congressadded $479 million in FY1996, $850 million in FY1997 and $800 million in FY1998 to the military construction accounts. Three themes explain the pattern of reoccurring congressional additions. First, some members of the military construction subcommittees believe that militaryconstruction has been chronically underfunded. Military construction proponents,including facility advocates in the military services, argue that military facilities havebeen systematically underfunded for many years -- even, some say, in the midst ofthe defense buildup of the 1980s. In arguing that military construction has been chronically underfunded, DOD facility managers state that they have not met their goal of budgeting 3% of the plantreplacement value of DOD facilities for annual construction and maintenance (calledreal property maintenance at the Pentagon). Although this 3% goal is below theaverage for public facilities nationwide, actual DOD funding has typically run at 1to 2% of plant replacement value. For example, the Air Force testified on March 11,1998 to the House National Security Subcommittee for Military Installations andFacilities that the Air Force could manage to budget only 1% for real propertymaintenance. Thus, facility proponents welcome congressional additions. (3) Second, other Members of Congress, as Senator Bond commented during the floor debate on FY1996 military construction appropriations, believe that thePentagon counts on Congress to add money to Guard and Reserve programs. Inrecent years, Congress has added as much as $401.8 million (FY1995) for NationalGuard and Reserve construction projects. (See Table 5.) Third, often Congress has different priorities from the Administration. Congressional military construction subcommittees -- authorization as well asappropriations subcommittees -- have often taken issue with Administration militaryconstruction priorities. In the 1990s, for example, the committees frequently reducedamounts requested for construction overseas -- on the grounds that troop levelsabroad should be reduced and that allied burden-sharing contributions shouldincrease -- and reallocated the funds to domestic projects. In addition, congressionalcommittees have added unrequested funds for quality of life improvements, such asday care centers and barracks renovation. The congressional defense committees have argued that the military services have tended to neglect these areas in favor ofwarfighting investments. Funding and Long-term Planning for Military Construction: Inadequate? Along with concern about the level offunding, Members of Congress have also complained that poor Pentagon planningmake it difficult for the Congress to insure that added military construction projectsmeet pressing priorities. The military construction budget request is created within the Department of Defense's Planning, Programming and Budgeting System (PPBS). (4) The PPBSprocess is used to prepare DOD's internal, long-term financial plan. The long-termplan extends over a six-year period and is known as the Future Years Defense Plan(FYDP). In the 1990s, congressional defense committees repeatedly criticized thePentagon's long-term planning for military construction. In the FY1998 hearings, the Chairman of the House Subcommittee on Military Construction, Representative Ron Packard chastised the Department of Defense forrepeatedly failing to submit "honest" budgets reflecting real service priorities. Hecomplained that the military construction request traditionally leaves out necessaryprojects, especially for the National Guard and Reserve, which the services expectCongress to add. Mr. Packard wanted the subcommittee to get out of the businessof adding money for projects that the administration had not requested, but yetapparently needs. He also wanted DOD and the Services to use the Future YearsDefense Plan (FYDP) rigorously to set priorities for their construction projects andto integrate Guard and Reserve needs. In testimony on the FY1998 request to the Military Construction Subcommittee of the House Appropriations Committee, then-DOD Comptroller, John Hamreadmitted that DOD needs to undertake good detailed planning for the militaryconstruction budget and has not done this in the past. Hamre also conceded that theDOD has not evaluated the accuracy of the military construction FYDPs, and that hesaw a need for that assessment. Its report on the FY1998 Military Construction Appropriations Bill ( H.Rept. 105-150 ), the House Appropriations Committee called for DOD to prepare a FutureYears Defense Plan (FYDP) for military construction at the project level of detail,including Guard and Reserve requirements. The FY1999 military construction hearings reviewed service efforts to integrate Guard and Reserve needs into the budget request. The Services -- especially theArmy -- testified that they have produced integrated military construction plans withGuard and Reserve input. Alma Moore, Principal Deputy Secretary of the Army forInstallations, Logistics and Environment, testified at a House Military ConstructionSubcommittee that: "This year's military construction budget was built on the Army's one team, one fight concept. We made a conscientious effort to balance our resources amongall components, the active Army, the National Guard and the Army Reserve." The Debate Over Added Projects and the McCain Criteria. Since the Congress has added significant amounts tomilitary construction budgets over the last 10 years, congressional debate hascentered on how to prioritize additional projects. In 1994, the Senate debate on the military construction appropriations bill heavily focused the amount of congressional additions to the request despiteconstraints on overall defense spending. Senator McCain, in particular, objected tothe provision of substantial amounts for projects that the Administration had notrequested. He argued that such projects largely represent "pork barrel" spending, andcome at the expense of higher priority defense programs. In Senate floorconsideration of the military construction bill that year, the managers accepted aMcCain amendment that called for criteria to be applied to additional projects. Hisamendment included a provision that any added project should be on the military listsof critical yet unbudgeted projects. The McCain amendment was not incorporatedinto the final conference version of the bill, however, and the conference agreementprovided over $900 million for unrequested construction projects. The National Defense Authorization Act for FY1995 ( P.L. 103-337 ), however, incorporated Senator McCain's criteria as a sense of the Senate provision, providingthat the unrequested projects should be: 1. essential to the DOD's national security mission, 2. not inconsistent with planned base closures, 3. in the services' Future Years Defense Plans (see above), 4. executable in the year they are authorized and appropriated, and 5. offset by reductions in other defense accounts, through advice from theSecretary of Defense. The purpose of these criteria is to help Congress rate the relative importance of different projects. Though a sense of the Senate provision does not have the forceof law, the McCain criteria have been cited repeatedly in Senate authorization andappropriations debates for FY1996 and FY1997. The criteria were also cited in theHouse FY1997 debates by members of the "porkbusters" coalition. In practice,debates have focused on justifying projects according to the first four criteria, whileignoring the offset requirement. In debate on the FY1998 military construction appropriations conference report, Senator McCain continued to challenge congressional add ons. He noted that theCongress added 129 projects, totaling $800 million. The National Guard andReserve received $220 million of the additional congressional money. SenatorMcCain listed the extra projects in the Congressional Record , in a letter to thePresident, and on his web page at the following address: (http://www.senate.gov/~mccain/milconf.txt). Since the 104th Congress, the House military construction authorizing and appropriations committees have used criteria, in collaboration with the Pentagon, toadd projects to the military construction budget. Each added project needs to passcriteria like the McCain criteria: Is the project essential to the DOD mission,consistent with BRAC plans, in the Future Years Defense Plan and "executable" inthe coming fiscal year? If the project can meet those criteria, the militaryconstruction authorizing and appropriations committees may add the project. The FY1998 Line Item Veto. Debate over whether congressionally added projects are pork or important to theDOD mission contributed to the President's first use of his line item veto authority (5) in October 1997. The line item veto was used on the military constructionappropriations law ( P.L. 105-45 ) to eliminate 38 projects in 24 states, totaling $287million. According to the line item veto law (6) , the$287 million in savings would godirectly to deficit reduction and not back to the Department of Defense. The White House cited three criteria in explaining why the President vetoed these projects. These criteria are similar to the McCain criteria and the Housecommittees' criteria for adding projects. 1. The projects were not in the Department of Defense's future years defenseplan (FYDP). 2. Design work for the projects was not completed and therefore the projectcould not be executed in the coming fiscal year. 3. The projects would provide no "substantial" contribution to improving thequality of life of U.S. troops. According to the Clinton Administration, the vetoed projects needed to meet all three criteria to be put on the veto list. The Administration's criteria, however, didnot square with the data on particular projects that the military officers provided intestimony to the Senate Appropriations Committee in October 1997. First, the datashowed that 33 of the 38 projects were in the Pentagon's FYDP. Second, some ofthe projects did have design work in progress and so it appeared that the informationthat the President received on design work was inaccurate. Many of the projectsappeared to be "executable" in FY1998. Finally, the committee questioned the WhiteHouse's judgement of the quality of life merit of the 38 projects. It appeared that most of the vetoed 38 projects did not meet two out of three Administration criteria for inclusion on the veto list. Based on this assessment, theHouse and Senate passed a disapproval bill ( H.R. 2631 ) in October 1997to overturn the veto. (7) The President vetoed thedisapproval bill in November 1997,despite the White House's admission that erroneous data were used to cancel someprojects. The Office of Management and Budget (OMB) refused to confirm whichprojects or how many were vetoed by mistake. The canceled projects were restoredby a veto override of H.R. 2631 in February 1998 by the House andSenate. The veto override restored funding for the 38 canceled projects. The debate on the military construction line item veto highlights the issues that arise with adding projects to the military construction budget. Which projects areurgent? According to which criteria? And if projects are important, why doesn't theAdministration request them? Prospects for Congressional Additions to the FY1999 Military Construction Budget. The Budget EnforcementAct of 1997 ( P.L. 105-33 ) set caps on budget authority and outlays forFY1998-FY2002 (8) . The President's FY1999 budgetproposal for national defenseequals the cap of $270.6 billion. Unless Congress revises the budget agreement,there would appear to be no room for Congress to add funding to the defense budget. This will be the first time in three years that Congress has not been able to add money to the defense budget. The Congress added budget authority of about $7billion in FY1996, $11.2 billion in FY1997 and $2.9 billion in FY1998 to the defensebudget. With those increases to the defense budget, military construction accountsreceived congressional additions of $479 million in FY1996, $850 million in FY1997and $800 million in FY1998. Despite these budget agreement constraints, the defense authorizing committees and the military construction appropriators added military construction money to thePresident's request. The House National Security Committee added $450 millionand the Senate Armed Services Committee added $500 million, in their deliberationsover the FY1999 defense authorization bills. The conference for the FY1999Military Construction Appropriations Bill recommended $8.450B, which is anadditional $666M to the President's request. Importance of Housing to the Quality of Life for Servicemembers. Quality of life issues are considered to beimportant to recruitment and retention of servicemembers. Review of the militaryconstruction budget brings up quality of life issues for family housing, barracks andchild care facilities in congressional debates. The Department of Defense has found that about two-thirds of military housing -- both family quarters and barracks -- are substandard because of size, safety orcondition. (9) In 1995, then-Defense Secretary Perryestablished an external advisorycommittee and an in-house executive committee to look at quality of life issues forthe men and women in uniform. Two major housing initiatives for family housing and barracks renewal emanated from Perry's quality of life committees. First, private sector financing andmethods for family housing were proposed and implemented in the FY1996 DefenseAuthorization Act ( P.L. 104-106 ). Second, a new barracks standard was set, called"1 + 1". This standard provides each servicemember at sergeant or below anindividual room plus a shared bathroom with an adjoining room. (10) Congress hasbeen concerned, however, about the pace of both programs. Privatization of Military Family Housing. To alleviate the family housing problem, the Congressgave the Pentagon new authorities (see above) to obtain private sector financing andexpertise for family housing. The Pentagon estimates that with these authorities,defense dollars can be leveraged to more quickly build three times the amount ofhousing units financed the traditional way. The authorities are: guarantees, both loan and rental; conveyance or lease of existing property andfacilities; differential lease payments; investments, both limited partnerships and stock/bondownership; and direct loans. These new authorities can be used individually, or in combination in variousprojects. (11) On February 26, 1998, John Goodman, Deputy Under Secretary of Defense (Industrial Affairs and Installations) testified to the Military Installations andFacilities Subcommittee of House National Security Committee about the use ofthese authorities over the past two years. He listed the following accomplishments: Two Navy projects -- in Corpus Christi, TX and Everett, WA -- were awarded, producing 589 units. These units are already occupied and wereprimarily privately financed. Two projects -- Army at Ft. Carson, CO and Air Force atLackland AFB in TX -- should be awarded this spring. The Ft. Carson project willrevitalize 1824 existing units and build 840 new ones. The Lackland AFB projectwill supply 400 units. A Request for Proposal (RFP) has been released for a MarineCorps Logistics Base in Georgia for 155 units. RFPs are being developed for 3 Army projects, 2 Air Forceprojects and 1 Marine Corps project, with up to 29 potential projects underconsideration. Because these are new authorities, however, start-up issues have delayedlarge-scale pursuit of privatization. The Department of Defense's HousingRevitalization Support Office (HRSO) is coordinating the implementation of the newauthorities for each of the Services (12) . HRSO isstaffed with 16 full-time housing andreal estate experts from each of the Services and the Office of Secretary of Defense,along with consultant support. It has taken some time for DOD to learn how to work in the commercial real estate market. The Office of Management and Budget had to determine rules toaccount for government obligations with each of the authorities, and the rules werenot devised until June 1997. Also, the Pentagon needed to translate loan and loanguarantee concepts into actual documents that the private financial community wouldtrust for investment grade financing. Representative Joel Hefley, chairman of the Military Installations and Facilities Subcommittee of the House National Security Committee pointed out in a March 10,1998 hearing that the military housing privatization's authorities expire on September30, 2000 unless extended by Congress or made permanent law. Mr. Hefley statedthat, "My inclination at this time would be to extend the authorities once the five-yearperiod expires, but in order to justify an extension, Congress will have to seesignificantly better execution." The Senate is interested in how the use of housing privatization initiatives could affect future Base Realignment and Closure (BRAC) rounds. This concern came upin a March 3, 1998 Senate Appropriations Subcommittee on Military Constructionhearing on the FY1999 military construction budget. Senator Stevens expressedconcern that many of the housing privatization initiatives contain variousmechanisms that shift financial risk and liability to the government, especially withrespect to BRAC actions. Senator Stevens commented that housing projects withthese guarantees could be an advantage to a base in future BRAC rounds and this issomething the committee should monitor. The FY1998 Senate AppropriationsCommittee report on Military Construction continued similar themes. Barracks Improvements. To improve the conditions of barracks, the Department of Defense is enforcing newstandards. According to DOD official John Goodman's February 26, 1998 testimonyto the House National Security Committee on the FY1999 military constructionbudget, the Pentagon directed that gang latrine barracks be eliminated by FY2008. The Air Force will meet that goal in FY1999, with the Marine Corps following inFY2005 and Army & Navy in FY2008. Implementation of the 1 + 1 standard (see above) for barracks housing will not be completed until well into the next century. John Goodman testified that thestandard will be met in FY2020 by the Army, in FY2013 by the Navy, and in FY2019by the Air Force. The Marine Corps plans to build to an interim 2+0 (two Marinesin one room, sharing a bath) standard by FY2035. These timetables were noted inthe FY1998 House Appropriations Committee report ( H.Rept. 105-150 ), whichstated that it will take $14.3 billion and 20 years to reach the 1 + 1 standard. Base Realignment and Closure (BRAC) Concerns. Legislation for more BRAC rounds would start in theauthorizing defense committees of the House and Senate. Also -- if passed --budget authority for future BRAC rounds would reside in military constructionappropriations accounts. However, this year's Administration request for two more BRAC rounds in FY2001 and FY2005 has been received by the Congress with skepticism. (13) Duringthe FY1998 review of the defense budget, both the House and Senate rejectedlegislation to approve more military base closures. Instead, the Congress passedSection 2824 of the FY1998 National Defense Authorization Act ( P.L. 105-56 ),which required the Pentagon to report the costs and savings from previouslyapproved domestic military base closures. The required report, entitled " The Report of the Department of Defense on Base Realignment and Closure " was released by the Pentagon in April 1998. The reportmakes the case that: the DOD has 23% excess base capacity; two new BRAC rounds will save about $3 billion per year, afterfully implemented; actual BRAC costs reflect budgetestimates; the BRAC process overstates costs for environmentalrestoration, and previous BRAC rounds in 1988, 1991, 1993 and 1995 aresaving billions. (14) Both defense authorizing committees rejected the Administration's proposal for twomore base closure rounds in May 1998. Environmental Issues. The Senate continues to raise concerns about the cost of environmental clean-up and its effectson military functions and readiness. The Chairman of the Senate AppropriationsSubcommittee on Military Construction, Senator Burns mentioned environmentalissues, during his subcommittee hearing on March 3, 1998. Senator Burns noted that45% of the Army's FY1999 BRAC funding ($489M) is for studies, clean-up andrestoration of BRAC facilities and that these costs are a growing concern to him. Senator Burns said that the subcommittee will look at where the clean-up money isgoing, how it is being spent and to what degree military construction facilities arecleaned when they are turned over to the private sector. Use of Advanced Procurement for Army Military Construction. This year, the Congress will consider the Army'sproposal to use advanced procurement procedures for military construction. Thiswill be an exception to current practices for defense funding. When Congress appropriates money for defense programs, it generally pays all the costs up front in one fiscal year. This practice is known as full funding. It wasmandated by Congress in the 1950s to give full visibility to the cost of weaponsprocured. Therefore, all the money estimated at the time to complete the entireproject -- such as production of 21 Trident missiles, overhaul of an aircraft carrier,or construction of an ammunition depot -- is approved as a single package by theCongress. Often, the procurement of these weapons systems can span many years. As an exception to this practice, Congress sometimes provides funding for advance procurement of "long-leadtime" weapons components, such asnuclear-power plants for Navy warships. (15) The FY1999 Army military construction request proposes to use advanced procurement for some of its projects. Acting Assistant Secretary of the Army(Installations, Logistics and Environment) Alma Moore stated at the House NationalSecurity Committee hearing on February 26, 1998 that with advance appropriations,the contract will not define the work to be performed by the contractor, but only limitthe work by the amount appropriated in a given year. Advance appropriations of$555,050,000 are requested for: the U.S. Disciplinary Barracks,$13,000,000; the Roi Namur Power Plant,$36,000,000; the Fort Hood Railhead facility,$15,000,000; the Cadet Physical Development Center, $73,000,000, and four Chemical Demilitarization projects (Umatilla, Pine Bluff,Aberdeen and Newport) at $418,050,000. To get these large military construction projects started, the Office of Management and Budget allowed the Army to propose advanced procurementfunding to the Congress. By approving advanced procurement, the Congress limitsits discretion on future military construction budgets, since it is committing futurefunding. The Army has been the executive agent of the Department of Defense chemical demilitarization (chem demil). The Pentagon decided, in response to its DefenseReform Initiative, that the Army now has total responsibility for chemicaldemilitarization. Therefore, a total of $125 million was transferred from the DODmilitary construction budget to the FY1999 Army military construction budget forsix chem demil military construction projects. The House National Security Committee and the Senate Armed Services Committee rejected the transfer of chem demil from the Office of Secretary ofDefense (OSD) to the Army in their FY1999 defense authorization bills. Bothcommittees felt that chem demil is of national importance and therefore needs to bein OSD. Each committee also cut funding from the chem demil program, becauseof a large amount of unobligated funds already in the accounts. The militaryconstruction appropriators did the same. The Administration proposed significant reductions in military constructionspending for FY1999, compared to the enacted FY1998 amount. The President'sFY1999 proposal of $7.8 billion is a 12% reduction from the FY1998 $8.9 billionlevel approved by Congress. The military construction conference committeerecommended $8.450B for FY1999, an additional $666M to the President's request. Table 2 shows overall military construction funding since FY1995, including family housing. Table 3 breaks down the FY1999 request by appropriations accountand compared to FY1997 and FY1998. Table 4 shows congressional action on theFY1999 military construction appropriations bills. Table 5 shows congressionalmilitary construction add-ons for Guard and Reserve projects since FY1985. H.R. 3616 (Spence) Referred to the House Committee on National Security, April 1, 1998. Fullcommittee markup held, May 6, 1998. Ordered to be reported as amended, May 6,1998. Reported to House, amended, by House Committee on National Security( H.Rept. 105-532 ), May 12, 1998. Rules Committee Resolution ( H.Res. 435 ) reported to House, May 14, 1998. Passed House (Amended) by recorded vote:357 - 60 (Roll No. 183), May 21, 1998. Senate took up H.R. 3616 ,struck all after the enacting clause, inserted the text of S. 2057 , approvedthe bill as amended, by unanimous consent, and requested a conference, June 25,1998. Conference agreement announced, September 17, 1998 and reported ( H.Rept.105-736 ), September 22, 1998. Conference report approved in the House (373-50),September 24, 1998 and Senate, October 1, 1998. Became P.L. 105-261 on October17, 1998. S. 2057 (Thurmond) Committee on Armed Services ordered to be reported an original measure( S. 2057 ), May 7, 1998. Committee on Armed Services. Originalmeasure reported to Senate by Senator Thurmond, without written report. Acompanion bill, S. 2060 , ordered to be reported ( S.Rept. 105-189 ). Placed on Senate Legislative Calendar under General Orders, Calendar No. 362, May11, 1998. Considered by the Senate, May 13, 14, and 15, and June 19, 22, and 231998. S. 2160 (Burns) Committee on Appropriations. Original measure reported to Senate by SenatorBurns, with written report ( S.Rept. 105-213 ), on June 11, 1998. Placed on SenateLegislative Calendar under General Orders. Calendar No. 410. Measure laid beforeSenate by unanimous consent, June 25, 1998. Senate passed companion measure H.R. 4059 in lieu of this measure by Unanimous Consent, June 25,1998. H.R. 4059 (Packard) House Committee on Appropriations reported an original measure, with writtenreport ( H.Rept. 105-578 ) on June 16, 1998. Placed on the Union Calendar, CalendarNo. 326. Rules Committee Resolution ( H.Res. 477 ) reported to Houseon June 18, 1998. Rule H.Res. 477 passed House, on June 19, 1998. Passed House by Yea-Nay Vote: 396 - 10 (Roll No. 254), June 22, 1998. Thelanguage of S. 2160 was adopted as an amendment by UnanimousConsent in the Senate, amended and passed in the Senate on June 25, 1998. Conference report H.Rept. 105-647 filed in House on July 24, 1998. House Agreedto Conference Report by the Yeas and Nays: 417 - 1 (Roll No. 353) on July 29, 1998. Senate Agreed to Conference Report by the Yeas and Nays: 87-3 on September 1,1998. Became P.L. 105-237 on September 20, 1998. 2. Mil. Con. Appropriations, FY1994-98 (budget authority in millions of dollars) Source: Actual FY1995-97 data and Request FY 1999 data from Department of Defense, Financial Summary Tables, February 1998 and previous years' reports andFY1999 Military Construction Appropriations Conference Report ( H.Rept. 105-647 ). Note: May not add exactly, due to rounding errors. 3. Mil. Con. Appropriations by Account: FY1997-99 (in thousands of dollars) Source: Department of Defense, "Financial Summary Tables," February 1998. 4. Mil. Con. Appropriations by Account - CongressionalAction (in thousands of dollars) Sources: H.Rept. 105-578 , S.Rept. 105-213 & Congressional Record, 6/25/98 and 6/26/98; H.Rept. 105-647 . Notes: * Sec. 127 of the conference report provides transfer authority from the BRAC accounts tothe Homeowners Assistance Program. ** The Paine Field, WA project was included in the Family Housing, Navy & Marine Corps total in the conference report. 5. Congressional Additions to Annual Department of Defense Budget Requests for National Guard and Reserve Military Construction, FY1985-98 (current yeardollars in thousands) Source: Department of Defense, Financial Summary Tables, successive years. CRS Issue Brief IB96022. Defense Acquisition Reform: Status and Current Issues , by [author name scrubbed]. CRS Report 93-317. A Defense Budget Primer , by Keith Berner and [author name scrubbed]. CRS Report 98-205 . Appropriations for FY1998: Defense , by [author name scrubbed]. CRS Report 98-155. Defense Budget for FY1999: Data Summary , by [author name scrubbed] and [author name scrubbed]. CRS Report 94-515(pdf) . Defense Burdensharing: Is Japan's Host Nation Support a Model for Other Allies? , by [author name scrubbed]. CRS Report 91-669. Military Construction: Current Controversies and Long-Term Issues , by Martin Cohen and [author name scrubbed]. House Committee on Appropriations http://www.house.gov/appropriations Senate Committee on Appropriations http://www.senate.gov/~appropriations/ CRS Appropriations Products Guide http://www.loc.gov/crs/products/apppage.html#la Congressional Budget Office http://www.cbo.gov General Accounting Office http://www.gao.gov Office of Management & Budget http://www.whitehouse.gov/WH/EOP/OMB/html/ombhome.html
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The military construction (MilCon) appropriations bill finances (1) military construction projects in the United States and overseas; (2) military family housing operations and construction;(3) U.S. contributions to the NATO Security Investment Program; and (4) most base realignment andclosure costs. This report reviews the appropriations and authorization process for military construction. The congressional debate perennially centers on the adequacy of the President's budget for militaryconstruction needs and the cases for and against congressional additions, especially for Guard andReserve projects. This year, key Members of Congress have argued that the Pentagon has neitherfunded nor planned adequately for military construction. For FY1999, the Administration has requested budget authority of $7.8 billion. This is down from the FY1996 level of $11.1 billion, the FY1997 level of $9.8 billion and the FY1998 level of$8.9 billion. On May 21, the House passed their version of the FY1998 defense authorization bill, H.R. 3616 ( H.Rept. 105-532 ). On May 7, the Senate Armed Services Committeefinished marking up its version, S. 2057 ( S.Rept. 105-189 ). The Senate passed thedefense authorization bill on June 25. The conference report ( H.Rept. 105-736 ) passed the Houseon September 24, and the Senate on October 1. The FY1999 authorization bill became P.L. 105-261 on October 17, 1998. The military construction appropriations subcommittees have finished their work. Theconference committee submitted their report ( H.Rept. 105-647 ) for H.R. 4059 on July24. The House agreed to the conference report (417-1), on July 29, with the Senate agreeing (87-3)on September 1. It became P.L. 105-237 on September 20, 1998. The conference recommended $8.450B. The conference committee added $666M to the President's request. Even with the additional funds, the FY1999 total is $759M less than what wasenacted for FY1998. This is an additional $216M to the House bill and a reduction of $31M fromthe Senate bill. Military construction accounts received emergency supplemental appropriations money for FY1999 in the Omnibus Consolidation bill ( H.R. 4328 , H.Rept. 105-825 ) in October1998. Due to monsoons in Korea and Hurricanes Georges & Bonnie, military construction projectssecured an additional $209 million in funding. Appropriations and authorization hearings on the FY1999 military construction budget have highlighted the following issues: importance of housing to the quality of life forservicemembers; privatization of military family housing and barracksimprovements; Base Realignment and Closure (BRAC) concerns; environmental issues; and advanced procurement for Army military construction. Key Policy Staff Division abbreviations: F = Foreign Affairs.
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O n August 31, 2015, the New York Times ( Times ) ran a story with the headline "Murder Rates Rising Sharply in Many U.S. Cities." The Times reported that at least 35 cities had seen increases in violent crime compared to 2014, but the story specifically highlighted increases in reported homicides in 10 cities. According to the Times , homicides have increased 76% in Milwaukee, WI; 60% in St. Louis, MO; 56% in Baltimore, MD; 44% in Washington, DC; 22% in New Orleans, LA; 20% in both Chicago, IL, and Kansas City, MO; 17% in Dallas, TX; 9% in New York City; and 4% in Philadelphia, PA. The Times story followed reports from other media outlets about a growing number of violent crimes in some cities. The recent increases in violent crime have grabbed the attention of law enforcement officials. The Major Cities Chiefs Association held a summit in Washington, DC, in August to discuss why it was increasing in some cities and what could be done to reduce it. The Department of Justice (DOJ) held a meeting on October 7 with officials from 15 cities to discuss how DOJ's resources could be utilized to help combat increases in violent crime. After years of declining crime rates, policymakers might consider legislation to reduce or eliminate some mandatory minimum sentences and reduce the number of people held in prison. The changes policymakers might consider could roll back some of the changes Congress made to criminal justice policy during the 1980s and early 1990s in response to long-term rising crime rates. In general, these changes increased sentences, especially for violent and drug offenses, and ensured that inmates served a greater proportion of their sentences in prisons. However, some observers are now concerned that recent reports of an increasing number of violent crimes, especially homicides, in some cities might stymie criminal justice reform in Congress. There has also been a spate of high-profile police-involved deaths over the past year. This has led to calls for legislation to reform police policies and tactics. Some observers are concerned that reports of rising numbers of violent crimes might thwart efforts to increase police accountability if those efforts are viewed as hampering law enforcement's ability to control crime. Has the United States reached the end of, as one criminologist characterized it, the "great American crime decline?" The general consensus is that it is too early to draw any conclusions about the reversal of long-term trends. Also, there are several explanations for why some cities might be experiencing an increase in violent crime other than that the recent era of diminishing violent crime is coming to a close. Reports of an increasing number of violent crimes in some cities do not necessarily mean that the United States is in the midst of a crime wave. Violent crime and homicide rates have been trending downward for more than two decades ( Figure 1 ). The nation's violent crime rate in 2014 was the lowest it has been since 1970, while the homicide rate was the lowest since 1960. Even if homicide and violent crime rates are on the upswing in 2015, the homicide rate would have to increase by 5.7 homicides per 100,000 people to reach the post-1960 high of 10.2 per 100,000, while the violent crime rate would have to increase by 392.7 violent crimes per 100,000 people to equal the post-1960 high-point of 758.2 per 100,000 in 1991. Both of these increases would represent more than a doubling of the 2014 homicide and violent crime rates. As the figures below indicate, Uniform Crime Report (UCR) data from the Federal Bureau of Investigation (FBI) lags by a year. Data on a rising number of homicides or other violent crimes generally comes either from a law enforcement agency or a state UCR program. Data show that since 1990, homicide and violent crime rates in large and medium-sized cities have mirrored national trends ( Figure 2 and Figure 3 ). All cities with populations of 50,000 or more had lower homicide and violent crime rates in 2014 compared to 1990, with the largest cities (i.e., cities with populations of 250,000 or more) experiencing the greatest decreases between those years. In general, crime data should be viewed over longer time periods in order to determine trends. For example, even though violent crime and homicide rates have been on a downward trend since the early 1990s, there were years where one or both increased, but those year-to-year increases did not portend a break in the overall trend. Evaluating crime data in short intervals (quarterly or monthly, for example) can amplify the "noise" in the data and make it harder to distinguish the underlying trend. There are several factors that might help explain some of the reported upticks in violent crime across the country: Year-to-year changes in crime rates can be subject to random fluctuations and not related to how the police do their job . For example, a short-term but intense dispute between rival gangs might lead to an increase in reported violent crimes. Crime is subject to seasonal effects. It tends to increase in the summer and decrease as the year goes on. So a year with a flood of homicides in July may still end up being roughly in-line with the previous year's total by December. Increases in crime might also be indicative of past successes (i.e., many of the reported increases in homicides are from cities where homicide rates are at historic lows, therefore it is possible that, at some point, homicides rates were going to increase compared to the previous year). Percentage change in reported crimes is a relative measure and is sensitive to magnitude. For example, an increase in 10 homicides in a city with 20 homicides the previous year would represent a 50% increase year-over-year, but an additional 10 homicides in a city with 100 homicides the previous year would only represent a 10% increase. In addition, percentage change can sometimes be misleading depending on the time period chosen. For example, if a city had 20 homicides by the end of March 2014 but recorded 25 homicides by the end of March 2015, that would represent a 25% year-to-year increase in the number of homicides. However, if that gap persisted and the city ended the year with 105 homicides compared to 100 homicides in 2014, it would represent a 5% increase in the number of homicides. Also, it is possible that increases in violent crime in some cities do not portend a nationwide increase. An analysis of homicide data from a broader array of cities than those cited in the Times article provides a more nuanced insight into the issue. Data from the nation's 60 most populous cities show that reported homicides were up 16% overall and up by 20% or more in 26 cities. On the other hand, homicides were down in 20 other cities. The majority of cities (44 of 60) have not seen statistically significant increases in homicides, but the overall increase in homicides is statistically significant. Also, it is not rare for there to be large fluctuations in the reported number of homicides from year to year. For example, 17 of today's 60 most populous cities had statistically significant decreases in the number of reported homicides in 2009, and in 2005 there were 15 cities that had statistically significant increases in the number of homicides. It is probably too early to draw any definitive conclusions about whether the country is experiencing a reversal of decreasing violent crime rates. Even if final crime data show an increase in homicides or violent crime in 2015, if history is any indicator a one-year increase does not necessarily suggest a reversal of the nation's two-plus-decade crime decline. While it might be too early to make any definitive conclusions about whether there has been a reversal of the decades-long decrease in violent crime, several commentators have speculated about why some cities are experiencing spikes in violent crime. This section of the report provides a brief overview of some of the more frequently discussed possibilities. The "Ferguson effect" is one of the more widely discussed, and controversial, explanations for the recent increases in violent crime in some cities. It posits that protests over police-involved shootings and attempts to reform how police use force are to blame for the recent increases in some areas. Specifically, this theory suggests that in the wake of recent high-profile officer-involved deaths , the police have become reluctant to engage in proactive policing, thereby emboldening criminals. Proponents of the "Ferguson effect" cite what is largely anecdotal and correlational evidence to support their claim. For example, it has been argued that the police in some cities have limited their use of proactive policing techniques , leading to more homicides. It was reported that by November 2014, arrests were down one-third in St. Louis city and county after the August 2014 shooting of Michael Brown in Ferguson, MO. By early November, homicides in the city were up 42%. Baltimore recorded 43 homicides in May 2015 after rioting resulting from anger over the death of Freddie Gray while he was in police custody. At the same time, arrests were down 57% compared to the previous year. On the other hand, data show that the increase in homicides in St. Louis started before Michael Brown's shooting, and arrests were down and homicides were increasing in Baltimore before Freddy Gray died. Also, arrests might have decreased for reasons other than police officers believing they could not do their jobs due to public criticism of how they use force. For example, the reduced number of arrests in Baltimore can be attributed to staffing shortages and the implementation of a new patrol strategy that preceded Freddy Gray's death. In addition, one criminologist has argued that efforts to reform police and reign in the most egregious abuses have not prevented police from being effective crime fighters. He points to the New York City Police Department (NYPD) as an example. He writes, There is one longer-term test of whether [the "Ferguson effect"] is fact, fiction or something in between. In New York City, concern about police aggressiveness has been a cottage industry for more than two years, as the number of stops has plummeted—yet crime levels that were historically low three years ago have stayed just as low. The police department has been under legal scrutiny and political pressure, but there is no evidence that operational efficiency has suffered. And New York City crime statistics remain astonishingly good compared to other cities. Another theory is that law enforcement is facing a legitimacy problem in communities where residents feel that they are not treated fairly by the police. This might be considered the other side of the argument with respect to the "Ferguson effect": law enforcement's effectiveness is not hampered because police are reluctant to engage in proactive policing, it is hampered because the community does not want to work with law enforcement to prevent or solve crimes. Two criminologists argue that when people lose trust in the police they are more likely to take matters into their own hands when conflicts arise. Specifically, they write, Research finds that law is most effective when it is perceived as having high levels of legitimacy. According to studies, when people have trust and confidence in the criminal justice system, they are more likely to act in accordance with the law. When citizens question whether police and other criminal justice officials act in a fair and impartial manner, when they fear that interactions with the police will result in unwarranted levels of bodily harm, and when they doubt that police will thoroughly investigate questionable actions by fellow officers, legal cynicism, in which people perceive the law as illegitimate, unresponsive, and ill equipped to ensure public safety, is likely to result. These researchers also note that one of the implications of the "Ferguson effect" is that critics of law enforcement practices must support the police or violence will be allowed to grip the city. This approach, however, might reduce police legitimacy is the eyes of some communities because it can make members of those communities, who may believe that they have legitimate complaints about their relationship with the police, feel that their concerns are not valid. A rise in gang violence may be to blame for the increases in violent crime in select urban areas. Half of the 35 cities surveyed by the Major Cities Chiefs Association identified "gang-related activity and retaliatory violence" as a reason for violent crime increases. Gang violence is episodic. For example, a shift in drug markets might trigger fights between rival gangs for control of turf, the murder of one gang member might result in retaliatory violence, or the arrest of a gang leader might lead to a fight for control of the gang. Largely because of its episodic nature, this explanation for increasing violent crime is likely highly localized, meaning that it is unlikely that rising gang violence provides an explanation for any perceived national violent crime wave. It is possible that an increase in gang crime might be driving an increase in violent crime in one city, but it does not necessarily mean that other cities are experiencing a concomitant increase in gang crime, thereby explaining why violent crime might have increased in those cities. For example, it was reported that prescription narcotics were stolen from stores and clinics during riots in Baltimore. This might have led to gangs fighting over turf for distribution of the stolen drugs. If this is true, it might provide an explanation for the increased violent crime in Baltimore , but it might not explain why violent crime increased in another city. Both Washington DC Police Chief Cathy Lanier and Chicago Police Superintendent Garry McCarthy have identified repeat violent offenders as possible sources of the growing number of homicides in their respective cities. Police Chief Lanier was quoted as saying, "[w]e are seeing far too many of our repeat violent offenders out here being reckless with firearms over and over again. There is a push to release a lot of people." Superintendent McCarthy noted, "[a]cross the country, we've all found it's not the individual who never committed a crime before suddenly killing somebody. It's the repeat offenders. It's the same people over and over again." Recidivism amongst violent offenders is a stubborn problem. The most recent data from the Bureau of Justice Statistics (BJS) indicates that approximately 71% of violent offenders released in 2005 were rearrested within five years; though only about one-third (33%) of these offenders were rearrested for a violent offense. Data also suggest that a small proportion of released offenders accounted for a disproportionate number of post-release arrests: 16.1% of released inmates accounted for approximately half (48.4%) of all of post-release arrests of the 2005 release cohort. On the other hand, hundreds of thousands of released inmates have been returning to communities across the country for more than two decades. On average, approximately 595,000 inmates were released from state and federal prisons each year between 1990 and 2014. The number of released inmates increased every year between 1990 and 2008 before decreasing five of the six years between 2009 and 2014. As discussed above, the nation's homicide and violent crime rates were generally decreasing at the same time the number of inmates released from prison was increasing. It is possible that recent cohorts of released inmates included a disproportionate number of ex-offenders with violent proclivities, but currently available data does not provide any insight into this possibility. There is discussion about whether increasing violent crime rates in some cities highlights the lack of nationwide "real time" crime data. As previously mentioned, Uniform Crime Report (UCR) data published by the FBI lags by nearly a year. Research on homicides in the 60 most populous cities in the United States was collected from a variety of sources. Data for the analysis were taken from police departments' websites, state UCR programs, media reports, and the survey conducted by the Major Cities Chiefs Association. In some instances, police departments had to be contacted directly. Also, the data available were not always consistent. Some cities only reported data on the number of homicides that had occurred as of May 31, 2015. Others had data available as of September 7, 2015. More frequent and consistent crime data might be able to provide more insight into crime trends. It has been reported that the FBI is in the process of redesigning and redeveloping the UCR program, with one goal being the more frequent publishing of crime data. Up-to-date national crime data could show whether the increases in homicides in some cities are a part of a national trend or a more localized issue. It could also show whether homicides are increasing as part of an overall increase in violent crime or if the increase in homicides is its own phenomenon. It has been argued that the federal government publishes economic and labor data more frequently than it does crime data. The FBI notes that collecting and reporting data is labor intensive: there are approximately 18,000 law enforcement agencies in the United States and the FBI checks crime data before it is published. It has also been argued that preliminary crime data might not be useful or it could be misleading, because the data can be, and usually is to some extent, revised (e.g., an aggravated assault might be changed to a homicide if the victim later dies from injuries suffered during the assault). However, economic and labor data can also be revised, and a variety of people find value in these preliminary data.
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On August 31, 2015, the New York Times ran an article with the headline "Murder Rates Rising Sharply in Many U.S. Cities." The story highlighted double-digit percentage increases in homicide rates in several cities, and came on the heels of reports from other media outlets of recent spikes in violent crime in cities across the country. Accounts of rising violent crime rates in some cities have generated speculation about whether the United States is in the midst of a new crime wave. Overall, homicide and violent crime rates have been trending downward for more than two decades, and both rates are at historic lows. An analysis comparing 2014 and 2015 homicide data from the nation's 60 most populous cities suggests that violent crime is not increasing. Overall, reported homicides were up 16% in 2015, but a majority of cities (44 of 60) have not seen a statistically significant increase in homicides. The general consensus is that it is too early to draw any conclusions about the reversal of long-term trends. Also, even if homicide and violent crime rates do increase this year, it may not portend a break in the long-term trend. Even though both rates have been on a downward trend since 1990, there were years where either the homicide rate or violent crime rate increased. There are several short-term factors that might help explain some of the reported upticks in violent crime across the country. Year-to-year changes in crime rates can be subject to random fluctuations. Crime rates are subject to seasonal effects. Many cities are experiencing increases from historically low levels of crime. Percentage change in reported crimes is a relative measure and is sensitive to magnitude. While it might be too early to make any definitive conclusions about whether violent crime is on the rise, several commentators have speculated as to why some cities are experiencing spikes in violent crimes. Suggested explanations include the following: The "Ferguson effect" (i.e., in the wake of a spate of high-profile officer-involved deaths, police have become reluctant to engage in proactive policing, thereby emboldening criminals). Law enforcement is facing a legitimacy problem in some communities where residents feel that they are not treated fairly by the police, and this may mean that people are more likely to take matters into their own hands when conflicts arise. The increase in violence can be attributed to battles between gangs for control of drug turf or released violent offenders committing new crimes. The recent discussion about the increases in violent crime in some cities might raise the question of whether there is a need for more "real time" nationwide crime statistics. More frequent and consistent crime data might be able to provide greater insight into crime trends. However, there are logistical issues involved with collecting and reporting timely and accurate crime statistics from the nation's approximately 18,000 law enforcement agencies.
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On September 8, 2008, President George W. Bush officially notified Congress that, in light of military actions taken by the Russian Federation against the nation of Georgia, he was rescinding his statutorily required certification of the proposed U.S.-Russia nuclear cooperation agreement. The President's action, in effect, withdrew the proposed agreement from further congressional consideration for the foreseeable future. The President's notification raised the possibility that should circumstances "permit future reconsideration of the proposes Agreement, a new determination will be made and the proposed Agreement will be submitted for Congressional review" pursuant to section 123 of the Atomic Energy Act. In light of these developments, this report is being archived and will not be updated. On May 13, 2008, President Bush submitted to Congress a proposed agreement for civil nuclear cooperation with the Russian Federation. In accordance with the non-proliferation provisions of the Atomic Energy Act, as amended (AEA or "the act"), agreements for nuclear cooperation may go into effect only following an opportunity for congressional consideration defined by section 123. of the act (42 U.S.C. 2153), on account of which these agreements are sometimes known as "123 agreements." For an agreement like that with Russia, the effect of these provisions is that the agreement will go into effect at the end of 90 "days of continuous session" of Congress after it is initially submitted, unless, during that time, a joint resolution disapproving the agreement is enacted through procedures defined in section 130. of the act (42 U.S.C. 2159). This report first sketches the procedures prescribed by the AEA for congressional action in relation to agreements of this kind, then summarizes legislative proceedings occurring in relation to the proposed agreement with Russia since its May 13 submittal. Thereafter, the report addresses several questions of the implementation and intent of these statutory requirements that are raised by their application to the proposed agreement with the Russian Federation. Special attention is given to the definition of "days of continuous session" and the consequences if the requisite period is not completed before the end of the 110 th Congress. Specific questions addressed in this report about congressional action on the proposed agreement and its potential effects include: What does the President submit, when, to whom, and with what effect? How and when are resolutions of disapproval (or approval) introduced? How might the requirement for automatic discharge of a resolution of disapproval (or approval) come to bear? How might congressional action on a resolution of disapproval (or approval) come about? What proceedings would have to occur for the nuclear cooperation agreement with Russia to be disapproved or approved? What possibilities of disapproval (or approval) of the agreement exist other than pursuant to the statutory procedures? Section 123.a. of the AEA establishes nine requirements that a proposed agreement for nuclear cooperation must either meet or receive presidential exemption from meeting. The remainder of section 123. prescribes different regulations for congressional action depending on whether or not the agreement requires this exemption and on other features of its terms. As explained below, the procedural regulations applicable specifically to the proposed agreement with Russia depend principally on three features of the agreement: (1) it requires no exemption for failure to meet any of the nine requirements; (2) it includes provisions relating to "large reactors;" and (3) it covers only civil uses of atomic energy. Section 123.a. provides that if a proposed agreement requires no exemption, it may go into effect at a prescribed point unless Congress acts before then to disapprove it. Section 123.b. specifies that unless an agreement involves military-related uses of nuclear energy, the President is to submit its text to the Senate Committee on Foreign Relations and the House Committee on Foreign Affairs for a period of "not less than 30 days of continuous session" for consultation. This submission is to be accompanied (for agreements like that with Russia) by an unclassified Nuclear Proliferation Assessment Statement (NPAS) prepared by the Department of State. Section 123.d. directs that if the agreement involves large reactors, the President is to submit it, along with additional supporting documents, to Congress for a period of 60 "days of continuous session." The supporting documents include (1) any classified annexes to the NPAS; and (2) a statement of the President's approval of the agreement and determination that it "will promote, and will not constitute an unreasonable risk to, the common defense and security." The measure is to be referred to the same two committees as specified under section 123.b., which are, during this 60-day period, supposed to hold hearings on the proposal and report recommendations to their respective chambers. The agreement goes into effect unless, by the end of the 60-day period, a joint resolution of disapproval is enacted into law pursuant to procedures prescribed by section 130.i. Section 130.i. specifies the text for this joint resolution of disapproval and provides that a joint resolution with respect to the agreement be automatically introduced in each chamber, at the beginning of the 60-day period, in the House by the chairman and ranking minority member of the Committee on Foreign Affairs, and in the Senate by the two party floor leaders, or, in either case, by their designees. If a committee of referral does not report a joint resolution with respect to the agreement within 45 days, it is automatically discharged from further consideration of the introduced resolution. For the Senate, section 130.i. provides that the joint resolution may be called up on a non-debatable motion, time for consideration is limited to 10 hours, and amendments are prohibited. For the House, the statute invites the Committee on Rules to report a special rule incorporating comparable restrictions. President Bush submitted the proposed agreement for civil nuclear cooperation with the Russian Federation to Congress on May 13, 2008. The President's letter of submittal stated that the agreement was accompanied by his "approval and determination," as well as by the requisite unclassified NPAS. The submittal letter also stated that the classified annex would be submitted separately (and it appears, in fact, that the committees of jurisdiction had already received this annex on May 12). The inclusion of the unclassified NPAS met the requirements of the AEA to begin the 30-day period, and the inclusion of the President's "approval and determination," together with the separate submission of the classified annex to the NPAS, met the requirements for the 60-day period to start. The President's letter of submittal, accordingly, stated that this submission "shall constitute a submittal for purposes of both sections 123.b. and 123.d. of the Atomic Energy Act." The letter of submittal, nevertheless, also expressed an understanding that the two periods would not both commence immediately, but instead would occur consecutively. It went on to declare that the 60-day period shall commence "upon completion of the 30-day period." Although it is unclear that the President can determine by declaration when the statutory periods start and end, these stipulations appear to conform to recent the past practice of both the President and Congress on agreements for nuclear cooperation. These practices appear to have the effect of treating the two periods, for practical purposes, as a single uninterrupted period of 90 days of continuous session. In accordance with section 123. of the AEA, the President's message and the accompanying papers were referred to the House Committee on Foreign Affairs and the Senate Committee on Foreign Relations. On May 14, 2008, a joint resolution of disapproval with the text required by section 130.i. was introduced in the House by a member of the Committee on Foreign Affairs. On June 12, the House Committee held a hearing on "Russia, Iran, and Nuclear Weapons: Implications of the Proposed U.S.-Russia Agreement," at which John C. Rood, Acting Under Secretary of State for Arms Control and International Security, appeared as a witness. On June 17, the Senate Committee on Foreign Relations received a closed briefing from William J. Burns, Under Secretary of State for Political Affairs, on "Russia, Iran and U.S.-Russian Nuclear Cooperation." Under the stipulations stated in the President's letter of submittal, as explained below in " Days of Continuous Session in the 110 th Congress ," the 30-day consultation period ended on June 23 and the 60-day period for congressional action began on June 24. On June 24, pursuant to the statute, a joint resolution to disapprove the agreement was submitted in the House, and a joint resolution to approve the agreement was submitted in the Senate. The possible consequences of these different forms of resolution being submitted are considered below, in the section on " Resolutions of Disapproval ." Section 123. of the AEA specifies that the two time periods involved in the proceedings prescribed for the nuclear cooperation agreement with Russia are to be measured in days of continuous session, as defined by section 130.g. of the AEA. Section 130.g.(2) stipulates that [F]or purposes of this section insofar as it applies to section 123 ... continuity of session is broken only by an adjournment of Congress sine die; and ... the days on which either House is not in session because of an adjournment of more than three days are excluded in the computation of any period of time in which Congress is in continuous session. The effect of this provision is that (1) any period of continuous session terminates only with the final adjournment of the last session of a Congress; but (2) in determining the length of a period of continuous session, any day on which either house is in a recess of its session is not counted. This arrangement is apparently intended to prevent a situation in which an agreement would go into effect only because Congress was not in session, or did not remain in session long enough to act on a disapproval resolution. The definition established by section 130.g.(2) seems intended to correspond to the constitutional requirement that neither house may adjourn for more than three days without the consent of the other. Congress may adjourn for more than three days either (1) by ending its annual session (an adjournment sine die ), or (2) by taking a recess within its annual session, such as the "non-legislative periods," or "state" (or "district") work periods" customarily scheduled, for example, around Memorial Day and Independence Day each year. In both cases, the two houses typically grant each other the required consent by adopting a concurrent resolution. Under the statutory definition, accordingly (1) continuity of session is broken just when Congress adjourns its last session pursuant to a concurrent resolution for a sine die adjournment; and (2) the count of "days of continuous session" pauses on exactly those days on which both houses, or either one of them, is not in session pursuant to a concurrent resolution for a recess of more than three days. On the other hand, a day on which either house, or both, is out of session for three consecutive days or fewer counts as a day of continuous session. If both houses adjourn from Friday to Tuesday, for example, not only the days each house is in session during the preceding and following week, but also the intervening three days of the extended weekend, count as days of continuous session. Under the definition of section 130.g.(2), accordingly, until the final sine die adjournment of the 110 th Congress, every calendar day, Saturdays and Sundays included, will count as a day of continuous session except those on which at least one house is out of session pursuant to a concurrent resolution providing for a recess of more than three days. Under the Constitution, however, the term of the 110 th Congress expires on January 3, 2009. At some point before then, as a result, the 110 th Congress must adjourn its last session sine die , or else it will automatically stand adjourned sine die at noon on January 3. As Under Secretary Rood affirmed in testimony before the House Committee on Foreign Affairs on June 12, this sine die adjournment will put an end to the existing period of continuous session. If Congress adjourns sine die without acting on the proposed agreement, and before 90 days of continuous session are completed, the agreement will not take effect until a new period of continuous session, beginning ab initio when the 111 th Congress convenes, has reached the requisite length. In colloquy with members of the Committee, Under Secretary Rood also expressed his understanding that the 90-day period was measured separately in each house and, for each house, included only the days on which that house was in session. On this understanding, for example, if the House were out of session on Thursday while the Senate met, and the Senate were out of session on Friday while the House met, one day of continuous session would be counted for each chamber. This interpretation appears to overlook that days of continuous session may occur even if one house is, or both houses are, out of session (as long as they are out of session for no more than three consecutive days). In addition, section 131.g. is not couched in terms of separate counts in each house, but explicitly refers to the continuous session of Congress as a whole. The language quoted at the outset of this section implies that a single count covers both houses, and states explicitly that when either house takes a recess (of more than three days), the count of days pauses until both houses are back in session. The estimates in the following sections follow this last interpretation of the quoted provision. After President Bush submitted the nuclear cooperation agreement with Russia on May 13, 2008, Congress remained in continuous session, as defined by the AEA, until May 22, which amounted to nine days of continuous session. The House then entered a recess for Memorial Day, so that the count of days of continuous session paused. (A non-legislative period of the Senate occurred during the same week, but that body took no adjournment of more than three days, meeting instead in periodic pro forma sessions, which the recess resolution had authorized it to do.) On June 3, when the House reconvened, the count resumed, making that day the 10 th day of continuous session. As a result, June 23 was the 30 th day of continuous session and the last day of the 30-day period for consultation. In accordance with the declaration in the President's letter of submittal, June 24, being the 31 st day of the overall 90-day period, became the first day of the 60-day period for congressional action. For the Independence Day non-legislative period, both houses adjourned for more than three days, but the recess of the House extended from June 27 through July 7, whereas that of the Senate extended from July 1 through July 6. On this occasion again, as a result, it was the schedule of the House, which took the longer recess, that defined the period excluded from the count of days of continuous session. The last day of House session before the recess, June 26, was the 33 rd day of continuous session in the overall 90-day period, and the day of its return, July 8, became the 34 th day. No further recess of either house occurred until August 1, which accordingly represented the 58 th day of continuous session. Congress then entered a summer non-legislative period pursuant to H.Con.Res. 398 , which stipulated that both chambers reconvene on September 8. During this non-legislative period again, the Senate arranged to meet in periodic pro forma sessions, so that no adjournment of more than three days occurred in that chamber. The House, on the other hand, did not schedule any pro forma sessions in the intervening period, so that an adjournment of more than three days did occur there. Inasmuch as one house was taking an adjournment of more than three days, the count of days of continuous session paused during this period. Unless both Houses return before then pursuant to either the contingent reassembly provisions of H.Con.Res. 398 or a call by the President, September 8 will be the 59 th day of continuous session. Any further projection of days of continuous session is dependent on assumptions about subsequent recesses and an adjournment sine die. The schedules previously announced by the majority party leadership in each chamber project no further recesses during the present session. The House schedule projects adjournment sine die on September 26, 2008; the Senate schedule includes no projection for this event. If the chambers follow these schedules, it appears that September 26, 2008 will be the 77 th day of continuous session. Accordingly, if Congress adjourns sine die on this date, continuity of session will be broken before the 90 th day is reached, and the proposed agreement with Russia will not be able to take effect before the end of the 110 th Congress. A new period of continuous session will begin when the 111 th Congress convenes, and the agreement with Russia will be able to take effect under the AEA only at the conclusion of this new period of continuous session. If, on the other hand, Congress does not adjourn sine die on September 26, and neither house takes any further recess, the 90 th day of continuous session could be reached on October 9, and the agreement with Russia could accordingly take effect on that date. The ability of Congress to disapprove the proposed agreement depends not only on whether the two houses can complete their initial action on a resolution of disapproval before the prescribed period of continuous session expires. Section 123. of the AEA prescribes that the agreement can be disapproved only if the joint resolution of disapproval is actually enacted into law within the prescribed period. If the President vetoes a disapproval resolution, as a result, the agreement will go into effect unless both houses can complete action to override the veto within 90 days of continuous session after its submission. Inasmuch as the President has 10 days to act on a measure presented for his approval (Sundays excepted), Congress might, in practice, be unable to prevent an agreement from taking effect unless it completes its initial action on the disapproval resolution by about the 88 th day of continuous session. These consequences are pursued in more detail in the later section on " Presidential Action ." Whether or not the continuous session of the 110 th Congress reaches its 90 th day before its adjournment sine die could potentially be altered in any of several ways. First, Congress could adopt concurrent resolutions establishing additional recesses of its session, including a recess spanning the election, after which Congress would reconvene in a "lame duck" session. Second, Congress could be reconvened, either during a recess or after a sine die adjournment, either by its leadership or by pursuant to the constitutional authority of the President. Finally, through the use of periodic pro forma sessions in both houses, a scheduled recess period could be converted into a period of continuous session. In some recent election years, Congress did not adjourn sine die before the elections, but instead recessed its session in early autumn and reconvened after election day for what is called a "lame duck session" (more accurately, a "lame duck" portion of its regular session). The leadership of both houses is said to intend to avoid this practice in the 110 th Congress by concluding the business of the session, and adjourning sine die , before election day (November 4). If, however, Congress in the end takes a recess spanning the election, the occurrence of the 90 th day of continuous session will depend on the dates of recess and reconvening. For example, Congress might recess on September 26 and reconvene on November 12 (the day after Veterans' Day). Under these conditions, if September 26 had been the 77 th day of continuous session, the 90 th day could occur on the 13 th calendar day following the reconvening, which, in the case supposed, could be November 24 (the Monday preceding Thanksgiving). If the 110 th Congress remained in session until this date and on this schedule without a disapproval resolution being enacted, the agreement with Russia would be able to take effect after this date. In recent years, concurrent resolutions providing for recesses of the session or sine die adjournments have normally provided contingent authority for the bicameral leadership to call Congress back into session before it is scheduled to reconvene, "if the public interest shall require it." It is also possible that the President might use his constitutional authority to reconvene Congress during a scheduled recess, or after a sine die adjournment and before the scheduled opening of the following session. If, by either of these means, Congress were to be reconvened during any recess, including one spanning the election, the days on which Congress met pursuant to that call would be converted from recess days to days of continuous session. If as many as 13 additional days of continuous session occurred as a result of this change, the 90 th day of continuous session counting from the May 13 submission could occur before the 110 th Congress adjourns sine die , in which case the agreement with Russia could take effect before the 111 th Congress convenes. Corresponding considerations could apply if the 110 th Congress were to adjourn sine die before the 90 th day of continuous session was reached, but were called back before the expiration of its term on January 3, 2009. Inasmuch as the term of the 111 th Congress would not yet have begun, the Congress that would reconvene would still be the 110 th Congress. The continuity of session as defined by section 130.g.(2) of the AEA would not have been broken, and the previous count of days of continuous session would presumably resume from the point at which it had left off. Under these conditions as well, the current period of continuous session might reach 90 days before the end of the 110 th Congress, and the proposed agreement with Russia could take effect. The way in which this continuity would be realized, however, would differ depending on whether Congress were called back by its own leadership or by the President. If Congress reconvened pursuant to the call of the leadership, the action would presumably vitiate the sine die character of the previous adjournment, and the 110 th Congress would presumably resume its present (second) session. If, on the other hand, Congress were reconvened by the President after a sine die adjournment, it would meet in a new session, which would be the third session of the 110 th Congress. Continuity of session would be maintained, in that case, because the sine die adjournment of the present session would cease to qualify as the sine die adjournment of the 110 th Congress. Pro forma sessions are those held merely "for the sake of form," or as a formality. Typically, no legislative business is conducted; on some occasions, the chamber provides in advance (usually by unanimous consent) that no business may occur. Pro forma sessions count as days of session for purposes of determining whether an adjournment of more than three days is occurring. The resolution authorizing the non-legislative period for George Washington's Birthday in 2008, for example, did not provide for a recess in the constitutional sense. Although the resolution covered essentially the period defined by the announced schedules, it did not provide for a recess of more than three days, but instead directed pro forma sessions of the House at least every fourth day, and authorized the Senate to arrange a similar schedule. Inasmuch as the Senate proceeded to exercise this authority, no "adjournment of more than three days," as contemplated by the Constitution and section 130.g.(2) of the AEA, occurred in either house during this period. Instead, every day of the non-legislative period counted as a day of continuous session. At the July 12 hearing of the House Committee on Foreign Affairs, Under Secretary Rood noted that days with pro forma sessions count as days of continuous session. He did not note that this will be true only if the other house also is not in recess. If both houses hold pro forma sessions at least every fourth day during a non-legislative period, no "adjournment of more than three days" occurs in either house. Nor did Under Secretary Rood explicitly note that under these conditions, not only the days of pro forma session themselves, but also the remaining days of the non-legislative period, will count not as days of recess, but as days of continuous session. It is possible that no pro forma sessions will be used in these ways to affect the length of continuous session of the current Congress. Days occurring during non-legislative periods will count as days of continuous session only if they are covered by periodic pro forma sessions in both chambers; if only one chamber holds pro forma sessions while the other takes a recess of more than three days, the days of the recess will still not count as days of continuous session. The resolution providing for the August 2008 non-legislative period, for example, authorized only the Senate to schedule pro forma sessions, and provided for a recess of the House in the constitutional sense. Pursuant to section 130.g.(2) of the AEA, inasmuch as one house has been in recess during this period, the days of this recess are excluded from the count of days of continuous session. Under these conditions, as already discussed, the date scheduled for sine die adjournment of the House will presumably arrive before the 90 th day of continuous session has been reached after submission of the agreement. If, on the other hand, both houses had determined to hold periodic pro forma sessions during the August non-legislative period, the 90 th day of continuous session could have occurred as early as Tuesday, September 2, 2008 (the day after Labor Day, and a date that would still fall within the non-legislative period). For some recent periods of pro forma sessions, including the August period, the Senate has sometimes provided that no legislative business occur in the pro forma sessions. If the 90 th day of continuous session were to fall within a session recess governed by such a provision, Congress could become unable to act on a joint resolution of disapproval in a timely fashion, and in the absence of that disapproval, the agreement with Russia would presumably take effect on the date specified. This difficulty, however, might be overcome by use of the authority of the leadership or the President to reconvene Congress before the expiration of the recess. Being reconvened by either means would presumably supersede the order against conducting legislative business, and accordingly would enable Congress to consider a disapproval resolution rather than allow the agreement to enter into force by default. If the 110 th Congress adjourns sine die before the 90 th day of continuous session after May 13, 2008, the period during which Congress could act to disapprove the agreement will not yet have elapsed, and the agreement with Russia will be unable to take effect under the AEA at that point. Instead, a new period of continuous session will begin with the convening of the 111 th Congress in January 2009 (assuming the 110 th Congress is not reconvened for the requisite remaining period after its sine die adjournment). Until this new period of continuous session reaches the requisite length, the entering into effect of the agreement will be postponed, and the opportunity for Congress to disapprove it pursuant to the AEA will remain available. The AEA does not explicitly provide whether failure of the 110 th Congress to complete the periods required under section 123. would necessitate starting from the beginning, in the 111 th Congress, of the entire approval process or of only such parts of it as the 110 th Congress did not complete. Inasmuch as the AEA makes provision for the process it prescribes to continue after a break in the continuity of session, it could be read as implying that the submission of an agreement triggers a single process of congressional action that may carry over into a subsequent Congress. The definition of "continuous session" in section 130.g.(2) seems expressly to contemplate that a new period of continuous session would begin automatically with the convening of the 111 th Congress. Rigorously applied, this view could imply that the 111 th Congress would not have to repeat statutory requirements that had already been accomplished in the 110 th Congress. For example, inasmuch as the President has already submitted the text of the agreement to the committees, made the required approval and determination, submitted the agreement itself to Congress, and submitted the NPAS and its classified annexes, he would not have to carry out these requirements anew in the 111 th Congress. It could be argued, as well, that inasmuch as 30 days of continuous session were completed during the 110 th Congress after the submission of the text on May 13, 2008, the 30-day consultation period required by section 123.b. would not have to repeated in the 111 th Congress. On this view, the first day of the 111 th Congress could be construed as the beginning of the 60-day period prescribed by section 123.d. for congressional action on the agreement and, accordingly, as the day on which new joint resolutions of disapproval should automatically be introduced. Further, by this interpretation, if no joint resolution of disapproval were to be enacted by the end of the 60 th day of continuous session of the 111 th Congress, the agreement would automatically go into effect. At the June 12 hearing of the House Committee on Foreign Affairs, on the other hand, Under Secretary Rood took the position that, if the full period of 90 days of continuous session is not completed within the 110 th Congress, the entire period must begin de novo in the 111 th Congress. Under this interpretation, it might also be held necessary for the President to resubmit the agreement itself to Congress in the new session, in the way provided in the AEA. Absent this resubmittal, it could be argued, no date could be fixed at which the disapproval resolution would be automatically introduced. Although no established guidance or previous proceedings appear to settle this point definitively, there are indications that both houses would be likely to pursue this interpretation of the act. Under this interpretation of the AEA, and if the statutory requirements are implemented in the 111 th Congress in the same way as the 110 th , the Presidential resubmission of the agreement with Russia would presumably have to be accompanied by the requisite unclassified NPAS and its classified annexes, as well as the approval and determination of the President. The committees to which the text of the agreement is submitted would presumably be intended to engage in consultations with the executive on the agreement during the 30 days of continuous session following submission. The leaders identified by the statute would presumably have to introduce new resolutions of disapproval on the first day of the following period of 60 days of continuous session, and the agreement would go into effect if no resolution of disapproval were to be enacted by the end of that 60-day period. Unless a disapproval resolution were enacted, accordingly, the agreement with Russia would go into effect at the end of 90 days of continuous session after the President submitted it to the 111 th Congress. In favor of this interpretation of the act, it could be argued that the newly constituted committees in the 111 th Congress might not wish to be compelled to rely on the consultations and deliberations engaged in by their predecessors. In addition, of course, inasmuch as any resolution of disapproval submitted in the 110 th Congress will die with a sine die adjournment, any such resolution could be considered in the 111 th Congress only if it were introduced anew in that Congress. Several features of the language of section 123. indicate differences in purpose and intent between the 30-day period for consultation under section 123.b. and the 60-day period for congressional action under section 123.d. Under section 123.b., the President submits the text of the agreement to the committees having jurisdiction for consultation ; under section 123.d. he submits the agreement itself to Congress for its action . Section 123.b. further directs that the President consult with the committees receiving the submission for a period of "not less than 30 days of continuous session ... concerning the consistency of the terms of the proposed agreement with all the requirements of" the non-proliferation provisions of the AEA. He is also to approve the proposed agreement and make "a determination in writing that ... [it] will promote, and will not constitute an unreasonable risk to, the common defense and security." Under section 123.d., the 60-day period for congressional action begins when the President submits the agreement itself to the Congress, along with his "approval and determination," and then only when the NPAS, including any classified annexes, has also been submitted to Congress. The reference of section 123.d. to the "approval and determination of the President," appears to address the same act of "approval" and "determination in writing" as required by section 123.b. Further, although section 123.b. does not explicitly require that the President must approve the agreement and make the required determination following the consultation with the committees, it can be read as implying that the consultation should precede this action. It is from such a reading of the statute that it appears possible to draw an implication that the 60-day period required by section 123.d. will not run concurrently with the 30-day period prescribed by section 123.b., but will instead follow that 30-day period. On the other hand, the AEA does not appear to require that the submission to Congress of the agreement itself must immediately follow the 30-day period for consultation. Two features of the President's submission on May 13 do not appear to comport clearly with the statutory scheme. First, the President's letter of submittal made explicit reference only to submitting the agreement to Congress for approval; it did not explicitly submit the text of the agreement to the committees of jurisdiction as well. Nevertheless, inasmuch as the submission did result in referral of the agreement to the committees, the President and Congress are apparently agreed in treating the submission of the agreement to Congress as also constituting submission of the text to the committees. It is this understanding, in effect, that enables the President by a single submission to fulfill the requirements of both sections 123.b. and 123.d. Second, inasmuch as all requirements for both the periods required by the statute were met by the time of the submission on May 13, it might be questioned why the 30-day and the 60-day period should not both be considered as beginning at once. The chief reason against doing so appears to be the apparent presumption of the statute that the President's "agreement and determination," the submission of which is required for the beginning of the 60-day period for congressional action, is to follow and, in some sense, result from the consultation with committees that is supposed to occur during the period of at least 30 days. Under this rationale, however, the President's declaration of his "approval and determination" at the outset of the 30-day period could be viewed as rendering moot the consultive purpose of that period. The President's letter of submittal, nevertheless, also declared the readiness of the Administration to "begin immediately the consultations ... provided in section 123.b." Section 130.i.(1) of the AEA regulates the form that a joint resolution to disapprove a proposed agreement for nuclear cooperation must take in order to be eligible for expedited consideration under the further provisions of section130.i. Section 130.i.(1) specifies that: For purposes of this subsection, the term "joint resolution" means a joint resolution, the matter after the resolving clause of which is as follows: "That the Congress (does or does not) favor the proposed agreement for cooperation transmitted to the Congress by the President on .", with the date of the transmission of the proposed agreement for cooperation inserted in the blank, and the affirmative or negative phrase within the parenthetical appropriately selected. If the phrase "does not favor" is selected, the measure will be a resolution of disapproval; if "does favor" is selected, it will be a resolution of approval. The phrase "appropriately selected" might be read as signifying that, for agreements that may go into effect unless disapproved, resolutions of disapproval are to be introduced, and for those that may go into effect only if approved, resolutions of approval are to be introduced. Pursuant to section 130.i.(2), such joint resolutions are to be introduced automatically in each chamber, in the House by the chairman and ranking minority member of the Committee on Foreign Affairs, and in the Senate by the two party floor leaders, or (in each case) their designees. The automatically introduced joint resolutions are to be introduced "by request," signifying that the introducing Members do not necessarily advocate the measures. The AEA, however, appears to contemplate that other Members may also introduce joint resolutions. Also pursuant to section 130.i.(2), the automatic introduction of these resolutions is to occur "on the day on which a proposed agreement for cooperation is submitted" to Congress under section 123.d. The date specified would be the first day of the period of 60 days of continuous session for congressional consideration mandated by section 123.d. Pursuant to section 130.i.(3), these resolutions are to be referred, in the Senate, to the Committee on Foreign Relations, and in the House to "the appropriate committee or committees," which presumably would be, or at least include, the Committee on Foreign Affairs. As noted in the section on " Legislative Action ," resolutions meeting the requirements of section 130.i.(1) were introduced with respect to the agreement with Russia in both chambers on the date, and by the Members, specified by section 130.i.(2). In the House, the chairman and ranking minority member of the Committee on Foreign Affairs introduced H.J.Res. 95 by request, and in the Senate the chairman and ranking minority member of the Committee on Foreign Relations introduced S.J.Res. 42 by request, evidently as designees of the two floor leaders. The House measure is a joint resolution of disapproval, which, if enacted before the end of the 60-day period, would presumably have the effect contemplated by the statute of preventing the agreement from taking effect. The Senate measure, however, is framed as a joint resolution of approval, stating that the Congress "does favor" the proposed agreement. If this resolution were to be enacted within the 60-day period, it would neither prevent nor hasten the entering into effect of the proposed agreement. The agreement could still take effect at the end of the 60-day period, just as if Congress took no action in the matter. In taking this joint resolution of approval as fulfilling the requirements of section 130.i. in this case, the Senate is apparently interpreting the statutory direction that the relevant phrase in the resolution be "appropriately selected" not as requiring the form of the resolution to be appropriate to the process of approval or disapproval to which the agreement in question was subject, but instead simply as conferring discretion on the sponsors. In addition to these two measures, a joint resolution to disapprove the proposed agreement ( H.J.Res. 85 ) had already been introduced in the House on May 14, the day after the President submitted the agreement to Congress. This resolution has the text specified by section 130.i.(1), and was referred to the Committee on Foreign Affairs, but was not introduced at the beginning of the 60-day period by the leaders of the Committee on Foreign Affairs or their designees. In accordance with the statute, it appears that H.J.Res. 85 does not count as the one required to be automatically introduced, but that this resolution would be eligible for expedited consideration under the act, and if enacted before the end of the 60-day period, would suffice to prevent the agreement from going into effect. Section 123.b. of the AEA directs that after the President submits the text of the agreement to the pertinent committees, he is to consult with them thereon during the stated period of "at least 30 days of continuous session." This provision does not specify the form to be taken by these consultations. During the 60 days of continuous session after the agreement itself is submitted to Congress, on the other hand, section 123.d. specifies that the committees of referral are to "hold hearings on the proposed agreement ... and submit a report to their respective bodies recommending whether it should be approved or disapproved." Presumably, if the committee decides to recommend disapproval, the report in question could be that which accompanies the resolution of disapproval itself. If the committee favors approval, the report might accompany an approval resolution, or it might simply be explanatory, without accompanying any legislation. The relation between these statutory requirements and initial congressional action on the proposed agreement with Russia again reflects possible ambiguities. Congressional action began with the hearing of the House Committee on Foreign Affairs on June 12 and the closed briefing with the Senate Committee on Foreign Relations on June 17. Inasmuch as officials of the Department of State appeared at both sessions, these sessions could no doubt be understood as constituting the consultations for which section 123.b. calls. There seems no reason to suppose that consultations pursuant to section123.b. might not take such a form. It is not clear whether either committee conceived its session as also meeting the requirement of section 123.d. for hearings on the agreement itself subsequent to its submission to Congress. If they did, it is not clear whether hearings held after the agreement has been submitted and referred, but before the agreed beginning of the 60-day period during which section 123.d. calls for such hearings, could appropriately be regarded as also satisfying the requirements of section 123.d.. Even if the earlier sessions cannot be regarded as satisfying the requirement of section 123.d., however, it does not appear that this requirement could be enforced through any procedural action on the floor. Under section 130.i.(4) of the AEA, each committee of referral is automatically to be discharged from the further consideration of all disapproval resolutions referred to it at the end of 45 days from the date of submission of the agreement. This provision appears intended to guarantee that a disapproval resolution will become eligible for timely floor consideration in each chamber even if the committee takes no action. The statute, however, does not define this time period in terms of days of continuous session. This omission will apparently have different effects in the two houses. In the House of Representatives, it is the practice to construe references in its procedures to "days," if not otherwise specified, as legislative days. A legislative day ends each time the chamber adjourns, and another begins each time it convenes after an adjournment. Accordingly, "legislative days" normally correspond to days of session. As a result, legislative days are likely to elapse more slowly than days of continuous session, which, except during recess periods, include all calendar days. If both chambers convene on Monday through Friday in each week, for example, five legislative days per week would probably occur in each chamber, although seven days of continuous session per week would elapse. In some circumstances, 45 legislative days might even last longer than 60 days of continuous session. In that case it would be impossible for the chamber to consider a disapproval resolution before the agreement took effect under the statute, unless the committee chose to report the resolution rather than be discharged. It is not clear whether the possibility of such a result was intended by the statute or arises from an inadvertent oversight in drafting. The Senate also has often interpreted "day" to mean "legislative day" unless otherwise specified. In the case of the statutory language of the AEA, however, it appears that the Senate will interpret "day," if not otherwise specified, as meaning a calendar day. In the present instance, 18 legislative days elapsed in the House from June 24, the beginning of the 60-day period, through August 1, the last day of session before the summer non-legislative period, but 28 days of continuous session occurred during the same period. If the House were to remain in session five days per week after it reconvenes on September 8, it will not reach the 45 th legislative day after June 24 until October 14. Even if Congress has not adjourned sine die by then, the 60 th day of continuous session would probably already have been reached on October 9, as estimated above. Accordingly, committee discharge in the House might not occur until after the agreement had already gone into effect and could no longer be disapproved under the terms of the statute. Unless the committee chooses to report the resolution to disapprove for the agreement with Russia, the provision of section 130.i. for automatic discharge may not afford the House a timely opportunity to act on the matter during the 110 th Congress. In the Senate, the referral statement for S.J.Res. 42 explicitly states that the measure is "referred to the Committee on Foreign Relations pursuant to 42 U.S.C. 2159 [which corresponds to AEA section130.] for not to exceed 45 calendar days." The date of introduction having been June 24, the 45 th calendar day thereafter was August 8, which fell during the summer non-legislative period. The committee was presumably regarded as automatically discharged from the Senate joint resolution on August 8, or perhaps on the next day of Senate session thereafter. During the non-legislative period, however, the Senate is operating under a unanimous consent order for periodic pro forma sessions, during which no legislative business is to occur. This order against legislative business might be held to preclude the discharge from occurring until the Senate returns for business on September 8. In any case, nevertheless, it appears that the measure will become available for Senate floor consideration no later than September 8, well before the expiration of the 60-day period for congressional action projected for October 9 (if Congress remains in session). As already explained, however, even if the Senate does adopt a joint resolution of approval, and the measure goes on to enactment, it would have no bearing on the statutory procedure authorizing the agreement to take effect unless disapproved within 60 days of continuous session after June 24. It appears, nevertheless, that the discharge of the committee from joint resolution of approval might affect the possibility of congressional disapproval of the proposed agreement in another way. AEA section 130.i.(4) says that: If the committee ... to which a joint resolution has been referred has not reported it at the end of 45 days after its introduction, the committee shall be discharged from further consideration of the joint resolution or of any other joint resolution introduced with respect to the same matter .... It appears that the Senate would interpret this provision to mean that the discharge of any one joint resolution with respect to an agreement will preclude the discharge of any other joint resolution with respect to the same agreement. Under this reading, even if some Senator were to introduce a disapproval resolution on the proposed agreement with Russia, once the committee either reports or is discharged from the approval resolution, the disapproval resolution would effectively be precluded from reaching the floor (unless the committee chose to report that measure as well). Section 130.i. of the AEA provides that, once the committee in either chamber reports or is discharged from a joint resolution to disapprove a nuclear cooperation agreement, the measure is to be placed on the chamber's calendar of business. The provision then directs that the disapproval resolution be considered under expedited (or "fast track") procedures, the purpose of which is to ensure that Congress will have an opportunity to consider and vote on the measure before the arrival of the time at which the agreement would otherwise automatically take effect. Section 130.i., however, does not itself specify procedures for floor consideration of a resolution of disapproval. Instead, for the Senate, it applies an expedited procedure contained in another statute, and for the House, it presumes that the procedures used will be established by a special rule, reported by the Committee on Rules and adopted by the House. For the Senate, section 130.i.(5) of the AEA provides that floor consideration shall occur pursuant to section 601(b)(4) of the International Security Assistance and Arms Export Control Act of 1976 (ISAAECA). This provision of law established an expedited procedure, for the Senate only, that has been made applicable to additional classes of measure by several subsequent laws. Pursuant to this expedited procedure, the joint resolution of disapproval is privileged, meaning that the Senate may take it up by approving a non-debatable motion to proceed to consider. ISAAECA also limits debate on the resolution itself to 10 hours (equally divided and controlled by the two floor leaders or their designees), and precludes any amendment (or motion to recommit). A non-debatable motion further to limit debate is allowed, various other potentially dilatory actions are prohibited, and limits are placed on the debate of questions arising during consideration. Provisions similar to these are standard components of statutory expedited procedures. Section 130.i.(5) establishes no regulations for House floor consideration of the resolution of disapproval, nor does it even make the measure privileged for consideration (which, in the House, means that the measure could be called up with priority over the regular order of business). Instead, section 130.i.(5) authorizes the Committee on Rules to report a special rule providing for consideration of the measure under terms that "may be similar, if applicable" to those of ISAAECA. Any special rule for consideration of a disapproval resolution would surely place limits on debate, and would most likely prohibit amendments as well, inasmuch as any change in the text of the resolution would render it inconsistent with the requirements of section 130.i.(1), and therefore, presumably, ineligible for further consideration under the expedited procedure of section 130.i. This provision of the AEA grants the Committee on Rules no power that it would not otherwise have. Nevertheless, unless the Committee on Rules reports a special rule for considering a disapproval resolution, or unless privilege for consideration is conferred on the measure by some other means (e.g., suspension of the rules or unanimous consent), section 130. would afford no means by which House floor consideration of the measure could be ensured. Section 130.i.(6) of the AEA makes provision to preclude the necessity to resolve differences between disapproval resolutions passed by the two chambers. If one chamber adopts its resolution and transmits it to the other, then the receiving chamber considers its own companion measure, but takes the final vote on the measure received from the first house. This automatic "hookup" is evidently intended to ensure that final action in both houses will occur on the same measure in the same form, so that it can be cleared for presentation to the President without the necessity for a conference committee or other process of resolving differences between versions of the measure adopted by the two chambers. This procedure, however, is predicated on a presumption that the measures initially passed by the two chambers will be substantively similar. Although section 130.i.(6) is stated as applying to "a joint resolution described in paragraph (1)" and a joint resolution of the other house "with respect to the same matter," it does not seem to contemplate a situation in which one of the measures is a disapproval resolution and the other an approval resolution. If an "automatic hookup" were applied under these conditions, it would result in the final vote of the second house occurring on a measure which would have an effect opposite to that of its own measure that it had just been considering. In practice, however, although the provision is framed as applying even if the two resolutions address the same matter in opposite senses, it appears that in such a case the chamber acting second would consider the provision for automatic hookup inoperative. The consequence of doing so would presumably be that the chamber acting second would instead vote on the adoption of its own measure. If it voted to adopt, the chamber could then take any of several actions: (1) send its own measure to the chamber that acted first for concurrence; (2) take up the measure received from the other chamber and act on it under its general procedures, without the restrictions of the expedited procedure; or (3) by unanimous consent, take up the measure received from the first chamber, amend it by substituting the text of its own measure, and return it to the first for concurrence or for the resolution of differences, either with a request for conference or through an exchange of amendments between the houses. Any of these alternatives would likely delay final congressional action on the matter. Pursuant to section 123.d. of the AEA, the proposed nuclear cooperation agreement with the Russian Federation will take effect at the end of the total period of 90 days of continuous session unless a joint resolution of disapproval is enacted before that time. It is not sufficient for Congress to complete action on the disapproval resolution within the required time; the measure must actually become law before the end of the prescribed period. Enactment into law of the resolution requires either that (1) the President signs it or allows it to pass into law without his signature; or (2) the Congress overrides his veto. For Congress to prevent the agreement from taking effect, one of these actions would have to take place before the end of the 90-day period. Under the Constitution, the President has 10 days (Sundays excepted) to act on a measure after it is presented to him. As a result, if a resolution of disapproval were to be presented when fewer than 10 calendar days (excluding Sundays) remained in the total period of 90 days of continuous session , it appears that the President could render the measure moot by failing to act until the 90-day period expired and the agreement went into effect. Similarly, if the President were to return the resolution with a veto, the agreement would take effect unless Congress were to complete action to override the veto before the 90 th day of continuous session after the initial submission of its text to the committees. In practice, the President is likely to veto a resolution disapproving an agreement of which, under the statute, he has already certified his approval. For Congress to make effective use of its opportunity under the AEA to disapprove the agreement, accordingly, it would presumably have to present the resolution of disapproval to the President at a point when a minimum of 11 days of continuous session remain in the 90-day period before the agreement automatically becomes effective. (The minimum is 11 if Congress remains in session, such that every calendar day is a day of continuous session, inasmuch as any period of 10 calendar days will contain at least one Sunday that will count as a day of continuous session but not as a day of the period for presidential action.) A still longer period would afford Congress a more practicable opportunity to act to override the veto. Specific implications of this circumstances for the agreement with Russia can be illustrated only through assumptions about the sine die adjournment of the 110 th Congress. Assume, for example, that Congress maintains the announced schedule described above, in the section on " Days of Continuous Session in the 110 th Congress ," through September 26, 2008, but instead of adjourning sine die on that date, recesses its session until November 12. As discussed earlier, September 26 would then presumably be the 77 th day of continuous session, and November 12 would be the 78 th . Under these circumstances, if Congress completes action on the resolution of disapproval and presents it to the President on September 26, just before recessing, the 10-day period allowed for presidential action would extend until October 8, and when Congress returned on November 12, it would have until the 90 th day of continuous session (presumably Monday, November 24) to prevent the agreement entering into effect by overriding the veto. If, on the other hand, Congress did not complete action on the resolution of disapproval until it reconvened on November 12, the 10 days allowed for presidential action would last until Monday, November 24. Assuming Congress remained in session, however, its 90 th day of continuous session after submission of the agreement would also be November 24. Under these circumstances, Congress might effectively be able to ensure the disapproval of the agreement only if both houses could complete action to override the veto on that same day. Finally, if Congress were to adjourn sine die shortly after adopting the disapproval resolution, the President could pocket veto it. If this sine die adjournment occurred after the 90 th day of continuous session, the agreement would go into effect. On the other hand, if the adjournment occurred on or before the 90 th day of continuous session, the agreement presumably could not go into effect until the appropriate period of continuous session had elapsed beginning with the convening of the 111 th Congress, and then only if no congressional disapproval was accomplished during that period. Although the AEA provides the expedited procedures described above for congressional action on a joint resolution of disapproval, it does not require Congress to use these procedures to act on the matter. If, during the period for action provided by the statute, Congress were to adopt a disapproval resolution meeting the requirements of section 130.i. under any of its regular procedures, enactment of the resolution would have the same effect of disapproving the agreement as would that of a similar measure under the expedited procedures of the statute. Disapproval might also be accomplished by legislative "riders" on an omnibus appropriations bill or in any other measure. Under its general legislative power, Congress could also determine the status of the agreement by acting on a measure other than the one prescribed by the statute. Such action occurred in the 99 th Congress (1985-1986), when Congress enacted a measure ( P.L. 99-183 ) providing that a nuclear cooperation agreement with China would become effective only when certain further conditions were met. Just as with the disapproval resolution specified by the statute, however, any such measure would have to be enacted before the end of period required by the AEA, because otherwise the agreement as submitted would automatically go into effect. On the other hand, inasmuch as any such alternative measure would not meet the requirements of section 130.i. for a joint resolution of disapproval, the measure would not be eligible for consideration under the expedited procedures of section 130.i. Instead, each house would have to consider it under its regular legislative procedures (unless it chose, in accordance with its own general procedures, to apply the expedited procedure to the alternative measure). Any measure granting approval with conditions to the proposed agreement with Russia would presumably have to contain language specifying that its provisions apply "notwithstanding section 123. of the Atomic Energy Act of 1954, as amended." Section (a)(2) of P.L. 99-183 , granting conditional approval to the agreement with China, contained a provision of this kind. In the absence of such a provision, the provision of section 123. for automatic unconditional approval at the end of the 90 days would presumably continue to apply, so that in spite of the conditional approval, and unless the joint resolution of disapproval specified by section 130.i. were enacted into law, the agreement might take effect without conditions at the end of the period. The President might also be able to vitiate an attempt by Congress to place conditions on its approval of the agreement with Russia by vetoing the measure. Unless Congress could override the veto (or secure enactment into law of a joint resolution of disapproval), the agreement would then instead go into effect without conditions at the end of the period prescribed in accordance with section 123. Finally, Congress might act on a measure enabling the proposed agreement with Russia to take effect immediately, without conditions. For this purpose, a measure having the text of S.J.Res. 42 , stating only that Congress "does favor" the proposed agreement, would not suffice, because no statutory provision authorizes an agreement subject to congressional disapproval either to take effect, or to take effect before the conclusion of the period defined by the AEA, simply because Congress states its approval. Rather, any such measure would presumably have to state explicitly that the agreement could take effect upon enactment notwithstanding the provisions of section 123. of the AEA.
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On May 13, 2008, President Bush submitted to Congress a proposed agreement for nuclear cooperation with the Russian Federation. On September 8, the President announced that he was rescinding his certification of the proposed U.S.-Russia nuclear cooperation agreement. This action, in effect, withdrew the proposed agreement from further congressional consideration for the foreseeable future Under the Atomic Energy Act (AEA), the text of such an agreement is to be submitted to the committees of jurisdiction for at least 30 days of consultation, and the agreement itself is then to be submitted to Congress for 60 days, during which the committees are to consider it and report recommendations. The AEA requires the President to state his approval of the agreement before the 60-day period begins, but he did so in his initial letter of submission, perhaps rendering moot the consultive purpose of the 30-day period. Such an agreement would go into effect unless a joint resolution of disapproval is enacted by the end of the 60-day period, which, the President's submittal stipulated, will immediately follow the 30-day period. Both periods are measured in "days of continuous session," which includes all days except recesses of either house of more than three days, with "continuity" broken only by the sine die adjournment of a Congress. September 8, when the August recess is to end, is to be the 59th day of the full 90-day period, and the projected sine die adjournment on September 26 may be only the 77th day. A later sine die adjournment, a "lame duck" session, recall by the President or by congressional leadership, or the use of pro forma sessions instead of recesses could allow the 90th day to be reached within the 110th Congress. Otherwise, the agreement could not take effect until the end of a new disapproval period starting anew after the 111th Congress convenes in January, 2009. The AEA prescribes an expedited procedure for Senate consideration, including committee discharge, a non-debatable motion to proceed to consider, a 10-hour limit on consideration, and a prohibition on amendments. For the House, the Committee on Rules is invited to prescribe similar terms of consideration. A disapproval resolution was introduced in the House on May 14, and another, by committee leaders, as the AEA prescribes, at the start of the 60-day period on June 24. On the same date, Senate committee leaders introduced a resolution of approval. Although enactment of the approval resolution neither block nor hasten the effectiveness of the agreement, it could apparently be considered under the expedited procedure, and might thereby prevent expedited action on a disapproval resolution. Congress could also disapprove the agreement, or approve it with conditions, by enacting an alternative measure under its general rules. The President might likely veto any disapproval or conditional approval, in which case the agreement would go into effect unless Congress overrides the veto before the end of the disapproval period. Inasmuch as the President may take 10 days for his action, the timely enactment of a disapproval resolution may be feasible only if Congress initially passes it with more than 10 days remaining in the disapproval period. This report will not be updated.
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Members of Congress were concerned about allegations that U.S. firms provided expertise tothe People's Republic of China (PRC) that could be used in its ballistic missile and space programsand that the Clinton Administration's policies on satellite exports facilitated legal or illegal transfersof military-related technology to China. The New York Times reported in April 1998 that the JusticeDepartment began a criminal investigation into whether Loral Space and Communications Ltd. (ofNew York), and Hughes Electronics Corp. (of Los Angeles) violated export control laws. (2) The firmswere alleged to have shared their findings with China, without approval from the U.S. government,on the cause of a PRC rocket's explosion while launching a U.S.-origin satellite in February 1996. In sharing their conclusions, the companies allegedly provided expertise that China could use toimprove the accuracy and reliability of its ballistic missiles, including their guidance systems. Several classified government studies reportedly concluded that the U.S. technical assistanceprovided to China damaged U.S. national security by helping the PRC to improve the guidancesystems on its ballistic missiles developed for China's military, the People's Liberation Army (PLA). In addition, the media reports alleged that President Clinton in February 1998 issued a waiver of sanctions that undermined the investigation by allowing the issuance of licenses for the export oftechnology or expertise similar to that in question -- despite "strong opposition" from Justice. Moreover, political considerations allegedly influenced the Administration's decision, with Loral'schairman being the largest individual donor to the Democratic Party in 1996. Congressional investigations also led to media reports in early 1999, confirmed by U.S. intelligence in April and the Cox Committee's declassified report in May 1999, that the PRCobtained secret information on U.S. nuclear weapons. (3) Members were concerned about the PRC'smodernization of its ballistic missiles. (4) There were also congressional concerns about the U.S. space industry (satellite-makers as well as space launch businesses), aside from questions about China. (5) This CRS Report discusses security concerns, significant congressional and administration action, and a comprehensive chronology pertaining to satellite exports to China (since 1988 underthe Reagan Administration). The events summarized below, based on open sources and interviews,pertain to various issues for U.S. foreign and security policy (including that on China and weaponsnonproliferation): Should Congress exercise strong oversight of the Administration's policy on satellite exports, including ensuring congressional review? What are the benefits and costs of satellite exports to China for U.S. economicand security interests? Should the United States continue, change, or cease the policy in place sincethe Reagan Administration that has allowed exports of satellites to China (for its launch and,increasingly, for its use)? Do satellites provide military applications for China? Have U.S. firms contributed intentionally or unintentionally to China'sdevelopment of ballistic missiles in ways that harmed U.S. national security, and what should be thegovernment's response to findings of such alleged transfers of U.S.technology? Should the Presidential waiver (of post-Tiananmen sanctions) for Loral'sChinasat-8 have been issued during an ongoing criminal investigation into alleged assistance byLoral and Hughes to China's missile program? Are there adequate controls and monitoring on exports of U.S.-origin satellitesand/or satellite technology, and on technical exchanges with PRC engineers that could contributeto China's programs on missiles or military satellites and other spacecraft? Should commercial space cooperation, especially allowing China to gain theeconomic benefits of satellite launches, be used as leverage in U.S. policy on weaponsnonproliferation? Should sanctions for missile proliferation be imposed on China's space launchcompany, China Great Wall Industry Corporation, and other companies, to improve China'snonproliferation practices? Should the United States negotiate a new space launch agreement with China,and did the country abide by the previous agreements? China Great Wall Industry Corporation (CGWIC, or China Great Wall) has been China's commercial space launch company since 1986. It has marketed the use of rockets developed by theChina Academy of Launch Vehicle Technology (CALT) and other aerospace academies. ChinaGreat Wall and CALT have been part of China's defense-related aerospace industry under the ChinaAerospace Corporation (abbreviated by China as CASC). CASC, established in 1993, has overseenspace as well as missile research and development. CASC and its subordinate companies, researchacademies, and factories have developed and produced strategic and tactical ballistic missiles, spacelaunch vehicles, surface-to-air missiles, cruise missiles, and military (e.g., reconnaissance andcommunications satellites) and civilian satellites. CASC was previously known as the Ministry ofAerospace Industry, also called the Seventh Ministry of Machine Building. The PLA has exercisedcontrol over satellite launches (under the new General Equipment Department since April 1998). China reportedly launched its first satellite, Dongfanghong ("East is Red"), on April 24, 1970. By the end of 1997, China reportedly launched 40 domestic satellites: 17 retrievable reconnaissancesatellites, 3 meteorological satellites, 8 communications and broadcasting satellites, and 12"experimental" (probably military) satellites. China has used satellites and space technology toenhance its national defense, economy, and international prestige. (6) On April 7, 1990, China GreatWall launched a foreign satellite (Asiasat) for the first time. Since then, the company has expandedits foreign business, especially with U.S. firms such as Hughes Electronics, Lockheed Martin, andLoral Space and Communications. China probably has sought foreign capital and technology toapply to its domestic satellite research and development efforts, in part to lessen reliance onpurchasing foreign satellites. The president of the Chinese Academy of Space Technology said thatthe PRC's Dongfanghong (East is Red) satellites matched the capacities of advanced satellites builtby Hughes, but were backward in satellite navigation and stabilization technologies. The Academyhad hoped to sell satellites at world standards by 2000. (7) China experienced a number of embarrassing and costly failed satellite launches until 1996. In 1992, a PRC rocket stalled while attempting to launch the Optus-B1 satellite, and another rocketexploded and destroyed the Optus-B2 satellite (both built by Hughes). In 1995, a Long March rocketexploded and destroyed the Apstar-2 satellite (built by Hughes). In 1996, another PRC rocketexploded and destroyed the Intelsat satellite (built by Loral). Aside from the dramatic explosions,other problems prevented the PRC rockets from successfully launching satellites into the correctorbits. However, since the launch of a "scientific" satellite on October 20, 1996, China reported 27consecutive, successful space launches through 2002, raising questions as to whether U.S.technology contributed to this achievement. China's aerospace industry shifted from denying all responsibility in failed launches of foreign satellites to a willingness to work with foreign companies in determining the causes of explosionsand other failures. This practice may have been a strategy to learn from foreign companies methodsto improve China's rockets, satellites, aerospace facilities, and other related space technology. Chinamay also have tried to reassure foreign insurance companies and satellite manufacturers that it cansolve problems with the Long March rockets. Security Concerns. One question in the controversy involves the applicability of satellite-launch technology to the modernization of China'sballistic missiles. China Great Wall uses the Long March series of rockets to launch satellites. China's "Long March (LM)" (" Chang Zheng ") space launch vehicles (SLVs) are related to its "EastWind" (" Dong Feng " (DF)) intercontinental ballistic missiles (ICBMs). China has used the LMrockets to launch its own satellites (since 1970) and foreign satellites (since 1990). The Long Marchboosters are also produced as China's CSS-3 (DF-4) and CSS-4 (DF-5A) ICBMs deployed in theSecond Artillery, the PLA's missile force. China's launch facilities, e.g., Xichang Satellite LaunchCenter in Sichuan province, are at PLA bases. A review of open sources found agreement that the first Long March rockets used to launch satellites were derived from ballistic missiles developed earlier and that there has been parallelresearch and development for the modernization of the SLVs and ICBMs. (8) The CSS-3 ICBM hasalso been produced as the booster for the LM-1 SLV. The CSS-4 ICBM has also been used as thebooster for the LM-2, LM-3, and LM-4 series of SLVs. In a 1984 publication, the DefenseIntelligence Agency (DIA) called the LM-1 SLV the "booster variant" of the CSS-3, and LM-2 the"booster variant" of the CSS-4. Indeed, this factor has made it difficult to accurately count thenumbers of ICBMs that China has produced and has allowed for China to increase the potentialnumber of ICBMs available for deployment. When the Reagan Administration first decided to allow China to launch U.S.-origin satellites, it cited the need to protect "legitimate U.S. national security interests" and promised Congress thatan agreement would be concluded with China to safeguard U.S. technology from "possible misuseor diversion." (9) Such an agreement on technologysafeguards was signed on December 17, 1988, butapparently required renegotiation. A new agreement was signed on February 11, 1993. Onequestion concerns whether China has abided by these agreements. After the end of the Cold War and with increase in U.S.-China trade, some said that national security interests need not be sacrificed by commercial interests. Within the current controversy,some argued that launching satellites from China conformed to national security interests becauseof the benefits to U.S. satellite manufacturers. (10) Loral. The Department of Justice's investigation looked at Space Systems/Loral (SS/L), Loral's subsidiary in Palo Alto, CA, which chaired a reviewcommittee on the launch failure of the Intelsat-708 satellite in February 1996. As for Loral's case,Acting Undersecretary of State John Holum confirmed on April 9, 1998, that after the accident inFebruary 1996, the Department of State "became aware that there may have been a violation." Thecase was referred to the Department of Justice for investigation. He said that there were "stronglegal remedies" for violations of export control laws, including a denial of future licenses. In 1997, when China signed a $200 million contract to buy the Chinasat-8 satellite from Loral, Henry Stackpole, president of Loral Asia-Pacific, said that Loral was "confident" that China GreatWall took steps "to overcome the systemic problems and some of the human aspects of theengineering" to be able to launch Chinasat-8. Stackpole also said that China Aerospace Corporationand China Great Wall used foreign technological know-how to improve their rockets and launchingprocedures. (11) Loral issued a statement on May 18, 1998, saying that allegations that it provided missile guidance technology to China were wrong. Loral also said that it did not advise China "on how tofix any problems with the Long March rocket." The company stated that "the Chinese aloneconducted an independent investigation of the launch failure [in February 1996] and they determinedthat the problem was a defective solder joint in the wiring -- a `low-tech' matter." Loral denied thatit and Hughes conducted an independent investigation to determine the cause of that launch failure. At the insistence of insurance companies, which required non-PRC confirmation of resolutions ofproblems with Long March rockets, Loral formed an "Independent Review Committee" of severalsatellite companies, including Hughes, to review the PRC investigation. According to Loral, the"Independent Review Committee" obtained information from the PRC and was not formed to helpthem solve their problems. The review agreed with the PRC conclusion (that a defective solder jointwas responsible), without performing tests or providing any test data to the PRC. The committeedid note that further tests by China would be required to establish certainty. Loral said that, duringthe review, it discussed the committee's work with U.S. officials. As far as Loral's engineers coulddetermine, the statement said, "no sensitive information--no significant technology--was conveyed"to China. Loral further disclosed that in April 1996, at China's request , Wah L. Lim, then a senior vice president and engineer at Loral, chaired the "Independent Review Committee" to study China'stechnical evaluation of the cause of the accident on February 15, 1996. Loral said China hadidentified the problem as residing in the inertial measurement unit (IMU) of the guidance system ofthe rocket. Loral believed that it did not have to request U.S. government licensing and monitoring. However, the first meeting of the "Independent Review Committee" was held in Palo Alto, CA, but the second meeting took place in Beijing, China. Notably, PRC aerospace engineers attendedthe meetings: four at the 1st meeting on April 22-24, 1996, and 22 participants at the 2ndmeeting onApril 30-May 1, 1996. (12) They included engineersand officers from: China Great Wall Industry Corporation Beijing Control Device Institute China Academy of Launch Vehicle Technology China Aerospace Corporation Moreover, the committee held meetings in hotel rooms in China which were probably not securefrom listening devices planted by China's intelligence service, conducted unmonitored technicalinterviews with over 100 PRC engineers and technical personnel, and generated over 200 pages ofdata and analyses. Loral admitted that, contrary to its policies, "the committee provided a report to the Chinese before consulting with State Department export licensing authorities." According to Loral, as soonas its executives found out in May 1996, the company notified the Departments of State and Defense. (The Customs Service then began an investigation in May 1996. (13) ) In June 1996, Loral providedto the U.S. government a detailed, written report concerning all communications with China. Loraladded that it was in full cooperation with the Justice Department in its investigation and withcongressional committees. Loral concluded that based upon its own review, it did not believe that"any of its employees dealing with China acted illegally or damaged U.S. national security." Inaddition, the statement said that Loral's chairman, Bernard Schwartz, was not personally involvedin any aspect of this matter: "No political favors or benefits of any kind were requested or extended,directly or indirectly, by any means whatever." Loral also denied any connection between the launchfailure in February 1996 and the Presidential waiver for another Loral-built satellite in February1998. The export license for the latest launch (for Chinasat-8) "applied the strictest prohibitions ontechnology transfer and specified that any new launch failure investigation would require a separatelicense." Loral stressed that it complied strictly with export control laws and regulations. Clinton Administration officials said that export licensing procedures and strict security measures (including monitoring by the Defense Department of pre-launch meetings and thelaunches) precluded any assistance to the design, development, operation, maintenance,modification, or repair of any launch facility or rocket in China. Moreover, Undersecretary ofCommerce William Reinsch testified to Congress on April 28, 1998, that effective export controlson dual-use technology (with military and civilian applications) allow U.S. exporters to competewhile protecting U.S. security interests. He disputed that there were objections within theAdministration to allowing satellite exports to China, saying that after November 1996 (when thelicensing jurisdiction was transferred from the Department of State to Commerce), the CommerceDepartment issued three export licenses for satellites to be launched from China -- with theconcurrence of all agencies. However, at least three classified studies found serious concerns about the U.S. firms' assistance to China's ballistic missile modernization program. A classified report at the Departmentof Defense's Defense Technology Security Administration (DTSA) reportedly concluded on May16, 1997, that Loral and Hughes transferred expertise to China that significantly enhanced theguidance and control systems of its nuclear ballistic missiles and that "United States national securityhas been harmed." (14) Significantly, the U.S. firmswere suspected of helping China to improvequality control and diagnostic techniques that would enable its aerospace engineers to detectproblems in guidance systems applicable to missiles. These concerns were first raised in a classifiedreport at the Air Force's National Air Intelligence Center (NAIC) in March 1997 and supported bythe State Department's Intelligence and Research Bureau (INR). (15) Also, analysis by CIA at the timedid not find "proliferation concerns." These reports apparently prompted the Justice Department'scriminal investigation that began in September 1997. Also, the Justice Department had expressed concerns about the February 1998 Presidential waiver for the Chinasat-8 satellite. A memorandum, dated February 12, 1998, written by NationalSecurity Adviser Samuel Berger for President Clinton, acknowledged that the Justice Department"cautioned" that such a waiver "could have a significant adverse impact on any prosecution thatmight take place" in Loral's case. (16) Finally, therewas little public information on the export licensesissued by the State Department or Commerce Department for Technical Assistance Agreements(TAAs) concerning the transfer of technical assistance and data needed to mate satellites to launchvehicles (so-called "form, fit, and function" technical data). While Loral's case continued to be under investigation by a federal grand jury, two incidents occurred with some embarrassment for the Clinton Administration. On March 16, 2000, U.S.Ambassador Joseph Prueher hosted a dinner in Beijing for representatives of Loral, LockheedMartin, Hughes, CASC, and ChinaSat. The Embassy denied that the subject of an export license forChinaSat 8 was discussed. (17) On July 17, 2000,the Defense Security Service issued an award for"outstanding security performance and practices" to Loral and 49 other companies, but thenrescinded the award for Loral after realizing it remained under investigation. (18) Meanwhile, the Justice Department's campaign finance task force reportedly found no evidence that Loral's chairman Bernard Schwartz corruptly influenced President Clinton in his decision toapprove Loral's export of a satellite to China in 1998, according to the contents of an internal memoand related documents disclosed by the press. (19) At a Senate Judiciary Subcommittee hearing on May2, 2000, Senator Specter referred to this memo, written to Attorney General Janet Reno in thesummer of 1998 by Charles LaBella, then chief of the task force. According to Senator Specter,Schwartz had donated $1.5 million to the Democratic National Committee. LaBella was said to havewritten that Schwartz' case "was a matter which likely did not merit any investigation." Nonetheless, LaBella recommended that Reno appoint an independent prosecutor to dispose of thecase, because the allegations of political favors involved the President. LaBella reportedly alsocriticized Justice Department officials for ordering the investigation of Schwartz while excludingPresident Clinton. Reno denied LaBella's recommendations for the special counsel. In the summer of 2001, it was disclosed that the George W. Bush Administration was negotiating with Loral and Hughes to reach civil settlements with the State Department, rather thanface the prosecution of criminal charges from the Justice Department. (20) Finally, on January 9, 2002,Loral announced that it had reached a $20 million settlement, whereby it agreed to pay a civil fineof $14 million to the State Department, "without admitting or denying the government's charges,"and to expend at least $6 million to strengthen its export control compliance program (with $2million already spent). Loral said that the Justice Department had ended its criminal investigationof the company and declined to pursue the case further. Beyond the Loral Case. Beyond the 1996 incident involving Loral and Hughes, there were wider concerns that the policy of allowing China to launchU.S.-built satellites has effectively subsidized and assisted China's missile modernization. Observers pointed out that the same PRC companies and engineers work in both civilian and militaryprograms and that much of the technology used in launching satellites can be used in militaryprograms on missiles, satellites, and other areas. Future developments in China's ICBM program have been related to the space launch program. U.S. intelligence reportedly has gained information about developments in China's ICBMs frominformation about PRC SLVs. (21) Jane's SpaceDirectory 1997-98 noted that China was not knownto use liquid oxygen/kerosene engines that were used extensively in other countries, "reflecting thespace variants' parallel development alongside storable propellant long range missiles." There have been concerns that China may deploy ICBMs with multiple independently targetable reentry vehicles (MIRVs) in the future. In 1999, the House Select Committee on U.S. NationalSecurity and Military/Commercial Concerns with the People's Republic of China (popularly knownas the "Cox Committee") judged that, by 2015, the PLA could deploy up to 100 ICBMs with asmany as 1,000 thermonuclear warheads. The Director of Central Intelligence (DCI)'s unclassified damage assessment of the PRC's suspected acquisition of U.S. nuclear weapon secrets found that China already has the "technicalcapability" to develop a MIRV system for the currently deployed ICBM but has not deployedMIRVs. Nonetheless, the DCI warned that "U.S. information acquired by the Chinese could helpthem develop a MIRV for a future mobile missile." (22) China first decided to develop MIRVs fordeployment in 1970. Development was in part stalled, however, by a lack of capability tominiaturize warheads. (23) The priority for theproject on MIRVs was lowered in March 1980, butresearch and development on MIRVs resumed on November 10, 1983, as part of the DF-5modification program. Also, China reportedly planned to add a new solid-propellant third stage (TS)to introduce a new LM-2E/TS SLV, with this third stage having a multiple-satellite dispenser tolaunch up to 12 satellites. Jane's Space Directory 1997-1998 reported that China developed arestartable, cryogenic (extremely low temperature) stage 3 for the LM-3 SLV. Motorola. There were concerns that Motorola's use of a PRC-developed multi-satellite dispenser (called "Smart Dispenser") on a variant of theLM-2C to launch two Iridium satellites at a time helped the PRC to develop MIRV capability. The Washington Times reported that a December 1996 classified study by the Air Force's National AirIntelligence Center (NAIC) concluded that the new PRC-developed "smart dispenser," anupper-stage booster used to launch two satellites for Iridium on one LM 2C/SD rocket, could bemodified to deploy multiple re-entry vehicles. Nevertheless, the report noted that there was noevidence that China was using the dispenser, built in 1996, for warheads and that the PRC multiplewarhead system would be less accurate than U.S. and Russian systems. (24) A Pentagon spokesmansaid on July 14, 1998, that Motorola provided data to allow the PRC to attach satellites to thedispenser that it designed without U.S. help and that releasing multiple satellites and targetingmultiple warheads require different technology. Moreover, the Cox Committee concluded that"Motorola did not provide the PRC with information on how to design the Smart Dispenser; but thePRC built the Smart Dispenser indigenously to Motorola's specifications." (25) Hughes. Some were especially concerned about PRC launches in 1995 and 1996 of three satellites built by Hughes which were not monitored by theDefense Department. On June 18, 1998, Jan Lodal, Principal Deputy Under Secretary of Defensefor Policy, testified to a joint hearing of the House National Security and International RelationsCommittees that there were three launches that were not monitored by the Defense Department,because the satellites did not require State Department licenses and monitoring had been tied tolicenses from the State Department for Munitions List items. The Director of DTSA, Dave Tarbell,testified to the Senate Select Committee on Intelligence on July 15, 1998, that the three unmonitoredlaunches took place in January 1995 (Apstar-2), July 1996 (Apstar-1A), and August 1996(Chinasat-7). The Department of Defense then concluded that full monitoring should be requiredfor satellites licensed by the Commerce Department, and the requirement was added after late 1996,he said. Nevertheless, Tarbell stated that "we are not aware of any transfer of technology from theseunmonitored launches that contributed to China's missile or military satellite capabilities." Hughesresponded that its security measures prevented unauthorized technology transfers. However, Air Force Lieutenant Colonel Al Coates, a former Pentagon official who monitored launches in China until he resigned in November 1998, said that even with monitoring, Hughesemployees were more concerned about successful launches and were often careless about discussingsensitive information with the PRC. Coates said he did not get responses from superiors in thePentagon to his reports of security problems, but told Congress and the Justice Department. (26) Some experts said that monitoring of technical exchanges was more crucial than monitoring the launches. Senator Kyl said on July 16, 1998, that, in addition to the three unmonitored launches,there was no monitoring of pre-launch technical exchanges on the mating of satellites to the launchvehicles for three satellite projects: Optus B-3 (Hughes), Echostar-1 (Martin Marietta), andChinastar-1 (Lockheed Martin). (27) Congress and the Justice Department also began to investigate Hughes' review of the PRC launch failure on January 26, 1995 (of the Apstar-2 satellite). (28) Testifying before a joint hearing ofthe House National Security and International Relations Committees on June 18, 1998, UnderSecretary of Commerce for Export Administration William Reinsch acknowledged that, in the 1995case, his department alone had allowed Hughes to provide launch failure analysis to China. Hestated that after the Apstar-2 launch failure in 1995, the company involved [Hughes] conducted an analysis without the participation of the Chinese launch service provider. The analysis was written in orderto satisfy insurance requirements. The analysis was reviewed by the Department of Commerce,which determined that it contained only information already authorized for export under the originalCommerce license issued in February 1994. The unclassified report was provided first to aconsortium of Western insurance companies and later to the Chinese launch serviceprovider. At that hearing, David Tarbell, Director of the Defense Technology Security Administration (DTSA), confirmed that the Department of Defense (DOD) did not monitor the launch or the launchfailure analysis. Reinsch acknowledged that the Commerce Department did not consult with eitherthe Department of State or DOD. The decision to release the report to the PRC was made solely bya Commerce Department licensing officer. (29) Reinsch also acknowledged, however, that the authorityfor an additional license to conduct launch failure analysis was later specified to be the Departmentof State, not Commerce, when the licensing jurisdiction was transferred to Commerce in 1996. At the request of Congress, DOD's DTSA and NAIC prepared and issued, on December 7, 1998, an initial assessment of the documents concerning Hughes' 1995 investigation that theDepartment of Commerce provided to DOD in July 1998. The unclassified report said thatCommerce did not consult with DOD or State (although the technical assistance constituted a"defense service" under State's export control jurisdiction and subject to DOD's monitoring) nordisclosed the documents until the June 1998 congressional hearings. The report concluded thatHughes' technical exchanges with the PRC raised national security concerns regarding violatingstandards of not improving PRC satellite or missile capabilities and "potentially contributing toChina's missile capabilities." While the report added that the benefits likely did not alter theU.S.-China "strategic military balance," the report did not look at whether China used theinformation for the PLA. DOD and State further examined whether the transferred informationbenefitted China's military. (30) On December 18,1998, the State Department's Office of DefenseTrade Controls (DTC) completed a sensitive but unclassified report, concluding that Hughes, inreviewing the January 1995 launch failure of Apstar-2, provided technical lessons that are"inherently applicable" to PRC missile as well as satellite launch programs. (31) DOD said that, from February to August 1995, Hughes conducted the investigation closely and jointly with the PRC, specifically, CALT and China Great Wall, that included "significantinteraction" and meetings in China. Hughes gave PRC aerospace engineers specific information tomake their rockets more reliable. According to DOD, Hughes provided "sufficient know-how tocorrect the overall deficiencies" of "oversimplified" mathematical models used in designing launchvehicles, modifications for launch operations, details about satellite designs, as well as "insights"into U.S. diagnostics for improving rocket and satellite designs. Specifically, Hughes showed Chinahow to improve its coupled loads analysis that was "critically important" for ensuring the integrityof the rocket during flight and "serious flaws" in PRC modeling of aerodynamic loads on the rocketfairing (the top part of the rocket that covers payloads). Hughes denied advancing China's missilesand said that its report was approved by the Commerce Department. (32) A task force formed by Hughes in December 1999 to assess its export compliance program issued its report on July 25, 2000. Former Senator Sam Nunn and former Undersecretary of DefensePaul Wolfowitz led the task force. They recommended 12 "best practices" for ensuring compliancewith export controls. (33) In January 2002, when Loral announced that it reached a civil settlement with the State Department, Hughes began its own negotiations for a civil settlement. At that time, the JusticeDepartment ended its investigation of Hughes as well. (34) Then on December 26, 2002, the Department of State's Office of Defense Trade Controls issued a letter charging the Hughes Electronics Corporation and Boeing Satellite Systems (whichacquired the Hughes Space and Communications Company in 2000) with 123 violations of the ArmsExport Control Act and International Traffic in Arms Regulations in connection with technologytransfers to China after the failed launches of the Apstar-2 satellite in January 1995 and theIntelsat-708 satellite in February 1996, and other activities. (35) The charges related to Hughes'interactions with China covering the following satellite projects: Optus-B2 Apstar-2 Intelsat-708 Apstar-1A APMT Asiasat-3 Astra-1G/1H In charging the companies, the State Department contrasted their response with the cooperation ofLoral, saying "unlike Loral, Hughes and Boeing have both failed to recognize the seriousness of theviolations and have been unprepared to take steps to resolve the matter or to ensure no recurrenceof violations in the future." (36) The State Department also charged that Hughes, in July 1996, submitted a munitions export license application to have a PRC national, Shen Jun, serve as interpreter, without notifying thedepartment that Shen was the son of PLA Lieutenant General Shen Rongjun, a Deputy Director ofthe PLA's Commission of Science, Technology, and Industry for National Defense (COSTIND) withresponsibility for missiles and satellites. (The license was granted and later suspended on July 2,1998.) On March 5, 2003, Hughes Electronics Corporation and Boeing Satellite Systems announced that they reached a settlement with the State Department with a civil penalty of $32 million ($4million for past expenditures on enhancing export programs, $8 million in future investments tostrengthen export control compliance programs, and $20 million paid over seven years). Thecompanies also said that they "acknowledge the nature and seriousness of the offenses charged bythe Department of State, including the harm such offenses could cause to the security and foreignpolicy interests of the United States." They further acknowledged that "assistance to a launchoperator ... could aid in the development of missile system technology and, thus, have a negativeimpact on national security." They expressed regret for not obtaining export licenses. (37) Lockheed Martin. On April 4, 2000, the Department of State charged Lockheed Martin Corporation with 30 violations of the Arms Exportand Control Act. (38) The charges were civil chargesand did not involve criminal law. LockheedMartin denied that it violated export control laws and said that Martin Marietta (later acquired byLockheed) had obtained a license from the Department of Commerce before it assessed, in 1994, aPRC kick motor for the Asiasat-2 satellite. A kick motor is fired after launching a satellite to sendit into its final orbit. Asiasat-2 is owed by the Asia Satellite Telecommunications Company, basedin Hong Kong, that is partly owned by the China International Trust and Investment Corporation(CITIC), a PRC state-owned enterprise. Lockheed said that it had sent its 50-page technicalassessment to the Department of Defense for review and removal of sensitive information beforesending copies of the study to Asiasat and China Great Wall Industry Corporation. China alsodenied the charge, claiming that it had developed the kick motor by "entirely relying on its ownefforts." (39) However, the State Department charged that Lockheed had sent the unedited version to Asiasat, before the Defense Department blacked out all but five pages of the report. The charges also allegedthat Lockheed failed to inform the Pentagon that it had already sent 10 unedited copies of the reportto Asiasat, until the U.S. Customs Service discovered them. The State Department also said thatsharing even the redacted version with China Great Wall violated export controls by sharingtechnical assistance that might enhance the PRC's space launch vehicles. Lockheed was alsocharged with identifying flaws in PRC testing procedures, confirming the results of PRC tests thatidentified faulty insulation, and identifying problems with U.S. solid rocket motor technologies. On June 14, 2000, the Department of State announced that it had reached a consensual settlement with Lockheed Martin that involved total penalties of $13 million. Lockheed agreed topay $8 million over four years and use $5 million to set up a comprehensive computer control systemto which the Departments of Defense and State will have access over the next four years andimproved oversight procedures. The State Department said "we think that the information that wastransferred was inappropriate, and that the reports that were transferred were not appropriate, andthat there was a serious problem here that information had the potential to be used to be applied tomissile development." (40) Military Benefit. Beyond the issue of whether sensitive technology or technical expertise in connection with satellite launches was transferred toChina, there has been disagreement on the extent to which such transfers have military benefit in thecontext of China's modernization of its nuclear-armed ballistic missiles and space systems. Chinareportedly has developed new land-mobile, solid-fuel DF-31 ICBMs for deployment in the early partof the 21st century. (41) As forsatellites with military applications, the PRC's military newspaperreported President Jiang Zemin as declaring in June 1991 that "in such a big country as ours, as itis neither possible nor necessary to build separate telecommunications systems for military use andcivil use respectively, we should take such a road as building a telecommunications system usablefor both military and civil purposes, which meet both peacetime and wartime needs." (42) Some, including officials in the Clinton Administration, stressed that there were differences between the PRC SLVs and ICBMs and there have been no authorized missile technology transfersto China. On September 17, 1998, Principal Deputy Assistant Secretary of Defense Franklin Millertestified only about authorized significant technology transfers and that satellite launches have notprovided any benefits to current generation PRC ICBMs. He was not able to elaborate publicly onpotential improvements to new PRC ICBMs under development. (43) Admiral Joseph Prueher,Commander in Chief of U.S. Pacific forces, said on October 23, 1998, that any transfers of missiletechnology or know-how in connection with launching U.S. satellites in China have improved PRCICBMs "only incrementally, not by any quantum leaps and bounds" and "accelerated solution of atechnical guidance problem for one of their missiles." (44) John Pike, Director of the Space Policy Project at the Federation of American Scientists, argued that there are significant differences between China's ballistic missiles and the Long March SLVs. (45) He said that the Long March SLVs were longer than the CSS-4 ICBM, so they flexed more duringascent. They also had bigger nose cones to hold satellites that were bigger than warheads. Thesecharacteristics resulted in stresses on the Long March. He also argued that deploying two satellitesfrom one Long March (as China has done for Iridium) was very different from launching MIRVs. Warheads, unlike satellites, were designed to survive greater vibrations and the heat of reenteringthe atmosphere. Other experts stressed the commonalities between the technology as well as technical expertise used in rockets and missiles. A Senate subcommittee provided a graphical comparison of theapplicability of technology in SLVs and ballistic missiles prepared by the Central IntelligenceAgency (CIA). (46) In general terms, the CIAcompared 11 categories of technology and equipment. Six, or more than half, of the categories are the same for the SLV and ICBM; four categories aresimilar; while only missiles contain warheads. (See the table below.) Table 1. Comparison of SLVs and Missiles Henry Sokolski (Executive Director of the Nonproliferation Policy Education Center and a Defense official in the Bush (I) Administration) argued that "all of our satellite transfers have helpedChina perfect its military rocketry." He also wrote that "intangible technology" was critical to thetimely, reliable, and accurate placement of satellites into space as well as launches of warheadsagainst targets by ballistic missiles. Intangible technologies included: coupling load analysis,guidance data packages, upper-stage solid rocket propellant certification, upper-stage control designvalidation, lower-stage design validation, and general quality assurance. Also, multi-satellitedispensers could be modified as multiple-warhead dispensers, thus assisting China's reported effortsto develop a capability in MIRVs for its ICBMs. (47) China used such dispensers to launch multiplesatellites for Iridium. Experts at the Monterey Institute of International Studies also pointed out that a significant portion of the components, technology, and expertise used in the research and development of SLVswere "virtually interchangeable" with that of ballistic missiles. These overlaps included: launchingmultiple satellites from a single SLV and delivering multiple warheads on a single missile. Similartechnology involved upper stage control systems (separation and ignition of the upper stage, attitudecontrol, and spin release of satellites), satellite dispensers (delivery of multiple satellites to separateorbits), coupling load analysis (to assure launches without damaging payloads), upper stagesolid-fuel engines, and kick motors (to deliver satellites into correct orbits). (48) Nevertheless, they also argued that having the capability to launch multiple satellites would not translate into having a military capability to deliver MIRVs. Delivering multiple reentry vehicles intoplanned trajectories was more difficult than launching multiple satellites into orbit. MIRV capabilitywould require greater precision. Reentry vehicles, unlike satellites, would not have their own kickmotors. A MIRV capability would require rocket motors that can stop and restart. Finally, in charging Lockheed Martin in April 2000 with violating the Arms Export Control Act by assessing a PRC kick motor for the Asiasat-2 satellite, the State Department spokesman declaredthat "any assistance to China that enhances its capabilities in space launch has the potential to beapplied to missile development." (49) China's organizations, such as China Great Wall Industry Corporation, have been affected by two categories of U.S. sanctions: those imposed for the 1989 Tiananmen crackdown and thoseimposed for missile proliferation. Tiananmen Crackdown. In 1990, the United States imposed post-Tiananmen sanctions as required in the Foreign Relations Authorization Actfor FY1990 and FY1991 ( P.L. 101-246 ). Sec. 902(a) have required suspensions in programs relatedto: (1) Overseas Private Investment Corporation, (2) Trade and Development Agency, (3) exportsof Munitions List items, (4) exports of crime control equipment, (5) export of satellites for launchby China, (6) nuclear cooperation, and (7) liberalization of export controls. Suspensions (3) and (5)have affected export of satellites to China. Sec. 902(b) have allowed Presidential waivers of thosesuspensions by reporting that "it is in the national interest" to terminate a suspension. Missile Proliferation. As for sanctions related to missile proliferation, (50) on April 30, 1991, theGeorge H.W. Bush Administration denied licensesfor the export of U.S. parts for a PRC satellite, the Dongfanghong-3, citing "serious proliferationconcerns." On May 27, 1991, President Bush declared sanctions on China for transferring toPakistan technology related to the M-11 short-range ballistic missile (category II), but not for thetransfer of complete missiles (category I). These sanctions, required by Sec. 73(a) of the ArmsExport Control Act (P.L. 90-629) and Sec. 11B(b)(1) of the Export Administration Act ( P.L. 96-72 ),were intended to enforce the international Missile Technology Control Regime (MTCR). Thesesanctions, which took effect on June 16 and 25, 1991, denied export licenses and waivers ofsanctions for: (1) high-speed computers to China, which can be used for missile flight testing; (2)satellites for launch by China; and (3) missile technology or equipment. They affected two PRCaerospace corporations: China Great Wall and China Precision Machinery Import ExportCorporation. President Bush waived these sanctions on March 23, 1992, after China agreed to abideby the MTCR guidelines. The Clinton Administration imposed similar, category II sanctions on August 24, 1993, after China was again determined to have transferred M-11 related equipment to Pakistan, but notcomplete missiles. A total of 11 PRC defense industrial companies were sanctioned, includingChina Great Wall again. In 1993-1994, the U.S. aerospace industry and aerospace companyexecutives, including then-CEO of Hughes, C. Michael Armstrong, lobbied against sanctions andfor expansion of satellite exports to China. (51) China, on October 4, 1994, agreed not to export"ground-to-ground missiles" inherently capable of delivering at least 500 kg to at least 300 km --an understanding the U.S. side sought to include the M-11 missiles under the MTCR. On November1, 1994, the Administration waived those sanctions. Still, questions persisted until 2000 about how to respond to persistent reports of PRC missile proliferation and whether new U.S. sanctions should be imposed for reported PRC missileproliferation in countries such as Pakistan and Iran, including the suspected transfer of completeM-11 missiles to Pakistan in November 1992. In preparing for the 1998 U.S.-PRC summit, theClinton Administration reportedly proposed supporting China as a partner in the MTCR, issuing ablanket waiver of post-Tiananmen sanctions on satellites, and increasing the quota on the numbersof satellites China is allowed to launch -- in return for further cooperation in missilenonproliferation, according to a Secret March 12, 1998, National Security Council memo (printedin the March 23, 1998 Washington Times ). Then, on November 21, 2000, the Clinton Administration announced a U.S.-PRC agreement on missile nonproliferation. On the same day, the PRC Foreign Ministry first issued a statement that"China has no intention of assisting any country in any way in the development of ballistic missilesthat can be used to deliver nuclear weapons (i.e., missiles which can deliver an effective payload ofat least 500 kilograms a distance of at least 300 kilometers)." Additionally, the ministry stated that"China will further improve and strengthen its export control system in keeping with its own missilenon-proliferation policies and export control practices, and this will include issuing a comprehensiveexport control list for missile-related items, including dual use items." (52) Following that statement,the State Department announced that the United States had determined that PRC entities hadcontributed to missile proliferation in Pakistan (Category I and II items) and Iran (Category II items),and that U.S. sanctions would be waived on PRC entities for the past transfers, but imposed onPakistani and Iranian ones. Furthermore, the United States agreed to resume processing -- notnecessarily approving -- licenses for exporting satellites to China. Thirdly, the United States agreedto resume discussions on extending the 1995 U.S.-China Agreement Regarding International Tradein Commercial Launch Services (due to expire on December 31, 2001). (53) After the George W. Bush Administration began, the U.S. Trade Representative (USTR) led the U.S. team to hold consultations on the space launch agreement in Beijing in March 2001. Thenon July 28, 2001, visiting Beijing ahead of President Bush's travels there in October, Secretary ofState Powell confirmed that there are "outstanding issues" about China's fulfillment of theNovember 2000 missile nonproliferation agreement and reported that expert talks would be held onnonproliferation. The expert talks were held on August 23 in Beijing, but the State Departmentreported that additional work was needed to "clarify China willingness to implement fully" thatagreement, while "the results have been mixed." Thus, on September 1, 2001, the State Department imposed sanctions for 2 years on a PRC company, the China Metallurgical Equipment Corporation (CMEC), for proliferation of missiletechnology (Category II items of the MTCR) to Pakistan. Imposed under the Arms Export ControlAct (AECA) and Export Administration Act, the sanctions also applied to Pakistan's NationalDevelopment Complex. (54) The sanctionseffectively denied licenses for the export of satellites toChina for use or launch by its aerospace entities, because the Category II sanctions deny U.S.licenses to transfer missile equipment or technology (MTCR Annex items) to any PRC "person,"which was defined by Section 74(8)(B) of the AECA (popularly known as the "Helms Amendment")as any PRC government activity related to missiles, electronics, space systems, or military aircraft,and the State Department has considered that satellites are covered by the MTCR Annex sincesatellite parts are listed there. With persistent questions about China's adherence to its missilenonproliferation pledges, President Bush did not waive the sanctions. Then, on September 19, 2003,the State Department imposed sanctions on a PRC defense industrial entity (NORINCO) for missileproliferation, effectively banning satellite exports to China for 2 more years. (See CRS Report RL31555 , China and Proliferation of Weapons of Mass Destruction and Missiles: Policy Issues , byShirley Kan.) China has had no commercial satellite launches since 2000 (see Table 3 ). After sanctions for the Tiananmen crackdown were imposed in 1989, Presidents Bush and Clinton issued 13 waivers for 20 satellite projects (projects may involve multiple satellites), basedon "national interest," on a case-by-case basis, to allow the export to China of U.S.-origin satellitesor components subject to export controls. (See the table below.) Waivers have been increasinglyissued for satellites used by China -- not just launched from China. Some waivers under Section902 of P.L. 101-246 have specified whether sections 902(a)(3) and 902(a)(5), on Munitions Listitems and satellites, applied; others simply referred to section 902 or 902(a). The policy of allowing China to launch U.S.-built satellites has been tied to the missile proliferation issue, partly because the same PRC aerospace organizations have been involved in both. However, a month before the Bush Administration issued missile proliferation sanctions on May 27,1991, the President issued a waiver of post-Tiananmen sanctions for Australian and Swedishsatellites (while denying an export license for U.S. parts for a PRC satellite). The ClintonAdministration again imposed missile proliferation sanctions on August 24, 1993, but PresidentClinton first issued a waiver of post-Tiananmen sanctions on July 2, 1993, for the export of Iridiumand Intelsat-8 satellites to China. Then, even while sanctions were in place on China Great Wall andother PRC companies for missile proliferation, President Clinton issued another waiver ofpost-Tiananmen sanctions on July 13, 1994. In 1998, Congress passed the Defense Authorization Act for FY1999 ( P.L. 105-261 ), with additional language on Presidential actions affecting satellite exports to China (also discussed belowunder Legislation). First, Section 1511 of the Act expressed the sense of Congress, among otherviews, that the President should not issue any blanket waiver of post-Tiananmen sanctions forexports of satellites to be launched by China. Second, Section 1512 required the President to certifyto Congress at least 15 days before exporting missile equipment or technology to China that suchexport would not be detrimental to the U.S. space launch industry and would not measurablyimprove PRC missile or space launch capabilities. Third, Section 1515 required a detailedjustification (covering 13 national security and economic areas) to accompany the President'swaiver, based on "national interest," of post-Tiananmen sanctions for satellite exports to China. Table 2. Presidential Waivers of Post-Tiananmen Sanctions forExports of Satellites or Parts to China Notes: a. Asia Satellite Telecommunications was a consortium based in Hong Kong and owned by ChinaInternational Trust and Investment Corporation (CITIC) of China, Cable and Wireless ofBritain, and Hutchison Telecommunications Ltd. Of Hong Kong. b. In the first waiver, President George H.W. Bush had waived sanctions for Aussat satellites, but he reissued a new waiver and licenses. He also denied export licenses for U.S. components fora PRC satellite, Dongfanghong-3 (waived later). c. Used by China Oriental Telecom Satellite Co. d. Various PRC state-owned companies invested in the project. e. Cooperative product between Daimler-Benz Aerospace and China Aerospace Corp. Since the Reagan Administration's decision in September 1988 to allow U.S.-built satellites to be launched from China, Members of Congress periodically have expressed concerns about theimplications for U.S. national security. After the press reports in April 1998 on Loral and Hughes,the 105th Congress held a number of open and closed hearings to examine the allegations ofcorporate misconduct and weaknesses in U.S. policy, including those by the following committees. Joint Economic Committee, April 28, 1998. Senate Governmental Affairs Subcommittee on International Security, Proliferation, and FederalServices, May 21, 1998. Senate Intelligence Committee, June 4, 1998. Senate Intelligence Committee, June 5, 1998. Senate Intelligence Committee, June 10, 1998. Senate Foreign Relations Committee, June 11, 1998. House National Security/International Relations Committees, June 17, 1998. House National Security/International Relations Committees, June 18 and 23, 1998. Senate Foreign Relations Subcommittee on East Asian/Pacific Affairs, June 18, 1998. Senate Governmental Affairs Subcommittee on International Security, Proliferation, and FederalServices, June 18 and July 8, 1998. Senate Intelligence Committee, June 24, 1998. House Science Committee, June 25, 1998. Senate Foreign Relations Committee, June 25, 1998. Senate Governmental Affairs Committee, June 25, 1998. Senate Intelligence Committee, July 8, 1998. Senate Armed Services Committee, July 9, 1998. Senate Intelligence Committee, July 15, 1998. Senate Governmental Affairs Subcommittee on International Security, Proliferation, and FederalServices, July 29, 1998. Senate Commerce, Science, and Transportation Committee, September 17, 1998. Cox Committee. In addition to those hearings in the 105th Congress, House Speaker Gingrich announced on May 19, 1998, that he wanted to createa select committee, headed by Congressman Cox, to investigate the various allegations concerningthis case. The House voted on H.Res. 463 (Solomon) (409-10) on June 18, 1998, tocreate the Select Committee on U.S. National Security and Military/Commercial Concerns with thePeople's Republic of China, popularly known as the "Cox Committee." (55) The committee had ninemembers: five Republicans (Representatives Cox, Goss, Hansen, Bereuter, and Weldon) and fourDemocrats (Representatives Dicks, Spratt, Jr., Roybal-Allard, and Scott). The panel held numerousclosed hearings and received wide-ranging briefings. The committee expanded its investigations toinclude policies before the Clinton Administration, other dual-use technology exports, includinghigh-performance computers and machine tools, (56) and suspected acquisitions of U.S. nuclearweapons secrets. On December 30, 1998, Rep. Cox and Dicks, the chair and ranking Democrat, said in a news conference that the bipartisan committee unanimously approved a 700-page, classified report on itsbroad, six-month investigation. The committee was extended for the first three months of the 106thCongress to work with the Administration on a declassified version. (57) Meanwhile, the White Houserevealed the recommendations in its February 1, 1999 response. There were then disagreements between the Select Committee and the White House on how much to declassify, particularly about the cases at the nuclear weapon labs. Representative Cox saidon March 3, 1999, that the House may vote during the week of March 22 to release an edited,unclassified version of the report, if there were no agreement with the Administration. However,Representative Dicks described such a move as a "dangerous precedent" to release classifiedinformation over the President's objections. (58) TheHouse did not vote to release the report withoutthe Administration's approval, and on March 24, 1999, passed H.Res. 129 to furtherextend the Select Committee on China for a month, until April 30, 1999. Meanwhile,Representatives Cox and Dicks briefed President Clinton on April 22, 1999, about the findings ofthe committee's report. (59) The House agreed to H.Res. 153 , on April 29, 1999, to furtherextend the committee until May 14, 1999, and approved H.Res. 170 , on May 13, 1999,to extend the date to May 31, 1999. On May 25, 1999, the Cox Committee released the declassifiedversion of its January 3, 1999 classified report on its investigation of U.S. technology transfers toChina. (60) (See CRS Report RL30220(pdf) .) The committee concluded that, over at least the last 20 years, China has pursued a "serious, sustained" effort to acquire advanced American technology -- covering "more serious nationalsecurity problems than the Loral-Hughes cases," and that technology acquisition has harmed U.S.national security. The Committee's report agreed with intelligence assessments that Loral andHughes helped to improve China's missile capabilities. The committee made 38 recommendationsfor remedies, including possible legislation, mostly to tighten export controls (e.g., giving theDepartments of Defense and State more say) and security at the national labs. The committeeapparently did not focus on the question of PRC political donations nor requested the JusticeDepartment to begin new investigations. Loral and Hughes denied having violated the law. (61) Shifting attention from missile technology to nuclear weapons, the Cox Committee reviewed the most serious concerns that the PRC had stolen information on nuclear weapons allegedly fromU.S. national laboratories of the Department of Energy. A third incident has been made publicinvolving the W-88 nuclear warhead (deployed on the Trident II submarine-launched ballisticmissile). (62) The Federal Bureau of Investigation(FBI) investigated that incident in which Chinareportedly received data from Los Alamos National Lab in the mid-1980s, but the case wasuncovered in 1995. Two other cases involving China and U.S. labs were previously reported. (63) Representative Dicks said that the most important matter to be learned from the committee's reportwill be "that for 20 years, starting in the 1980s, we had a major counterintelligence failure at LosAlamos and at other national labs that is now being corrected." (64) Allegations of the PRC'sacquisition of nuclear weapon secrets were publicly confirmed by U.S. intelligence on April 21,1999. (65) In 2000, U.S. intelligence reportedlyconcluded from additional translations of PRCdocuments obtained in 1995 that PRC espionage has gathered classified information on U.S. ballisticmissiles and reentry vehicles, in addition to that on nuclear weapons. (66) According to the Cox Committee, "the PRC has stolen or otherwise illegally obtained U.S. missile and space technology that improves the PRC's military and intelligence capabilities." Afterthree failed satellite launches in 1992, 1995, and 1996, U.S. satellite makers (Hughes and Loral)transferred missile design information and know-how to China without required export licenses fromthe Department of State "in violation of the International Traffic in Arms Regulations." The U.S.firms gave technical information that has improved the "reliability" of PRC rockets used to launchsatellites with civilian and military purposes. The information was also useful for the design andimproved reliability of "future PRC ballistic missiles." Specifically, the committee found that in1993 and 1995, Hughes "illegally" recommended to the PRC improvements to the fairing (nose conethat protects the payload), and in 1996, Loral and Hughes helped the PRC improve the guidance ofa failed rocket, and in so doing, "deliberately acted without the legally required license and violatedU.S. export control laws." Regarding Hughes, the committee's report printed an unclassified assessment completed on December 18, 1998, by the State Department's Office of Defense Trade Controls. That officeconcluded that, in reviewing the PRC launch failure of January 1995 that involved a LM-2E spacelaunch vehicle (SLV) and the Apstar-2 satellite, Hughes engaged in technical discussions with thePRC, without U.S. government monitors, that resulted in "significant improvement to the PRCspacelift program and contributed to China's goal of assured access to space." Moreover, "thelessons learned by the Chinese are inherently applicable to their missile programs as well, sinceSLVs and ICBMs share many common technologies." As for Loral and Hughes' activities in 1996, the committee reported that a 1998 interagency review determined that the "technical issue of greatest concern was the exposure of the PRC toWestern diagnostic processes, which could lead to improvements in reliability for all PRC missileand rocket programs." The improvements to China's missile program could come from "increasedproduction efficiency, and improved reliability through adoption of improved quality control andreliability-enhancing measures in design and manufacturing that were introduced after the accidentinvestigation, including some that the [Loral-led] Independent Review Committee advocated." Thecommittee judged that the guidance system of the Long March 3B rocket, reviewed by Loral andHughes in 1996, was "among the systems capable of being adapted for use in the PRC's plannedroad-mobile intercontinental ballistic missiles" (i.e., the DF-31). There were previous concerns that after the explosion that destroyed the Loral-built Intelsat-708 satellite in 1996, classified U.S. encryption boards were lost to China. The committeereported that while the two FAC-3R encryption boards were not recovered from the crash site byLoral, they "most likely were destroyed in the explosion." While it is not known whether the PRCrecovered the boards, even if they did, "it would be difficult for the PRC to determine thecryptographic algorithm that was imprinted on them," and "reverse-engineering of a damaged boardwould be even more difficult." Thus, "the National Security Agency remains convinced that thereis no risk to other satellite systems, now or in the future, resulting from having not recovering theFAC-3R boards from the PRC." Contrary to earlier allegations of U.S. assistance for China's development of multiple satellite dispensers and MIRVs, the committee determined that "Motorola did not provide the PRC withinformation on how to design the Smart Dispenser; rather, the PRC built the Smart Dispenserindigenously to Motorola's specifications." The Cox report agreed with earlier public assessments of the Administration that, in the 1990s, the PRC has deployed a total of approximately 20 CSS-4 ICBMs in silos, but contrary to the WhiteHouse's June 1998 announcement of a detargeting agreement with China, "most" of those ICBMsremain targeted on the United States. Nonetheless, the report noted previous statements by U.S.intelligence that the "CSS-4s are deployed in their silos without warheads and without propellantsduring day-to-day operations." The committee judged that "within 15 years," China's missilemodernization program could result in the deployment of up to 100 ICBMs. Moreover, if Chinaaggressively developed MIRVs, it could deploy "upwards of 1,000 thermonuclear warheads onICBMs by 2015." Confirming suspicions of problems in China's SLBM force, the committeereported that while China developed a JL-1 SLBM to be launched from the PLA's Xia-classnuclear-powered submarine, the PRC has not yet deployed the JL-1 SLBM. In June 1999, Loral Space and Communications published a full-page response to the Cox report. Loral said that its employees "acted in good faith and did nothing to violate export controlregulations or the law or to harm national security." Nonetheless, Loral's statement acknowledgedthat "mistakes were made." Loral also referred to sensitive information that could have beenconveyed at the meetings, saying that "unfortunately, the [Review] Committee secretary, a Loralengineer, had already faxed a copy of the report [reviewing the launch failure] to the Chinese in theprocess of sending it to the Committee members. However, prior to doing so, the secretary tookmeasures to delete all sensitive material from the report." (67) In its recommendations related to satellite exports, the Cox Committee: Expected that the executive branch will aggressively implement the Satellite Export Control provisions of the Strom Thurmond National Defense Authorization Act forFY1999. Stated that the congressional judgment that the Department of State is theappropriate agency for licensing both exports of satellites and any satellite launch failureinvestigations must be faithfully and fully implemented. Stated that the Department of State must ensure, consistent with nationalsecurity, that satellite export licenses and notices to Congress are acted on in a timely fashion andthat exporters are informed about the progress of their applications and have access to appropriatedispute resolution procedures. The executive branch and Congress should ensure that theDepartment of State has adequate personnel and resources devoted to processing export licenseapplications. Recommended that congressional committees report legislation to ensure thatsatellite manufacturers are not disadvantaged in collateral areas such as tax credits by the transferof licensing responsibility to the Department of State. Stated that DOD must give high priority to obligations under the StromThurmond National Defense Authorization Act, including requirements for monitoring launches andtechnology control plans. Recommended that congressional committees report legislation providing that,in connection with foreign launches of U.S. satellites, DOD shall contract for security personnel whohave undergone background checks to verify their loyalty and reliability. The number of guards shallbe sufficient to maintain 24-hour security of the satellites and all related missile and other sensitivetechnology. The satellite export licensee shall be required to reimburse DOD for all associated costsof such security. Recommended that DOD shall ensure sufficient training for space launchcampaign monitors and the assignment of adequate numbers of monitors to space launchcampaigns. Recommended that DOD monitors shall maintain logs of all informationauthorized for transmission to the PRC, and such information shall be transmitted to DOD, State,Commerce, and the CIA. Recommended that relevant departments and agencies ensure that the laws andregulations on export controls are applied in full to communications among satellite manufacturers,purchasers, and the insurance industry, including communications after launchfailures. Recommended that, in light of the impact on U.S. national security ofinsufficient domestic, commercial space launch capacity and competition, congressional committeesreport legislation to encourage and stimulate further the expansion of such capacity andcompetition. Clinton Administration's Response. The Clinton Administration expressed concerns about implications of the Cox Committee's recommendationsfor U.S. exports. Under Secretary of Commerce William Reinsch said in a speech on export controlsto high-tech companies that there were those in Congress who "do not understand" the "political andeconomic transformations" in recent years and "respond to them by trying to return to the simplerera of the Cold War and a single bipolar adversary. Only this time, it is China. A good example ofthis is the Cox Committee. . ." (68) On February 1, 1999, the National Security Council (NSC) of the White House issued a 32-page unclassified version of its response to the House Select Committee's 38 recommendations, (69) even before the committee's report was declassified. Those issues pertained to several broad areas: security on nuclear weapons at national labs; multilateral export control and weapon nonproliferation efforts; satellite launches; high-performance computers; export controls; and counter-intelligence. The White House said it agreed with some of the recommendations or has already addressed those concerns. The NSC, however, opposed other recommendations, including the followingobjections: assessments at the Departments of State, Defense, Energy, and Justice, and the CIA on security risks in U.S.-PRC lab-to-lab exchanges should be conducted by intelligence experts,not inspector generals; the United States should not deny exports of high-performance computers ifChina does not permit effective end-use verification, including surprise on-site inspections, by an"arbitrary deadline" of September 30, 1999; export control procedures do not need longer review periods where an agency'smid-level officials may "stop the clock" on national security grounds with "indefinite" and"unjustified" delays; export control procedures requiring consensus of reviewing agencies would"hinder the deliberative process;" new legislation, beyond the Hong Kong Policy Act of 1992, was not neededto require examination of: trade flows to China through Hong Kong, U.S. export control policy oftreating Hong Kong differently from China, and unmonitored border crossings by PRC militaryvehicles; legislation that would amend the Defense Production Act of 1950 to requiremandatory notifications to the Committee on Foreign Investment in the United States (CFIUS) byany U.S. national security-related business of any planned mergers, acquisition, or takeovers by aforeign or foreign-controlled entity could "chill legitimate foreign investment" that is strongly inU.S. interests; the Department of Justice deemed it "unnecessary" to have legislation directingit to promptly share national security information with other agencies through the establishment ofan interagency mechanism. Senate Task Force. In the Senate, Majority Leader Lott announced, on May 20, 1998, the creation of a Task Force, with Senators Shelby, Helms,Thurmond, Thompson, Cochran, Kyl, and Hutchinson. The task force, which first met on June 2,1998, oversaw the four investigations of the Committees on Intelligence, Foreign Relations, ArmedServices, and Governmental Affairs. (70) On May29, 1998, Senate Democratic Leader Daschleapproved a Democratic Task Force, with Senators Kerrey, Biden, Sarbanes, Glenn, Leahy, Levin,Kerry, and Feinstein. On July 14, 1998, Senator Lott made a floor statement on interim findings that sensitive U.S. technology relating to satellite exports has been transferred to China and that those transfers providedmilitary benefits. He reported five "major interim judgments:" the Clinton Administration's export controls on satellites were wholly inadequate;" sensitive technology related to satellite exports was transferred toChina; China received military benefit from U.S. satelliteexports; the Administration ignored overwhelming information regarding PRCproliferation and has embarked on a de facto policy designed to protect China and U.S. satellitecompanies from sanctions under U.S. proliferation laws; new information came to light about China's efforts to influence the U.S.political process. Senator Shelby stated on July 14, 1998, that "some of the tendencies of the evidence tend to support" Senator Lott's statement, but that "the Intelligence Committee has not reached anypreliminary judgment." The Pentagon's spokesman, Kenneth Bacon, responded to Senator Lott bysaying that the Administration submitted requested documents to Congress and had inheritedsafeguards from previous Administrations that prevent inappropriate technology transfers to China. The Senate Intelligence Committee's investigations covered two categories: U.S. export control policies, since 1988, on PRC launches of U.S.-built satellites and implications for U.S. national security; any secret PRC program to contribute political donations and influence theU.S. political process in 1996. (71) On May 7, 1999, the Senate Committee on Intelligence released its 45-page, unclassified report that it had approved two days before in a bipartisan 16-1 vote. (72) The office of Senator Graham, whodissented, explained he was concerned that the process did not allow sufficient time for the membersto review the report before the vote. As urged by Senator Levin, the sections on possible missiletechnology transfers and PRC efforts to influence U.S. policies were kept separate, because noevidence of a link between the two issues was found. (73) The report included a number of findings andrecommendations. On security implications of any U.S. technology transfers for China's military and missile programs, the committee found no evidence that U.S. technology had been incorporated into the currently deployed PRC ICBM force, while noting that such integration may not be apparent forseveral years if at all. The report also stated that "extensive assistance from non-U.S. foreign sourcesprobably is more important" than technology transfers associated with satellite launches. Nonetheless, the committee concluded that "the technical information transferred during certainsatellite launch campaigns enables the PRC to improve its present and future ICBM force thatthreatens the United States," as well as short-range and intermediate-range ballistic missiles thatthreaten U.S. military forces and allies in Asia. Further, U.S. national security may be harmed,according to the report, if China proliferated missile systems improved by U.S. technology. Thecommittee also found that improvements to China's space launch capability also enhanced its useof space for military reconnaissance, communications, and meteorology, posing challenges to U.S.national security. The committee found, that despite assurances of government monitoring andsecurity safeguards, there were security violations and "significant weaknesses" in theimplementation of the satellite export policy since the Reagan Administration. U.S. satellite exportsto China, the committee concluded, have "created a tension between U.S. national security interestsand U.S. commercial interests," and "this tension and conflict of interests have been problematicthroughout the U.S.-PRC satellite launch relationship." The Committee made 10 recommendations related to strengthening controls over satellite exports. These included: authority for monitors from the Defense Threat Reduction Agency (DTRA) to suspend launch-related activities; strengthening DTRA to monitor satellite launchesoverseas; annual reports from DTRA to Congress on implementation of technologysafeguards; adherence by the Department of State to strict timetables in reviewing licenseapplications; intelligence review in the licensing process; intelligence assessments of foreign efforts to acquire U.S.technology; consideration of investigations for export control violations associated withsatellite exports; call for the Administration to use all available means to obtain PRCcompliance with the MTCR; efforts by the Administration and Congress to encourage expansion of the U.S.commercial launch industry; and reappraisal of the policy to export satellites to China, including whether itshould be phased out. Clinton Administration's Response. The White House issued a response to the Senate Intelligence Committee's report on May 7, 1999. (74) TheAdministration acknowledged that it shared the Committee's concern that "unauthorized assistanceand transfers of technology relevant to space launch vehicles and ballistic missiles may haveoccurred during certain space launch failure analyses." The statement also noted the Department ofJustice's investigations into those allegations. The White House agreed and confirmed that U.S.concerns did not center on China's "currently deployed ICBM force," but that "unauthorizedassistance and transfers of space launch vehicle and satellite technology could assist China in thedevelopment of future ballistic missiles." While concurring with most of the committee'srecommendations, the Administration disagreed with the last one, saying that "the longstandingpolicy of permitting the launch of U.S. commercial satellites by China, with strong technologycontrols, serves our overall national interest." However, this statement did not cover China'sincreasing use (not just launch) of such satellites. Export Controls and Intelligence. In addition, congressional investigations expanded to include concerns about alleged politicization of exportcontrol and intelligence in the Clinton Administration. Export control specialists skeptical ofliberalizing controls on dual-use technology transfers to China complained that decision-makers, inapproving exports, ignored evidence of U.S. firms helping China's military. One manager in DTSA,Michael Maloof, reportedly kept a diary of export control cases critical of the Commerce Departmentand his superiors at DTSA, including David Tarbell. Maloof's information was shared with theHouse Select Committee in August 1998 and also with the Department of Justice and CustomsService. His criticisms reportedly covered alleged close ties between Tarbell and Hughes. Tarbelldenied showing favoritism to Hughes. The Pentagon's spokesman dismissed Maloof's charges as"ideological differences" about U.S. policy toward China, while Peter Leitner, another DTSAemployee who briefed Congress, criticized "long-time ideological opponents" of export controls. (75) Meanwhile, at the request of the Senate Intelligence Committee, the Justice Department began an unusual criminal investigation in 1998 into whether the CIA obstructed justice when it allegedlywarned Hughes about the committee's interest in some of its employees. CIA officials agreed totestify before a federal grand jury in Washington in December 1998. In April 1996, a CIA analyst,Ronald Pandolfi, had reportedly prepared a National Intelligence Estimate (NIE) on how Hughesmay have helped to improve China's missile capabilities, but the CIA reportedly did not approve theNIE. In September 1998, Pandolfi briefed the committee on what he found in 1995 (after Hughesreviewed the explosion of a Long March rocket in January 1995). The CIA then told Hughes aboutPandolfi's briefing for the committee. Administration officials said that the CIA advised Hughesabout providing names of its executives to the committee in order to urge Hughes to cooperate anddenied that the CIA tried to hinder the committee's investigation. Nonetheless, the committeequestioned whether the Clinton Administration's policy of engagement with China influencedintelligence assessments about China. (76) Confirming that he and Senator Bob Kerrey, the vicechairman, had found out about the CIA's contact with Hughes in an internal CIA cable datedSeptember 23, 1998, and then asked Attorney General Janet Reno for the criminal investigation,Senator Shelby said in September 2000 that the Justice Department decided not to charge anunnamed CIA official with obstructing a Senate investigation. (77) In another case, the Cox Committee asked the CIA to provide a classified cable written in March 1996 on Hughes and Loral that had not been provided to the Justice Department until thesecongressional investigations began. The CIA's inspector general began investigating the allegedfailure to pass the cable to Justice, which the CIA characterized as an oversight. The message wassaid to have reported on an American consultant, Bansang Lee, who worked for Hughes from 1989to 1995, when Loral hired him to work on sales of satellites, including Chinasat-8. In helping to sellsatellites to China and to export them for launch from there, Lee allegedly made illegal payments toand received payments from PRC aerospace executives. Lee's lawyer stated that Lee "has nevermade any unlawful or improper payments of any kind to any Chinese official," and spokesmen forHughes and Loral also denied any wrongdoing. (78) Senator Specter's Investigation. In October 1999, Senator Specter, under the jurisdiction of the Senate Judiciary Subcommittee on AdministrativeOversight and the Courts, began holding hearings in his investigation into the Justice Department'shandling of the PRC's suspected acquisition of missile technology and nuclear weapon secrets,campaign finance, Waco, and other issues. 105th Congress. In the 105th Congress, theHouse-passed National Defense Authorization Act for FY1999 ( H.R. 3616 ) includedamendments (sections 1206-1209) passed on May 20, 1998, that sought to express the sense ofCongress that the United States should not enter into new agreements with China involving spaceor missile-related technology (Spence, agreed 417-4); prohibit U.S. participation in investigationsof PRC launch failures (Bereuter, agreed 414-7); prohibit transfers of missile equipment ortechnology to China (Hefley, agreed 412-6); and prohibit the export or re-export of U.S. satellitesto China (Hunter, agreed 364-54). Also, section 1212 sought to return control over licensing exportof satellites from the Commerce Department to the State Department (under the Munitions Listcontrolled under the Arms Export Control Act). On June 4, 1998, Senator Hutchinson submitted an amendment to the Senate-passed Defense Authorization Act for FY1999 ( S. 2057 ), which was ordered to lie on the table. Itsought to amend the language authorizing Presidential waivers of post-Tiananmen sanctions bysubstituting a narrower basis ("in the vital national security interest") for the current language ("inthe national interest"), and add a requirement for the President to submit a detailed justification foreach waiver. On July 22, 1998, Senator Hutchinson filed but did not offer Amendment 3250 to the Senate-passed Defense Appropriations Act for FY1999 ( S. 2132 / H.R. 4103 ) to transfer the export control of satellites back to the State Department and require a detailedjustification for Presidential waivers of post-Tiananmen sanctions for exports of satellites or defensearticles. On July 30, 1998, Senator Kyl proposed Amendment 3398 to this bill to limit the use offunds pending the establishment of the position of Deputy Under Secretary of Defense forTechnology Security Policy who would also serve as the director of DTSA. Although the Senate's version of the Defense Authorization Act for FY1999 ( S. 2057 ) did not include the restrictions on satellite exports, the Senate Task Force led by MajorityLeader Lott, as proposed by Senator Helms of the Foreign Relations Committee, was in favor oftransferring the licensing authority over satellites back to the State Department. (79) At a conferencecommittee meeting on September 17, 1998, House and Senate conferees agreed to transfer thelicensing authority over commercial satellites back to the State Department in an effort to strengthenexport controls. (80) They did not agree to banfurther satellite exports to China, as some advocated incalling for a reassessment of the policy of allowing China to launch U.S.-origin satellites. (81) U.S.policy might have also distinguished between exports of satellites for PRC launch only and satellitesfor PRC use. Some said it would be difficult to prevent the PLA from using commercial satellitesowned by China. Others said that it was up to Congress to assess the state of U.S. dual-use exportcontrols by passing a law to replace the Export Administration Act that expired in 1994. (82) Section 1511 of the Act ( P.L. 105-261 ) expressed the sense of Congress, among other views, that the President should not issue any blanket waiver of post-Tiananmen sanctions (in P.L. 101-246 )for satellite exports to China. Section 1512 required the President to certify to Congress beforeexporting missile technology to China that such export will not be detrimental to the U.S. spacelaunch industry and will not measurably improve PRC missile or space launch capabilities. Section1513 transferred satellites controlled under the Commerce Department's Commerce Control Listback to the State Department's Munitions List, effective March 15, 1999. That section also requireda report from the Secretary of State on implementation, improvement to the timeliness andtransparency of the license review process, adequacy of resources, and recommendations foramending the Arms Export Control Act. Section 1514 mandated additional requirements tostrengthen national security controls over satellite exports, including mandatory licenses for launchfailure investigations, mandatory intelligence review of license applications and TAAs consideredby the Departments of Commerce and State for foreign launches of satellites, and notification toCongress of export licenses issued for satellite launches; with the exception of satellites exportedfor launch by members of the North Atlantic Treaty Organization (NATO) or a major non-NATOally. Section 1515 required a detailed justification to accompany the President's waiver ofpost-Tiananmen sanctions for satellite exports to China. Section 1521 required the establishmentof a Deputy Under Secretary of Defense for Technology Security Policy to serve as the director ofDTSA. There had been concerns in Congress about how the Administration would implement the requirement to shift licensing authority back to State. Despite signing the Act on October 17, 1998,President Clinton said he "strongly opposed" the transfer of authority. He also warned that he would"take action to minimize the potential damage to U.S. interests" and order appropriate agencies toimplement the change "in a manner consistent with current dual-use export license processing." (83) National Security Adviser Samuel Berger reportedly urged a veto and included the strong language. (84) In coordination with the U.S. satellite industry which has preferred speedier and more predictablelicensing procedures, (85) the White House's NationalSecurity Council reportedly drafted an executiveorder for the President to issue to accord the Commerce Department a continuing role in licensingsatellite exports, perhaps the authority to appeal the decisions of the State Department on MunitionsList items, including satellites. (86) In response, thechairmen of six House and Senate committees(National Security, Armed Services, International Relations, Foreign Relations, Intelligence) wrotea letter on December 9, 1998, warning the President against "direct contravention" of the legislation. As required by section 1513, the Secretary of State submitted to Congress on January 21, 1999, the plan on regaining licensing authority over commercial satellites as Munitions List items onMarch 15, 1999. It included a goal (but not a limit) of timely review of licenses within 90 workingdays; procedures for Commerce to comment, but not veto, licensing reviews; and veto authority forthe Defense Department (that would not be subject to appeal by the Commerce Department). Itstated that "no new Executive Order is needed," and decisions on defense exports are madeexclusively by the Departments of State and Defense and "solely on the basis of national security andforeign policy." (87) The Defense Department's newSpace Launch Monitoring Division of the DefenseThreat Reduction Agency reportedly was hiring 39 engineers and other staff to review licenses forsatellite exports and monitor foreign launches. U.S. firms were to reimburse the costs ofmonitoring. (88) Congress also passed omnibus legislation ( P.L. 105-277 , Sec. 101(b)) appropriating funds for the Department of Commerce in FY1999 that required notification to Congress before expendingfunds to process licenses for satellite exports to China. 106th Congress. In the 106th Congress, Rep.Sweeney introduced H.R. 281 on January 6, 1999, to prohibit the export to China ofsatellites and related equipment. On May 19, 1999, he sponsored an amendment to the NASAauthorization bill ( H.R. 1654 ) to require NASA to certify, before any cooperativeagreement with the PRC, that the technology transfer will not improve PRC ballistic missile or spacelaunch capabilities. The House agreed to the amendment. The NASA Authorization Act for FYs2000, 2001, and 2002 ( P.L. 106-391 , signed into law on October 30, 2000) included the requirementfor certification to Congress, at least 15 days before such an agreement, that it would not bedetrimental to the U.S. space launch industry and would not improve the PRC's ballistic missile orspace launch capabilities (Section 126(a)(2)). During the mark-up of the Foreign Relations Authorization Act for FY2000, H.R. 1211 , by the Committee on International Relations on April 14, 1999, Representative Rohrabacherintroduced an amendment to give preferential treatment in licensing for export of satellites andrelated items to NATO allies, major non-NATO allies, and other friendly countries; but not forChina, countries that potentially pose a security threat to the United States, or countries likely toproliferate satellite technology to countries of security concern. (The FY1999 National DefenseAuthorization Act already exempted NATO and non-NATO allies from the more stringent exportcontrols.) As amended by Representative Gejdenson, however, the approved section 210 of H.R. 1211 ( H.Rept. 106-122 ) did not have references to China and other countries notsubject to preferential treatment. Rohrabacher's amendment also directed the Secretary of State toobligate $2 million to the Office of Defense Trade Controls to expedite the review of satellite exportlicenses. (89) On May 27, 1999, the Senate agreed by voice vote to Senator Lott's amendment to the National Defense Authorization Act for FY2000 ( S. 1059 ). The amendment sought to improvethe monitoring of satellite exports and strengthen safeguards, security, and counterintelligence atDOE facilities. (90) On June 9, 1999, RepresentativeCox introduced an amendment (91) to the House'sversion ( H.R. 1401 ). The amendment consisted of 27 sections, with 25 sectionsrequiring reports or other actions, or amending the law; a section simply providing a short title; anda section providing a definition of "national laboratory." The sections or subsections of the Coxamendment addressed fully or partially 21 of the 38 recommendations of the Cox Committee. TheHouse agreed to the Cox amendment by 428-0 on that day and passed H.R. 1401 onJune 10, 1999. In September 1999, Congress approved the conference report ( H.Rept. 106-301 ) on S. 1059 . The act, signed into law ( P.L. 106-65 ) on October 5, 1999, includes sections1401-1412 that addressed export controls as they related to missile technology, satellites,high-performance computers, multilateral export controls, monitoring of foreign satellite launches,State Department licensing, improved intelligence consultation, and notification to Congress ofinvestigations into possible export control violations by satellite makers. In addition, section 1612(b)expressed the sense of Congress that the policy of exporting satellites to the PRC for launch shouldbe reexamined, with a review of whether to phase out that policy. Congress did not require a reporton this review. On May 10, 2000, Representative Gejdenson introduced H.R. 4417 to transfer export controls over satellites back to the Secretary of Commerce and provide for certain proceduresfor satellite exports to the PRC. 107th Congress and 108th Congress. In February2001 briefings for Representatives Cox and Rohrabacher, the Satellite Industry Association (SIA)argued that California's satellite industry lost $1.2 billion in potential revenues and over 1,000 newjobs in the face of greater European competition, because the State Department's export controlsover satellites negatively affected U.S. firms after March 1999. SIA also contended that the U.S.share (vs. European share) of orders of Geostationary Earth Orbit (GEO) commercial satellitesdropped from a high of 76 percent (19 orders) in 1997 to 45 percent (13 orders) in 2000. (92) Releasedby Representatives Berman and Tauscher in April 2002, a report by the Center for Strategic andInternational Studies (CSIS) also argued that legislation "to return jurisdiction to Commerce forcommunications satellites, which includes extensive technology safeguards, would go far to repairdamage." (93) However, others reported difficulties for U.S. satellite-makers due to lower demand in the worldwide market for satellites after 2000. (94) Worldwide, there were 35 commercial satellitelaunches in 2000, 16 in 2001, and 24 in 2002. (See Table 3 .) Boeing Launch and SatelliteSystemsreported a significant reduction in demand with the resulting over-capacity in the launch and satelliteindustry by 2002. (95) The table also shows thatsatellite launch companies of the United States andother countries (Russia, European countries, Japan, India, Brazil, and Israel) continued to sellservices, with no commercial launch business going to China since 2000. Table 3. Satellite Launches: 1998-2002 Source: Aerospace Daily , July 2, 2003. Some argued for keeping satellite export controls under the State Department but with expeditious and fair processing of license applications. In March 2001, the conservative HeritageFoundation said that "though the satellite industry lobbied to get license authority transferred backto the Commerce Department, given the sensitive nature of the technology involved in theengineering and launch of satellites, the State Department's licensing authority combined with theDefense Department's approval of a technology transfer control plan and close monitoring of alllaunches is prudent to make sure that commercial interests have been weighed against security risksposed by each transaction." (96) Supporters ofkeeping satellites as Munitions List items cited a June2001 report by GAO that found similar export licensing times at the Departments of State andCommerce. (97) Also, some in Congress have beenmindful that satellites licensed by the StateDepartment are subject to congressional review, particularly by the Foreign Relations Committee. On May 3, 2001, Representative Howard Berman introduced H.R. 1707 (the Satellite Trade and Security Act of 2001), with Representative Dana Rohrabacher as the co-sponsor. The bill sought to shift the jurisdiction over satellite exports back to the Department of Commerce. On August 1, 2001, Representative Berman added the legislation as an amendment (co-sponsoredby Representative Rohrabacher) to the House version of a new Export Administration Act (EAA), H.R. 2581 . While Representatives Bereuter and Hyde opposed the amendment, theHouse International Relations Committee approved it on a voice vote. However, the languagesought to exempt satellites going to China for launch, which would remain under the oversight ofthe State Department. (98) As the Committee onInternational Relations reported on November 16,2001 ( H.Rept. 107-297 , Part 1), Section 704 would keep satellite exports for PRC launch as subjectto the Arms Export Control Act and require that, in issuing certifications to Congress for suchexports under Section 36(c) of that Act, the President do so without regard to the values of theproposed contracts. However, the House Armed Services Committee disagreed with the proposalto return jurisdiction of satellite exports to the Commerce Department and, on March 8, 2002,reported the bill with the language struck out ( H.Rept. 107-297 , Part 2). The House did not vote on H.R. 2581 . In addition, Congress passed appropriations legislation for fiscal years 2002 and 2003 ( P.L. 107-77 and P.L. 108-7 ) to require that the Department of State notify the Committees onAppropriations at least 15 days in advance of obligating or expending funds for processing licensesto export U.S.-origin satellites (including commercial satellites and satellite components) to China. Legislation for State Department appropriations in FY 2004 ( H.R. 2799 and S. 1585 ) would continue the requirement. Congressional Oversight and Bush Policy Reviews. In addition to the FY1999 Defense Authorization Act, Congress alsopassed omnibus legislation ( P.L. 105-277 , Sec. 101(b)) appropriating funds for the Department ofCommerce in FY1999 that required notification to Congress before expending funds to processlicenses for satellite exports to China. On November 20, 1998, the Commerce Department reportedprocessing of two export license applications. Commerce again notified Congress on February 1,1999, that it was processing three additional applications to export satellites to China. Those fivesatellite projects considered by Commerce were: Chinasat-8R, Asia Pacific MobileTelecommunications (APMT), Asiasat-3sb/4, Command and Control Software for Satellites, andIridium. As exports of Munitions List items licensed by the State Department, satellite exports have been subject to congressional review, particularly by the Senate Foreign Relations Committee. Under Section 36(c) of the Arms Export Control Act (AECA), P.L. 90-629, the Department of Stateis required to notify Congress of any proposed licenses for the export of any major defenseequipment sold commercially under a contract worth $14 million or more or for the export of defensearticles or services sold commercially under a contract worth $50 million or more. Such a licensemay not be issued for an export to China until at least 30 calendar days after Congress receives thecertification and shall not be issued if Congress, during the review period, enacts a joint resolutionto prohibit the proposed export. In the case of exports to the PRC, approvals for export licenses arealso contingent upon a presidential waiver of post-Tiananmen sanctions. On July 2, 2001, Senators Helms, Shelby, Thompson, and Kyl signed a letter to President George W. Bush, urging him to deny waivers for proposed satellite exports to China based onweapons nonproliferation and human rights reasons. (99) They expressed their concern that "China hascontinued to transfer missile equipment and technology" in contravention of both the MissileTechnology Control Regime and its November 2000 pledge on missile nonproliferation. They urgedthe President not to present the Congress (particularly, the Senate Foreign Relations Committee) withproposed licenses for satellite exports to China, under review at the State Department. On July 20, 2001, Senator Helms, ranking member of the Foreign Relations Committee, issued a letter to other Senators urging them to call for a re-evaluation of policy toward the PRC and tosupport President Bush should he decide to deny China the opportunity to "launch United Statessatellites for profit," focusing on those satellites that might be exported for launch from China. Senator Helms also issued a chart describing China's nonproliferation pledges and violations ofthem, including the assurance of November 2000. He wrote that "none of these pledges has beenhonored." (100) On March 27, 2002, the NASA Administrator said that he and Deputy Secretary of State Richard Armitage were spending "a lot of time" reviewing whether U.S. policy should allow Chinato cooperate with the United States in space, although China's military runs the manned spaceprogram. (101) In October 2002, Armitageannounced that the Bush Administration decided to reviewits policy on defense trade controls. The comprehensive review of arms export controls, includingthe Munitions List, would cover policy, processes, technology, and organizational structure, he said. The next month, the White House said the policy review would be completed in six months. (102) Intestimony to the Senate Foreign Relations Subcommittee on East Asia and the Pacific in March2003, Deputy Assistant Secretary of State Randall Schriver assured Senator Brownback that theDepartment of State has exercised strict controls over exports to China's space programs and hastried to ensure that any cooperation with China would not benefit its military. (103) APMT and China's Military. At least one pending export to China, the APMT satellite project, encountered controversy about militaryapplications. On July 2, 1998, the State Department suspended a license issued in 1996 to Hughesthat permitted Shen Jun, son of a PLA lieutenant general, to work on the $450 million deal for theAPMT consortium. Shen Jun's father, Lt. Gen. Shen Rongjun, was a Deputy Director of theCommission on Science, Technology, and Industry for National Defense (COSTIND) (104) from 1985to 1998, with special responsibility for missiles and satellites in the aerospace sector. Also, theAdministration re-examined the APMT project, in part because the PRC governmental investorsincluded those with ties to the military: COSTIND, China Launch and Tracking Control, CASC,Ministry of Information Industry, and China Telecommunications Broadcasting Satellite Corp.(Chinasat). (In April 1998, COSTIND was reorganized as a civilian organization under the StateCouncil, while the PLA retained control over satellite launches under the new General EquipmentDepartment.) Some were concerned that the APMT satellite (with powerful spot beams) could beused by the PLA to improve command and control and that the satellite contained sensitivetechnologies, including a huge 40-ft.-wide antenna and on-board digital processor, also used inHughes' classified, communications satellites used by the U.S. military. There were also concernsabout Hughes' past record of interaction with PRC aerospace engineers, including the review of theJanuary 1995 launch failure. (105) On February 23, 1999, the Clinton Administration announced that it decided to deny approval to Hughes for the export of the APMT satellite, after the Departments of Defense and State objectedto the export, while the Commerce Department favored it. (106) The Administration cited concerns thatthe end-user would be the PLA. Hughes responded on March 15, 1999, asking the Administrationfor a detailed justification for the denial. But on April 14, 1999, Hughes said that the APMTconsortium dropped Hughes as the satellite supplier. (107) As for the PLA's possible use of ostensibly civilian communication satellites, a DTSA official, Michael Maloof, wrote a July 1998 memo about his concerns that the PRC military has usedU.S.-made satellites to improve its encrypted command, control, communications, and intelligence(C 4 I), using the Asiasat and Apstar satellites built by Hughes. (108) In an unclassified report submittedas required by FY1999 appropriations legislation, the Secretary of Defense reported on February 1,1999, that China's military and civilian leaders were paying "specific attention" to the C 4 Iinfrastructure. The report further said that "the military's lack of communications satellites couldforce the PLA to rely on foreign satellite services to meet military needs in wartime or a crisis" andthat, in a crisis, "the military would preempt the domestic satellite systems for combat operations." (109) Concerning military satellites, a report said that the indigenous satellite (Chinasat-22) launched by China on January 26, 2000, was also called the Feng Huo-1, representing the first of China'smilitary communications satellites for a new battle management system, called the Qu Dian C 4 Isystem. The news story cited a classified report by the Defense Intelligence Agency, reportedlydescribing the Qu Dian system, when fully deployed in several years, as intended to be similar to theU.S. Joint Tactical Information Distribution System (JTIDS), a secure data link network used by U.S.and allied forces. (110) China has planned todeploy three major satellite systems for remote-sensing,navigation and positioning, and communications. (111) China's first Ziyuan-2 satellite, launched onSeptember 1, 2000, was reportedly used by the PLA as a reconnaissance satellite and secretlydesignated as Jianbing-3. (112) In April 2003,a newspaper of China's space industry reported that themilitary used satellites, including the Fengyun meteorological satellites to gather intelligence on theU.S. war in Iraq, such as pictures of damage to runways. (113) Chinasat-8. Meanwhile, Loral encountered delay in obtaining approval from the Department of State for the export to China of the Chinasat-8satellite, the subject of the Presidential waiver in February 1998 that raised controversy. (114) In afull-page ad in the May 6, 1998 Washington Post , Loral boasted that Chinasat-8 was the "mostpowerful satellite China has ever purchased." Originally, Chinasat-8 had been scheduled for launchin May 1999. The PRC government entity buying the satellite was named as the ChinaTelecommunications Broadcast Satellite Corporation, subordinate to the Ministry of InformationIndustry (MII). (115) The MII represents a PRCdefense industrial sector that was formed in March1998 in a reorganization that merged the Ministry of Electronics Industry and the Ministry of Postsand Telecommunications. (116) Loral's chairman,Bernard Schwartz, argued that the government'sdelay in granting a technical assistance agreement (TAA) for Chinasat-8 risked the "commercialviability" of the whole U.S. satellite manufacturing industry in Asia. (117) The trade publication, SpaceNews , alleged in September 1999 that "the State Department is delaying approval of the Chinasat-8TAA to punish Loral for the still unproven allegation that the company broke the law whileparticipating with Hughes in an independent review of a Chinese launch accident investigation." Italso protested that "the export licensing process should not be used as a substitute for the judicialsystem." (118) The Department of State reportedlyreturned the license without action in January2001. (119) Other Satellite Projects. Other satellite projects subject to U.S. export controls, Presidential waivers, and congressional review have included thefollowing. On May 10, 1999, as required by section 1512 of the FY1999 National DefenseAuthorization Act ( P.L. 105-261 ), President Clinton issued a certification for the export of satellitefuels and separation systems for the Iridium satellite project (owned by Motorola). He certifiedthatthe export would not be detrimental to the U.S. space launch industry and that the material andequipment, including any indirect technical benefit that could be derived from such export, wouldnot measurably improve PRC missile or space launch capabilities. (120) In September 2000, AsiaSat, the Hong Kong-based company partly owned by the PRC's China International Trust and Investment Corporation (CITIC) and Societe Europeenne des Satellites(SES), announced that it ordered AsiaSat-4 from Hughes Space and Communications (lateracquiredby Boeing). AsiaSat-4 originally was scheduled for launch in the first half of 2002 from CapeCanaveral on an Atlas 3 rocket owned by U.S.-based International Launch Services -- not on a PRCrocket. (121) Under section 36(c) of the AECA,the State Department, on October 11, 2000, notifiedCongress of a proposed export license for AsiaSat-4, and on May 25, 2001, notified Congress of aproposed export license for technical data and assistance to support the launch of the satellite. (122) AnAtlas 3B rocket launched AsiaSat-4 from Cape Canaveral, FL, on April 11, 2003. (123) In January 2001, Hong Kong-based APT Satellite Co. (partly owned by China Aerospace Science and Technology Corporation) ordered the Apstar-5 communications satellite fromLoral. (124) APT had planned to launch the satellite from China on a Long March 3B rocket in 2003. (125) InNovember 2001, the State Department granted Loral a TAA to discuss the satellite. (126) Then, inSeptember 2002, Loral purchased 50 percent ownership of Apstar-5 for $115 million from APTSatellite Company. (127) Loral and APT Satellitethen arranged a launch of the satellite by Sea Launch(Long Beach, CA) in 2003, presumably because of the lack of a U.S. license to launch the satellitefrom China. (128) With Loral's partial or perhapsfull ownership of Apstar-5, and subsequent lease ofthe use of the satellite to APT Satellite (depending on which company controls the satellite), Loralmay not need to obtain an export license and a Presidential waiver of post-Tiananmen sanctions. In February 2001, Intelsat concluded an agreement to order the APR-3 satellite from Astrium SAS of France, which would be used by the PRC's Sinosat company after launch by China GreatWall Industry Corporation in the spring of 2002. The satellite reportedly would include U.S.components. (129) However, the project laterappeared defunct. In 2002, Sinosat (owned by CASC,People's Bank of China, and the Shanghai Development Bank) announced plans to add Sinosat-2 (built by China Academy of Space Technology using a new Dongfanghong (DFH)-4 satellite,withimported components, and scheduled for launch in 2005). (130) DFH-4 was reported as part of thecooperation between China Aerospace Corporation and Alcatel Space of France, with amemorandum of understanding signed on October 23, 2001, by which Alcatel would provide parts(possibly with U.S. components) for the DFH-4 satellite that will be designed with a life span of 15years. (131)
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Congress has been concerned about whether U.S. firms, in activities connected with exporting satellites, provided expertise to China for use in its ballistic missile and space programs and whetherU.S. policy has facilitated transfers of military-related technology to China. This CRS Reportdiscusses security concerns, policy changes, congressional action, and a chronology of majordevelopments since 1988 under President Reagan. It is updated as warranted. Some critics opposed satellite exports to China, while others were concerned that the Clinton Administration relaxed export controls and monitoring of commercial satellites in moving thelicensing authority from the State Department to the Commerce Department in 1996. A range ofconcerns were prompted by New York Times reports in April 1998 that the Justice Department begana criminal investigation into whether Loral Space and Communications Ltd. and Hughes ElectronicsCorp. violated export control laws. The firms allegedly shared their findings with China on the causeof a rocket's explosion while launching a U.S.-origin satellite in February 1996. The companiesreportedly provided expertise that China could use to improve the accuracy and reliability of itsfuture ballistic missiles, including their guidance systems. At least three classified studies reportedlyfound that U.S. national security was harmed. Congress and the Executive Branch also investigatedHughes' review of China's launch failure of January 1995. After failed satellite launches in 1992,1995, and 1996, China has reported 28 consecutive, successful commercial and government/militaryspace launches. In 2000, the State Department and Lockheed Martin agreed to a settlement with afine of $13 million. In 2002, Loral announced a civil settlement with a fine of $20 million. In early2003, Hughes and Boeing agreed to a civil penalty of $32 million. In 1998, Congress passed the FY1999 National Defense Authorization Act ( P.L. 105-261 ) that transferred licensing authority over satellites back to the State Department (effective March 15,1999). On December 30, 1998, the Cox Committee unanimously approved a classified report saidto conclude that China's technology acquisitions over the past 20 years, not only that associated withsatellite launches, harmed U.S. national security. The Senate Intelligence Committee released itsunclassified report on May 7, and the Cox Committee issued a declassified report on May 25, 1999(see CRS Report RL30220(pdf) ). Congress has debated whether to shift satellite export controls back toCommerce. Congress also oversees the Bush Administration's actions, including any newPresidential waivers of post-Tiananmen sanctions (after the last waiver in 1998 for Loral'sChinasat-8); export licenses; reviews of policy toward China on satellite exports or spacecooperation; and weapons proliferation sanctions that have banned satellite exports to China sinceSeptember 2001, with new sanctions imposed on September 19, 2003 (see CRS Report RL31555 ). China has had no commercial satellite launches since 2000. Legislation for State Departmentappropriations for FY2004 ( H.R. 2799 and S. 1585 ) wouldcontinue torequire State to notify the Committees on Appropriations at least 15 days in advance of obligatingor expending funds for processing licenses to export U.S.-origin satellites to China.
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Nationally, according to the Census of Agriculture, there were 24,805 U.S. farms producing cotton in 2002. (1) Out of this total, nearly 60% (14,476farms) were classified as specialized cottonfarms (because half or more of their commodity sales were cotton), and this group produced 70%of that year's total cotton crop. In 2003, 12.1 million harvested acres produced an estimated 18.255million 480-pound bales of cotton lint (3.97 million metric tons), or 725 lbs. per acre. (2) If themarketing year farm price averages $0.638/lb., the farm value of the 2003 crop will be about $5.5billion. With calendar year 2003 estimated cash receipts for lint and seed at $5.5 billion, cotton will account for 5.1% of estimated total receipts from all U.S. crops ($106.7 billion) and 2.5% of totalcrop and livestock receipts ($212.4 billion). Other leading crops were corn (71.1 million acres, and$18.7 billion in receipts), soybeans (72.3 million acres, and $15.7 billion in receipts), wheat (52.8million acres, and $6.8 billion in receipts), and rice (3.0 million acres, and $1.1 billion in receipts). (3) The leading seven cotton-producing states accounted for 80% of total production in 2003: Texas, 24%; Georgia, 12%; Mississippi, 12%; California, 10%; Arkansas, 10%; North Carolina, 6%;and Louisiana, 6%. (4) Figure 1 illustrates the cotton-producing regions. Figure 2 shows annual U.S. cotton production since 1991, and the U.S. share of world production. Annual average U.S. production since 1991 is 16.8 million bales (weighing 480 poundsper bale), ranging from a low of 13.9 million bales to a high of 20.3 million bales. The U.S. shareof world production has averaged 20% since 1991, ranging from a low of 16% to a high of 23%. This recent history differs little from that of the past 30 years. Since 1971, the U.S. average shareof world production is 19% and the range has been from a low of 12% to a high of 23%. (5) The United States is the world's second largest cotton producer, behind China (see Figure 3 and Appendix Table 2 ). While some 80 countries are forecast to produce about 93 million balesof cotton in the 2003/04 marketing year, the leading seven countries account for about 75 millionbales, or 80% of world production. Among these leading producing nations, only the United States,Brazil, and Uzbekistan are net exporters. The others are net importers of cotton as well as leadingcotton producers. The United States dominates all other cotton exporting countries ( Figure 4 and AppendixTable 2 ). Expected U.S. exports of 13.8 million bales constitute 42% of total world exports inmarketing year 2003/04. The second largest single country exporter is Uzbekistan at 3.1 millionbales, holding 10% of the world share. The 13 countries of West and Central Africa (WCA), withan export volume of 4.621 million bales, account for 13% of the world total. Such major cottonproducers as China, India, and Pakistan also are importers of cotton to meet the needs of their yarn,fabric, and textile manufacturing industries. The United States is itself a large user of its own cotton. At 6.2 million bales, domestic use accounted for 32% of combined domestic and export use in the 2003/04cotton marketing year. However, domestic manufacturing of cotton fabric and yarnhas been declining rapidly while foreign manufacturing has increased. On the otherhand, for the past three years exports have risen rapidly and to record levels asmanufacturing has expanded overseas. In the 2003 marketing year, U.S. cottonexports are expected to reach 13.8 million bales, constituting 68% of total use. Figure 5 graphically portrays the market shift in deliveries from domestic to foreignusers. Observers may question whether cotton support and export promotion programsare contributing to the decline in U.S. cotton manufacturing. However, by design thedirect and counter-cyclical payments as well as the marketing loan provisions do notraise the market price for U.S. cotton or constrain production. To the contrary, thesubsidies support the income of producers and enable them to incur variable andfixed production costs when market prices are low. As shown in Figure 2 , U.S.cotton production did not drop in response to low market prices in 1999 through2002. In fact, average annual production increased after the price drop in 1999compared to production levels in the higher price years prior to 1999. The United States does have tariff barriers to discourage domestic manufacturers from importing lower-priced world cotton. These barriers areintended to protect U.S. cotton producers from foreign competition. At the sametime, Cotton User Marketing Certificates (also called Step 2 Payments), SpecialImport Quotas, and the Limited Global Import Quota are designed to benefit U.S.yarn and fabric manufacturers by partially offsetting domestic supply shortages orhigher U.S. cotton prices. The factors thought to be most important in the decline in U.S. textile and fabric manufacturing are increased import competition and the scheduled phase-out ofquotas on textiles and apparel in January 2005. Efforts to boost economic growth inpoorer regions of the world have contributed to the import competition. TheCaribbean Basin Economic Recovery Act (CBERA) (Title II of P.L. 98-67 ), theAndean Trade Preference Act ( P.L. 102-182 ), and the African Growth andOpportunity Act (Title I of P.L. 106-200 ), were initial measures to help those regions. The last two Congresses have expanded the benefits accorded in those measures. (See CRS Report RL31723 , Textile and Apparel Trade Issues , January 6, 2004.) U.S. farm-level cotton prices are determined by world supply and demand conditions, which are substantially influenced by U.S. cotton production and U.S.demand for cotton textiles. Supply, which is subject to farmers' planting andmanagement decisions as well as the vagaries of weather and pests, is variable,particularly at the individual farm level. Demand also is unstable since it is subjectto all of the forces that shape consumer purchases, including competing fibers suchas wool and synthetics. Imbalances between supply and demand are reflected in pricechanges. Figure 6 shows average marketing year upland cotton prices andcalendar-year cash receipts received by U.S. farmers from the sale of all cotton lintand seed from 1991 through 2003. Over the 13-year period from 1991 through 2003 shown in the graph, farm prices averaged $0.57/lb. However, this time frame is particularly unstable, with theannual average farm price reaching a record high of $0.75 for marketing year 1995and then dropping to $0.30 for marketing year 2001. A drop this low had not beenseen since 1972, when it averaged $0.27. The price swing, which occurred duringthe 1990s, falling from record or near-record highs to lows nearly as extreme, was notunique to cotton. During this time period, other agricultural commodities showedsimilar price swings in response to short supplies and strong demand followed byincreased production but declining demand due to financial crises in large parts ofAsia, South America, and Russia. The various programs categorized in this report as price support and crop loss assistance directly support farm income, mostly as direct payments to farms and ascrop insurance indemnity payments above and beyond the premiums paid by farmers. In most cases the programs are designed to offset either low market prices or lowyields. Detailed explanations of the various farm subsidy programs and exportsubsidy programs, along with expenditure data are presented in the appendix of thisreport. Total cotton subsidy payments to farmers averaged $0.21/lb. ($0.17 for pricesupport and $0.04 for crop loss assistance) from crop year 1991 through 2003 (See Figure 7 ). The practical result of these farm subsidies is that they stabilize the revenue of cotton farmers. Figure 8 demonstrates this by adding subsidy payments per poundof production to the average price received for cotton. The average price received byfarmers was $0.57 for crop years 1991 through 2003. Therefore, the combinedannual average value of the market price and the farm subsidy was $0.78/lb., rangingfrom a low of $0.71 to a high of $0.86. The United States is not the only nation that subsidizes the production and marketing of cotton. However, data published by the International Cotton AdvisoryCommittee (ICAC) (6) indicate that it is one of thelargest. Subsidies per unit werelargest in Spain ($1.04/lb.) and Greece ($0.77/lb.), followed by the United States($0.31/lb) for the 2001/02 crop. Spain and Greece are comparatively small producers(107,000 metric tons and 435,000 metric tons respectively) compared to the UnitedStates (4,420,000 metric tons). In terms of total subsidy cost, the United States rankshighest at $3,001 million, followed by China at $1,196 million, Greece at $735million, and India at $500 million ( Table 1 ). (7) Table 1. World Direct Government Assistance to Cotton Production, by Country, 2001/02 Source: International Cotton Advisory Committee, Production and trade PoliciesAffecting the Cotton Industry, Washington, DC, September 2003. * Income and price support only. According to the ICAC report, some countries that provided assistance in 2001/02 did so on an emergency basis for that year only and do not maintain ongoingprice support or income support programs for cotton. Production costs usually are divided into categories of variable cash costs and fixed costs. (8) U.S. variable cash costs of cottonproduction have shown somemovement above and below their $0.50/lb. average over the past 13 years ( Figure9 ). Variable cash costs (such as seed, fertilizer, chemicals, fuel, and repairs) typicallyare selected for examination because they largely are under the control of the farmoperator and vary with the intensity of the production effort. Revenue must at leastcover variable cash costs or the farming enterprise cannot be sustained for very long. Fixed costs, which have averaged about $0.29/lb., include depreciation of equipmentand buildings ($0.15/lb), land ownership and rental costs ($0.08/lb), (9) taxes andinsurance ($0.03/lb.), and general farm overhead ($0.03/lb.) An allowance forunpaid family labor is excluded from this analysis. Since 1991, cash variable costs have averaged $0.50/lb. while season averagemarket prices have averaged $0.57. While, on average, variable cash costs weremore than covered by market prices, there was not enough to pay for the remainingfixed costs. In addition, for crop years 1999 through 2002, variable costs exceededmarket prices. However, subsidies are another source of revenue for cottonproducers, as well as producers of other major crops, that enable them to cover costswhen market prices are low (described in a later section). Cost of production comparisons among countries are made by the International Cotton Advisory Committee (ICAC) based on survey data supplied by participatingmember countries. While there are problems of data comparability betweencountries, the numbers do indicate that U.S. costs of production rank near the top (see Figure 10 ). (10) Also, U.S. costsmay be about double or more than costs in Brazil andsome of the African countries that compete with the United States in export markets. It is beyond the scope of this report to examine why there are differences inproduction costs between countries, but some of the explanations include differencesin yields, land costs, labor costs, fertilizer costs, and ginning costs. (11) Over the 13-year period 1991 through 2003, U.S. farm cotton revenues annuallyaveraged $0.78/lb. ($0.57 from the marketplace plus farm subsidy payments of$0.21). In comparison, annual variable cash costs of production averaged $0.50/lb.,and total economic costs averaged $0.78/lb. (See Figure 11 .) The substantialcontribution cotton subsidies play in helping cover production costs explains theirimportance to farmers. In the absence of support programs, the data suggest asizeable proportion of cotton would not be profitable. The 1994 WTO Agriculture Agreement developed in the Uruguay Roundbrought all agricultural products listed in the agreement under more effectivemultilateral rules and commitments, including "tariff bindings." It prohibitssubsidies that exceed negotiated limits for specific products, and it specifiesgraduated reductions in domestic support. However, this Agreement was seen onlyas a beginning for reductions in protection and trade-distorting support. Article 20of the Agriculture Agreement committed members to start negotiations on continuingthe reform effort. This commitment was fulfilled when the United States and other WTO members began a new round of multilateral trade negotiations, called the Doha DevelopmentAgenda (DDA.), in November 2001. The objectives for agricultural tradeliberalization are to substantially improve market access for agricultural products,reduce and phase out export subsidies, and substantially reduce trade-distorting(production inducing) domestic support. One step in the negotiations was to agreeon a "framework" for the agriculture negotiations at a ministerial meeting in Cancunin September 2003. Just prior to the Cancun meeting the United States and the EU reached agreement on a proposed framework for the agriculture negotiations. This provokeda group of 21 developing countries (that included, among others, Argentina, Brazil,China, and India) to make a counterproposal (called the G-21 framework) that calledfor deeper cuts in developed country domestic support, the elimination of exportsubsidies, and preservation of special and differential treatment for their ownsubsidies and tariffs. This standoff reflected the continuing differences betweendeveloped and developing countries, and U.S. support for cotton was viewed assymbolic of the differences between the two groups. Developed (U.S. and EU) anddeveloping (G-21) nations' differences over cotton contributed to the failure to reachagreement on a framework for the agriculture negotiations. Four African cotton-exporting countries -- Benin, Burkina Faso, Chad, and Mali -- proposed an end to global trade-distorting subsidies for cotton within threeyears with transitional compensation to be paid to producers. The United States, inresponse, proposed a global sectoral initiative for cotton and textiles that would haveaddressed subsidies for cotton and textiles, tariffs on fibers, textiles and clothing,nontariff and other barriers in the fiber sector. A compromise on cotton the cottonissue could not be reached at the September 2003 Cancun ministerial conference andnegotiations broke down. (See CRS Report RS21715, The African Cotton Initiativeand WTO Agricultural Negotiations .) Earlier, in December 2002, Brazil initiated a dispute settlement case (DS267) at the WTO against the U.S. cotton program. Brazil charges that U.S. cotton subsidyoutlays have exceeded U.S. commitments to the WTO, which causes overproductionand higher exports that cause serious injury to the Brazilian cotton sector. U.S. tradeofficials argue that the subsidies provided to U.S. cotton growers have been withinthe allowable WTO limits and are consistent with U.S. WTO obligations. Consultations between the two countries failed to resolve the dispute and a DisputeSettlement Panel was formed on March 18, 2003, to review the charges. (See CRS Report RS21715, U.S.-Brazil WTO Cotton Subsidy Dispute .) Brazil also argues that the "Step 2" provisions of the U.S. cotton program, as well as the favorable terms provided under U.S. export credit programs and theMarket Access Program (MAP), function as export subsidies and are inconsistentwith U.S.-WTO obligations regarding export subsidies. The United States considersStep 2 payments as part of its domestic support program since they are targeted todomestic cotton users as well as exporters and reports the payments as "amber" box(trade-distorting) domestic support payments. U.S. trade officials also contend thatboth the U.S. export credit (GSM) programs and MAP are consistent with WTOobligations. Key to Brazil's case is the argument that the United States is no longer exempt from WTO dispute proceedings under the so-called "peace clause" (Article 13) of theWTO's Agreement on Agriculture. Article 13 exempts domestic support measuresfrom being challenged as illegal subsidies as long as the level of support remains ator below the benchmark 1992 marketing year (MY) levels. Brazil argues that U.S.cotton subsidies were about $2 billion in MY1992 compared with over $4 billion inMY2001. Therefore, Brazil argues that the United States is no longer in compliancewith the requisite conditions and can no longer seek protection under the WTO'speace clause rule. The Dispute Settlement Panel released its confidential interim report to Brazil and the United States on April 26, 2004. News reports suggest at least a partialfinding against the United States. The panel's final report was released confidentiallyto the disputing parties on June 18, 2004, but the ruling is not expected to be madepublic until late August. If the ruling is unfavorable, as expected, the United Stateslikely will appeal, which would extend the process until mid- to late November 2004. Resolution of the WTO case in Brazil's favor could result in a WTO decisionconcerning implementation of U.S. cotton program provisions. Noncompliance withsuch a decision on the part of the United States could result in compensation toBrazil, or possible limited trade sanctions against U.S. cotton or other exports. U.S. agricultural subsidies and import barriers in general and for cotton in particular have become a complicating factor in negotiating a Free Trade Area of theAmericas that would encompass 34 countries. Brazil and the United States co-chairthe Trade Negotiating Committee, which is responsible for directing nine negotiatinggroups, one of which is agriculture. Differences between Brazil and the UnitedStates typify an underlying challenge. The United States has a relatively low averagetariff compared to Brazil and so is pushing for broad tariff reduction. Brazil andother Latin American countries are pressing the case that the United States shouldrelax use of its trade remedy laws, curtail domestic subsidies for farmers, and lowerpeak tariffs related to quotas. For many Latin American countries, agricultural tradeis at the forefront of concerns, given the importance that it plays in their economies. However, the United States does not want to address its agriculture policies in aregional FTAA, preferring that this be part of the global Doha Round negotiations. (See CRS Report RL30935 , Agricultural Trade in the Free Trade Area of theAmericas .) In each of the challenges described here, cotton is the focus for policies that apply to grains and oilseeds as well. Thus, if the United States is forced to makechanges to cotton programs, such changes can be expected to support programs thataffect much of U.S. crop production. International Cotton Advisory Committee, Production and Trade Policies Affecting the Cotton Industry , Washington, DC, July 2002. International Cotton Advisory Committee, Survey of the Cost of Production of Raw Cotton , Washington, DC, September 2001. USDA, Economic Research Service, Cotton and Wool Situation and Outlook Yearbook , U.S. Department of Agriculture, Washington, DC, November 2003. USDA, Farm Service Agency, Commodity Credit Corporation Commodity Estimates Book, FY 2005 President's Budget , Washington, D.C., February 2004. USDA, Farm Service Agency, Fact Sheet, Upland Cotton, Summary of 2002 Commodity Loan and Payment Program , January 2003. USDA, Farm Service Agency, History of Budgetary Expenditures of the Commodity Credit Corporation , Washington, DC, Book 3, April 9, 2001, and Book 4, January30, 2004. Wescott, Pual C., and Leslie A. Meyer, U.S. Supply Response Under the 2002 Farm Act , USDA, Economic Research Service, Agricultural Outlook Forum 2003,February 21, 2003. To stabilize and support farm incomes, in the face of highly variable prices caused by fluctuating world supply and demand conditions, major crops produced inthe United States, including cotton, have been subsidized since the 1930s. Mostrecently, the 2002 farm bill ( P.L. 107-171 ) authorized a price support framework thatprovides three unique subsidy mechanisms for upland cotton and other coveredcommodities (including wheat, corn, sorghum, barley, oats, rice, soybeans and otheroilseeds, and peanuts). By design, none of the three support mechanisms raises themarket price of cotton. However, they do raise the effective price received byfarmers and so are called "price support" programs. The three support mechanismsavailable to producers include (1) marketing assistance loans, (2) direct payments,and (3) counter-cyclical payments. Marketing Assistance Loan Program. Upland cotton producers are eligible for the minimumnational average price of $0.52/lb. under the market assistance loan program on allthey produce. ELS cotton producers are eligible for the minimum national averageprice of $0.7977/lb. under the marketing assistance loan program, but are not eligiblefor other support payments. Farmers with harvested cotton can use the stored commodity as collateral for a nonrecourse marketing assistance loan from the U.S. Department of Agriculture'sCommodity Credit Corporation (CCC). The farmer has the choice of repaying theloan in full (plus interest) in order to recover clear title, which is commonly donewhen market prices are higher than the loan rate. Alternatively, when market pricesare lower than the loan rate, the farmer can repay the loan at the adjusted world price(AWP) (12) , retain ownership of the cotton and sellit in the marketplace (mostadvantageously when prices rise above the loan rate). The difference between the loan rate and the AWP is known as a marketing loan gain. This gain is considered a direct payment from the CCC and is reportable assuch for income tax purposes. This marketing loan gain is limited to $75,000 perperson per year (but the rules allow a doubling of the limit for a spouse or formultiple farms). By design, repayment of loans at the AWP is intended to avoidacquisition of cotton by the CCC due to forfeiture of collateral in settlement of thenonrecourse loans. Forfeiture of cotton to CCC is another alternative available to thefarmer borrower. Still another way farmers can repay nonrecourse marketing assistance loans is to purchase cotton commodity certificates from the CCC at the adjusted world priceand use the certificates to repay the loans, the only use that is allowed for thecertificates. Gains achieved in this way (though identical to gains achieved byrepaying loans at the AWP) are not subject to the per person annual payment limit. Farmers otherwise eligible to put cotton under loan can agree to forgo the loan option and instead receive loan deficiency payments (LDPs) when market prices fallbelow the loan rate. The LDP payment rate is the difference between the AWP andthe loan rate (financially equivalent to the marketing loan gain). The loan deficiencypayment option has several administrative and financial advantages for farmers overactual nonrecourse loans, which encourages its use. However, LDPs are treated justlike marketing loan gains in terms of contributing toward the per person annualpayment limits. Marketing assistance loans reduce revenue risk associated with price variability and are considered production distorting in a WTO-sense because benefits are linkeddirectly to production. Direct Payments Program. The direct payments program pays upland cotton farmers $0.0667/lb. on 85% ofhistorical cotton production (ELS cotton is not eligible). These direct payments arenot linked to either current production or prices. In fact, farms may but need notproduce cotton to receive the direct payments. They are allowed to grow cotton orany other major grain or oilseed (but not fruits and vegetables). The United Statesconsiders direct payments to be non trade-distorting under WTO rules, althoughsome dispute this classification. This decoupling of the support payments from production requirements and market prices was first adopted in the 1996 farm bill. The payments were calledproduction flexibility contract (PFC) payments, or simply "contract payments." Renamed "direct payments" in the 2002 farm bill, they were extended another sixyears through crop year 2007. Direct payments are subject to an annual per personlimit of $40,000, which can be doubled under the spouse or three-entity rules. While direct payments are decoupled from both production and market prices, they are tied to acreage and so are capitalized into land values. This wealth effectmay have some effects on production and investment decisions. Counter-Cyclical Program. The counter-cyclical program was adopted in the 2002 farm bill and makes paymentsbased on 85% of historical production (to the same farmers receiving directpayments). The payment rate is counter-cyclical to the market price. It goes up asthe season average market price for upland cotton declines below the target price of$0.7240/lb. The difference (with adjustment) between the lower season averagemarket price and the higher target price is the counter-cyclical payment rate. Thispayment rate is constrained on the lower end by the loan rate ($0.52) plus the directpayment rate ($0.0667), and so cannot exceed $0.1373/lb. Alternatively, if theseason average price is above $0.6573, no counter-cyclical payments are made. Again, farmers need not produce cotton to receive the counter-cyclical payments. While benefits are not linked to farmers' production decisions, they arelinked to market prices. The linkage to market prices may be seen by some farmersas reducing market revenue risks, and so may influence some production decisions. Together, direct payments and counter-cyclical payments are called the direct andcounter-cyclical payments program (DCP). Counter-cyclical payments are similar, but not identical to target price deficiency payments that were made from 1973 through 1995. The difference is that target pricedeficiency payments were made on each farmer's actual production of cotton eachyear whereas farmers now need not produce cotton to receive cotton counter-cyclicalpayments. Counter-cyclical payments are subject to an annual per person paymentlimit of $65,000, which can be doubled under the spouse or three-entity rules. Market Loss Payments. On an ad hoc basis, Congress directed that market loss payments be made to commodityprogram participants for the 1998, 1999, 2000, and 2001 crops. These paymentswere a reaction to sharply lower market prices that, in the absence of target pricepayments, meant substantially lower farm revenue. This experience played a criticalrole in the decision to create the counter-cyclical payments program in the 2002 farmbill. Most observers would say that the inclusion of counter-cyclical payments in the2002 farm bill institutionalized market loss payments. With counter-cyclicalpayments in place, it is not expected that market loss payments will be applied tocotton or the other "covered commodities" through crop year 2007, the life of thecurrent farm bill. CCC Expenditures for Price Support. Generally, a pound of cotton produced on program baseacreage is eligible for the loan program price of $0.52, plus a fixed direct paymentof $0.05667 (85% of $0.0667), plus a counter-cyclical payment of $0.1167 (85% of$0.1373 ($0.724-($0.52+$0.667)). This totals $0.6934/lb. (about 89% of the totaleconomic costs of production). How much these three support mechanisms cost thegovernment depends upon how low market prices go. However, no matter how highprices go, the government is obligated each year to make the fixed direct payments. Cotton produced outside of the program base is guaranteed only the market assistanceloan rate of $0.52/lb. (13) The history of cotton price support payments is shown in Figure 12 . For crop years 1991 through 2003, price support program payments averaged $1.441 billionannually. When total price support payments are divided by production, the subsidies average $0.17/lb. from crop years 1991 through 2003, ranging from a low of zero in1995 to a high of $0.38 in 2001 (see Figure 13 ). This $0.17/lb. average annualsubsidy amounts to 34% of the $0.50/lb. average variable cash costs of productionover that time period. Alternatively, this $0.17/lb. subsidy level was enough to covernearly 60% of the $0.29/lb. fixed and non-cash costs of production, including theaverage $0.08/lb. land cost. One reason for supply instability is low crop yield caused by natural disaster conditions (such as drought, flood, pests, and disease). Cotton producers can obtainsubsidized crop insurance to protect against these losses. In addition, Congress hasauthorized crop disaster payments nearly every year since 1982 to provide extraassistance for growers suffering substantial crop losses. Disaster payments wereavailable to qualifying growers who participated in the federally supported cropinsurance program as well as growers who chose to forego insurance. Crop Insurance. Multi-peril crop insurance is available to cotton producers (as well as most other crop producers) toprotect against losses of crop yield from natural hazards. Nearly every cause of yieldloss is covered (i.e., weather, pests, fire, but not producer negligence), hence thedesignation multi-peril. While the insurance is sold to farmers largely throughprivate agencies, the USDA's Risk Management Agency (RMA) pays in excess of50% of the premiums. Additionally, the RMA pays the private agencies nearly 24%of total premiums toward their administrative costs, plus RMA's own administrativecosts, which have averaged 4% of total premiums. By design, the crop insurance program is supposed to be actuarially sound. In other words, over time total premiums (producer plus government premiumcontributions) are supposed to cover total indemnities. In practice, however, the ratioof cotton losses to premiums from 1991 through 2003 has averaged 1.3 to 1, and onlyin two years did premiums exceed indemnities. The net losses (indemnities overpremiums) fall upon the federal government because it reinsures the privatelymarketed policies. Critics of the crop insurance program argue that the highpremium subsidy and the lack of actuarial soundness imply that the program ismerely another tool for transferring government funds to cotton farmers. Substantial revisions were made to the crop insurance program by Congress in 1994 ( P.L. 103-354 , Title I, Federal Crop Insurance Reform Act of 1994) thateffectively mandated the participation of farm subsidy program recipients in cropyear 1995. While the mandatory provisions were eliminated the subsequent year,increased federal insurance subsidies enacted in 2000 ( P.L. 106-224 , AgriculturalRisk Protection Act of 2000) encouraged participation to rise above 90% of plantedcotton acres. From 1991 through 2003, the federal cost of crop insurance annually has covered an average 10.9 million planted cotton acres. The net federal cost ofpremium subsidies and the excess of indemnities over premiums averaged $219million per year (see Figure 14 ). These expenditures can be considered subsidies indirect support of farm income. Indirectly benefitting farmers were the reimbursementof private insurance agency administrative costs and federal administrative costs thattogether averaged an estimated $74 million per year. Counting only the $219 million annual average premium and indemnity subsidies, the average subsidy rate per pound of actual cotton production was $0.026over the 1991 through 2003 time period. When the 1995 through 2003 post-reformperiod is examined alone, the subsidy rate is higher, at $0.032/lb. Crop Disaster Payments. Congress, on an ad hoc basis, has mandated disaster payments above and beyondinsurance indemnities and also to producers who chose to not buy insurance. Overthe nine years from 1995 through 2003, when an average of 90% of planted cottonacreage was insured, annual disaster payments ranged from zero (in 6 of the years)to $444 million. The average was $100 million per year (see Figure 14 ), equaling$0.01/lb. of production over that time period. The farm income support programs are supplemented with additional tools to maintain sales of U.S. upland cotton when domestic prices are not low enough to becompetitive in international markets. Three competitiveness programs unofficiallyare called Step 1 , Step 2 , and Step 3 . Step 1 allows for additional reductionsin themarketing assistance loan repayment rate when world market prices are higher thanthe loan rate. Step 2 pays domestic mills and exporters that purchase U.S. cottonwhen domestic prices are higher than world cotton prices. And Step 3 permitsspecial (increased) import quotas when domestic prices are higher than world cottonprices so that domestic mills have adequate supplies. Also, a separate limited globalimport quota for upland cotton (which was adopted prior to the Step 1, Step 2, andStep 3 provisions) remains in effect. Step 1 Loan Repayment Rate Reduction. The Step 1 adjustment provision was initially adoptedby the USDA under its administrative authority on October 3, 1989. Congress putthe Step 1 provision into statute in the 1990 farm bill ( P.L. 101-624 , Sec. 501). Boththe 1996 and 2002 farm bills retained the Step 1 authority, but with technicalchanges. However, the USDA has not taken action under Step 1 since 1992. Marketing loan gains and loan deficiency payments are calculated as the difference between the loan rate and the adjusted world price (AWP). Only when theAWP is below the loan rate do farmers receive a subsidy payment. A provision ofthe law allows the USDA to lower the AWP when the price of U.S. upland cottonsold in Northern Europe (USNE) is higher than the price of competing cotton. Thisauthority to reduce the AWP is unique to cotton and creates the opportunity forincreased marketing loan program subsidies, even when the price of upland cottonis higher than the loan rate. A Step 1 downward adjustment to the Adjusted World Price (AWP) may be made when the five-day average of the U.S. Northern European price (USNE)exceeds the Northern European price (NE), and the AWP is less than 115% of theloan level. In this circumstance, the USDA may lower the AWP up to the differencebetween the USNE price and the NE price. In other words, when the AWP is lessthan $0.598 (115% of $0.52), it can be adjusted downward by the difference betweenthe higher USNE price and the lower NE price. The practical result of a Step 1adjustment is to enable loan deficiency payments when US prices are higher than theloan price of $0.52, and to increase the loan deficiency payment rate by increasingthe spread between the AWP and the loan price. Step 2 Payments to Domestic Mill Users and Exporters. Step 2, first enacted in the 1990 farm bill and officiallyknown as Upland Cotton User Marketing Certificates, provides subsidy payments todomestic users and exporters of U.S.-produced cotton when its price is higher thanforeign-produced competing cotton. By offsetting the price difference with directpayments, Step 2 encourages U.S. yarn and fabric mills and exporters to purchaseU.S. cotton. In other words, the subsidy payment to buyers makes higher-priced U.S.cotton competitive in the marketplace with lower-priced foreign cotton. Currently,Step 2 requires that through July 31, 2008, payments in either cash or marketingcertificates be made to domestic users and exporters for documented purchases ofU.S.-upland cotton when the USNE price of upland cotton exceeds the NE price fora consecutive four-week period. Step 2 payments are not made if the AWP exceeds134% of the loan rate, or $0.697/lb. Similar user payments were adopted for ELScotton in 1999 and are authorized through July 31, 2008. Figure 15 shows yearly(August 1-July 31) payments (but the expenditures are for all cotton, not necessarilycotton produced in that crop year). From August 1, 1991 through May 31, 2004, Step2 payments have averaged $0.026/lb. of cotton produced in the United States. Step 3 Special Import Quotas. The United States maintains a tariff rate quota on imported upland cotton of 173.09million pounds (equivalently, 360.6 thousand bales or 86.545 thousand metric tons). The duty is nominal below the quota quantity, ranging from zero to $0.05/lb. Abovethe quota quantity trigger, the duty increases to a prohibitively high $0.1424/lb.($0.314/kg). In periods of short domestic supply (due possibly to weather-relatedproduction shortages) and strong world demand, U.S. mills might have insufficientsupplies. So-called Step 3 special import quotas allow for increased imports exemptfrom the high duty. Step 3 requires that a "special import quota" be opened if, for a consecutive four-week period, the USNE price, adjusted for Step 2 payments in effect theprevious week, exceeds the NE price. Another trigger for opening a Step 3 quota isa decline in the U.S. stocks-to-use ratio to below 16%. The size of the quota is equalto one week's domestic mill consumption. Importers have 90 days to make thepurchases and 180 days to bring the cotton into the country. Quota periods canoverlap. Total Step 3 imports in any crop year are limited to five weeks of domesticmill use. In practice, annual U.S. imports of cotton are much less than the 173 million pound tariff-rate quota. The USDA estimates that cotton imports will total about 19million pounds (40 thousand bales) in the 2003/04 marketing year. Limited Global Import Quota. A "limited global import quota" for upland cotton equal to 21 days of domestic millconsumption is allowed (at below tariff rate duty levels) when spot market pricesshow sustained strength for a three-year period. This allows domestic mills accessto lower-priced foreign cotton, helping them to compete with foreign mills. Limitedglobal import quotas cannot overlap with one another. Nor can a limited globalquota be established if a Step 3 "special import quota" is in place. The precisecondition for a limited import quota is an average spot market price for a month inexcess of 130% of the average spot market price for the preceding 36 months. Cotton, as well as other agricultural commodities, benefits from several export assistance programs. Federal export credit guarantees are available to eligible foreignbuyers who want to purchase commodities with borrowed funds. Additionally, theUSDA administers two promotion programs that operate on a cost-share basis withthe private sector. The Foreign Market Development (FMD) Cooperator Program(also widely known as the Cooperator program) focuses on generic commoditypromotion and the Market Access Program (MAP) focuses on value-addedagricultural products. FMD and MAP are exempt from Uruguay Round Agreementsubsidy reduction commitments. Export Credit Guarantees. The USDA's General Sales Manager (GSM) in the Foreign Agricultural Service (FAS)administers three credit guarantee programs for commercial financing of U.S. exportsof food and agricultural products. With funds from the CCC, the governmentunderwrites credit extended by the private lenders to finance exporter sales to eligibleforeign importers. The guarantees are intended to encourage sales in countries wherecredit is necessary, but where financing may not be available. The credit guaranteeprograms replaced more costly direct loan programs. USDA views its credit guarantee programs as commercial programs, not as export subsidies. The programs are supposed to support and encourage commerciallyviable transactions. Sales are made by private exporters to foreign buyers at pricesand other terms, such as interest rates, negotiated by the two parties. However, thiscountry has been working within the Organization for Economic Cooperation andDevelopment (OECD) to achieve internationally agreed disciplines on the use ofexport credits. Terms and conditions for export credit programs are now beingnegotiated in the WTO. GSM-102 guarantees repayment of short-term bank loans (up to three years), and GSM-103 guarantees repayment of intermediate-term bank loans (up to 10years). For a fee, the guarantees cover 98% of principle and a portion of the interest. Eligible countries are those that USDA determines can service the debt backed byguarantees (the "creditworthiness" test). Cotton-related exporter applications forFY2003 totaled $334.8 million, all under GSM-102. The Supplier Credit Guarantee Program (SCGP) guarantees short-term credit (not to exceed 180 days) extended by U.S. exporters directly to their foreigncustomers. Cotton-related exporter applications for FY2003 totaled $11.73 million. If a foreign borrower defaults on a guaranteed loan, the U.S. financial institution files a claim with the CCC for reimbursement, and the CCC assumes the debt. If acountry subsequently falls in arrears to the CCC, typically its debts are rescheduled. Under WTO rules, use of credit guarantees for foreign aid, foreign policy, or debtrescheduling purposes is prohibited. Foreign Market Development Program. The Foreign Market Development Cooperator Program(7 U.S.C. � 5722) began in 1955 (under authority of P.L. 83-480, 7 U.S.C. � 1701)with the purpose of expanding bulk commodity export opportunities over the longterm by partially financing industry-sponsored consumer promotions, technicalassistance, trade servicing, and market research. The 2002 farm bill reauthorized theFMD through FY2007. Funding is from discretionary appropriations of no more than$34.5 million annually. Typically, nonprofit industry organizations submit proposalsfor marketing activities to the USDA. Approved projects normally are reimbursedafter completion on a cost share basis of 45% federal and 55% private sector. Cooperators receiving federal funds under FMD in FY2002 for cotton-relatedactivities were the Cotton Council International ($2,312,188) and the NationalCottonseed Products Association ($90,635). Market Access Program. The Market Access Program (MAP) was originally created in 1978 as the MarketPromotion Program ( P.L. 95-501 , 7 U.S.C. � 5623). The name was changed in the1996 farm bill, and the 2002 farm bill authorized annual appropriations of up to $100million in FY2002 and gradually increasing to $200 million for FY2006 and FY2007. It is intended to help develop foreign markets for value-added agricultural productsand operates as a cost-share program like the FMD Program. The types of activitiesthat are undertaken through MAP are advertising and other consumer promotions,market research, technical assistance, and trade servicing. About 60% of MAP fundstypically support generic promotion (i.e., non-brand name commodities or products),and about 40% support brand-name promotion (i.e., a specific company product). The federal contribution for generic promotion is up to 90% and for brandedpromotion up to 50%. The FY2003 allocation for the Cotton Council Internationalis $8,406,098. Appendix Table 2. Major Cotton Producing,Exporting, and Importing Countries, and Share of the World Market, Crop Year2003/04 Source : Primary data are from USDA, FAS, Cotton: World Markets and Trade, June 2004. * WCA, West and Central African country production including Benin (685), Burkina Faso (965), Cameroon (500), CentralAfrican Republic (30), Chad (225), Cote d'Ivoire (400), Ghana(25), Guinea (40), Mali (1,200), Niger (5), Nigeria (415),Senegal (100), Togo (325). Appendix Table 3. U.S. Cotton Area, Production, and SeasonAverage Price Receivedby Farmers, Crop Years 1991-2003 Source : USDA, NASS, Crop Production, April 2004; ERS, Cotton and Wool Situation Outlook Yearbook, November 2003; World Board, World AgriculturalSupply and Demand Estimates, May 2004. Appendix Table 4. Cost of U.S. Cotton Production, Crop Years1991-2003 Est. Source : Basic data for per acre costs from USDA, ERS, Cost of Cotton Production. Costs per pound are calculated by the author based on actualproduction. Rounding the data creates apparent discrepancies that are notpresent in the underlying numbers. *The opportunity costs for unpaid family labor are excluded from economiccosts. Appendix Table 5. Federal Expenditures for Cotton PriceSupport and Crop Loss Assistance, CropYears 1991-2003 Source : Primary data from USDA, Farm Service Agency, Fact Sheet Upland Cotton: History of BudgetaryExpenditures, Commodity Estimates Book. USDA, Risk Management Agency, Summary of Business Data by Yearand Crop. *Includes target price deficiency payments in 1991-95 and counter-cyclical payments in 2002 and 2003. Appendix Table 6. Cotton Price Support Payments and CropLoss Assistance Per Pound, Crop Years1991-2003 Source: Calculated by author using basic data from the USDA, Farm Service Agency, Fact Sheet Upland Cotton:History of Budgetary Expenditures, Commodity Estimates Book. USDA, Risk Management Agency, Summary ofBusiness Data by Year and Crop. *Includes deficiency payments in 1991-95 and counter-cyclical payments in 2002 and 2003.
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While cotton, along with other major crops, has been subsidized by the U.S. federal government since the 1930s, cotton subsidies are now in the focus of an international spotlight. The nature andextent of these subsidies have become a roadblock in negotiating multilateral and bilateral tradeagreements. Sharp criticism came from the West and Central African countries during various DohaRound meetings. Also, efforts to create a Free Trade Area of the Americas (FAA) foundered at leastpartially over U.S. cotton subsidies. Now, Congress is watching to see if the United States will berequired by the World Trade Organization (WTO) to revise its cotton subsidies in response to adispute lodged by Brazil. One reason the international spotlight is on U.S. cotton subsidies, in contrast to other subsidizing nations, is the sheer size of U.S. cotton production and exports. The United States is thesecond-largest producer of cotton in the world, and the largest exporter. Therefore, U.S. cottonsubsidies have global repercussions. Domestically, what happens to cotton subsidies is importantto a broad group of interests because grains, oilseeds, and peanuts receive similar support. U.S. cotton production and export subsidies provide comprehensive support for producers. Farmers with a history of cotton production are eligible for direct and counter-cyclical payments. On their actual production, farmers may utilize the marketing loans and loan deficiency payments. Protection against low yields is available through subsidized crop insurance, and in some yearsCongress has approved additional disaster payments. When U.S. market prices rise, and there is arisk that competitors might capture more of the world export market and even deliver to U.S. yarnand fabric mills, so-called Step 2 user payments are made to U.S. exporters and mills if theypurchase U.S. cotton. From 1991 through 2003 farm subsidies for cotton production have cost $1.76 billion per year, on average. This is the annual equivalent of $0.21/lb. of U.S. production. While the United Statesis not alone in subsidizing cotton, this level of support is nearly the highest in the world, accordingto the International Cotton Advisory Committee. When the $0.21/lb. average crop year farm subsidy is added to the $0.57/lb. average market price, it has given producers an average revenue of $0.78/lb. from 1991 through 2003. This levelof revenue is more than enough to cover average variable cash costs of $0.50/lb., and just enoughto cover average total economic costs of $0.78/lb. According to the International Cotton AdvisoryCommittee, variable cash costs of some of the competing cotton exporting nations are about halfthose of the United States. This report will not be updated.
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In Merck KGaA v. Integra Lifesciences I, Ltd ., __ U.S. __, 125 S. Ct. 2372 (2005) , the United States Supreme Court decided, without dissent, that the patent law's safe harbor provision exempts from infringement the preclinical use of patented inventions in drug research. Without this legal immunity, pharmaceutical companies face patent infringement liability when they conduct preclinical experiments using rival companies' patented compounds. The U.S. Court of Appeals for the Federal Circuit had earlier found that the statutory exemption applied only to clinical research activity that contributes "relatively directly" to information the Food and Drug Administration (FDA) considers in approving a drug. This narrow interpretation of the safe harbor provision had raised concerns that the patent law could significantly restrict the development and introduction of new medical treatments and generic drugs. Vacating the appellate court's decision, the U.S. Supreme Court unanimously ruled that the exemption protects all uses of patented inventions that are "reasonably related" to the process of developing any information for FDA submission, which includes preclinical studies. The Court's expansive construction of the safe harbor provision "leaves adequate space for experimentation and failure on the road to regulatory approval" and "provides a wide berth for the use of patented drugs in activities related to the federal regulatory process." It is normally a violation of the Patent Act to use any patented invention without prior authorization of the patent owner. However, a statutory exception to this general rule provides: "It shall not be an act of infringement to make, use, offer to sell, or sell within the United States or import into the United States a patented invention ... solely for uses reasonably related to the development and submission of information" to the United States Food and Drug Administration (FDA). Thus, a party that uses a patented invention without the patent owner's permission is committing an infringing act, but if the use comes within the scope of the statutory exception, the party will not be held liable for violating the patent owner's rights. The statutory exception was created by the Drug Price Competition and Patent Term Restoration Act of 1984, commonly known as the Hatch-Waxman Act. This legislation modified the Patent Act by creating a new section, 35 U.S.C. § 271(e), that provides "safe harbor" from infringement for pharmaceutical companies using patented inventions in their drug research and development operations. The Hatch-Waxman Act is widely credited with encouraging and expediting the creation and availability of generic versions of approved patented drugs. Prior to its enactment, pharmaceutical companies had to wait until all relevant patents expired before undertaking the clinical research necessary to obtain FDA approval of generic equivalents. Thus, an established drug's patent term was de facto extended beyond its expiration date by the length of the FDA regulatory process for approving the generic equivalent, which took more than two years. The Hatch-Waxman Act allows generic drug manufacturers to conduct safety and effectiveness tests during the time the brand name drug's patent is still in force, often resulting in immediate introduction of a generic drug into the market upon the pioneer drug's patent expiration. The Federal Food, Drug, and Cosmetics Act (FDCA) regulates the manufacture, use, or sale of drugs. Under the FDCA, the FDA must determine that a drug is safe and effective before it can be marketed to consumers. The FDCA establishes a two-stage approval process for new drugs: an "Investigational New Drug" (IND) application and a "New Drug Application" (NDA). The drug manufacturer must file an IND with the FDA after the company has identified, through preclinical testing on animals and in test tubes, chemical compounds that appear to have beneficial therapeutic effects. The IND is a request for authorization to conduct clinical (human) testing, and it must contain information and data from the preclinical studies that justify the proposed clinical trial. Once the FDA approves the IND, the drugmaker can commence clinical studies. If these studies demonstrate that a new drug is reasonably safe and effective for use, the drugmaker is required to submit a NDA. The NDA must include data from preclinical and clinical studies. After extensive review of the NDA, the FDA issues final approval or denial of the application for manufacturing and selling the new drug to the public. The Patent Act's safe harbor provision has often been compared to the "fair use" defense in copyright law, since it immunizes from liability otherwise infringing acts in order to advance compelling public policy interests. The legislative history of the Hatch-Waxman Act provides the basis for this analogy: "Just as we have recognized the doctrine of fair use in copyright, it is appropriate to create a similar mechanism in the patent law. That is all this bill does." Despite this deceptively simple language of purpose, the safe harbor provision has been the subject of confusion and litigation for many years following its enactment. For over two decades, federal courts struggled to define the breadth and contours of the exemption, particularly concerning the types and uses of patented invention covered by the safe harbor. As for the types of covered patented invention, the United States Supreme Court in Eli Lilly & Co. v. Medtronic, Inc. expansively interpreted § 271(e)(1) to include not only drug and veterinary products, but also medical devices that are subject to pre-market approval by the FDA. The Eli Lilly Court determined that "[t]he phrase 'patented invention' in § 271(e)(1) is defined to include all inventions, not drug-related inventions alone." The Court opined that if Congress had wanted the safe harbor to cover only generic drugs, "there were available such infinitely more clear and simply ways of expressing that intent." As written, § 271(e)(1) applies to the "entire statutory scheme of regulation," including "medical devices, food additives, color additives, new drugs, antibiotic drugs, and human biological products." Concerning the protected uses of a patented invention, a long disputed issue was what kind of research in the drug development process qualified for the exemption: basic research, preclinical research, or clinical studies. These three stages of drug development are described as follows: basic research involves the testing of thousands of compounds to discover any biological activity relevant to understanding the cause of a disease; the preclinical stage involves more focused research on a smaller group of chemical compounds in the hopes of finding the best candidate for clinical development; and clinical studies are the testing of the drug on human subjects in preparation for FDA approval. Following its interpretive lead in Eli Lilly, the Supreme Court in Merck KGaA v. Integra Lifesciences I, Ltd . ( " Integra " ) ruled that § 271(e)(1) immunizes from infringement both preclinical and clinical use of patented inventions in the drug research and development process. Integra Lifesciences I, Ltd. ("Integra") is a pharmaceutical company that owns five patents related to a sequence of three amino acids, arginine, glycine, and aspartic acid (the "RGD peptide"), which promotes cell adhesion by attaching to receptors on cell surface proteins called integrins. Scientists working for Telios Pharmaceuticals, Inc. discovered that the RGD peptide had potential use in promoting wound healing and biocompatibility of prosthetic devices, prompting Telios to obtain patents for the RGD peptide compositions and methods. However, after failing to develop a viable commercial product, Telios sold the patents to Integra. In the mid-1980s, Dr. David Cheresh at the Scripps Research Institute ("Scripps"), a non-profit corporation that conducts biochemical research, discovered that blocking integrin receptors using the RGD peptide inhibited angiogenesis, a process by which new blood vessels sprout from existing vessels. Angiogenesis plays a critical role in the spread of many diseases, including cancerous tumor growth, diabetic retinopathy, and rheumatoid arthritis. Merck KGaA ("Merck"), a German pharmaceutical corporation unaffiliated with the U.S.-based pharmaceutical company Merck & Co., was interested in developing this discovery into a drug to control angiogenesis. In 1988, Merck entered into an agreement with Scripps to provide funding for Dr. Cheresh's research, in exchange for Scripps granting Merck an option to license future discoveries arising from his research. In 1994, Dr. Cheresh succeeded in reversing tumor growth in chicken embryos using a RGD peptide identified as EMD 66203, which had been provided by Merck. This peptide was covered by Integra's patent. Due to Dr. Cheresh's breakthrough achievement, Merck and Scripps entered into a new collaboration agreement in September 1995 to fund the "necessary experiments to satisfy the biological bases and regulatory (FDA) requirements for the implementation of clinical trials" with EMD 66203 or a derivative thereof. Dr. Cheresh then proceeded to conduct in vivo and in vitro experiments on EMD 66203 and two derivatives of it, EMD 85189 and EMD 121974, in order to evaluate each peptide as potential drug candidates. These "tests measured the efficacy, specificity, and toxicity of the particular peptides as angiogenesis inhibitors, and evaluated their mechanism of action and pharmacokinetics in animals." Based on these tests, in November 1996 Merck's pharmaceutical steering committee selected EMD 85189 for pre-clinical development; in April 1997, Merck switched to EMD 121974 as its most promising candidate for clinical testing. In October 1998, Merck reached an agreement with the National Cancer Institute (NCI) to sponsor the clinical trials, and later that year, the NCI filed an IND application with the FDA for EMD 121974. When Integra became aware of Merck's agreement with Scripps to conduct angiogenesis research for commercial purposes, Integra offered Merck the opportunity to purchase licenses to use its patented RGD peptides. In July 1996, after Merck had declined the offer, Integra sued Merck, Scripps, and Dr. Cheresh, seeking monetary damages for Merck's alleged patent infringement and a declaratory judgment against Scripps and Dr. Cheresh. In defense, Merck asserted that its actions involving the RGD peptides came within the common-law research exemption and the statutory safe harbor afforded by § 271(e)(1). At the conclusion of trial, the U.S. District Court for the Southern District of California dismissed Integra's claim for declaratory judgment and held that the common-law research exemption protected Merck's pre-1995 use of the RGD peptides. However, the court found that a question of fact remained as to whether Merck's post-1995 actions fell within the scope of the § 271(e)(1) safe harbor. The district court instructed the jury that, for Merck to prevail on the safe harbor defense, it must prove by a preponderance of the evidence that it was objectively reasonable for the company to believe that "there was a decent prospect" that the experiments "would contribute, relatively directly," to the generation of information likely to be relevant to the drug approval regulatory process. The jury found Merck liable for infringing Integra's patents and that Merck had failed to show that § 271(e)(1) protected its post-1995 research activities. The jury awarded damages of $15 million in royalties. In response to post-trial motions, the district court dismissed Integra's suit against Scripps and Dr. Cheresh, but affirmed the jury's monetary award, explaining that there was substantial evidence to show that the connection between the experiments and FDA review was "insufficiently direct to qualify for the [§ 271(e)(1) exemption]." In June 2003, a divided panel of the Court of Appeals for the Federal Circuit affirmed the district court's determination as to liability but reversed the court's refusal to modify the damages award. The panel majority found that safe harbor does not "reach any exploratory research that may rationally form only a predicate for future FDA clinical tests." In confining the § 271(e)(1) exemption to research activities that contribute "relatively directly" to information "reasonably related" to clinical testing for the FDA, the appellate court stated: In this case, the Scripps work sponsored by Merck was not clinical testing to supply information to the FDA, but only general biomedical research to identify new pharmaceutical compounds. The FDA has no interest in the hunt for drugs that may or may not later undergo clinical testing for FDA approval. Furthermore, the court expressed concern that construing the safe harbor provision more expansively "would effectively vitiate the exclusive rights of patentees owning biotechnology tool patents," since patented research tools are often used in general research to identify candidate drugs and experiments on those drugs. On January 7, 2005, the U.S. Supreme Court granted certiorari to review the court of appeals' interpretation of the safe harbor provision. The question presented to the Supreme Court was "whether uses of patented inventions in preclinical research, the results of which are not ultimately included in a submission to the Food and Drug Administration (FDA), are exempted from infringement by 35 U.S.C. § 271(e)(1)." In a unanimous opinion written by Justice Scalia, the Court vacated the judgment of the Federal Circuit and held that the § 271(e)(1) safe harbor protected the preclinical use of patented compounds "as long as there is a reasonable basis for believing that the experiments will produce 'the types of information that are relevant to an IND or NDA'" submission to the FDA. The Court explained: [W]e think it apparent from the statutory text that § 271(e)(1)'s exemption from infringement extends to all uses of patented inventions that are reasonably related to the development and submission of any information under the FDCA. ... This necessarily includes preclinical studies of patented compounds that are appropriate for submission to the FDA in the regulatory process. There is simply no room in the statute for excluding certain information from the exemption on the basis of the phase of research in which it is developed or the particular submission in which it could be included. The Court rejected Integra's argument that the scope of the safe harbor is limited only to preclinical studies pertaining to the safety of a drug in humans. Since the FDA requires an IND to be filed before human trials can begin, IND applications must include summaries of a drug's efficacy, pharmacokinetics, pharmacology, and toxicological effects in animals. This data would necessarily have to be developed in preclinical studiesâinformation that is "reasonably related" to an FDA submission and thus covered by § 271(e)(1). The Court further disagreed with Integra's claim that Merck's preclinical research is disqualified from safe harbor protection because the experiments were not conducted in conformity with the FDA's "good laboratory practices" (GLP) regulations. Two reasons supported the Court's reasoning: first, the FDA's GLP regulations concerning preclinical studies apply only to experiments on drugs "to determine their safety," and not to studies of a drug's efficacy, mechanism of action, pharmacology, or pharmacokinetics; second, even non-GLP compliant safety-related studies are suitable for submission in an IND, when such studies are accompanied by a reason for the noncompliance. The Court placed an outer limit to the safe harbor provision by endorsing the Federal Circuit's conclusion that the exemption does not reach all experimental activity that at some point, however attenuated, may lead to an FDA approval process. For example, safe harbor does not embrace basic scientific research performed on a patented compound without the intent to develop a particular drug or without a reasonable belief that the compound will cause a particular physiological effect that the researcher desires. Thus, the boundary line between unprotected basic research and protected preclinical research is reached when a scientist discovers that a patented compound produces a "particular" physiological effect through a "particular" biological process. In denying safe harbor protection for Merck's preclinical activities, the Federal Circuit had relied upon the fact that the "Scripps-Merck experiments did not supply information for submission to the [FDA], but instead identified the best drug candidate to subject to future clinical testing under the FDA processes." The Supreme Court dismissed the appellate court's narrow interpretation of the "reasonably related" requirement in § 271(e)(1). Such a construction, the Court explained, "disregards the reality that ... scientific testing is a process of trial and error," and that "neither the drugmaker nor its scientists have any way of knowing whether an initially promising candidate will prove successful over a battery of experiments." Thus, under certain conditions, the Court noted that the safe harbor provision is "sufficiently broad" to protect the use of patented compounds in experiments that are not ultimately submitted to the FDA or drug experiments that are not ultimately the subject of an FDA submission. The Court announced a standard for construing § 271(e)(1)'s reasonable relation requirement in a way that "leaves adequate space for experimentation and failure on the road to regulatory approval": At least where a drugmaker has a reasonable basis for believing that a patented compound may work, through a particular biological process, to produce a particular physiological effect, and uses the compound in research that, if successful, would be appropriate to include in a submission to the FDA, that use is "reasonably related" to the "development and submission of information under ... Federal law." Research tools are defined as "tools that scientists use in the laboratory, including cell lines, monoclonal antibodies, reagents, animal models, growth factors, combinatorial chemistry and DNA libraries, clones and cloning tools (such as PCR), methods, laboratory equipment and machines." Smaller biotechnology companies and universities that invent research tools are concerned that a broader construction of § 271(e)(1) encompassing these tools will deprive them of licensing fees that they collect from larger pharmaceutical firms. Moreover, some companies rely on such fees for their financial existence, since many of these research tools have little commercial value beyond usage in drug research. The Federal Circuit in Integra had specifically identified this potential negative consequence for patented research tools, in its support for a more limited safe harbor: [T]he context of this safe harbor originally keyed its use to facilitating expedited approval of patented pioneer drugs already on the market. Extending § 271(e)(1) to embrace all aspects of new drug development activities would ignore its language and context with respect to the [Hatch-Waxman Act] in an attempt to exonerate infringing uses only potentially related to information for FDA approval. Moreover, such an extension would not confine the scope of § 271(e)(1) to de minimis encroachment on the rights of the patentee. For example, expansion of § 271(e)(1) to include the Scripps-Merck activities would effectively vitiate the exclusive rights of patentees owning biotechnology tool patents. Thus, exaggerating § 271(e)(1) out of context would swallow the whole benefit of the Patent Act for some categories of biotechnological inventions. Needless to say, the [Hatch-Waxman Act] was [not] meant ... to deprive entire categories of inventions of patent protection. In its amicus curiae brief submitted to the Supreme Court, the U.S. Government suggests that § 271(e)(1) does not apply to patented research tools. The Government's brief explains that the safe harbor section, by its own terms, applies only to "a patented invention." The Patent Act defines the term "invention" to mean any "invention or discovery," " unless the context otherwise indicates." The brief asserts that the context of § 271(e)(1) indicates that Congress may not have intended to include patented research tools within the scope of the safe harbor exemption. Since most research tools are used to study or develop other compounds for submission to the FDA regulatory approval process, rather than being themselves the subject of FDA regulatory review, it is plausible to conclude that research tools are not "patented inventions" within the meaning of the statute. In Integra, the Supreme Court expressly declined to decide whether or to what extent the exemption applies to patented research tools since the matter was not at issue in the case. The Court explained that Integra had never argued that the RGD peptides were used by Merck/Scripps as research tools, "and it is apparent from the record that they were not." Thus, without a definitive judicial determination from the Court , the use of patented research tools in drug research and development may or may not fall under the § 271(e)(1) exemption from infringement. Such uncertainty over the patent rights of makers of research tools could serve as a source of continued confusion and litigation in this area. The original legislative intent behind the Hatch-Waxman Act that created § 271(e)(1) was to facilitate the introduction of a generic drug upon the patent expiration of the brand name drug. However, as the Supreme Court explained in the Eli Lilly case that broadened § 271(e)(1) beyond generic drugs to the entire statutory scheme of FDA regulation: "[I]t is not the law that a statute can have no effects which are not explicitly mentioned in its legislative history." The consequences of the Supreme Court's decision in Integra are significant. Some observers argue that if the Federal Circuit's opinion had not been vacated, its narrow interpretation of the patent law's safe harbor potentially would have created a chilling effect on the development of innovative, pioneer drugs and new generic drugs. Limiting § 271(e)(1) to only clinical research appears contrary to the objectives of the Hatch-Waxman Act: If a drug manufacturer could not perform the preclinical studies needed to obtain FDA approval to conduct clinical studies, "the [§ 271(e)(1)] exemption would never be reached because the underlying preliminary research and development work could not be undertaken" without risking patent infringement liability. The Supreme Court's more expansive construction of § 271(e)(1) avoids this result. Since "it will not always be clear to parties setting out to seek FDA approval for their new product exactly which kinds of information, and in what quantities, it will take to win that agency's approval," the safe harbor provision is needed to immunize certain preclinical studies that use patented compounds. The Court also provided an articulated standard for courts, scientists, drug companies, and patent holders to follow concerning the scope of § 271(e)(1) coverage: Safe harbor applies if there is a reasonable basis to believe that the preclinical experiments will produce information that is relevant to an IND or NDA submission with the FDA. Failure to meet this standard would constitute infringing conduct not exempted by § 271(e)(1). By unanimous opinion, the Integra Court has emphatically clarified that preclinical use of patented compounds in pharmaceutical research is not categorically unprotected and can qualify for the patent law's safe harbor as long as it comes within this enunciated standard. However, the Integra Court left unresolved the issue of whether research tools come within the scope of the safe harbor exemption. It is important to note that Integra does not affect the validity and value of patented research tools when they are employed in basic research or for purposes unrelated to an FDA submission. Yet the unauthorized use of research tools in the development of information for the FDA regulatory process may constitute infringing conduct or could be exempted by the patent law's safe harbor. This legal uncertainty raises concerns about the enforceability of research tool patents in this circumstance. Unless or until the Supreme Court answers this question in a future case, Congress may desire to clarify § 271(e)(1)'s applicability to research tools.
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In Merck KGaA v. Integra Lifesciences I, Ltd ., __ U.S. __, 125 S. Ct. 2372 (2005), the United States Supreme Court unanimously held that the preclinical use of patented inventions in drug research is exempted from patent infringement claims by the "safe harbor" provision of the Patent Act, 35 U.S.C. § 271(e)(1). (Merck KGaA is a German company unaffiliated with the U.S.-based pharmaceutical company Merck & Co.) This decision potentially may help expedite the development of new medical treatments and lower the cost of some drugs for consumers. In 2003, the U.S. Court of Appeals for the Federal Circuit had narrowly construed the safe harbor provision as protecting only clinical research activities that produce information for submission to the Food and Drug Administration (FDA) in the regulatory process. In vacating that decision, the U.S. Supreme Court ruled that the exemption applies to all uses of patented inventions that are "reasonably related" to the process of developing any information for FDA submission. The Court explained that, under certain conditions, the safe harbor provision is even "sufficiently broad" to protect the use of patented compounds in experiments that are not ultimately submitted to the FDA or drug experiments that are not ultimately the subject of an FDA submission. Finally, the scope of the exemption is not limited only to preclinical studies pertaining to a drug's safety in humans, but also includes preclinical data regarding a drug's efficacy, mechanism of action, pharmacokinetics, and pharmacology. However, the Court cautioned that the exemption does not reach all experimental activity that at some point, however attenuated, may lead to an FDA approval process. For example, the safe harbor provision does not embrace basic scientific research performed on a patented compound without the intent to develop a particular drug or without a reasonable belief that the compound will cause a particular physiological effect that the researcher desires. In addition, because the matter was not at issue in the case, the Court expressly declined to decide whether or to what extent the exemption applies to patented "research tools" that are often used to facilitate general research in developing compounds for FDA submissions.
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U.S. dairy producers are caught in a classic "price-cost squeeze," with farm milk prices declining sharply from record highs while feed costs remain high. From January through September 2009, the all-milk price received by farmers was 36% below a year earlier. (The all-milk price is the weighted average farm price of fluid-grade and manufacturing-grade milk produced.) Meanwhile feed costs, as measured by alfalfa prices, were down only 20% from a year earlier. The deteriorating economic picture has prompted calls for policymakers to consider how well current dairy policies are assisting dairy producers and what other options might be available. The dairy market since 2007 illustrates how an agricultural boom can turn into a bust. Dairy farmers enjoyed excellent returns in 2007 and most of 2008 as strong demand pushed up the price of dairy products and the farm price of milk. In November 2007, the all-milk price hit a record $21.90 per hundredweight (cwt.). In 2008, milk prices remained high, but feed prices rose rapidly, creating concern for dairy farmers. The financial danger was a further escalation of feed prices or a price reversal in dairy product prices. Product prices have, in fact, dropped. Feed costs have declined some, but not enough to offset the drop in milk prices. One simple measure of today's price-cost squeeze affecting dairy farmers is the milk-feed price index, as reported by the U.S. Department of Agriculture (USDA). The ratio averaged 2.01 in 2008, the lowest since at least 1985 and down from 2.81 in 2007, a year with record-high milk prices. Thus far in 2009 (January-September), the ratio has averaged 1.56, down from the 10-year average of 2.90. A ratio near 3 or higher is considered positive for milk production. The major factors leading to the current economic stress in the dairy industry are continued weak demand relative to milk supplies and relatively high feed costs. In 2009, USDA expects the all-milk price to average between $12.05 per cwt. and $12.25 per cwt., down from $18.29 per cwt. in 2008 and 17%-19% below the 10-year average of $14.83. Productivity growth is a hallmark of U.S. agriculture, and dairy is no exception. Over the years, improved dairy cattle genetics and better feed management practices have increased output per cow. Dairy farmers continued the advancement last year: USDA estimates milk per cow in 2009 at a record high of 20,493 pounds, up from 20,396 in 2008 (one gallon of milk equals about 8.6 pounds). Normally, higher productivity is partially offset by a decline in cow numbers, resulting in more modest gains in total milk production. However, in 2008, dairy farmers increased herds in response to attractive returns, particularly in 2007. As a result, U.S. milk production rose 2.3% in 2008, compared with the increase in milk per cow of only 1.0%. Milk supplies expanded at about the same time that demand started to weaken. In 2009, lower returns have encouraged farmers to cull dairy cows, with the national herd declining 123,000 head or 1.3%. Productivity gains, though, are expected to offset some of the reduction in cow numbers, leaving U.S. milk production down just 0.8%. In 2009, the decline in production has been less than the drop-off in demand, resulting in sharply lower prices than a year ago. Dairy exports account for a relatively small but important share of U.S. dairy product sales. On a fat basis, exports were estimated at 3% of total use in 2007 and 4% in 2008. (On a skim-solids basis, the export shares were 12% in 2007 and 15% in 2008.) Growth in U.S. dairy exports stemmed from lower product availability from New Zealand and Australia (and other countries) and the lower-valued dollar. U.S. cheese exports saw particularly strong gains. Export prospects have weakened in 2009, with USDA forecast exports dropping below 2007 levels. Among the factors USDA cites for the decline in export demand are the global recession, lower incomes, higher dairy production abroad, and a stronger dollar. The drop-off in export demand means that more product must be sold on the domestic market, which has driven down dairy product prices and farm milk prices. Domestic demand has also reportedly slowed, given reduced restaurant sales and sales of premium food products, including some dairy items, as consumers reduce overall spending. However, increased purchases of food for home consumption are likely supporting the market to some degree in 2009. Feed costs rose sharply in mid-2008. Expanding corn demand for ethanol use, strong global demand for grain, and heightened investment in commodity markets collided with uncertain prospects for U.S. corn and soybean yields. In spring/summer 2008, massive flooding in the Midwest led to fears that the U.S. corn and soybean supplies would be sharply curtailed at a time when demand seemed limitless. In July 2008, the farm price of corn peaked at $5.47 per bushel, up nearly $2 per bushel from a year earlier. Alfalfa prices followed suit, with farm prices reaching $180 per ton in August compared with $135 a year earlier. The commodity price boom of 2008 began to collapse in September when financial and commodity markets faltered. Large amounts of investment money began to leave the market, and crop yield prospects for both corn and soybeans firmed up. Supply fears essentially evaporated. As 2008 came to a close, prices for dairy feedstuffs had dropped substantially from highs earlier in the year but remained well above year-earlier levels. Corn prices in December averaged $4.10 per bushel compared with $3.77 in December 2007. The price of alfalfa was $155 per ton in December 2008, compared with $135 in December 2007. In contrast, soybean prices, which had seen a faster rise the year before, averaged $9.24 per bushel, down from $10.00 in December 2007. Thus far in 2009, average prices for dairy feed have moderated from 2008 highs but remain well above 2007 levels. In recent months, USDA has revised its forecasts of 2009 corn and soybean prices downward based on prospects for larger crops this fall. Given the downturn in dairy farm income, dairy economists expect producers in 2009 to send more cows to slaughter and adjust feed rations to save money, which together would result in a slight decline in total milk production in 2009. On the demand side, dairy exports in 2009 have declined as global economic weakness slows foreign demand. Based on USDA forecasts, the expected supply adjustments and higher support prices announced by USDA on July 31 will lift milk prices in the last quarter of 2009. Average farm-level milk prices are expected to rise from $11.60 per cwt. in the April-June quarter to $12.90 per cwt. in October-December 2009 (midpoint of the USDA forecast range). The October-December 2008 prices averaged nearly $17 per cwt. In 2010, USDA expects milk production to decline further as farmers cull more cows following low returns in 2009. Also, exports are expected to pick up slightly as the global economy improves, although USDA expects export prospects will be limited by higher domestic prices and larger exportable supplies in competitor countries. With less milk and somewhat higher demand, the all-milk price is forecast to increase from $12.15 per cwt. in 2009 to $15.05 per cwt in 2010. U.S. dairy policy has been developed over the last seven decades. The early policies addressed three main problems: (1) producers lacked bargaining power with milk buyers; (2) producers suffered from volatile or low prices; and (3) market participants encountered severe shortages/gluts resulting from marketing a highly perishable commodity (fluid milk). The policy response resulted in the development of two major government activities that still function today: federal milk marketing orders (FMMOs) and the Dairy Product Price Support Program (DPPSP). While both FMMOs and the DPPSP have their roots in the 1930s and 1940s, the programs have changed modestly over the years as the industry structure and markets changed. Two other components of U.S. dairy policy are relatively new programs. First, the 1985 farm bill established the Dairy Export Incentive Program (DEIP) to counter foreign competitor subsidies. Second, the Milk Income Loss Contract (MILC) program was established in the 2002 farm bill as a government payment for dairy farmers in times of low milk prices. Like U.S. crop programs, the MILC program pays dairy producers when prices decline below a specified level. The following sections describe each of these four components and how they relate to the current market situation. Lower milk and dairy product prices since late 2008 have generated new program activity. USDA began purchasing dairy products last fall under the DPPSP; MILC payments were triggered beginning in February. The Milk Income Loss Contract (MILC) program pays dairy farmers when farm milk prices fall below an established target price. Section 1506 of the 2008 farm bill ( P.L. 110-246 ) extends authority for the MILC program until September 30, 2012. This program is similar to long-time subsidy programs for crops (e.g., wheat, corn, and soybeans) that pay farmers when farm prices drop below certain levels. USDA's Farm Service Agency implements the MILC program. Under MILC, participating dairy farmers nationwide are eligible for a federal payment whenever the minimum monthly market price for farm milk used for fluid consumption (Class I; see discussion on " Milk Marketing Orders ") in Boston falls below $16.94 per cwt. Eligible farmers then receive a payment equal to 45% of the difference between the $16.94 target price and the lower monthly market price. The payment quantity is limited to 2.985 million pounds of annual production (equivalent to about a 160-cow operation). Since the inception of the MILC program, large dairy farm operators have expressed concern that the payment limit has negatively affected their income. For larger farm operations, their annual production is well in excess of the limit, and any production in excess of that receives no federal payments. To address the issue of rising feed costs, the 2008 farm bill includes a provision that adjusts upward the $16.94 target price in any month when feed prices are above a certain threshold. The law requires USDA to calculate monthly a National Average Dairy Feed Ration Cost based on a formula that USDA currently uses to calculate feed costs. In any month that the average feed cost is above $7.35 per cwt., the $16.94 target price will be increased by 45% of the difference between the monthly feed cost and $7.35. For the latter half of 2007 and all of 2008, farm milk prices remained well above the MILC trigger price, precluding the need for any MILC payments. However, milk prices have since declined below the trigger for MILC payments. The Class I Boston farm milk price for February 2009 (advance pricing) was $13.97 per cwt. With the adjustment for feed costs raising the trigger to $17.33 per cwt., MILC payments were activated for the first time in two years at a payment rate of $1.51 per cwt. (($17.33 - $13.97) times 45%). The payment rate rose to $2.01 per cwt. in March. Given current prospects in the futures markets for milk, corn, and soybeans, payments are expected to continue during 2009, but at smaller rates. Individual producers must select which month to begin receiving payments, based on their projection of potential payment rates and the possibility of hitting the production payment limit. As of October 26, 2009, total MILC payments distributed to date were $775 million ( Table 1 ). The timing of the payments has caused some concern for producers this spring. While milk price data become available during the payment month, data needed for the feed cost adjustor are not available until USDA publishes monthly average feed prices in Agricultural Prices at the end of the next month. Consequently, MILC payments for a particular month are not processed until two months later. The Agricultural Act of 1949 first established a dairy price support program by permanently requiring USDA to support the farm price of milk. Since 1949, Congress has regularly amended the program, usually in the context of multiyear omnibus farm acts and budget reconciliation acts. Historically, the supported farm price for milk is intended to protect farmers from price declines that might force them out of business and to protect consumers from seasonal imbalances of supply and demand. USDA's Commodity Credit Corporation (CCC) supports milk prices by its standing offer to purchase surplus nonfat dry milk, cheese, and butter from dairy processors. Whenever market prices fall to product support levels, processors generally make the business decision of selling surplus product to the government rather than to the marketplace. Consequently, the government purchase prices usually serve as a floor for the market price, which in turn indirectly supports the farm price of milk for all dairy farmers. The effectiveness of the dairy price supports depends on removal of products from the market and placement into government storage. The Dairy Product Price Support Program (DPPSP) as authorized by the 2008 farm bill requires USDA to purchase products at the following minimum prices: block cheese, $1.13/lb.; barrel cheese, $1.10/lb.; butter, $1.05/lb.; and nonfat dry milk, $0.80/lb. Under previous law, the support price for farm milk was statutorily set at $9.90 per cwt., and USDA was given the administrative authority to establish a combination of dairy product purchase prices that indirectly supported the farm price of milk at $9.90. Although the 2008 law does not specifically state that the overall support price is $9.90 per cwt, each of the mandated product prices in the law is equivalent to the existing product purchase prices, so farm milk prices effectively continue to be supported at $9.90. In late 2008 and 2009, after several years of relative inactivity, the price support program resumed purchases when dairy product prices approached support levels. As of September 11, 2009, USDA estimated that it purchased 111 million pounds of nonfat dry milk under the program in 2008 and expects to purchase 379 million pounds in 2009, along with small amounts of butter and cheese (including amounts exported under the Dairy Export Incentive Program). Total expenditures on the DPPSP were $223 million from October 1, 2008, through September 10, 2009. With an expected rise in milk and product prices next year, USDA forecasts only a small amount of butter to be purchased in 2010. Following heightened industry and congressional interest in taking action to boost milk prices for farmers, USDA announced on July 31, 2009, a temporary increase in price support for cheese and nonfat dry milk from August 2009 through October 2009. (See " Increase Price Support for Cheese and Nonfat Dry Milk " below for more information.) Subsequently, the Senate approved an amendment to the Senate-passed FY2010 agriculture appropriations bill to increase Farm Service Agency funding by $350 million, ostensibly for an additional increase in dairy product price support levels. However, the conference agreement for the FY2010 Agriculture appropriations bill, which was enacted on October 21, 2009, provides for a different use of the funds ($60 million to purchase dairy products and $290 million in direct payments to farmers). See " Modifying Existing Programs to Enhance Dairy Farmer Income ," below, for more information. Federal milk marketing orders (FMMOs) mandate minimum prices that processors must pay producers for milk depending on its end use. This compares with the MILC program, which provides direct payments to producers, and the DPPSP, which buys surplus dairy products at specified minimum prices. The DPPSP serves as a price floor for products and undergirds FMMO minimum milk prices. The farm price of approximately two-thirds of the nation's fluid milk is regulated under FMMOs. Federal orders, which are administered by USDA's Agricultural Marketing Service, were instituted in the 1930s to promote orderly marketing conditions by, among other things, applying a uniform system of classified pricing throughout the market. Some states, California for example, have their own state milk marketing regulations instead of federal rules. FMMOs also address how market proceeds are distributed among producers delivering milk to federal marketing order areas. Producers are affected by two fundamental marketing order provisions: the classified pricing of milk according to its end use, and the pooling of receipts to pay all farmers a blend price. Federal orders regulate dairy handlers (processors) who sell milk or milk products within a defined marketing area by requiring them to pay not less than established minimum class prices for the Grade A milk they purchase from dairy producers, depending on how the milk is used. This classified pricing system requires handlers to pay a higher price for milk used for fluid consumption (Class I products) than for milk used in manufactured dairy products such as yogurt, ice cream, and sour cream (Class II), cheese (Class III), and butter and dry milk products (Class IV). These differences between classes reflect the different market values for the products. Blend pricing allows all dairy farmers who ship to the market to pool their milk receipts and then be paid a single price for all milk based on order-wide usage (a weighted average of the four usage classes). Paying all farmers a single blend price is seen as an equitable way of sharing revenues for identical raw milk directed to both the higher-valued fluid market and the lower-valued manufacturing market. Manufactured class (Class II, III, and IV) prices are the same in all orders nationwide and are calculated monthly by USDA based on current market conditions for manufactured dairy products. The Class I price for milk used for fluid consumption varies from area to area. Class I prices are determined by adding, to a monthly base price, a "Class I differential" that generally rises with the geographical distance from milk surplus regions in the Upper Midwest, the Southwest, and the West. Class I differential pricing is a mechanism designed to ensure adequate supplies of milk for fluid use at consumption centers. The supply of milk may come from local supplies or distant supplies, whichever is more efficient. However, local dairy farmers are protected by the minimum price rule against lower-priced milk that might otherwise be hauled into their region. Over the years, dairy farmers have supported minimum prices afforded by FMMOs because they help balance marketing power traditionally held by processors. In contrast, dairy processors generally oppose them. Mandated minimum prices, they say, do not allow for timely adjustments in a rapidly changing market and can leave product manufacturers in unprofitable situations. Also, they contend that the FMMO system distorts markets, saying fixed differentials contributed to high fluid milk prices last year. First authorized in 1985, the Dairy Export Incentive Program (DEIP) provides cash bonus payments to U.S. dairy exporters. The program was initially intended to counter foreign—mostly European Union—dairy subsidies (while removing surplus dairy products from the market), but subsequent farm bill reauthorizations have added market development to the role of DEIP. Payments since the program's inception have totaled $1.1 billion. The program was active throughout the 1990s, peaking in 1993 with $162 million in bonuses. DEIP funding is a mandatory account provided through the Commodity Credit Corporation (CCC) borrowing authority from the U.S. Treasury, rather than through annual USDA appropriations bills. The program had not been used since FY2004 until USDA announced its reactivation on May 22, 2009. (See " Activate Dairy Export Incentive Program (DEIP) ," below.) U.S. dairy product exports made with DEIP bonuses are subject to annual limitations under the Uruguay Round Agreement of the World Trade Organization (WTO). The limits are 68,201 metric tons of skim milk powder, 21,097 tons of butterfat, 3,030 tons of various cheeses, and 34 tons of other dairy products (quantity limits are on a July-June year). Total expenditures under WTO commitments are now capped at $117 million per year (value limits on a October-September year). The reversal of market fortunes for dairy farmers since 2008 has prompted calls from dairy producer groups to address the situation. The National Milk Producers Federation (NMPF), the largest trade association representing milk producer cooperatives, wrote to the Secretary of Agriculture on January 8, 2009, asking the Department to take several steps to assist dairy producers. Subsequently, letters to the Secretary were also sent by Members of Congress. On January 26, the International Dairy Foods Association, which represents dairy manufacturers and marketers, wrote to the Secretary, focusing only on ways to bolster demand for dairy products. The recommended industry actions deal also with revisions in the support program to increase dairy product purchases by the government, specifically asking USDA to be more flexible with the acceptable types and forms of eligible dairy products. Additional purchases are expected to spur domestic demand and slow the decline in prices. The request from NMPF also included reactivation of the Dairy Export Incentive Program to boost exports and remove excess inventory while helping exporters maintain business relationships developed in recent years. In early May 2009, the National Milk Producers Federation reiterated its request that the U.S. government restart the Dairy Export Incentive Program to help remove excess dairy products from the market. Subsequently, NMPF asked USDA to increase the support prices of both cheese and nonfat dry milk. Another policy proposal is a dairy herd buyout to reduce the milk supply. A federal buyout has not been included in the NMPF requests, but it had been discussed in the agricultural media earlier in 2009. The industry currently operates a voluntary, producer-funded program to remove dairy cows from milk production. USDA operated a federal dairy herd buyout program in the mid-1980s. In July 2009, the Subcommittee on Livestock, Dairy, and Poultry of the House Agriculture Committee held a series of hearings to review economic conditions facing the dairy industry. The subcommittee heard a range of opinions from the witnesses, with some asking for increased intervention in the form of higher support prices or supply management. Others argued that the industry would benefit if the government did nothing because inaction would more quickly bring supply in line with current demand. USDA has taken several actions in 2009 to support dairy farm income, including increasing dairy product price supports, transferring dairy products to domestic feeding programs, and activating the Dairy Export Incentive Program. USDA expects to spend about $1 billion in fiscal 2009 on purchases of dairy products and payments to producers under the Milk Income Loss Contract (MILC) program. Following heightened industry and congressional interest in taking action to boost milk prices for farmers, USDA announced on July 31, 2009, a temporary increase in price support for cheese and nonfat dry milk from August 2009 through October 2009. This raises the government purchase price for nonfat dry milk from $0.80 per pound to $0.92 per pound, the price for cheddar blocks from $1.13 per pound to $1.31 per pound, and the price of cheddar barrels from $1.10 per pound to $1.28 per pound. Prior to the change, USDA expected that temporarily raising the price of these dairy products would increase the price that dairy farmers receive for their milk, boost U.S. dairy farmers' revenue by $243 million, and result in the government purchase of an additional 150 million pounds of nonfat dry milk and an additional 75 million pounds of cheese. According to USDA, the purchases will be a no-net-cost transaction because the product will presumably be resold at higher prices when the dairy product market recovers next year. Following USDA's announcement, cheese prices rose to and above the new support levels, with the government purchasing less than 1 million pounds of nonfat dry milk (some of this product was sold as part of a packaging test). Separately, market observers have noted a modest strengthening in product markets overseas, with milk powder prices increasing in recent months following improved demand in Asia. On March 26, 2009, USDA announced that approximately 200 million pounds of nonfat dry milk (purchased under the Dairy Product Price Support Program) would be transferred from the Commodity Credit Corporation to USDA's Food and Nutrition Service for use in domestic feeding programs. Besides helping needy families by providing food through the National School Lunch program and others, the transfer is expected to increase dairy product consumption, thereby supporting the prices farmers receive for milk. On May 22, 2009, USDA announced allocations under DEIP for the marketing year that ends June 30, 2009, as allowed under the rules of the World Trade Organization (WTO). During the month of June, USDA accepted bids for nonfat dry milk, cheddar cheese, mozzarella cheese, butter, and anhydrous milk fat from exporters shipping to Africa, the Middle East, and Asia. On July 6, 2009, USDA announced initial DEIP allocations for the marketing year spanning July 1, 2009, through June 30, 2010. Subsidized export quantities are limited on a July-June marketing year basis. USDA had committed $18 million in DEIP awards through September 10, 2009. The use of export subsidies has the economic effect of moving more product into market channels, reducing inventories, and raising farm prices. However, economists say significant quantities would be necessary to appreciably move farm prices from current levels based on prevailing supply and demand. Free trade supporters caution that if price-enhancing DEIP export quantities are above the limits agreed to in the Uruguay Round Agreement, the U.S. government will need to break its World Trade Organization commitments; otherwise the action might result in little impact on farm milk prices. Free trade supporters also say that policymakers need to weigh the merits of returning to an aggressive export subsidy stance, how export subsidies fit with current overall U.S. trade policy, and the potential reaction from major agricultural trading partners. Producer groups favoring the reactivation of DEIP point to the European Union (EU), which has already taken action to address falling dairy prices in Europe. In January 2009, the EU announced it would restart its dairy export subsidy program for butter, cheese, and milk powder in an attempt to stabilize the domestic market. For more information on DEIP, see CRS Report R40584, Implications of Reactivating the Dairy Export Incentive Program (DEIP) , by [author name scrubbed] and [author name scrubbed]. Most policy responses that are currently being discussed fall into three categories: (1) maintain the status quo and allow remaining programs to operate, (2) implement a new program such as a dairy buyout, and (3) modify existing programs to enhance dairy farmer income. Each is discussed in sections below. A change in federal milk marketing orders could also be used for boosting dairy farm returns. The Federal Milk Marketing Improvement Act of 2009 ( S. 1645 ; first introduced as S. 889 ) is expected to "help farmers get a fair price for their milk" and provide relief and assistance to dairy farmers by using the cost of milk production as the basis for pricing milk. While the bill could raise farm milk prices, some are concerned that it could also reduce the competitiveness of the U.S. dairy industry because, they argue, a pricing system based on cost of production potentially rewards inefficiency. Also, some are concerned that provisions in the bill for USDA to influence supply may not be sufficient to bring supply and demand into balance. Increasing import barriers is another approach for addressing the issue of low milk prices. The Milk Import Tariff Equity Act was introduced in the Senate ( S. 1542 ) on July 30, 2009, and in the House ( H.R. 3674 ) on September 29, 2009, to impose tariff-rate quotas on imports of casein (the main protein found in milk) and milk protein concentrates. Similar bills have been introduced in virtually every Congress over the last decade, but no action has occurred. For more information, see CRS Report R40839, Proposed Import Restrictions on Milk Protein Concentrates (MPCs) . The current and prospective price environment complicates the policy decision. Given reduced returns, producers are culling herds and reducing milk production, which is expected to lift farm prices. However, the full effect of the production decisions is expected to take several more months. One option for policymakers is to do nothing and allow current programs to operate as intended. U.S. dairy programs, particularly the DPPSP and MILC, are now operative. USDA has been purchasing dairy products in 2009 under the DPPSP. These actions take excessive inventory off the market and support overall milk prices. Similarly, the MILC program is expected to continue making payments to dairy farmers in 2009. To the extent that feed prices remain above the threshold level, the feed cost adjustor plays a role in compensating dairy farmers to offset the high cost of feed. Supporters of the status quo argue that current dairy programs already encourage additional milk production when the market is not calling for it. The International Dairy Foods Association (IDFA), representing dairy manufacturers, contends that the MILC program, the dairy product price support program, and recent USDA decisions on FMMOs contribute to excess milk supplies. Similarly, some farmers do not favor raising support prices because " ... it has the strong potential to send the wrong signal to the market to increase or at least maintain, rather than to decrease, production." As a result, modifications to enhance producer incomes could exacerbate the milk supply and price situation. At any rate, any proposals that involve new budgetary outlays could be challenged as adding to an already large federal deficit and/or burdening consumers with higher costs. Proponents of additional action point out that many producers are facing significant income loss and that without additional assistance, they may not survive financially. Also, some producers argue that the level of support—no longer specified for milk directly, but effectively providing support at roughly $9.90 per cwt—is too low given current feed prices. In 1986 and 1987, the Dairy Termination Program, authorized under the Food and Security Act of 1985 ( P.L. 99-198 , the 1985 farm bill) was designed to reduce government costs associated with federal purchases of surplus dairy products. The program paid participating farmers to remove more than 1 million dairy cows from milk production, or about 9% of the U.S. dairy herd in 1985. Participating farmers were barred from the dairy industry for five years. The program temporarily reduced the nation's milk production capacity and was designed to ease farmers' transition to a lower price support level that was also included in the 1985 farm bill. One concern with pursuing another buyout is raised by the beef industry. Beef producer groups note that dairy cow slaughter under the 1980s program added beef to total meat supplies, which reduced beef and cattle prices. Under the Dairy Termination Program, USDA purchased beef for other programs as a way to lessen the price impact on the beef and cattle markets. The National Milk Producers Federation (NMPF) currently operates its own, producer-funded dairy buyout program called Cooperatives Working Together (CWT). It has purchased and removed from dairy production 276,000 cows representing more than 5 billion pounds of annual milk production during its first six herd retirement rounds, which began in 2003. In early February, the NMPF said it was not pursuing a new federal program. On May 1, 2009, the CWT closed its seventh round of bidding for dairy cow purchases. Dairy cow culling reportedly slowed in March and April as farmers who had applied for the program awaited the results. CWT announced in mid-May that it had accepted bids representing nearly 101,000 cows and almost 2 billion pounds of milk production capacity, CWT's largest single herd retirement program to date. Herd culling occurred over the summer months. On July 10, 2009, CWT announced its eighth round, which was completed September 24, 2009. Compared with previous rounds, the bid period was shortened to two weeks in order to have a more immediate impact. In this round, CWT accepted bids on 74,114 cows, representing 1.5 billion pounds of milk. Also, nearly 3,000 bred heifers were sent to processing plants. Most recently, on October 1, 2009, CWT announced yet another round, with bids due by October 15. A herd buyout-related bill was introduced in Congress on July 23, 2009. H.R. 3322 would direct USDA to use Section 32 funds to enter into a contract with a producer association or other third party to encourage dairy producers to remove dairy cows from production. It would also temporarily increase MILC payments (see next section). Another option being offered to address the current market situation is to modify existing programs. The National Farmers Organization (NFO) and other farm groups have proposed adding funds to increase the amount of Milk Income Loss Contract (MILC) payments, which resumed in February 2009. The groups contend that adding payments to the existing income support program provides a necessary addition to dairy farmer income. Several bills have been introduced in Congress to increase MILC payments. However, opponents of this option argue that additional payments could slow the supply adjustment process needed to bring the dairy market back into balance. Congressional leadership has reportedly been reluctant to act on the proposal because the move would be considered as re-opening the 2008 farm bill, which would likely result in a multitude of requests from other groups seeking changes. Earlier in 2009 , the National Milk Producers Federation proposed several administrative changes to the price support program, such as loosening packaging requirements and expanding the list of eligible products. Such changes would likely remove additional products from the market and provide some additional support to prices. Similarly, the International Dairy Foods Association (IDFA) proposes to boost demand by exchanging government-owned bulk dairy inventory for consumer-ready dairy products and using existing authorities to purchase and donate additional dairy products like yogurt. A regulation addressing some of these issues in currently in review at USDA. In October, low financial returns for dairy farmers prompted Congress to make additional financial assistance available by including funds for dairy farmers in the FY2010 Agriculture appropriations bill ( P.L. 111-80 ), which was enacted on October 21, 2009. The enacted appropriation (in the General Provisions, Section 748) provides a total of $350 million, divided between $290 million for supplemental income payments to dairy farmers and $60 million for the purchase of cheese and other dairy products to be distributed through food banks and similar locations. Provisions for expedited rulemaking are expected to allow USDA to make the additional payments in a timely manner. The bill does not specify how the Secretary should allocate the funding for direct payments among producers. This issue is a source of contention because the eventual distribution method used by the Secretary will determine which size of farm will receive the most benefits. Under the Milk Income Loss Contract (MILC) program, for comparison, the payment quantity is limited to 2.985 million pounds of annual production (equivalent to about a 160-cow operation), as specified in the 2008 farm bill. The idea for an additional dairy appropriation originated in the Senate-passed bill, which included an amendment for an additional $350 million in FSA salaries and expenses, ostensibly for dairy disaster assistance through an increase in dairy product price supports. Amendment proponents in Congress expected that the additional funding, if used for the price support program, would raise minimum purchase prices another $0.05 per pound for nonfat dry milk and $0.09 per pound for cheese from levels USDA announced on July 31, 2009. The House-passed appropriations bill did not have a similar provision. The National Milk Producer Federation (NMPF), representing dairy farmers, favors direct purchases, while the National Farmers Union supports higher purchase prices. NMPF contends removing surplus products would raise overall price levels and provide benefits through higher market prices that would be nearly four times greater than the value of benefits derived from either higher purchase prices under the DPPSP or additional direct farmer payments. In contrast, the International Dairy Foods Association (IDFA) favors other options to minimize market impacts, including additional MILC payments and government purchases of a wide variety of products rather than a large-scale purchase of a single product such as cheese. IDFA also argues against higher purchase prices that, they say, would increase costs for food processors and encourage additional milk production, exacerbating the milk surplus problem. Recent USDA regulatory actions have included a dairy import assessment as part of the 2008 farm bill implementation, as well as proposed changes to federal milk marketing orders. On May 19, 2009, USDA published a proposed rule in the Federal Register to establish a dairy import assessment program as required by the 2002 and 2008 farm bills. U.S. dairy producers in the 48 contiguous states currently pay a 15-cent per cwt. assessment on all milk produced to fund a national dairy producer program for generic dairy product promotion, research, and nutrition education. Authorization for the program stems from the Dairy Producer Stabilization Act of 1983 (7 U.S.C. 4501-4514). The 2002 farm bill (Section 1505) amended the act requiring that the assessment also be collected on all imported dairy products. After consulting with the Office of U.S. Trade Representative (USTR), the Secretary of Agriculture determined that a mandatory dairy import assessment was not permissible, since Alaska and Hawaii are exempt from the domestic assessment. According to USDA, the exemption treats some domestic producers more favorably than importers, thereby violating U.S. trade obligations. To remedy the situation, Section 1507 of the 2008 farm bill extends the domestic assessment to Alaska, Hawaii, and Puerto Rico. The statutory change is designed to make the definition of the United States consistent with the definition used by the USTR and U.S. trading partners, thus allowing the assessment on imported products. The enacted 2008 farm bill also sets the assessment on imports at 7.5 cents per cwt. The import assessment is supported by most dairy producer groups because importers "benefit from domestic dairy promotion efforts without contributing to programs aimed at growing the U.S. market." However, milk producers in Alaska and Hawaii were opposed to any definition change that required them to contribute to the program. Dairy importers and processors are opposed to the import assessment, contending that it is an unfair tax on imported products which they say could be challenged as trade-distorting in the World Trade Organization, regardless of whether Alaska and Hawaii are included. The argument is that because some imported products are subject to quantity limits under tariff rate quotas, importers will not benefit from the assessment in terms of building additional demand for their product. In May 2009, USDA held a public hearing on proposals to amend federal milk marketing orders (FMMOs) regarding producer-handler provisions. Producer-handlers are dairy farmers who process milk from their own cows in their own plants and market their packaged fluid milk and other dairy products themselves. Currently, dairy farmers who qualify as producer-handlers under federal milk marketing orders are exempt, as handlers, from the pricing and pooling provisions of the orders. The provisions require handlers to pay minimum prices to dairy farmers for milk depending on its use (e.g., fluid milk, cheese). The pooling process redistributes revenue among producers from across a marketing area (10 regions in total) so that all producers receive the same "blend" price. Thus, as handlers, the producer-handlers can produce and sell their milk without being required to participate in the pool, and therefore not be subject to paying minimum prices as other handlers must do. As a result, producer-handlers may have a cost advantage over other handlers. This possibility helped motivate proposals to eliminate the producer-handler exemption. The proposed changes would eliminate or modify who is exempt from federal marketing orders. Some of the proposals allow for continued exemptions for producer-handlers based on the size of the operation, ranging from milk production of 450,000 pounds of milk per month (equivalent to about a 275-cow operation) to 3 million pounds per month (about 1,750 cows). Nationwide, about 15 producer-handlers fall into that range of production. Three other firms are larger yet. On October 21, 2009, USDA issued a recommended decision that would limit exemption from pooling and pricing provisions of federal orders to those producer-handlers with total route disposition of fluid milk products of 3 million pounds or less per month. After a 60-day comment period, USDA will issue a final decision. A referendum is then conducted among individual producers (or as represented by cooperatives) and, if approved by two-thirds of producers, the amendment to the order is made effective by final rule in the Federal Register . A negative vote on an amended order would eliminate the order.
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In 2009, U.S. dairy producers have been caught in a classic "price-cost squeeze," with farm milk prices declining sharply from record highs while feed costs remain high. From January through September 2009, the all-milk price received by farmers was 36% below a year earlier, when prices were near a record high. Meanwhile, feed costs, as measured by alfalfa prices, were down only 20% from a year earlier. Declining milk and dairy product prices in late 2008 and early 2009 reactivated government programs to support dairy prices and dairy farm income. During this period, after several years of relative inactivity, the dairy price support program resumed purchases of surplus dairy products as prices approached support levels. The U.S. Department of Agriculture (USDA) estimates that it removed 111 million pounds of nonfat dry milk in 2008 and expects to remove 379 million pounds in 2009, along with small amounts of butter and cheese. In February 2009, milk prices declined below the trigger for Milk Income Loss Contract (MILC) payments to dairy farmers for the first time in two years. Payments have been triggered in all subsequent months to date, totaling $775 million as of October 26. The deteriorating economic picture has prompted calls for policymakers to consider how well current dairy policies are assisting dairy producers and what other options might be available. Throughout 2009, the National Milk Producers Federation (NMPF), the largest trade association representing milk producer cooperatives, has requested that USDA take steps to assist dairy producers. Members of Congress have also engaged the Secretary of Agriculture. On May 22, 2009, USDA restarted the Dairy Export Incentive Program to help remove excess dairy products from the market. On July 31, 2009, USDA announced a temporary increase in price support for cheese and nonfat dry milk. Since then, Congress has considered additional support for dairy farmers. In October, Congress passed the conference agreement for the FY2010 agriculture appropriations bill, which includes an extra $350 million for emergency dairy assistance ($60 million to purchase dairy products and $290 million in direct payments to farmers). The bill was enacted on October 21, 2009. Given the economic climate, producers are making business choices that are expected to reduce milk production and lift prices. However, the full effect of those decisions is underway, raising the question of what, if any, policy changes are needed. Options to address the current dairy market situation include (1) keeping the status quo and allowing remaining programs to operate, (2) implementing a new program such as a dairy buyout, and (3) modifying existing programs to enhance dairy farmer income. Proponents of keeping the status quo argue that current dairy programs—specifically the dairy product price support program and the MILC program—already encourage additional milk production, and that more production-related support will slow the supply adjustment process needed to bring the dairy market back into balance. At any rate, any proposals that involve new budgetary outlays could be challenged as adding to an already large federal deficit, and/or burdening consumers with higher costs. Proponents of additional action point out that many producers are facing significant income loss and that without additional assistance, they may not survive financially. Producer groups and processors alike want to increase demand as a way to bolster milk and dairy product prices.
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The United States is recovering from a broad recession that is considered the longest-lasting economic downturn since World War II. The National Bureau of Economic Research (NBER) determined that the recession officially began in December 2007 and ended in June 2009, followed by a period of recovery. While NBER declared an end to the recession, it has not reported favorable economic conditions or a return to economic strength. The United States remains in a period of recovery—what some have characterized as slow and uneven. Various indicators of economic strength, such as the unemployment rate and foreclosures, reached their worst showings in decades during the recession and the following months. While some newspapers across the country have published stories linking the depressed economy with localized increases in crime, others have reported decreases in crime. The current state of the economy has continued to spark debate concerning whether economic factors can affect crime. Any increase in crime rates during a period of economic uncertainty could exacerbate an already difficult situation for communities across the United States. Congress has voiced concern over this issue and deliberated funding for federal programs that provide support for state and local law enforcement agencies. Advocates of increasing funding for state and local law enforcement assistance believe that additional funding is needed for a number of reasons, including that crime rates tend to increase during periods of economic uncertainty and that state law enforcement agencies facing budget cuts may be forced to stop hiring new officers or filling vacated positions. Opponents of this funding argue that there is no documented link between economic downturns and increases in crime rates, and that the federal grant programs in question are inefficient. This report examines the relationships between selected variables of economic strength and crime. It begins with an overview of crime rates during times of economic recession in the United States. It then reviews the existing literature in the field analyzing various data sets that examine whether the unemployment rate and foreclosures can be related to increases in the national crime rate. This report focuses primarily on national-level data rather than on state- or local-level data. Because of the aggregation of national-level data, local trends may be lost. Therefore, this report presents a picture of the relationship between crime and economic indicators for the nation as a whole, but it does not discuss these relationships that may exist at the state or local level. Further, conclusions drawn about the relationship between national crime rates and economic variables may not be able to be generalized to the relationship between the economy and crime in all states and localities around the country. In essence, there may exist a relationship between the economy and crime in specific areas of the country, even if this relationship is not visible at the national level. The report also considers other economic indicators that may warrant further research with respect to their relationship with crime. Lastly, the report raises several issues that Congress may debate should it consider the relationship between the current state of economic recovery and crime, including whether crime rates are related to periods of economic turmoil and whether hiring additional police officers can reduce crime. According to NBER, "[a] recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in production, employment, real income, and other indicators. A recession begins when the economy reaches a peak of activity and ends when the economy reaches its trough." NBER has identified seven recessions in the United States since 1960. Figure 1 and Figure 2 illustrate the violent and property crime rates, respectively, from 1960 through 2009. Both figures identify each of the seven recessions identified by NBER. In general, property crime rates increased fairly steadily from the early 1960s through the mid-1980s and violent crime rates continued to increase through the early 1990s. Both property crime and violent crime rates have generally been decreasing since the early 1990s. Figure 1 and Figure 2 show that, since 1960, there has been no consistent relationship between periods of economic recession and the crime rates. While the violent crime and property crime rates did increase during some recessions (generally in the 1970s), during others they either remained relatively stable or actually decreased. CRS was unable to find any literature examining potential links between recessions in the United States and crime rates. Instead, the literature in the field tends to focus on the impact that macroeconomic trends have on crime rates. With a recession defined as "a significant decline in economic activity spread across the economy," this leaves open the possibility that any number or combination of economic variables may be affected in a recession. It also suggests that no two recessions may be the same, and thus some economic variables may be at greater flux during some recessions than during others. This poses challenges in analyzing the relationship between recessions—in general—and crime. Consequently, researchers tend to use individual economic indicators, such as the unemployment rate, as a proxy for the state of the economy. However, any given indicator may not be generalizable to the state of the economy as a whole during any one given recession or across recessions. Despite the limitations in using specific economic variables as proxies for a complex economic state, this methodology does allow researchers to isolate variables and analyze their individual effects. Specifically, during the most recent economic downturn, many referred to the unemployment rate and the proportion of home foreclosures as proxies for economic health. The following sections will examine these particular economic indicators in order to see whether they can be linked to changes in the crime rates. The unemployment rate is one of the most widely referenced economic indicators. In discussions of potential impacts of the economy on crime rates, many scholars and policy makers use the unemployment rate as a proxy for economic strength. Congress has shown interest in the relationship between the economy—unemployment, in particular—and crime rates since the 1970s. The most recent recession, which was accompanied by a rise in the unemployment rate, once again focused attention on the relationship between unemployment and crime rates. In fact, according to the Bureau of Labor Statistics, at the beginning of the most recent recession in December 2007, the national unemployment rate was 5.0%. This rate continued to increase throughout the recession, reaching 9.5% at the official end of the recession in June 2009. This rate grew further and peaked at 10.1% in October 2009 before decreasing slightly. The most recent data indicates that unemployment in November 2012 was at 7.7%. The current unemployment rate represents the highest level of unemployment in the United States since the early 1990s. Researchers and scholars have several theories concerning the relationship between unemployment and crime. One of these theories, the economic theory of crime, assumes that people make rational choices between legitimate activities and criminal activities as a source of economic gain. More specifically, the comparison is between the economic benefit of legitimate work versus that of violent or property crime, after accounting for crime-related costs such as incarceration. Although the theory was originally formulated with an application to all crimes, many researchers have used it in discussions of unemployment and property crime. This theory predicts a positive correlation between unemployment and property crime; in other words, that increases in the unemployment rate will be correlated with increases in property crime rates. The reason for this positive correlation, according to the economic model, is that during periods when there are fewer opportunities for legitimate income, people may turn to illegal activities, while when more jobs are available, the risks of committing a crime may be weighed against the opportunity for legitimate work. A second theory factors both the motivation to commit crimes as well as the opportunities available to commit crimes. On one hand, this theory concurs with the economic theory of crime in predicting that the unemployment rate may be positively correlated with the crime rates because of increased criminal motivation (with potential benefits of legitimate work weighed against potential costs of crime). However, the theory simultaneously predicts that unemployment may be negatively correlated with the property crime rate, because during periods of increasing unemployment, there may be decreased criminal opportunities for reasons including that potential targets/victims may also be unemployed and thus better able to guard their property. Similarly, the theory predicts that unemployment may be negatively correlated with the violent crime rate using two assumptions: (1) during periods of unemployment, individuals may have more time to spend in situations (i.e. home and neighborhood) where people may be more close-knit, and (2) violent crimes more often involve casual acquaintances or strangers rather than individuals with close relations (based on Department of Justice and Uniform Crime Report data). If unemployment had an equal effect on increasing criminal motivation and decreasing criminal opportunity, this theory would predict no correlation between unemployment and crime rates. If the effects on increased motivation were stronger than the effects on decreased opportunity, this theory would predict (as does the economic model of crime) a positive correlation between unemployment and the property crime rate. A number of studies analyzing the relationship between unemployment and crime rates tend to find small statistically significant correlations between unemployment and the property crime rate but not between unemployment and the violent crime rate. During congressional hearings on unemployment and crime in 1979 and 1981, Congress heard testimony that there is a positive, but generally insignificant, relationship between unemployment and crime rates, and that this relationship holds true more often for the property crime rate than for the violent crime rate. A review of the literature found large disparities in the magnitude of the correlation between unemployment and the property crime rate. Some researchers found a small relationship (unemployment accounts for about 2% of the change in the property crime rate); other researchers found a large relationship (unemployment may account for up to 40% of the change in the property crime rate), while still others found no relationship. Steven Levitt examined empirical studies on the relationship between unemployment and the property crime rate between 1973 and 2001. Assimilating the findings across five studies including his own research, Levitt concluded that controlling for other factors, almost all of these studies report a statistically significant but substantively small relationship between unemployment rates and property crime. A typical estimate would be that a one percentage point increase in the unemployment rate is associated with about a one percent increase in property crime. Levitt estimated that changes in the economy (unemployment) accounted for only about 2% of the changes in the property crime rate between 1991 and 2001. He argued that most of the decline in the property crime rate during the 1990s can be attributed to non-economic factors (increases in the number of police, increases in the prison population, the receding crack epidemic, and increases in abortion ) rather than the declining unemployment rate. In reviewing the literature examining the relationship between unemployment and the property crime rate, CRS identified several issues that may affect policy makers' abilities to draw conclusions about the true relationship between unemployment (as a proxy for economic strength) and crime. For one, the effects of the unemployment rate on the property crime rate may better explain property crime trends during some time periods than during others. For example, Theodore Chiricos reviewed 63 studies, some of which evaluated the unemployment-crime relationship between 1960 and 1970, and some of which evaluated this relationship after 1970. Although the 1960s saw a decrease in unemployment and the 1970s saw an increase in unemployment, both decades witnessed a general increase in the property crime rate. Consequently, Chiricos's research suggests an "inconsistent" relationship between unemployment and property crime rates during the 1960s and a positive relationship during the 1970s. Eric Gould and his colleagues evaluated the relationship between unemployment and the property crime rate between 1979 and 1997, and similarly found that the significance of the relationship was dependent on the time period. They found a strong, short-term correlation for the years 1993 through 1997, but determined that there was no evidence for a long-term relationship between unemployment and the property crime rate between 1970 and 1997. Further, Steven Levitt concluded that there was a statistically significant, but substantively small, impact of unemployment on the property crime rate during the 1990s. Even looking within the 1990s, there is a stronger correlation between unemployment and the property crime rate in the late 1990s than in the early 1990s. Because the conclusions drawn about the relationship between unemployment and the property crime rate differ not only across larger time periods, but across shorter segments of time, it is difficult for researchers to predict the effect—if any—that recent unemployment rates may have on the property crime rate. Secondly, the source of the data and its level of aggregation, both for unemployment and for crime statistics, appears to affect the strength of the relationship between these variables. For example, Theodore Chiricos found that the "level of aggregation" of the data influenced the conclusions. Of the studies he examined using state-level data, 21% revealed a significant positive relationship between unemployment and the property crime rate, while 14% of the studies showed a significant negative relationship. Of those studies that relied on city-level data, a larger proportion showed a significant positive relationship, while a smaller proportion of the studies showed a significant negative relationship. Chiricos suggested that whereas state-level data may be relatively heterogeneous (e.g., it includes a wider variety of socioeconomic variables), city-level data may be more homogenous and thus more likely to reflect the specific trends observed within a given group of individuals in the city. Therefore, in considering potential effects of the most recent economic downturn and its after-effects on crime rates, it may be that the unemployment-crime relationship differs across various parts of the country. If this relationship is not consistent across the country, it may affect conclusions drawn about unemployment-crime trends across the nation as a whole. Thirdly, there may be external factors that affect the unemployment-crime relationship. If there were a direct link between unemployment and the property crime rate, varying one would necessarily vary the other. The lack of conclusive evidence for a strong, or even significant, correlation between the two suggests that the unemployment rate may have an indirect relationship with the property crime rate. Although unemployment is correlated with overall economic conditions, it may not fully capture other key economic indicators such as work hours, employment stability, and wages. Some researchers, for example, have found that employment stability and wages may correlate more strongly with the property crime rate than does unemployment. Eric Gould and colleagues demonstrated that, although the increased unemployment of non-college-educated men was associated with an increase in the property crime rate, a decrease in wages for this demographic group was actually more strongly correlated. The most recent recession has been linked by some to falling home prices and increases in mortgage delinquencies that led to home foreclosures. Essentially, as home prices fell over several years, homeowners across the country increasingly found themselves owing more on their mortgages than the market value of their homes. This, in turn, led to a rapid increase in the delinquency rate on mortgage payments and to the rate at which banks entered into the foreclosure process. As mentioned earlier, NBER indicates that the economic recession began in December 2007. Home foreclosure data from that time (the fourth quarter of 2007) indicate that 2.04% of all home loans were in foreclosure. At the official end of the recession in June 2009, 4.30% of all home loans were in foreclosure. Data indicate that this percentage continued to increase beyond the recession itself, as 4.43% of all home loans were in foreclosure at the end of September 2011. Foreclosures have since begun to decline, and at the end of September 2012, 4.07% of all home loans were in foreclosure. Given the still-elevated percentage of home foreclosures across the nation—relative to foreclosure rates before the most recent economic downturn—there has been interest concerning what kind of impact foreclosures, which can lead to houses sitting empty for some time, have on crime rates. Although a number of newspaper articles have cited anecdotal evidence that crime rates increase in neighborhoods where many foreclosures have occurred, there is a dearth of scientific studies on the impact that home foreclosures have on crime rates. For example, one academic study addressing the link between foreclosures and crime examined this foreclosure-crime relationship in one particular locale rather than on a national level. The main literature analyzing crime rates through the spectrum of the housing market has descended from the "broken windows" theory elucidated by James Wilson and George Kelling in 1982. According to this theory, physical signs of disorder in a neighborhood (such as broken windows, graffiti, and abandoned buildings) generate apathy and fear among the residents of that neighborhood. Wilson and Kelling argue that "at the community level, disorder and crime are usually inextricably linked, in a kind of developmental sequence." The authors reason that as more houses become abandoned in a neighborhood, the neighborhood begins to feel untended to its residents, leading to an increase in the delinquent activities and ultimately the crime that will occur there. Wilson and Kelling suggest that by focusing policing on minor misdemeanor laws (such as graffiti, vandalism, and loitering), urban police departments could help reduce more serious crime. This has come to be known as "order maintenance" policing, and it has been adopted as a strategy by many urban police departments across the country. A number of studies have shown a relationship between physical signs of disorder in a neighborhood and increasing crime. However, there is mixed evidence concerning whether there is a causal link between neighborhood disorder and crime, and whether "order maintenance" policing can reduce crime rates. It is important to note, however, that the neighborhood declines measured in many of these studies usually take place over an extended period of time—often longer than a decade—while home foreclosures can occur suddenly. However, if foreclosed properties remain on the market for extended periods of time, or become abandoned or blighted, they may accelerate the process of neighborhood decline. The impact that foreclosures have on neighborhoods can also differ widely depending on the characteristics of the particular neighborhood involved. In neighborhoods where demand for residential property is strong, or neighborhoods where foreclosures are not heavily concentrated, foreclosures may not have much of an impact. On the other hand, if foreclosures are concentrated heavily in one particular neighborhood, or if foreclosures take place in neighborhoods with low demand for residential property, the impact on the neighborhood may be significant. One academic study addressing the link between foreclosures and crime that CRS was able to identify analyzed the housing market and crime rates in Chicago. After controlling for a number of socioeconomic factors, the authors concluded that violent crime—but not property crime—was linked to increases in neighborhood foreclosures. The authors noted that, given their statistical analysis, a 1% increase in foreclosures would be accompanied by a 2.3% increase in violent crime. They also noted that property crimes may have been underreported because they were related to vacant or abandoned houses, or because they took place in lower-income neighborhoods, where residents may be less likely to report property crimes than residents in comparable higher-income neighborhoods. Because the study was restricted to a large urban center, however, it has limited generalizability to other, less urban parts of the country. Moreover, the study analyzed one year of data. This focus on one year of data may make it difficult to extrapolate the study's results over a longer period; instead, the study represents a snapshot of one place in time. Similar findings regarding the relationship between home foreclosures and crime rates come from the Charlotte-Mecklenburg Police Department (CMPD) in North Carolina. The CMPD examined a five-year period from 2003 through 2007 and concluded that "[v]iolent crime rose consistently during the 5-year period in the high-foreclosure neighborhoods, but remained significantly lower in the low-foreclosure neighborhoods, except in 2004." Property crime rates did not appear to be as closely linked to foreclosures as were violent crime rates. Moreover, the authors did not control for other factors (such as the age of homes in foreclosure) that may have contributed to the difference in violent crime between the high-foreclosure neighborhoods and other neighborhoods. Another study identified by CRS from the 1990s examined the relationship between foreclosures and crime—specifically, the impact of crime on foreclosures rather than the impact of foreclosures on crime. The study concluded that increases in crime rates led to increases in mortgage delinquencies and foreclosures. The authors found that crime rates were inversely related to property values in the United States; decreases in property values were one of the chief determinants of increases in mortgage delinquency rates leading to foreclosures. It should be noted that this is not a direct relationship between crime and foreclosures, but rather an indirect relationship; crime is linked to property values, and property values are linked to mortgage delinquencies, which are in turn linked to foreclosures. The author concluded that increases in violent crime had a three-year lag effect on decreasing property values, while increases in property crime had a more immediate one-year lag effect on decreasing property values. However, the author did not control for other socioeconomic, neighborhood, and financial characteristics that could have contributed to or accounted for the decreases in property values. Conversely, as previously noted, the use of aggregate data could have had a dampening effect on the study's results. While much research on the relationship between economic variables and crime rates has focused on macroeconomic variables such as unemployment and home foreclosures, some research suggests that other economic variables could fluctuate more strongly with crime rates and could thus serve as better proxies for evaluating the relationship between the economy and crime. For example, in examining factors affecting the property crime rate between 1980 and 1997, Reza Fadaei-Tehrani and Thomas Green ran a correlation between six different independent variables (GDP, median income, education expenditures, poverty rate, drug seizures, and unemployment) and the property crime rate. They did not find a significant relationship between unemployment—the most highly examined economic variable—and the property crime rate. They did, however, determine that a decrease in the property crime rate was significantly related to an increase in public expenditures for education, median income, and gross domestic product (GDP). Together, these three variables accounted for about 74% of the variation in the property crime rate from 1980 through 1997, and the GDP accounted for about 28%. These results suggest that crime rates—the property crime rate, in particular—may be linked to the economy, but that researchers may not see the relationship by studying traditional macroeconomic factors such as unemployment. Thomas Arvanites and Robert Defina utilized inflation-adjusted, per capita gross state product (GSP) as an indicator of economic strength and found a significant relationship between GSP and the property crime rate from 1986 through 2000. They argue that GSP may be a more valid proxy for economic strength than the unemployment rate because while the unemployment rate may correlate with overall economic conditions, it may not reflect changes in other economic indicators such as work hours, wages, job mobility, and job security—other key indicators of economic conditions. One particular limitation of using this data range (1986-2000) is that crime rates were generally declining during that time; a larger range would allow the researchers greater generalizability of their findings. Like many of the other studies, the correlational nature of these studies does not allow for conclusions about causality. Researchers have suggested that consumer sentiment may correlate with crime rates, particularly for those crimes that may be, to some extent, economically motivated. The idea behind the use of a broader gauge for the economy than concrete macroeconomic factors is the notion that "[a]s the economy deteriorates, one's ability to meet their financial and emotional needs, regardless of her/his employment status, may become strained." In direct response to this idea, Richard Rosenfeld and Robert Fornango used annualized values from the Index of Consumer Sentiment (ICS) as a proxy for how individuals perceived the economy and contrasted it with UCR data for crimes they deemed to be economically motivated, such as robbery, burglary, and larceny. Results from their analyses indicated that consumer sentiment was more highly correlated with robbery and property crimes than more traditional measures of the economy, such as the unemployment rate. These results underscore the importance of analyzing perceived economic conditions in addition to actual economic conditions. One particular limitation of this study, however, is that the researchers did not consider the effect of consumer sentiment on violent crimes other than robbery. Many violent crimes, including murder and assault, may have a nexus to economic motivation, such as a robbery that ends up with the victim being accidentally killed. However, most of the research reviewed by CRS failed to establish a reliable link between economic variables and violent crimes. As discussed earlier, no two recessions are identical, and thus some economic variables may be at greater flux during some recessions than during others. Similarly, as illustrated in Figure 1 and Figure 2 , crime rates may fluctuate more during some recessions than during others. As also mentioned, while research is inconclusive regarding the true relationship between economic indicators and crime rates, some have found lag or time-delay relationships between changes in economic indicators and subsequent changes in crime rates. As such, if crime rates were to increase in the wake of the most recent recession, policy makers may focus on the nature of the relationship between this recession and crime rates. Of note, however, in the immediate years following the recession, 2010 and 2011, crime rates—both violent and property crime rates—have continued to decline. The literature reviewed by CRS has several possible implications for policy makers. It does not appear that recessions—as measured by macroeconomic variables such as the unemployment rate or home foreclosures—can be definitively linked to increases in crime rates. However, preliminary research on other (though less-studied) factors, such as GDP (or GSP) as well as consumer sentiment, indicates there may be some correlation between these factors and crime rates, and these relationships warrant further research. In addition, research on economic indicators and crime rates using aggregate data—particularly on the national level—appears to produce less conclusive results than research using state or city-level data. Congress may also consider issues including whether the current state of the country's economic health is linked to crime rates and, if so, whether changes in the number of law enforcement officers may impact crime rates. The most recent economic downturn led some to speculate that increases in unemployment and home foreclosures could lead to increases in crime. However, CRS found little historical evidence of correlation between broad macroeconomic trends or foreclosures and crime rates, and the literature on the relationship between unemployment and crime rates provided mixed results. However, as noted, research using city- and state-level data rather than aggregate national data demonstrated stronger relationships between economic variables and crime rates—particularly property crime rates. This suggests that some areas of the country may experience a greater relationship between various economic indicators of the ongoing recovery from the economic downturn and crime rates than other areas. Consequently, one policy option may involve determining those localities that are experiencing larger increases in crime and directing state and local law enforcement assistance to those areas. As mentioned earlier, the CRS review did find limited evidence of some correlation between crime and microeconomic indicators such as consumer sentiment. This could suggest that how people perceive the economy may be more related to increases in crime than any tangible economic trends. This may be of interest to Congress, given the negative view of the economy revealed by recent surveys of consumer sentiment. The University of Michigan consumer sentiment survey used by CRS in this report, for example, reached 55.3—its lowest level in almost three decades—in November 2008. Consumer sentiment then rebounded and reached 76.0 in June 2010 before declining again. The most recent data indicate that in November 2012, consumer sentiment was at 82.7, still lower than consumer sentiment levels for most of 2007 before the start of the recession. If the past correlation between consumer sentiment and crime holds true, and if consumer sentiment remains on an upswing, policy makers may choose to follow whether crime rates—and in particular, the property crime rate—may continue to trend downward in the future. If crime rates do in fact increase during times of economic decline or instability (something that the literature and data are inconclusive about), policy makers may be interested in what measures can be taken to address such increases in specific localities that may be related to the economic decline. As mentioned, there may be stronger relationships between economic variables and crime rates—particularly property crime rates—when looking at city- and state-level data rather than at national level data. While the FBI's UCR data indicated that both violent and property crime rates fell in all regions of the country in 2011, some regions of the country may have experienced localized increases in property and violent crimes. It is unknown, however, whether any of these trends may be related to lingering impacts of the most recent economic downturn. Some have suggested that additional funding be made available for state and local law enforcement agencies to hire additional police officers in order to counteract any potential increases in crime rates that may be generated during the recovery from the economic downturn. This line of thought is related to the deterrence theory of crime, which predicts that increasing law enforcement (in this case by increasing the police force) has a deterrent effect on crime. Policy makers have often discussed whether increasing the number of police on the streets will subsequently decrease the incidence of crime. CRS reviewed the empirical literature that has evaluated the impact of the size of the police force on crime rates. Overall, the results of these investigations indicate that there is no conclusive evidence regarding the impact of police force size on national crime rates; the studies reported all possible results—law enforcement increased crime, decreased crime, and had no effect on crime. The total body of research suggests that law enforcement may have little impact on the amount of crime. However, researchers have acknowledged that past research suffered from a series of methodological and analytical problems, which could mean that any conclusions drawn from those studies are dubious. Some of the most recent research—which some argue is more methodologically sound than past research—suggests that more law enforcement officers could have a negative impact on crime. Yet, as some experts have noted, the ability to study the relationship between law enforcement levels is limited by the amount of data available and the current theory about what factors impact crime rates. Congress may face the issue of whether funding additional law enforcement officer positions is a cost-effective method of reducing crime, or whether there may be other ways to support the states' criminal justice systems. Congress may also consider whether it might be more effective to fund programs that address other correlates of crime rather than funding state and local law enforcement hiring programs such as Community Oriented Policing Services (COPS).
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The United States is currently recovering from a broad recession that is considered the longest-lasting economic downturn since World War II. Various indicators of economic strength, such as the unemployment rate and foreclosures, reached their worst showings in decades during the recession and the following months. The state of the economy has generated debate concerning whether economic factors can affect crime. This report examines research on how selected economic variables may or may not be related to crime rates. There are multiple macroeconomic indicators, such as the consumer price index or real earnings, that can serve as estimates of economic strength. Specifically, during the most recent economic downturn, many referred to the unemployment rate and the proportion of home foreclosures as proxies for economic health. Therefore, most of the discussion in this report utilizes unemployment and foreclosure data in discussing the relationship between the economy and crime. A number of studies have analyzed the link between the unemployment rate and crime rates (with a greater focus on property crime), some theorizing that in times of economic turmoil, people may turn to illicit rather than licit means of income. However, a review by CRS found a lack of consensus concerning whether the unemployment rate has any correlation with the property crime rate. A number of studies analyzed by CRS that did find a correlation between the unemployment rate and the property crime rate generally examined time periods during which the unemployment and property crime rates moved in tandem. Conversely, some studies that used longer time-horizons tended to find no direct link between the unemployment rate and the property crime rate. The link between foreclosures and crime rates has not been reviewed as comprehensively by social scientists as other broader macroeconomic variables—namely, unemployment. Most of the literature in the field focuses on whether abandoned houses can be linked to increases in crime rather than looking at the particular role that foreclosures may play. The literature reviewed suggests that there is some correlation between abandoned houses and the property crime rate (but not, however, the violent crime rate). With respect to the relationship between foreclosures and crime rates, some of the studies found that foreclosures did have an impact on the violent crime rate (but not the property crime rate). However, the limited number of studies examining the relationship between foreclosure rates and crime rates complicates any attempt to draw firm conclusions. While much research on the relationship between economic variables and crime rates has focused on macroeconomic variables such as unemployment and home foreclosures, some research suggests that other economic variables, such as gross domestic product (GDP) or gross state product (GSP), as well as consumer sentiment, could fluctuate more closely with crime rates and could thus serve as better proxies for evaluating the relationship between the economy and crime. Policy makers continue to be concerned with potential impacts—such as increased crime—that the economic climate may have on the nation. As a result, some have suggested that focus should be placed on increasing the resources of state and local police departments (i.e., increasing the number of police officers). In addressing this concern, however, Congress may opt to consider whether economic downturns can be linked to crime rates.
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As Congress weighs comprehensive immigration reform legislation that would likely include strengthened enforcement measures, a significant expansion of guest workers, and perhaps include increased levels of permanent immigration, some question whether the Department of Homeland Security (DHS) can handle the increased immigration workload. In response to growing concerns that the immigration responsibilities and other important duties of DHS were not functioning effectively, DHS Secretary Michael Chertoff announced the Second Stage Review (2SR) to base work on priorities driven by risk. "Strengthen[ing] border security and interior enforcement and reform[ing] immigration processes" is on the six-point agenda driving Secretary Chertoff's plans to improve DHS management. Currently, three agencies in DHS have important immigration functions: Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), and U.S. Citizenship and Immigration Services (USCIS). In 2004, the U.S. Government Accountability Office (GAO) reported that many of the management problems that plagued the former Immigration and Naturalization Service (INS) have carried over to the three DHS immigration agencies. Late in 2004, the Heritage Foundation released a report that reached the following conclusion: " ... in consolidating responsibility for border, immigration, and transportation security, DHS actually increased the number of involved agencies to eight and created additional problems that now need solving." There are at least three elements to consider when assessing DHS effectiveness in immigration policy: (1) the immigration laws and regulations, (2) the management and administration of the agencies charged with implementation of the immigration laws and regulations, and (3) the funding resources and staffing to carry out these laws and regulations. As Figure 1 illustrates, these three elements drive the effectiveness of immigration policy. Over the years, Congress has considered all three elements to address perceived, as well as reported, problems in immigration policy. This report focuses on the management and administration element. It analyzes the division of immigration responsibilities in DHS and sets the stage for the current debate over how these functions are organized. The report opens with a brief history of the federal responsibility for immigration and the legislative debate that led to the transfer of most immigration functions to DHS. It follows with an organizational chart depicting current immigration functions in DHS. The major immigration duties of the various DHS agencies are summarized and Secretary Chertoff's "Second Stage Review" is explained. An analysis of available immigration workload data offers some perspectives on the work of the three agencies over time. The report concludes with a summary of key concerns, overarching views, and emerging policy questions. Congress's role over naturalization and immigration derives from Article 1 of the U.S. Constitution. In 1882, Congress enacted a law providing for an examination of all aliens who arrive in the United States; in 1891, Congress established the Bureau of Immigration. In 1903, Congress transferred the various existing immigration functions from the Department of Treasury to the then-Department of Commerce and Labor. By 1905, this agency was known as the Bureau of Immigration and Naturalization. When the Department of Labor (DOL) was established in 1913, the immigration and naturalization functions were transferred and split into the Bureau of Immigration and the Bureau of Naturalization, both in the new DOL. The two bureaus again merged into the U.S. Immigration and Naturalization Service (INS) in 1933. These immigration and naturalization functions remained in DOL until 1940, when most were moved to the Department of Justice (DOJ), largely for national security reasons. In 1952, Congress consolidated and codified the body of immigration and citizenship laws and policies into the Immigration and Nationality Act (INA). The last legislative reorganization of federal immigration functions was in 2002. Currently, five federal departments have important immigration responsibilities, with the Department of Homeland Security (DHS) as the lead. Figure 2 presents the dispersal of immigration duties across these five departments following the enactment of the Homeland Security Act of 2002 ( P.L. 107-296 ). Although the departments of Justice and State do not have a wide range of immigration duties, those that they do have are quite important and extensive. In the 1970s and 1980s, organizational critiques of INS arose as the agency was unable to stymie illegal immigration and was faced with growing backlogs of adjudications. During this period, the GAO published several reports that found problems in the administration of adjudications, the enforcement of immigration laws, and the management of case records overall. The Select Commission on Immigration and Refugee Policy (SCIRP), which Congress established in 1978, offered a comprehensive package of recommendations in 1981 that included options aimed at strengthening and streamlining INS. SCIRP referred to INS as "beleaguered" and specifically recommended that INS be elevated as an agency within DOJ, with the Commissioner upgraded to a Director reporting directly to the Attorney General. The Immigration Reform and Control Act of 1986 (IRCA) strengthened and broadened immigration enforcement (e.g., authorized legal sanctions against employers who hire unauthorized aliens) and legalized the status of several million unauthorized aliens living in the United States. Although this major overhaul of immigration law featured many of the recommendations of SCIRP, it did not address the organizational issues raised by SCIRP. Indeed, some observers have subsequently concluded that IRCA exacerbated the management problems of INS by overloading it with competing mandates, which included the legalization of 2.7 million unauthorized aliens, additional border controls, and the expansion of work site enforcement and employer sanctions. When the Commission for the Study of International Migration and Cooperative Economic Development (IRCA Commission), which Congress established in IRCA, issued its final report in 1990, it called for the creation of an Agency for Migration Affairs that reported directly to the President. The IRCA Commission recommended placing all immigration, naturalization, and refugee functions from the INS (except the law enforcement functions of the Border Patrol and interior enforcement agents) and from the Department of State into this independent agency. The IRCA Commission argued that consolidating and elevating these functions would address the problems brought on by inadequate prioritization and fragmentation across departments. By the close of the 20 th century, there was widespread concern with INS management that primarily centered on the competing priorities of adjudicating immigration benefits (service) and enforcing violations of immigration law (enforcement). In September 1997, the U.S. Commission on Immigration Reform became yet another congressionally mandated study group to point out the administrative and management problems that plagued the implementation of immigration policy. It described INS as an agency suffering from conflicting priorities and mission overload, whose enforcement and service missions were incompatible. The U.S. Commission on Immigration Reform opted not to echo the past commissions' proposals to elevate the federal immigration system; rather, it recommended that the federal immigration system be fundamentally reorganized by, among other things, dismantling INS. GAO focused on specific problems with INS, most notably for having antiquated databases, failing to integrate its systems, and continuing the use of paper for tracking most of its data functions. The GAO reports were critical of the INS's field and regional offices due to an absence of communication among the various offices. The DOJ Office of Inspector General also questioned the reliability of INS's information systems and the accuracy of the information. The last two Commissioners of INS, Doris Meisner (1993-2000) and James Ziglar (2001-2003) each proposed to restructure INS administratively into distinct enforcement and service branches. Ziglar's restructuring was in progress as Congress weighed legislative action, which was further fueled by the September 11, 2001, terrorist attacks. Prior to these attacks, several pieces of legislation were before the 107 th Congress that would have abolished INS and would have either created two separate bureaus within DOJ to carry out INS's current services and enforcement functions, created a integrated immigration agency within DOJ, or dispersed INS's service functions among a number of different agencies and created a new enforcement agency within DOJ. When the 107 th Congress weighed the broader question of homeland security and the creation of the DHS, the issue of where to locate the various immigration and citizenship functions then performed by the Department of Justice's INS and the Department of State's (DOS) Bureau of Consular Affairs became a major concern. The debate in the 107 th Congress centered on several options: place all of INS in a newly created DHS under a Border Security and Transportation Division (Bush Administration); place INS's enforcement functions in DHS under the Border Security and Transportation Division, but leave INS's service function in DOJ under a newly created Bureau of Citizenship and Immigration Services (House-passed H.R. 5005 ); place all of INS in DHS in its own Directorate of Immigration Affairs, which would have two separate bureaus for the enforcement and service functions, with border inspections as a stand-alone and dual-function entity within the Directorate of Immigration Affairs (Senate substitute); or, place INS's enforcement functions in the DHS Bureau of Border Security and INS's service functions in the DHS Bureau of Citizenship and Immigration Services (House-passed H.R. 5710 ). In addition to the transfer of INS, there was considerable debate over whether the issuances of visas should remain with the DOS. When the President's proposal to establish DHS ( H.R. 5005 ) was debated, his initial plan to give the DHS Secretary exclusive authority through the Secretary of State to issue or refuse to issue visas was a thorny point. The House Select Committee on Homeland Security approved compromise language on visa issuances in H.R. 5005 that retained DOS's administrative role in issuing visas but added specific language to address many of the policy and national security concerns raised during hearings. An amendment to move the consular affairs visa function to DHS failed when the House passed H.R. 5005 . The Homeland Security Act (HSA) of 2002 ( P.L. 107-296 ) retained the compromise language stating that DHS issues regulations regarding visa issuances and assigns staff to consular posts abroad to advise, review, and conduct investigations, and that DOS's Consular Affairs continues to issue visas. Title IV of HSA, as in House-passed H.R. 5710 , placed the immigration inspections, investigations, detention, removal, and the border patrol functions into a Bureau of Border Security, and kept the U.S. Customs Service intact. Congress placed both the Bureau of Border Security and the U.S. Customs Service in the Directorate of Border and Transportation Security, along with the Transportation Security Administration. Under HSA, the newly created U.S. Citizenship and Immigration Services (USCIS) agency reported directly to the Secretary of Homeland Security, similar to the U.S. Coast Guard. The major activities that dominate the work of the USCIS are the adjudication of immigration petitions (including nonimmigrant change of status petitions, relative petitions, employment-based petitions, work authorizations, and travel documents); the adjudication of naturalization petitions; and the consideration of refugee and asylum claims and related humanitarian and international concerns. The Attorney General retained considerable authority over the interpretation of immigration law and policy under HSA. Most significantly, the Executive Office of Immigration Review (EOIR), which administers and interprets federal immigration laws and regulations through the immigration court proceedings, appellate reviews, and administrative hearings of individual cases, remained in DOJ. Two specific sections in the HSA became noteworthy. Foremost, §1502 gave the President the authority for the first year after enactment of the HSA to reorganize the newly created department. Additionally §471, which abolished INS, states that the authority provided by §1502 "may be used to reorganize functions or organizational units within the Bureau of Border Security or the Bureau of Citizenship and Immigration Services, but may not be used to recombine the two bureaus into a single agency or otherwise to combine, join, or consolidate functions or organizational units of the two bureaus with each other." As it established the Department of Homeland Security in 2003, the Bush Administration split up the U.S. Customs Service and the Bureau of Border Security and reconfigured them into two bureaus: one that pertains to border activities, known as Customs and Border Protection (CBP), and one that pertains to interior enforcement, known as Immigration and Customs Enforcement (ICE). At that time, DHS stated that ICE would comprise INS interior enforcement functions, including the detention and removal program, the intelligence program, and the investigations program along with the former U.S. Custom Service interior enforcement activities. The Administration went on to state that CBP would contain the resources and missions relating to borders and ports of entry of the former U.S. Customs Service and the former INS, including the border patrol and the immigration inspections responsibilities, as well as the agricultural inspections function of the Agricultural Quarantine Inspection program. The subsequent decision by CBP officials to further integrate the inspection duties so that there is "one face at the border" meant that CBP inspectors are essentially interchangeable and responsible for all primary inspections. CBP inspectors are now charged with enforcing a host of laws. The INA requires the inspection of all aliens who seek entry into the United States, and every person is inspected to determine citizenship status and admissibility. All goods being imported into the United States are subject to a customs inspection, but an actual physical inspection of all goods is not required. There also are laws that subject animals and plants to border inspections. A range of legal, administrative, and policy issues have emerged with unified border inspections. The memorandum of understanding (MOU) that implements §428 of HSA on visa policy and delineates the working relationship between DOS and DHS's three immigration-related bureaus was signed September 28, 2003. Some have expressed the view that DOS retains too much control over visa issuances under the MOU, maintaining that the HSA intended DHS to be the lead department and DOS to merely administer the visa process. Proponents of DOS playing the principal role in visa issuances assert that only consular officers in the field have the country-specific knowledge to make decisions about whether an alien is admissible and that staffing 250 diplomatic and consular posts around the world would stretch DHS beyond its capacity. As a result of HSA, the international immigration components now have greater responsibilities than did those of the INS Office of International Affairs (OIA). Former DHS Secretary Thomas Ridge established an Office of International Enforcement in the Border and Transportation Security Directorate (BTS) to oversee DHS's activities under the MOU with DOS. Figure 3 summarizes the placement of immigration activities in DHS from 2003 through 2005. The immigration activities generally classed under the enforcement function include the following: providing border security and management, enforcing immigration law within the interior of the United States, detaining and removing aliens found in violation of the INA and related laws, and providing immigration-related intelligence. Conducting inspections on persons at U.S. ports of entry, once considered an activity comparable to immigration benefit processing, is now considered a dual enforcement and benefit processing function. Below is a summary of the immigration enforcement activities of DHS. The border patrol activity includes enforcing U.S. immigration law, as well as some aspects of the criminal law (e.g., drug interdiction) along the border and between ports of entry. The border patrol coordinates its border security and management activities with other federal agencies, such as the Drug Enforcement Administration and the U.S. Coast Guard. CBP inspectors examine and verify U.S. citizens and foreign nationals who seek admission to the United States at ports of entry. Immigration inspectors determine if an individual qualifies for admission and, if so, under what status. They also inspect passports, visas, and other immigration documents for possible fraud. They rely on databases, such as the US-VISIT system discussed below, to confirm whether aliens are eligible for entry. In addition to inspecting individuals seeking entry into the United States, immigration inspectors, like their border patrol counterparts, are the first line of contact for all aliens seeking entry into the country, including asylum seekers who may not have proper documents. They play the major role in facilitating the processing of people into the United States. As a result, many view CBP inspectors as retaining the dual functions of enforcement and service. To keep inadmissible aliens from departing for the United States, the law requires the implementation of a pre-inspection program at selected locations overseas. At these foreign airports, U.S. immigration officers from CBP inspect all passengers before their final departure to the United States. The law also directs DHS to expand the Immigration Security Initiative, which places CBP inspectors at foreign airports to prevent people identified as national security threats from entering the country. Passenger manifests are transmitted to immigration officials through the Advance Passenger Information System (APIS). The electronic submission of passenger manifests prior to arrival allows immigration officials to conduct inspections on travelers in advance. There are also a series of programs collectively referred to as the Passenger Accelerated Service System (PortPASS) initiated by the former INS that were transferred to the CBP. PortPASS enrollees are precleared for inspection purposes (i.e., they do not need to interact with immigration or customs inspectors at the border), and thus the programs ease commuter traffic at land ports of entry by providing dedicated commuter lanes to facilitate the speedy passage of low-risk frequent travelers. Immigration interior enforcement activity includes investigating aliens who violate the INA and other related laws. These activities focus primarily on the range of immigration-related probes that are national security priorities. Additionally, the main categories of nonterrorism-related crimes they investigate are suspected criminal acts; suspected fraudulent activities (i.e., possessing or manufacturing fraudulent immigration documents); and suspected smuggling and trafficking of aliens. ICE investigators are considered law enforcement agents. Often considered a subset of investigations, a key activity is the investigation of suspected violations of immigration law pertaining to aliens working illegally in the United States. This function most frequently involves aliens who work without proper employment authorization as well as employers who knowingly hire illegal aliens (commonly called employer sanctions). According to ICE, the agency prioritizes "work site enforcement efforts by focusing on investigations related to critical infrastructure, national security and employers who engage in egregious criminal violations." The responsibilities of the Detention and Removal Office (DRO) include overseeing the custody of aliens who are detained by DHS and facilitating their release or deportation. The INA requires DHS to detain several classes of aliens, including those who are inadmissible or deportable because of criminal, terrorist, or national security grounds; those who arrived in the United States without proper documents and requested asylum (pending a preliminary determination of their asylum claims); and those who have final orders of deportation. Typically, ICE investigators identify the aliens subject to removal on grounds specified in INA and turn these aliens over to DRO. Similarly, but not identical to detention criteria, the removal grounds include criminal offenses, terrorist activities and security-related concerns, falsification of documents, unlawful voting, immigration fraud and violations of immigration status, and becoming a public charge within five years of entry. ICE maintains several databases that track aliens in the United States, and two merit special mention. One is the National Security Entry-Exit Registration System (NSEERS), which subjects certain foreign nationals to special registration requirements. It covers nonimmigrants who are citizens or nationals of Iran, Iraq, Libya, Sudan, and Syria, as well as other nonimmigrants determined to pose an elevated national security risk. Under current NSEERS regulations, covered nonimmigrants are fingerprinted, photographed, and registered at the port of entry. Following this initial registration, DHS decides on a case-by-case basis which registrants must appear at an ICE office for one or more additional registration interviews to determine whether they are in compliance with the conditions of their nonimmigrant visa status and admission. The other database is the Student and Exchange Visitor Information System (SEVIS). Foreign students who wish to study in the United States must first apply to a school certified by ICE's Student and Exchange Visitor Program. Once the student is admitted, the school enters the student's name and identifying information into the SEVIS system, which tracks his or her status through graduation or termination of status. The US-VISIT system uses biometric identification (i.e., finger scans and digital photographs) to check identity and track presence in the United States. Biometric data on many nonimmigrants are entered into the US-VISIT system, which in turn draws on an existing system called the Automated Biometric Fingerprint Identification System (IDENT) as well as other data systems, such as the U.S. Department of State's Consolidated Consular Database. On January 5, 2004, US-VISIT was implemented at 115 airports and 14 seaports, and exit pilot programs were established at one airport and one seaport for the collection of biometric information of aliens leaving the United States. "Exit pilot programs" are now in place at 15 air and sea ports. The Intelligence Reform and Terrorist Prevention Act of 2004 calls for a more accelerated implementation of a comprehensive entry and exit data system. DHS announced the third increment of US-VISIT on September 14, 2005, stating that entry procedures would be implemented at all land border ports of entry by December 31, 2005 (for a total of 154 land ports of entry). There are three major activities that dominate the functions of USCIS: the adjudication of immigration petitions, the adjudication of naturalization petitions, and the consideration of refugee and asylum claims and related humanitarian and international concerns. USCIS also processes a range of immigration-related benefits and services, such as employment authorizations and change-of-status petitions. In addition, DOS Consular Affairs is an integral partner with USCIS in many components of the service function, most notably the visa issuance responsibility. USCIS adjudicators determine the eligibility of the immediate relatives and other family members of U.S. citizens, the spouses and children of legal permanent residents (LPRs), employees that U.S. businesses have demonstrated that they need, and other foreign nationals who meet specified criteria. They also determine whether an alien can adjust to LPR status. USCIS is responsible for naturalization, a process in which LPRs may become U.S. citizens if they meet the requirements of the law. Adjudicators must determine whether aliens have continuously resided in the United States for a specified period of time, have good moral character, have the ability to read, write, speak, and understand English, and have passed an examination on U.S. government and history. All persons filing naturalization petitions must be fingerprinted, as background checks are required of applicants. This activity, located in the USCIS Office of International Affairs, adjudicates refugee applications, processes parolees, and conducts background and record checks related to some immigrant petitions abroad. The largest component of this program is the asylum officer corps, whose members interview and screen asylum applicants. Although a small portion of the USCIS workload, it can be a high-profile activity. Aliens may apply for asylum with USCIS after arrival into the country or may seek asylum before an EOIR immigration judge during removal proceedings. Decisions on refugee cases are made by USCIS overseas. USCIS also processes other humanitarian cases, most notably aliens who have been given Temporary Protected Status (TPS). At this time, however, ICE officials set the policy on who receives humanitarian parole. USCIS also makes determinations on a range of immigration-related benefits and services. The agency decides whether a foreign national in the United States on a temporary visa (i.e., a nonimmigrant) is eligible to change to another nonimmigrant visa. USCIS processes work authorizations to aliens who meet certain conditions and provides other immigration benefits to aliens under the discretionary authority of the Attorney General (e.g., aliens granted cancellation of removal by EOIR). Adjudication of these various immigration and naturalization petitions, however, is not a routine matter of processing paperwork. USCIS must confirm not only that the aliens are eligible for the particular immigration status they are seeking, but also whether they should be rejected because of other requirements of the law. USCIS established the Office of Fraud Detection and National Security to work with the appropriate law enforcement entities to handle national security and criminal "hits" on aliens and to identify systemic fraud in the application process. Many of these duties were formerly performed by the INS enforcement arm that is now part of ICE. HSA established the Ombudsman for the U.S. Citizenship and Immigration Services reporting directly to the Deputy Secretary. The duties of the Ombudsman are to assist individuals and employers in resolving problems with the USCIS, to identify areas in which individuals and employers have problems in dealing with the USCIS, and to propose changes in the administrative practices of the USCIS to mitigate problems. In addition, the Ombudsman submits annual reports to Congress that, among other things, identify the recommendations the Office of the Ombudsman has made on improving services and responsiveness of USCIS. HSA transferred the responsibility to compile and analyze immigration data collected by USCIS, ICE, and CBP to the DHS Assistant Secretary for Management and established an Office of Immigration Statistics (OIS). The stated functions of OIS are to develop, analyze, and disseminate statistical information needed to assess the effects of immigration in the United States. When Secretary Chertoff took office in 2005, he requested a 90-day intensive review of DHS operations. The results of this study, which he announced in July 2005, became known as the Second Stage Review (2SR). The 2SR produced a reorganization of the department as well as new policy initiatives. Several of the policy initiatives that Secretary Chertoff offered are targeted to immigration concerns. Among other things, Chertoff emphasized a new approach to securing our borders through additional personnel, new technologies, infrastructure investments, and interior enforcement—coupled with efforts to reduce the demand for illegal border migration by channeling migrants seeking work into regulated legal channels; and restructuring the current immigration process to enhance security and improve customer service. In reorganizing DHS, the Secretary proposed the abolishment of the Directorate of BTS but retained the three distinct immigration agencies (CBP, ICE and USCIS), despite calls from some to merge ICE and CBP. All of the policy coordination functions initially performed by the Directorate of BTS are now to be assumed by a new Directorate of Policy, which coordinates policies, regulations, and other initiatives on a DHS-wide basis. Broad support for the establishment of a department-wide policy function had been coalescing for months. In January 2005, the chair of the Senate Committee on Homeland Security and Governmental Affairs, Senator Susan Collins, concluded that "there seemed to be unanimity on the need for an Under Secretary for Policy." Presumably, this Directorate of Policy will be responsible for establishing crosscutting immigration policy as well as departmental policy on disaster management and relief; coastal, port and transportation security; and related homeland security matters. As Secretary Chertoff explained, "seven primary operational components will have a direct line to the Secretary" as a result of 2SR. Now CBP, ICE and USCIS are on an organizational par with the U.S. Coast Guard, the Federal Emergency Management Agency (FEMA), the Secret Service, and the Transportation Security Administration. As Figure 4 depicts, the heads of all seven units report directly to the DHS Secretary. It is not yet clear where the new Directorate of Policy will intersect with these seven primary operational components. The 2SR organizational structure became effective in October 2005. Immigration policy is often assessed in terms of numbers of people—whether it be the number of people who become legal permanent residents, the number of people forcibly removed, or the number of people arrested for hiring illegal aliens. For many years, the INS collected data measuring its workload, known as the Performance Analysis System (PAS). The DHS Office of Immigration Statistics publishes eight summary measures of these data in monthly statistical reports and in the Fiscal Year End Statistical Report . This section of the report is based on the PAS data currently available, in most instances FY1997-FY2005. The PAS data offer limited measures of immigration workload, some of which may reflect the allocation of staff and resources and others of which may more simply capture the "demand" for certain immigration benefits. For example, the number of naturalization petitions filed in a given year are largely influenced by demographic, social, and political factors that are external to DHS. Border patrol apprehensions, on the other hand, are shaped by DHS resources and staffing as well as the social, political, and economic factors that drive actual incidence of aliens crossing illegally into the United States. Generally, the workload in adjudication of benefits and services results from external factors, and the workload in enforcement results from a combination of resources, staffing, and external factors. The following analysis of the PAS data—even though performance is part of the name—does not fully capture DHS performance in carrying out its immigration duties. These data do, however, provide useful snapshots of immigration workload. Petitions for immigration adjudications dominate the service-side workload of USCIS, which also handles the adjudication of naturalization petitions and the consideration of refugee and asylum claims. This measure of immigration benefits as depicted in Figure 5 includes petitions for family members, foreign workers, employment authorizations, and adjustments of status. In FY2005, 5.6 million immigration applications and petitions were filed with USCIS. While the high point remains 7.3 million petitions filed for immigration benefits in FY2001, the caseload appears to be inching upward again. As one might expect, the pending immigration caseload (i.e., cases awaiting action) lags behind the level of petitions filed. At the close of the first year of USCIS (FY2003), the pending immigration caseload peaked at 5.4 million. As Figure 5 illustrates, the pending caseload has been falling in the past two years. In FY2005, there were 3.2 million cases pending, which is the lowest level since FY2000, when 2.9 million cases were pending. For a variety of reasons, the number of LPRs petitioning to naturalize has increased in the past year, but it has not reached nearly the highs of the mid-1990s, when more than 1 million people sought to naturalize annually, as Figure 6 depicts. The pending caseload for naturalization hit record highs in the 1990s, but fell to under 1 million by the close of FY2000. The level of pending naturalization petitions remains over half a million, and it is not uncommon for some LPRs to wait one to two years for their petitions to be processed, depending on the caseload in the region in which the LPR lives. As Figure 7 illustrates, asylum petitions filed decreased in the late 1990s but rose again to 66,356 in FY2001. Figure 7 does not depict the record high of 154,464 asylum cases filed with USCIS in FY1995. In FY2003, there were 42,114 claims for asylum filed with USCIS, and by the close of the fiscal year, there were 262,102 asylum cases pending at USCIS. The number of asylum cases filed has dropped to 32,900 in FY2005. The approval of asylum cases has varied recently from 28% to 44%. The pending USCIS asylum caseload declined after asylum processing reforms were implemented in the early and mid-1990s. By the close of FY2005, there were 98,499 asylum cases pending at USCIS, down from a recent high of 393,699 at the close of FY1997. As Figure 8 indicates, CBP inspected 417.0 million persons in FY2005, down from a high of 534.2 million in FY2000. The majority of travelers (approximately 80%) enter the United States at a land port of entry. Over the years, the southwest border has seen the highest volume of travelers seeking entry into the United States. The aliens found inadmissible number in the hundreds of thousands, but represent less than 0.2% of all inspections annually. The majority of border patrol agents, approximately 90%, are deployed along the southwest border. Border patrol agents, in particular at the southwest border, spend a large portion of their time apprehending aliens. The number of apprehensions at the southwest border had decreased until recently, as Figure 9 shows. The reason for the large increase in apprehensions at the southwest border during the late 1990s was due, in large part, to a series of operations that were aimed at stemming illegal migration and interdicting human and drug smugglers. There was a sharp drop off in apprehensions immediately after September 11, depressing the FY2001 totals. Border patrol apprehensions are inching back up. Prosecutions for criminal, fraud, and smuggling violations of immigration law peaked at 6,903 defendants in FY2000. In FY2003, the last year these data were available, 5,670 defendants were prosecuted ( Figure 10 ). According to the DHS Office of Immigration Statistics, criminal alien cases include large-scale organizations engaged in ongoing criminal activity and individual aliens convicted of crimes such as terrorism or drug trafficking. Fraud investigations involve schemes that are used to violate immigration and related laws or to shield the true status of illegal aliens in order to obtain entitlement benefits. Smuggling cases are those which target persons or entities who bring, transport, harbor, or smuggle illegal aliens into or within the United States. The number of arrests for immigration law violations have dropped sharply, as Figure 11 reveals. Employer investigations target employers of unauthorized aliens and include criminal investigations. In terms of employer violations of immigration law, arrests of employers decreased from 17,554 in FY1997 to 445 in FY2003 (final year data were reported). This decline is largely due to shifts in policy away from noncriminal investigations and a reallocation of resources to other immigration enforcement priorities. Arrests of aliens who entered without inspections or violated their immigration status exhibit a steadier trend, but have declined from a high of 14,963 arrests in FY2000 to 9,319 aliens arrested in FY2003. Frequently, such aliens are not investigative targets themselves, but are located during other investigations. Criminal offenses, terrorist activities and security-related concerns, falsification of documents, unlawful voting, immigration fraud, and violations of immigration status are among the grounds for removal. Figure 12 shows an increase in alien removals from FY1997 to FY2000. In 2001, however, the number of alien removals dropped by 7,979 from FY2000. By FY2005, however, alien removals hit a high of 204,193. While the number of criminal aliens removed has steadily increased over this period, noncriminal grounds remain the predominant basis of most alien removals. In seven of the eight workload measures analyzed above, the immigration workload has declined since 2001. Only the removal of aliens has surpassed levels prior to the reorganization of the immigration functions. While several key workload trends are inching upward—notably, border apprehensions and immigration adjudications—other workload trends have declined or remained flat. The analysis of the PAS data hint that DHS is making some progress in managing the immigration caseload, but that the data need further study. Notably, USCIS has evidenced a reduction in pending cases; however, this trend may be as much the result of a lessening in the "demand" for certain immigration benefits as it is of improvements in managing caseload. Similarly, the drop in CBP inspections more likely reflects international travel trends that are shaped more by economic and social phenomena than by CBP policies. These workload trend lines reveal only a narrow perspective on DHS handling of immigration functions. Qualitative analyses, organizational evaluations, and even anecdotal reports help to flesh out our understanding of this complex system. This report closes with highlights of specific concerns, a synthesis of overarching issues, and a set of policy questions under consideration. Of the several areas of specific concern, none has been more prominent than the problem of integration between ICE and CBP. During a hearing of the House Committee on Homeland Security in March 2005, Representative Christopher Cox, then-Chairman of that committee, offered the following in his opening statement: [Q]uestions remain about whether DHS has organized itself and is managing its immigration enforcement and border security resources in the most efficient, sensible, and effective manner. Anecdotal evidence suggests that the division of customs and immigration inspectors from their related investigative colleagues may be building administrative walls, and hampering cooperation and information sharing, between ICE and CBP in critical mission areas. Some observers also have suggested that the distinction between the 'interior enforcement' activities of ICE and the 'border security' functions of CBP are artificial constructs that contribute to needless administrative overlaps, programmatic turf battles, mission gaps, and sometimes dangerous operational conflicts. The media often center on anecdotal criticisms by stakeholders. One recent article reported that [t]he official said one of the biggest problems is ICE and CBP have separate legal offices, which sometimes hand down differing legal interpretations. Disputes also have arisen when ICE wants to parole an illegal immigrant in order to pursue investigative leads, but CBP objects, the official added. Advocates of stronger immigration enforcement argue that former Customs agents at ICE do not fully understand immigration laws and are more interested in performing investigations than enforcing immigration rules. Cable network news shows frequently feature problems along the U.S. border in regular segments. Surveys of public opinion indicate a particular concern with illegal immigration, and a recent survey reported that 61% of respondents disapprove of the Administration's handling of illegal immigration. In addition to the concerns over the integration of ICE and CBP and their roles in abating illegal immigration, there is a reported lack of coordination between USCIS and ICE in the area of fraud and national security investigations. USCIS established the Office of Fraud Detection and National Security to work with the appropriate law enforcement entities to handle national security and criminal "hits" on aliens and to identify systemic fraud in the application process. Many of these duties were formerly performed by the INS enforcement arm that is now part of ICE. The GAO has reported that "The difficulty between USCIS and ICE investigations regarding benefit fraud is not new.... As a result, some USCIS field officials told us that ICE would not pursue single cases of benefit fraud. ICE field officials who spoke on this issue cited a lack of investigative resources as to why they could not respond in the manner USCIS wanted." Moreover, USCIS appears to have problems of its own. The DHS Inspector General found problems in the background checks for which USCIS is now responsible. Among other findings, the report concluded that USCIS's security checks are overly reliant on the integrity of names and documents that applicants submit and that "USCIS has not developed a measurable, risk-based plan to define how USCIS will improve the scope of security checks." It further stated that "USCIS's management controls are not comprehensive enough to provide assurance that background checks are correctly completed." Pending caseloads and processing backlogs continue to plague USCIS. GAO concluded that it is unlikely that USCIS will completely eliminate the backlog of pending adjudications by the deadline of 2006. Despite progress in cutting the backlog of pending cases from 3.8 million in January 2004 to 1.2 million in June 2005, GAO speculates that USCIS may have difficulty eliminating its backlog for two complex application types that constitute nearly three-quarters of the backlog. The dispersal of immigration functions across three agencies within DHS means that no one person is responsible for immigration policy and operations in a clear chain of command. The Assistant Secretary of ICE, the Commissioner of CBP, and the Director of USCIS all serve on a parity under the Secretary of DHS. Of these, only the Director of USCIS has responsibilities that are exclusively immigration. While the Secretary of DHS is the lead cabinet officer on immigration issues, he shares substantial immigration policymaking roles with the Attorney General, who oversees the EOIR immigration judges and the Board of Immigration Appeals, and the Secretary of State, who oversees the Bureaus of Consular Affairs and of Population, Refugees, and Migration. Does this disaggregation of immigration operations sharpen the focus to perform the disparate functions and prompt a sense of responsibility across a broader set of managers—increasing the stakeholders and improving administration of immigration law and policies? Or does the dispersal of immigration functions muddy the chain of command and foster competition among priorities—leading to turf battles and thwarting the development of a comprehensive immigration policy? Thus far, independent assessments of the functioning of immigration in DHS have centered on problems rather than successes. These identified problems have ranged from USCIS processing of background checks and adjudication of benefits, ICE worksite enforcement efforts and information technology systems, and cooperation between CBP and ICE on the U.S.-VISIT system. Indeed, the GAO has concluded that many of the management problems that plagued the former INS remain with the DHS organizational structure. The paucity of evaluations that describe successes resulting from the current organization of immigration functions does not necessarily mean that the restructuring is failing. By their very nature, inspector general reports tend only to focus on areas that need improvement. It is possible that some of these problems may be the result of inadequacies in the immigration laws or the funding resources rather than the management of the agencies. The underlying question remains whether a sufficient length of time has elapsed to assess DHS's efficacy in managing immigration policy. As Congress considers whether comprehensive immigration reform is needed and whether the current configuration of immigration functions in DHS would effectively implement such reform, a series of questions about DHS management emerges. While not an exhaustive set, the selected questions below express a few of the key organizational issues. Is communication and coordination among CBP, ICE, and USCIS facile and efficient? By what agency and at what level should legal opinions on immigration law and policy be made? Should USCIS have a formal enforcement arm to investigate benefit fraud and other adjudications-related violations? Should immigration enforcement functions in CBP and ICE be merged into one agency? If immigration enforcement functions are merged together, should that agency resemble the statutory framework established by HSA (Bureau of Border Security) or a super-agency of U.S. Customs and Immigration Enforcement? Would any substantial reorganization of immigration functions—no matter how optimal—be too disruptive to be prudent at this time? Ultimately, these questions are addressed in the broader policy making context. Congress weighs at least three elements (i.e., the immigration laws and regulations, the funding resources and staffing, and the management and administration) as it seeks to achieve an efficacious immigration policy. Appendix A. Other Federal Departments with Immigration-Related Responsibilities Department of State Visa Issuances The Department of State's Bureau of Consular Affairs is the agency responsible for issuing visas. DHS is responsible for formulating regulations on visa issuances and may assign staff to consular posts abroad to advise, review, and conduct investigations. As discussed earlier, USCIS is charged with approving immigrant petitions, a prerequisite for obtaining a visa to become a legal permanent resident. The documentary requirements for visas are stated in §222 of the INA, with some discretion for further specifications or exceptions by regulation, most notably the Visa Waiver Program. All aliens seeking visas—prospective immigrants and nonimmigrants—must undergo admissibility reviews performed by DOS consular officers abroad. These reviews are intended to ensure that they are not ineligible for visas or admission under the grounds for inadmissibility, which include criminal, national security, health, and indigence grounds as well as past violations of immigration law. As a result, all aliens arriving with visas have had background checks. For the past several years, moreover, Consular Affairs has been issuing machine-readable visas. As of October 2004, all visas issued by the United States use biometric identifiers (e.g., finger scans) in addition to the photograph that has been collected for some time. The National Commission on Terrorist Attacks Upon the United States (also known as the 9/11 Commission) argued that targeting travel is at least as powerful a weapon against terrorists as targeting their money. The 9/11 Commission recommended that the United States combine terrorist travel intelligence, operations, and law enforcement in a strategy to intercept terrorists, find terrorist travel facilitators, and constrain terrorist mobility. P.L. 108-458 establishes a Visa and Passport Security Program within the Bureau of Diplomatic Security at DOS to target and disrupt individuals and organizations at home and in foreign countries that are involved in the fraudulent production, distribution, or use of visas, passports, and other documents used to gain entry to the United States. Refugees and Migration The Bureau of Population, Refugees, and Migration (PRM) has primary responsibility for formulating policies on population, refugees, and migration, and for administering the United States international refugee assistance and admissions programs. PRM monitors U.S. contributions to international and nongovernmental organizations that assist and protect refugees abroad. It oversees admissions of refugees to the United States for permanent resettlement in coordination with DHS and the U.S. Department of Health and Human Services. PRM also plays an important role in setting U.S. migration policy. According to its official statements, PRM works closely with DHS, the Department of Labor, the International Organization on Migration (IOM), the United Nations High Commissioner for Refugees (UNHCR), and other relevant international organizations to advance U.S. migration policy goals. "One of the Bureau's key strategies for advancing effective and humane migration policies is to support and participate in regional migration dialogues, such as the Regional Conference on Migration." Department of Justice Immigration Courts The role of the Executive Office of Immigration Review (EOIR) is to administer and interpret federal immigration laws and regulations through the immigration court proceedings, appellate reviews, and administrative hearings in individual cases. There are three main components to EOIR: the Board of Immigration Appeals, the Office of the Chief Immigration Judge, and the Office of the Chief Administrative Hearing Officer. These judges and courts decide cases of eligibility, inadmissibility, deportation or removal, asylum appeals, and requests for relief from deportation. Complaints are brought by the DHS, the Office of Special Counsel for Immigration-Related Unfair Employment Practices, or private individuals, as prescribed by statute. At various points over the years, legislation had been introduced to create statutory authority for EOIR within DOJ. Title XI of HSA provided statutory authority for EOIR and located it in DOJ. The placement of EOIR sparked some interest during the debate over HSA, and the decision to keep these duties in DOJ enables the Attorney General to retain a very important role in interpreting immigration law and policy. Immigration-Related Employment Discrimination DOJ's Office of the Special Counsel for Immigration-Related Unfair Employment Practices investigates and prosecutes charges of immigration-related employment discrimination. In 1986, Congress prohibited discrimination on the basis of legal alien status or national origin in hiring, firing, and recruitment or referral for a fee in §102 of the Immigration Reform and Control Act. The Special Counsel for Immigration-Related Unfair Employment Practices also offers grants for public education programs on the rights afforded potential victims of employment discrimination and the responsibilities of employers under the anti-discrimination provisions of the INA. Attorney General Since the codification of the INA in 1952, the law placed the administrative authority to interpret, implement, enforce, and adjudicate immigration law almost exclusively with the Attorney General. With the transfer of nearly all immigration functions to DHS, however, §103(a)(1) of the INA has been amended twice to clarify the respective authorities newly obtained by the Secretary of Homeland Security and retained by the Attorney General. While the law now places primary responsibility for enforcing and administering immigration law in the United States with the Secretary of Homeland Security, it still apparently allows the Attorney General to retain a significant amount of authority to enforce, administer, and interpret immigration law. Much of this authority derives from his role overseeing EOIR. Department of Health and Human Services Communicable Diseases The Centers for Disease Control (CDC) in the U.S. Department of Health and Human Services (HHS) take the lead in protection against foreign nationals arriving with communicable diseases. A medical examination is required of all aliens seeking to come as legal permanent residents (LPRs) and refugees, and may be required of any alien seeking a nonimmigrant visa or admission at the port of entry. An immigration inspection includes a determination of whether the alien is inadmissible due to a health-related condition. The diseases that trigger inadmissibility in the INA are acquired immune deficiency syndrome (AIDS) and those communicable diseases of public health significance as determined by the Secretary of HHS. Refugee Resettlement and Unaccompanied Minors The Office of Refugee Resettlement is within the Administration for Children and Families in HHS. Since its establishment by the 1980 Refugee Act, this HHS refugee resettlement program administers an initial transitional assistance program for temporarily dependent refugees and Cuban/Haitian entrants. The Trafficking Victims Protection Act of 2000 ( P.L. 106-386 ) makes victims of a severe form of trafficking in persons eligible for federally funded or administered benefits and services to the same extent as refugees. The Homeland Security Act of 2002 ( P.L. 107-296 ) also transferred the responsibility for the care and custody of unaccompanied alien children to the HHS Office of Refugee Resettlement. Department of Labor Labor Certification The Division of Foreign Labor Certification in the U.S. Department of Labor (DOL) is responsible for ensuring that foreign workers do not displace or adversely affect working conditions of U.S. workers. DOL handles the labor certifications for permanent employment-based immigrants, temporary agricultural workers, and temporary nonagricultural workers as well as the simpler process of labor attestations for temporary professional workers. The U.S. employer, rather than the prospective worker who is foreign, is responsible for completing the foreign labor certification process. Currently, foreign labor certification is one of the "national activities" within the Employment and Training Administration. Worker Protections DOL's Wage and Hour Division is responsible for administering and enforcing worker protections provided in several temporary foreign worker visa categories. The Wage and Hour Division's primary duties include the minimum wage, overtime, and child labor provisions of the Fair Labor Standards Act; the Family and Medical Leave Act; the Migrant and Seasonal Agricultural Worker Protection Act; and the prevailing wage requirements of the Davis-Bacon Act and the Service Contract Act. Appendix B. Excerpt from Becoming an American: Immigration and Immigrant Policy The Executive Summary of the U.S. Commission on Immigration Reform's 1997 report to Congress offered the following recommendation to restructure INS: The Commission considered a range of ways to reorganize roles and responsibilities, including proposals to establish a cabinet-level Department of Immigration Affairs. After examining the full range of options, the Commission concludes that a clear division of responsibility among existing federal agencies, with appropriate consolidation of functions, will improve management of the federal immigration system. As discussed below, the Commission recommends a restructuring of the immigration system's four principal operations as follows: 1. Immigration enforcement at the border and in the interior of the United States in a Bureau for Immigration Enforcement at the Department of Justice; 2. Adjudication of eligibility for immigration-related applications (immigrant, limited duration admission, asylum, refugee, and naturalization) in the Department of State under the jurisdiction of an Undersecretary for Citizenship, Immigration, and Refugee Admissions; 3. Enforcement of immigration-related employment standards in the Department of Labor; and 4. Appeals of administrative decisions including hearings on removal, in an independent body, the Agency for Immigration Review. The Commission believes this streamlining and reconfiguring of responsibilities will help ensure coherence and consistency in immigration-related law enforcement; a supportive environment for adjudication of applications for immigration, refugee, and citizenship services; rigorous enforcement of immigration-related labor standards to protect U.S. workers; and fair and impartial review of immigration decisions. Appendix C. Reorganization Plan Modifying the Immigration Enforcement Functions As DHS was forming, the Administration provided the following explanation of the reorganization that created CBP and ICE: (A) Rename the "Bureau of Border Security" the "Bureau of Immigration and Customs Enforcement." As required by the Act, this Bureau will be headed by an Assistant Secretary who will report directly to the Undersecretary for Border and Transportation Security. This Bureau will comprise Immigration Naturalization Service (INS) interior enforcement functions, including the detention and removal program, the intelligence program, and the investigations program. At the same time, pursuant to this modification, the interior enforcement resources and missions of the Customs Service and the Federal Protective Service will be added to this Bureau. The mission of the Bureau is: 1. To enforce the full range of immigration and customs laws within the interior of the United States; and, 2. To protect specified federal buildings. The Assistant Secretary will: 1. Establish and oversee the administration of the policies for performing the detention and removal program, the intelligence program, and the investigation program functions as are— (a) transferred to the Under Secretary for Border and Transportation Security by Section 441 of the Act and delegated to the Assistant Secretary by the Undersecretary for Border and Transportation Security; or (b) otherwise vested in the Assistant Secretary by law. 2. Advise the Under Secretary for Border and Transportation Security with respect to any policy or operation of the Bureau that may affect the Bureau of Citizenship and Immigration Services established under Subtitle E of the Act, including potentially conflicting policies and operations. (B) Rename the "Customs Service" the "Bureau of Customs and Border Protection." This Bureau will be headed by the Commissioner of Customs and will report to the Under Secretary for Border and Transportation Security. The Bureau will contain the resources and missions relating to borders and ports of entry of the Customs Service, the INS, including the Border Patrol and the inspections program, and the agricultural inspections function of the Agricultural Quarantine Inspection program. The Commissioner will: 1. Establish and oversee the administration of the policies for performing the Border Patrol and inspections program functions as are— (a) transferred to the Under Secretary for Border and Transportation Security by Section 441 of the Act and delegated to the Commissioner by the Under Secretary for Border and Transportation Security; or (b) otherwise vested in the Assistant Secretary by law. 2. Advise the Under Secretary for Border and Transportation Security with respect to any policy or operation of the Bureau that may affect the Bureau of Citizenship and Immigration Services established under Subtitle E of the Act, including potentially conflicting policies and operations.
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As Congress weighs comprehensive immigration reform legislation that would likely include additional border and interior enforcement, a significant expansion of guest workers, and perhaps include increased levels of permanent immigration, some question whether the Department of Homeland Security (DHS) can handle the increased immigration workload. There are concerns that the immigration responsibilities in the DHS are not functioning effectively. DHS Secretary Michael Chertoff announced a "Second Stage Review" (2SR) in 2005 that includes strengthening border security and interior enforcement and reforming immigration processes as major agenda items. Currently, three agencies in DHS have important immigration functions: Customs and Border Protection (CBP), Immigration and Customs Enforcement (ICE), and U.S. Citizenship and Immigration Services (USCIS). The immigration functions are dispersed across three agencies within DHS. The Assistant Secretary of ICE, the Commissioner of CBP, and the Director of USCIS all serve with the same rank directly under the DHS Secretary. Of these, only the Director of USCIS has responsibilities that are exclusively immigration. While the DHS Secretary is the lead cabinet officer on immigration issues, he shares substantial immigration policymaking roles with the Attorney General and the Secretary of State. Some now argue the disaggregation of the government's immigration responsibilities across several agencies has weakened immigration as a policy priority and has made it much more difficult for the executive branch to develop a comprehensive immigration reform and border security strategy. Others maintain that the current organizational structure sharpens the focus on the key, yet disparate, immigration functions and is optimal from a homeland security perspective. In seven of the eight workload measures analyzed over the past decade in this report, the immigration workload has declined in recent years. Only removals of aliens has surpassed levels prior to the restructuring of immigration responsibilities. While several key workload trends—notably, border apprehensions and immigration adjudications—are inching upward, the workload trends in asylum, inspections, naturalization, criminal prosecutions, and work site enforcement have declined or remained flat. Thus far, independent assessments of the functioning of immigration in DHS have centered on problems rather than successes. Indeed, the U.S. Government Accountability Office (GAO) has concluded that many of the management problems that existed before the restructuring of the federal immigration functions still remain. An underlying question is whether a sufficient length of time has elapsed to assess DHS's efficacy in managing immigration policy. This report does not track legislation and will not be regularly updated.
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American consumers increasingly rely on credit and debit cards to pay for goods and services. Between 1997 and 2011, card payments rose from accounting for 23% of payments to 48%. During the same period, payment by cash and checks dropped from 70% to 35%. In 2011, consumers made 49 billion debit transactions totaling $1.8 trillion and 26 billion credit transactions totaling $2.1 trillion. This shift makes card security and fraud prevention more important than ever. In 2012, MasterCard and Visa—also called "payment brands" —set October 1, 2015, as the date by which U.S. card issuers—banks and credit unions—would need to have replaced existing credit and debit magnetic stripe cards with chip cards, and for merchants to begin accepting them. Chip cards are formally known as "EMV" cards, named for the coalition of three companies, Europay, MasterCard, and Visa, that developed the specifications for the standard. EMVCo membership has now expanded to include the payment brands of American Express, JCB, Discover, and UnionPay. There were four significant drivers of EMV adoption in the United States: L iability Shift. The October 1, 2015, deadline that shifted liability to the party that has not switched to chip cards is seen as a strong incentive for merchants and issuers to make the switch. Increasing Financial Impact of Fraud. In 2012, credit card losses in the United States totaled $5.33 billion, an increase of 14.5% from 2011. Between 2004 and 2010, fraud using U.S.-issued bank credit cards rose 70%. Merchants, card issuers, and consumers are adversely affected by increases in fraud. Increasing Concern o ver Data Breaches. Although the number of breaches dipped significantly between 2011 and 2012, there has been a modest increase between 2012 and 2013. Although the number of incidents in 2013 (198) is small compared to 2011 (855), a lot of attention has been paid to those breaches in the news. That attention appears to have created the perception that the number of breaches is increasing more than it actually is, raising concern among consumers, as well as policymakers. Better Security for Cards and Transactions. Chip cards make data stolen in a breach much more difficult to use: Counterfeiting is significantly more difficult than with stripe cards. Most observers, including the Federal Reserve Bank, agree that chip cards, "regardless of the verification method used, will provide a more secure payment environment." The cost of a complete transition in the United States is expected to be at least $6 billion, but the costs for issuers and merchants that do not meet the adoption deadline could be even greater: Now that the deadline has passed, the liability for fraudulent transactions will shift to the party that has not switched to chip cards. For example, if a merchant does not accept chip cards and the customer has a chip card, the transaction will still be processed using the magnetic stripe still present on the back of the card, but the merchant will bear responsibility for any fraudulent activity. If the merchant has a chip point-of-sale (POS) terminal, but the bank has not issued a chip card to the customer, the bank will be liable. If neither or both parties have complied, the fraud liability will remain the same as it is today. Historically, the issuer has paid about 60% of losses and retailers have paid 40%. Issuers picked up most of the losses when the card was present but was fraudulent, while merchants picked up the bulk of losses when cards were not present. Now that October 1, 2015, has passed, exploring and understanding the ramifications of the transition—or the failure to transition—is likely to become increasingly important for Congress, especially if additional major breaches occur. Additionally, new deadlines are coming in 2016 and 2017 for card-branded ATM cards. There are many policy issues related to EMV adoption in the United States and elsewhere in the world. This report describes the financial harm caused by data breaches and explains how those breaches are carried out. It provides information about the effect of the transition in selected foreign countries. The report also discusses resolved and remaining impediments to completing the EMV transition in the United States and identifies areas of potential congressional interest. EMV cards offer a significantly higher level of data security than stripe cards: Data on the chip is secured using both hardware and software security measures, so even if the card data is compromised, the chip itself will still be difficult to counterfeit. The EMV chip carries cardholder and account data, and is programmed to make decisions about a transaction and control its outcome, that is, approve or decline it. Chip cards can be produced as "chip-and-PIN," "chip-and-signature," or "chip-and-choice" (which allows the use of either a personal identification number [PIN] or signature). Transactions are verified in the method programmed into the chip. If the card is to have a PIN associated with it, the PIN is programmed into the chip before it is embedded in the card and sent to the cardholder. EMV is the global standard for the chip technology embedded in financial payment cards. Much of the rest of the world—Europe, Canada, Latin America, and the Asia-Pacific region—has already transitioned to chip cards. In the fourth quarter of 2012, there were 1.62 billion chip cards in use across 80 countries, leaving the United States as the last major country to implement what is now the de facto global standard. Globally, card fraud totaled $11.3 billion in 2012, an increase of 15% from 2011. In the United States, although fraud constituted less than 1% of total expenditures, credit card losses totaled $5.33 billion in 2012, an increase of 14.5% from 2011. The United States has been disproportionately affected by fraud: Since 2003, the United States has consistently accounted for about half of the total global loss, but for only about a quarter of the total volume of card payments ( Figure 1 ). Between 2004 and 2010, fraud committed on U.S.-issued bank credit cards rose 70% ( Figure 2 ). Debit card fraud also rose, with cards using a signature for verification accounting for 91% of the fraud and cards using a PIN for verification accounting for 9% ( Figure 3 ). Card fraud can be conducted in a number of ways, but it always begins with the theft of card information. The scale of the theft can range from small, such as stealing a wallet, to large, such as skimming or a data breach. Data breaches can be carried out in more than one way (and for reasons other than committing fraud), but the most common method is hacking into a POS system used to make card-based purchases. These breaches are called "POS intrusions." In 2013, 75% of breaches in the travel/hospitality sector and 31% in the retail sector were POS intrusions aimed at stealing credit and debit card data. POS intrusions and the ensuing card fraud are facilitated by what many consider to be the weak link in the U.S. card payment process: the continued use of magnetic stripe cards that carry unencrypted data. A hacker can gain access to a company's POS systems in a number of ways. Sometimes the hacker will use a "brute force" approach, systematically checking all possible keys or passwords until the correct one is found, or exploiting inadequately managed Internet connections to the POS system. Another common way is through the use of stolen third-party (vendor) credentials (sign-on information). For example, some POS system vendors do not change the default password to access the system. That password is often included in the system documentation, making it easy for anyone, especially a hacker, to find the information online. Once the hacker has gained access to the computer system used to manage the POS system, he or she installs malware that copies the unencrypted data on cards as they are swiped. The most common type of malware used in POS intrusions is called a "RAM scraper," so named because it allows the hacker to "scrape" data out of the memory of the POS system. The RAM scraper exploits the very brief period that the card data is in the POS reader, before it is encrypted and sent to complete the payment process. Europe has transitioned between about 73% and 80% of cards and about 95% of POS terminals to EMV technology. Other regions around the world have transitioned to varying degrees ( Figure 4 ). A 2012 study of five countries by the Federal Reserve Bank (FRB) of Atlanta examined fraud trends experienced by the United Kingdom, Canada, France, Australia, and the Netherlands as they transitioned from stripe cards to chip-and-PIN cards; none of the countries studied issued chip-and-signature cards. Three of the five countries studied in the report experienced decreases in both the rates and total amounts of card fraud ( Figure 5 ), with some exceptions attributed to factors other than the security of the chip itself. For example, when the United Kingdom began issuing chip cards, the cards continued to carry a magnetic stripe, too. If the card was swiped to make a purchase and the card data was compromised, it could be used in card-not-present (CNP) environments or to make counterfeit cards for use in non-chip countries. The data analyzed in the study showed that chip-and-PIN is most effective in reducing certain types of fraud, notably— card-present fraud ; domestic counterfeit card fraud , committed by manufacturing cards created with valid information from lost or stolen cards, but most often carried out using data stolen in a data breach or "skimming"; and lost and stolen card fraud , committed using an original, activated, and valid card after it is lost or stolen, in both "card present" (e.g., retail) and certain "card-not-present" (e.g., Internet purchase) scenarios. Additionally, mail non-receipt fraud , committed by stealing a card before it is activated by the rightful owner, has also decreased with the introduction of chip cards. For example, since 2004, this type of fraud has decreased 91% in the United Kingdom. Most U.S. issuers have stated that they plan to issue chip-and-signature credit cards, rather than chip-and-PIN cards. It is uncertain how this decision may affect fraud in the United States. In all but one of the countries studied (France), the switch to chip cards caused two types of fraud to increase: domestic CNP fraud , e.g., catalog or Internet purchases, and c ross-border counterfeit card fraud . This type of fraud uses data stolen from cards issued in chip countries to produce physical counterfeit cards for use in non-chip countries. This is a phenomenon referred to as "fraud migration," with the fraud migrating primarily to the United States, the last major market to transition to chip cards. In the countries where CNP fraud eventually decreased, many merchants have adopted fraud prevention measures. There are two simple prevention measures: requiring cardholders to authenticate their identities by entering the card's verification/security code and/or expiration date. A card's security code and expiration are shown only on the card and are not encoded on either the magnetic stripe or the EMV chip. An additional measure is "Address Verification Service" (AVS). AVS matches the billing address information provided at check-out with that on file with the card issuer. Other options to mitigate CNP fraud are also available and have been adopted in varying degrees. Some of these are discussed below. Visa, MasterCard, and American Express have developed and adopted proprietary security measures to make CNP fraud more difficult to perpetrate: Verified by Visa, SecureCode, and SafeKey, respectively. All three are based on the 3-D Secure protocol and are only used for Internet-based purchases. They work by redirecting the payment transaction to the issuer's website to perform user authentication by requiring the cardholder to provide additional credentials before approving a transaction. The merchant, the cardholder, and the card issuer all must use the system for it to work. In 2013, only about 3% of U.S. merchants employed an authentication method based on 3-D Secure. The 3-D Secure protocol allows the card issuer to define what those credentials will be. For example, the cardholder might be required to enter a password. The password can be permanent or transaction specific. Transaction-specific passwords can be generated in a number of ways. Issuer-generated passwords can be sent via text message and email to the cardholder's registered mobile device and email account. This method can be used with both stripe and chip cards. With a chip card, the cardholder can generate a password by inserting the card into a cardholder-owned reader and entering the card's permanent PIN. The reader will then generate a one-time PIN for use with that specific transaction. In Europe, about 30 million people use chip cards and readers for Internet transactions. Although 3-D Secure provides an extra layer of security for CNP transactions, it still has vulnerabilities. For example, in the past, hackers successfully used malware to direct cardholders signing up for 3-D Secure to a fake enrollment window, allowing theft of the card data. While this specific vulnerability can be avoided using additional security methods, hackers are likely to continue looking for any vulnerability they can find and exploit in POS systems. There are also new security measures available that were developed by third-party companies not associated with the card companies. Two such examples are "D-FACTOR," by DeviceAuthority, and "TranSecure," a partnership between Quatrro and NorseCorp. Using D-FACTOR, cardholders link their credit cards to one or more devices, such as a mobile phone or home computer. Before a CNP purchase is approved, D-Factor verifies that the purchase is being made using a cardholder-registered device. TranSecure is not a transaction authentication method, but provides ongoing monitoring for fraud. This system uses fraud-detection software paired with fraud analysts to thwart CNP and other types of card fraud. Neither of these systems has been widely adopted at this time. Cross-border counterfeit fraud increased in the countries studied by FRB Atlanta, as counterfeiters used data stolen in chip-and-PIN markets and produced stripe cards for use in those markets still using them. The FRB Atlanta report attributed the increase to issuers providing cards with both chips and magnetic stripes. For instance, when the United Kingdom transitioned to EMV cards, credit and debit cards were issued with both a chip and a magnetic stripe, which rendered them as easy to exploit and clone as stripe cards. The stolen data could then be used to manufacture counterfeit stripe cards for use in places such as the United States, where the transition had not yet begun. To mitigate the chance that this vulnerability will exist, cards issued in the U.K. now include a small "flag" on the magnetic stripe to indicate that the card has a chip on it. If swipe card data is stolen, the flag would be copied along with the other stolen data onto the cloned card. The POS system would then recognize the flag if the card were swiped, alerting the merchant that a cloned card was being used. The United Kingdom and Australia reported an initial increase in counterfeit fraud after EMV implementation, but it later decreased. It is too soon to say whether the United States could have this same "immunity" from such an increase: Since the United States is the only remaining major market still using at least some stripe cards, there will not be any other major markets where stolen information could be used. Unlike CNP fraud, counterfeit fraud appears to diminish as more countries eliminate stripe cards. The upcoming liability shifts for branded ATM cards and the ongoing debate over signature versus PIN are two areas of continued work toward a complete shift to chip cards. On October 1, 2016, a new liability shift will occur: Automated teller machines (ATMs) that accept MasterCard-branded debit cards must be EMV operational. ATMs that accept Visa-branded debit cards will have an additional year to be operational. As nearly all ATMs in the United States accept both Visa-branded and MasterCard-branded cards, the 2016 date for MasterCard essentially forces all ATMs to be operational. As with the 2015 shift date, this date is not a mandate, but most ATMs are likely to be EMV operational to avoid possible fraud liability. There is some concern that the complexity of updating payment processing software to accommodate both debit (PIN) and credit (signature) processing of debit card transactions could contribute to the delay or cause a decrease in the number of ATMs. Many retailers are frustrated with the delays in certifying their payment systems. Retailers made significant investments to upgrade their systems to avoid the possibility of having the liability for fraudulent transactions shift to them after October 1, 2015. For instance, in New York City, one supermarket chain spent about $700,000 to upgrade their systems in time to meet the October 1, 2015, deadline, but their systems remain uncertified as of March 2016 and they have now begun incurring the costs associated with fraud liability. The banks and retailers have differing opinions on the cause or causes for the delay in retail-outlet certification: Banks say that retailers waited till the last minute to update their terminals. Retailers point to financial ties between the banks and the companies that provide certification, saying there is no motivation to move faster. Although most issuers are currently providing chip-and-signature cards, some experts predict that could change. Along with some retailers, the federal government supports PIN use in EMV transactions, stating: Currently, not all EMV cards are issued to consumers with the PIN capability and not all merchant PoS terminals can accept PIN entry. EMV transactions at chip PoS terminals provide more security of consumers' personal data than magnetic strip PoS transactions.... Although EMV cards provide greater security than traditional magnetic strip cards, an EMV chip does not stop lost and stolen cards from being used in stores, or for online or telephone purchases when the chip is not physically provided to the merchant. As yet, there has been no legislation introduced in the 114 th Congress that would affect the EMV transition. In the 113 th Congress, no legislation was introduced that would have directly affected the manner in which the transition is taking place. Four bills contained language that would have addressed concerns about improving protection from credit card data theft in other ways. These bills would have, for example— increased protection for consumers whose card data had been compromised (e.g., free credit monitoring for a year); increased penalties for those convicted of identity theft and certain other violations of data privacy and security; provided for criminal penalties against entities that fail to provide required notice of a breach of personally identifiable information; defined thresholds for when public notification would be required after a breach; and/or defined thresholds for when notification of law enforcement or other government entities (e.g., Secret Service, Federal Bureau of Investigation, Congressional Judiciary Committees, Federal Trade Commission) would be required. A resolution was also introduced that would have expressed "the sense of the Senate that the President should pursue extradition authority for international cybercriminals committing credit card theft targeting United States citizens." No further action was taken. To date, there has been one hearing in the 114 th Congress on the EMV transition. On October 7, 2015, the House of Representatives Committee on Small Business held a hearing, "The EMV Deadline and What It Means for Small Businesses." The 113 th Congress held three hearings that addressed data breaches, both generally and in response to specific breaches. Each hearing included questions and discussion about the status of EMV adoption in the United States, such as how the transition was expected to affect the frequency and seriousness of data breaches and the progress being made towards a full EMV migration in the United States. Privacy in the Digital Age—Preventing Data Breaches and Combating Cybercrime. This hearing was held by the Senate Committee on the Judiciary on February 4, 2014. It consisted of two panels of witnesses, the first composed of representatives from the consumer protection, retail, and data security sectors, and the second composed of representatives from federal government agencies charged with investigating the breaches. Of particular interest to committee members was the Target Corporation data breach, as well as the Personal Data Privacy and Security Act, which was reintroduced by Senator Leahy, Judiciary Committee Chair, on January 8, 2014. Among other issues, the hearing explored how quickly companies inform their customers after a data breach, and whether current reporting requirements are adequate or whether legislation is needed. Protecting Consumer Information: Can Data Breaches Be Prevented? This hearing was held on February 5, 2014, by the House Committee on Energy and Commerce and its Subcommittee on Commerce, Manufacturing, and Trade. This hearing was prompted by the Target Corporation data breach. Among other issues, the hearing explored: the relationship between federal law enforcement and the private sector in tracking and responding to breaches of consumer information; how private sector entities work among themselves and with the federal government to develop and maintain best practices; how the tactics and efforts of cybercriminals have changed over time; whether it is possible or realistic for a company to be impervious to data breaches; and whether additional regulation of data security might be necessary. Protecting Consumer Information: Can Data Breaches Be Prevented? Can Technology Protect Americans from International Cybercriminals? This hearing was held on March 6, 2014, by the House Committee on Science, Space, and Technology Subcommittee on Oversight and Subcommittee on Research and Technology. This hearing focused on the consumer privacy and national security aspects of data breaches. Witnesses included federal government officials, payment industry representatives, and a privacy advocacy organization. Members were particularly interested in whether the payments industry was on track to meet the October 1, 2015, deadline. Other issues discussed included the current state of technology and standards to protect consumers from international cybercriminals, and the evolution of cyberattacks against the U.S. industry from rogue hackers to sophisticated international crime syndicates and foreign governments. Questions and concerns remain that Congress might choose to monitor. Data on the impact of EMV signature verification on fraud reduction do not exist because signature verification was not adopted in other countries (they chose to adopt PIN verification). So, while the primary driver of the transition is fraud reduction, it remains to be seen if signature verification will produce the same level of fraud reduction in the United States as PIN verification has produced in other countries. Congress may follow the renewed interest by some states to encourage PIN adoption. The delay reaching agreement over debit card programming could cause the EMV debit card transition to lag behind the EMV credit card transition. One study found that fraud reduction in POS transactions was achieved more quickly by migrating all card products at or near the same time. The payments industry will need to stay on track to achieve the simultaneous transition, which could have an impact on overall fraud reduction, and the relative level of fraud between credit cards and debit cards. Given the broad interest in reducing data breaches and fraud, and the October 1, 2015, transition deadline, the 114 th Congress might examine the effectiveness of the transition to determine whether legislative action may be needed, especially if major breaches continue to occur. Many questions were raised in hearings during the 113 th Congress, including: Are companies implementing the additional security safeguards recommended to decrease c ard- n ot- p resent f raud ? CNP fraud decreased significantly in countries where both card issuers and merchants implemented additional safeguards on such transactions. Card issuers here have implemented various methods to offer those safeguards, but success will be largely dependent on widespread use by merchants. Are companies taking adequate steps to prepare for a data breach? Data breaches will likely continue, but there are steps that companies can take to prepare for them and mitigate their damage. For example, Experian has published a preparation guide for companies that could make post-breach activity easier and more conducive to assisting law enforcement. Are existing post-breach consumer notification procedures adequate and consistent? Consumers might reasonably expect to receive all the information needed, in a timely manner, to protect themselves after a data breach. Additionally, they might expect to receive the same information after every breach, regardless of the company who had been breached or where they are located. Are existing legal and regulatory post-breach thresholds that trigger mandatory reporting to law enforcement adequate and consistent ? Law enforcement is unable to begin investigating breaches until they have been notified that a breach has occurred by the affected company. In addition, nearly all states have their own laws requiring notification; there are no federal laws or guidelines. Of the states that have laws, the circumstances that "trigger" reporting differ. For example, some states define "personal information" narrowly, while others have adopted more expansive definitions. So, in effect, a company might be required to report in some states, but not all, when their data has been breached, as well as report different information in each state. These differing requirements can present a challenge to companies with a presence in more than one state. This is one reason that some in the federal government, including some in Congress and the Federal Trade Commission, have advocated a single federal law to address all aspects of data breach reporting nationwide. Many states with existing, and in many cases long-standing laws, though, have expressed concerns about enacting a federal law. They believe such a law, which would likely supersede state laws, might offer consumers less protection. One compromise that policymakers have discussed would be to allow existing state laws with more stringent protections to take precedence over a federal law. The cost of the EMV transition, the slow pace of adoption, and other issues may have hampered both issuer and retailer efforts to meet the October 2015 deadline. Disagreements over transaction verification methods for credit transactions, chip programming, and the fee structure for debit transactions all played roles in delaying EMV transition planning and adoption. Most issues have been resolved through industry negotiation or litigation. There have been four impediments to EMV adoption in the United States: High Cost of Implementation . Both card issuers and merchants in the United States have balked at transitioning to chip cards. They have already made significant financial investments in existing technology, and the transition will impose immediate, short-term costs on them. The cost of the transition to chip cards for financial institutions and businesses that use POS readers will be significant. Although opinions differ greatly as to the actual amount, most industry observers agree that it will cost between $6 billion and $8 billion. Of that amount, 75% is likely to be paid by merchants, making the transition three times as expensive for them as for the issuers. Costs for Card Issuers: Chip and Card Production . Some analysts have stated that manufacturing chip cards costs between $1.00 and $4.00 per card—2 to 16 times as much as traditional stripe cards, which cost about 25¢ to 50¢ each. Adding to that cost, personalizing the card with the holder's name and other details is about twice as expensive with chip cards as with stripe cards. While the issuing institution would pay initially for the chip and personalization of the card, those costs might be passed down to the consumer. Issuers will also face consideration of the one-time and ongoing costs associated with each type of implementation. Costs for Merchants: POS System Replacement . In addition to the costs to issuers of producing the cards, merchants have to purchase new POS equipment (i.e., chip readers) to process chip card transactions. In 2015, cost estimates ranged from about $100 to $600 each, depending on the number ordered and specific product features. Stripe readers cost approximately $50 to $100 when purchased individually, but less than $20 when purchased in bulk. Estimates prior to the transition were that only 25%-44% of retailers would meet the deadline, with the majority of those being the larger retailers. Minimal Implementation Prior to October 1, 2015 . There are about 1.1 billion credit and debit cards in use in the United States. At the time of the transition, estimates of the share of cards with EMV chips stood between 7% and 15%. Some believe that issuers would have had to replace, on average, about 2 million cards every day until the deadline to achieve 100% transition. Despite the slow start, some experts have predicted that by the beginning of 2016, 90%-95% of cards could be chip cards. About 33% of POS machines are now EMV compliant and that figure would have to increase significantly before the benefits of the chip cards can be realized. Transaction Verification: PIN versus Signature. Despite initial resistance from the retail community, which asserted that PIN verification would be far more likely to reduce fraud, card issuers largely decided to implement chip-and-signature. This could change, however. First, in a June 2015 speech, Federal Reserve System Governor Jerome H. Powell expressed his support for the use of PINs. Then, on November 17, 2015, nine state attorneys general asked leaders at companies including MasterCard, Visa, Discover Financial Services, Bank of America, Capital One, Citigroup, American Express, and JP Morgan Chase—who have collectively begun the nationwide transition to a chip-and-signature card—to move to full chip and PIN technology as soon as possible. This latest renewed interest could indicate a possible shift in the future. Dual Debit Applications . Visa and MasterCard use one proprietary debit processing application, and the major PIN debit networks use another. After lengthy negotiations, both sides finally agreed to cross-license their applications in July 2013, resolving most of the technical issues hampering transition planning. This issue is no longer a matter of contention. Debit Transaction Fees: Delay in Regulatory Certainty . In 2010, as part of a larger financial reform law, the Federal Reserve Board (FRB) was charged with developing rules setting maximum transaction fees ("interchange fees") that merchants can be charged for debit card transactions. In addition, the law specified the framework the FRB was to use in developing those rules. The rules went into effect in October 2011, but the National Retail Federation, representing merchants, appealed the ruling, stating that it believed the fee ceiling had been set too high. In July 2013, a judge for the U.S. District Court for the District of Columbia (D.C.) rejected the FRB's regulations, stating that the agency had set the cap too high on debit-card transactions, and that it had disregarded congressional intent in its proceeding. However, in March 2014, the Court of Appeals for the D.C. Circuit reversed the lower court's decision and upheld the FRB's rules. The merchants again appealed the decision, this time to the U.S. Supreme Court, filing for a writ of certiorari in August 2014. On January 20, 2015, the Court denied the merchants' petition, allowing the FRB's original rules to go into effect. Because of the long-running court case and the other problems described, card issuers lost more than three years of planning time to meet the October 2015 deadline for debit cards (credit cards are unaffected by the fee structure under consideration by the Court). Some issuers were thought to be hesitant to replace their stripe-based debit cards until the issue was resolved. The delay has the potential to cause a lag between when chip-based credit cards are issued and chip-based debit cards are issued. Issuing debit and credit chip cards simultaneously was cited by the FRB as a key to maximizing the benefits of chip cards in reducing fraud: Based on the experiences of chip-and-PIN migrations in other countries, it is imperative that all card-based products should be migrated at, or near, the same time to have a positive impact on reducing face-to-face fraud within a country's borders. As witnessed in Canada, migrating credit before debit resulted in a significant increase in fraud perpetrated with debit cards, ultimately resulting in a minimal reduction of total card fraud. If the United States migrates to chip-and-PIN without market consensus, agreement, or in a timely and concerted effort; those issuers, networks, or merchants who are slow to migrate will see increased fraud levels and the impact on overall fraud levels could be minimal. Ultimately, it remains to be seen what impact the court case will have on debit card replacement.
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Consumer financial card fraud due to data breaches of card information is an ongoing problem in the United States. The majority of breaches are carried out against point-of-sale (POS) systems, and are facilitated by what many consider to be the weak link in the U.S. retail sales payment process: the continued use of magnetic stripe cards (also referred to as stripe-and-signature cards). These cards are still what most U.S. consumers think of when referring to financial cards. In much of the rest of the world, cards that provide a much higher level of security for conducting sales transactions have been used for many years: EMV cards, named for the coalition of card brands Europay, MasterCard, and Visa (the EMV Coalition or EMVCo) that developed the specifications for the system in the 1990s. EMV cards store card information on an embedded microchip and are more commonly called chip cards. With these cards, instead of swiping and signing to make a payment, the cardholder inserts the card into the POS machine, then either enters a personal identification number (PIN) or signs to verify the transaction. On October 1, 2015, the liability for fraudulent transactions involving magnetic stripe cards shifted to the entity—card issuer (e.g., bank, credit union) or merchant—that had not yet made the transition. The transition makes U.S.-issued cards compatible with POS systems and automated teller machines in much of the rest of the world. On October 1, 2016, a new liability shift will occur: automated teller machines (ATM) that accept MasterCard branded cards must be EMV operational. ATMs that accept Visa-branded cards have an additional year to be operational. The 114th Congress may examine the transition and its effectiveness to determine whether any legislative action is needed, especially if major breaches continue to occur despite the transition.
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Civilians in Africa's conflict zones—particularly women and children, but also men—are often vulnerable to sexual violence, including rape, sexual assault, mutilation, forced prostitution, sexual slavery, and other abuses. Some incidences appear to be opportunistic, the product of a larger breakdown in the rule of law and social order that may occur amid conflict. In other cases, sexual violence has also been employed by combatant groups as a strategic tool. Perpetrators may include members of the security forces, rebel movements, militias, or other non-state armed groups. In some cases, individuals at the highest levels of the state have been accused of ordering, condoning, or tolerating such violence. There have also been instances where humanitarian and peacekeeping workers have been accused of sexual abuse and exploitation. The issue of sexual violence in conflict is far from confined to Sub-Saharan Africa (henceforth, "Africa"), and it has not been a salient feature of all African conflicts. Sexual violence by combatant groups in the former Yugoslavia in the 1990s, for example, drew widespread international attention. Moreover, conflict settings are not necessarily those in which sexual abuse is most prevalent. Sexual atrocities have nevertheless been a feature of many African conflicts over the past two decades, including in active conflicts in Central African Republic (CAR), Chad, Democratic Republic of Congo (DRC), Ethiopia, Nigeria, Somalia, and Sudan; and in recent conflicts in Burundi, Congo-Brazzaville (Republic of Congo), Côte d'Ivoire, Liberia, Rwanda, Sierra Leone, and northern Uganda. Such acts have been particularly prevalent in eastern DRC, where security forces, rebel organizations, militias, and other armed groups have inflicted sexual violence upon the civilian population on a massive scale. This report focuses on conflicts in Africa in which sexual violence is reported to be widespread or systematic. It describes the context in which such violence takes place, selected cases where it is currently occurring, and U.S. policy responses. The report concludes with a discussion of potential policy considerations, including the design and effectiveness of U.S. programs; coordination between agencies and between international donors; and the question of whether policy responses to sexual violence can be separated from the broader context in which such violence occurs. The report includes a detailed case study of DRC, which has drawn particular attention from the Obama Administration and the 111 th Congress. In recent years, Congress has demonstrated an interest in drawing attention to sexual violence in conflict zones, including through legislation, hearings, and other activities. Congressional interest has encompassed the humanitarian, health-related, socio-economic, and security implications of such violence, and ways in which U.S. and multilateral policies can respond to or prevent it. In May 2009, the Senate Foreign Relations Committee held a hearing on "Confronting Rape and Other Forms of Violence Against Women in Conflict Zones—Spotlight: DRC and Sudan." The House Foreign Affairs Committee and the Senate Foreign Relations Committee also held several hearings in 2009 on the broader topic of international violence against women. Two pieces of legislation that pertain to sexual violence in African conflict settings were passed during the 111 th Congress. These were the Lord's Resistance Army Disarmament and Northern Uganda Recovery Act of 2009 ( P.L. 111-172 ) and the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ), which includes an amendment to regulate "conflict minerals" that references reported links between illicit mining activities and high levels of sexual and gender-based violence in DRC. In addition, several pieces of draft legislation were introduced during the 111 th Congress on the overlapping issues of international violence against women and sexual violence in conflict zones. These include H.Res. 1676 (Carnahan); H.R. 5121 (Clarke); S. 2982 (Kerry); H.R. 4594 (Delahunt); H.Res. 931 (Carson); and H.J.Res. 10 (Jackson-Lee). Several pieces of Africa-focused draft legislation also reference sexual violence in connection with specific countires, including S.Res. 345 (Boxer), on Guinea; S. 3757 (Feingold), on Ethiopia; and H.Res. 1588 (Capuano), on Sudan. At least one piece of related draft legislation has been introduced during the 112 th Congress: on January 7, 2011, H.J.Res. 12 (Jackson Lee), on international gender-based violence, was introduced in the House. The Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 , July 21, 2010) includes an provision on "conflict minerals" that references reported links between illicit mining activities and high levels of sexual and gender-based violence in the Democratic Republic of Congo (DRC). The provision (Section 1502 of the act) requires U.S.-listed companies whose products are made from certain minerals associated with conflict areas in central Africa to annually disclose to the Securities and Exchange Commission whether the minerals used in their products were mined in Congo or neighboring countries. Among other provisions, it also requires the Secretary of State and the Administrator of the U.S. Agency for International Development (USAID) to develop and submit to Congress a strategy "to address the linkages between human rights abuses, armed groups, mining of conflict minerals, and commercial products," and requires the U.S. Comptroller General to submit to Congress a report that includes "an assessment of the rate of sexual- and gender-based violence in war-torn areas of the Democratic Republic of the Congo and adjoining countries." In annual and supplemental appropriations legislation, the 111 th Congress directed specific funds to be used in addressing the issue of sexual violence in African conflict zones, particularly with regard to Congo: The Supplemental Appropriations Act, 2010 ( P.L. 111-212 , Section 1012) allocated $15 million in FY2010 Economic Support Fund (ESF) funds "for necessary expenses for emergency security and humanitarian assistance for civilians, particularly women and girls, in the eastern region of the Democratic Republic of the Congo." The conference report accompanying the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ) directed "not less than" $10 million to address gender-based violence, including for fistula repair and other assistance for victims, and training and support for health and law enforcement personnel. P.L. 111-117 also stated that funds for bilateral Development Assistance, Economic Support Fund assistance, and International Narcotics Control and Law Enforcement assistance "shall be made available for programs to address sexual and gender-based violence" overseas, and that bilateral economic assistance and international security assistance programs that provide funding for foreign police, judicial, and military officials "shall address, where appropriate, gender-based violence." The Supplemental Appropriations Act, 2009 ( P.L. 111-32 ) provided $10 million in Economic Support Funds (ESF) for "programs and activities to assist victims of gender-based violence" in DRC. In an explanatory statement attached to the act, appropriators directed the State Department and USAID to report to Congress on "programs addressing sexual and gender-based violence and how these issues are being integrated into foreign police, judicial and military training programs." The conference report accompanying P.L. 111-117 also directed the Department of State, in consultation with USAID, "to provide a report to the Committees on Appropriations outlining a comprehensive strategy and budget to address gender-based violence in the DRC" that "should describe how United States Government efforts fit into multi-donor and host government strategies to address this issue." Appropriators directed the Department to consult with the Committees on Appropriations prior to developing the strategy. A strategy was briefed to Congress by the Administration in early January 2011. Widespread sexual violence has been reported as a feature of several active conflicts in Africa. Most prominent in scale are the conflicts in eastern DRC and the Darfur region of Sudan. In DRC, which will be discussed in the " Case Study: Democratic Republic of Congo (DRC) " section below, armed groups have committed sexual atrocities on a massive scale during recurrent internal conflicts over the past two decades. In Darfur, rape has reportedly been perpetrated by government and government-allied forces since 2003 amid fighting between Sudanese security forces and allied pro-government militias known as janjaweed , rebel groups, and other irregular forces. United Nations officials, advocacy groups, news reports, and witness accounts allege that sexual violence was systematically employed in Darfur during the height of the conflict (2003-2006) as a weapon of war and ethnic cleansing, part of a government counterinsurgency strategy that has orchestrated mass violence against civilians. Similar allegations were made against the Sudanese government in the context of the North-South civil war, which officially ended in January 2005. Between July 2008 and June 2010, the African Union-United Nations Hybrid Operation in Darfur (UNAMID) recorded 166 incidents of sexual violence directly related to clashes between the government and armed groups, or to inter-communal fighting and banditry. While few perpetrators have been traced, 73% of suspects were described as members of non-state armed groups; another 16% were identified as belonging to the Sudanese Armed Forces and police; and other survivors reported rapes by elements of Chadian armed opposition groups. According to advocacy groups, assistance for rape survivors in Darfur was "largely eliminated" in March 2009, when Sudan expelled 13 international relief organizations operating in the region in response to the International Criminal Court arrest warrant for Sudan's president. Other active conflict zones with reportedly significant levels of sexual violence include areas of the Central African Republic (CAR), Chad, eastern Ethiopia, southern Nigeria, and Somalia: CAR has seen a proliferation of anti-government rebel movements—some of which exercise territorial control in the north and northeast—as well as community defense militias and organized criminal gangs. Sexual violence has reportedly been committed by the security forces—especially the army, presidential guard, and police—and non-state armed groups, as well as Chadian troops stationed within CAR and other factions. According to the U.N. Office for the Coordination of Humanitarian Affairs, over 15% of women and girls in CAR's violence-ridden north have been victims of sexual violence. In Chad, multiple rebel groups based largely in the east are challenging the government's rule. Chadian security forces—particularly the army, police, and gendarmerie—have been accused of perpetrating sexual violence, along with ethnic militias, bandits, and armed groups connected to the spillover of conflict from neighboring Darfur. Rape and other forms of sexual violence are reportedly pervasive in and around Darfuri refugee camps in eastern Chad. According to United Nations figures, there has been an increase in the number of reports of sexual and gender-based violence among refugees in Chad, from 295 in 2006 to 860 in 2009. In Ethiopia, according to human rights groups, systematic rape has been a feature of the Ethiopian government's counterinsurgency campaign since 2007 against the Ogaden National Liberation Front (ONLF), a largely ethnic Somali rebel group operating in the east. Ethiopian security forces have allegedly frequently raped women detained on accusations of aiding the ONLF. In Nigeria, state security forces deployed to the oil-producing Niger Delta region have reportedly used rape to intimidate the local population and retaliate for attacks on oil installations by militant groups. There have also been occasional reports of rape by militant groups. In Somalia, forces allied with the Transitional Federal Government (TFG) and clan militias have been accused by human rights groups of perpetrating sexual violence against civilian residents and displaced populations. During Ethiopia's occupation of south-central Somalia between mid-2006 and January 2009, Ethiopian troops were also accused of sexual assault. In northeast DRC, southeast CAR, and southern Sudan, sexual violence has been carried out not only by domestic armed groups, but also by members of the Lord's Resistance Army (LRA), an insurgent group that originated in northern Uganda over 20 years ago. LRA fighters have reportedly raped and mutilated civilians and abducted boys and girls for sexual slavery. Sexual violence has long been described as the "collateral damage" of fighting, and its prevalence in Africa is often viewed as a by-product of internal conflicts involving irregular forces, which frequently result in disproportionate civilian casualties. However, sexual violence is also often deployed strategically by combatant groups. Sexual violence in conflict settings may be employed as a "benefit" for victorious troops and commanders; a means of initiation and social bonding between combatants; a punishment meted out to civilians associated with opposing groups; a means of humiliating male members of an opposing community; a method of destroying communities and cultures associated with opponents; and a means of ethnic cleansing by impregnating women or forcing their displacement. In such cases, sexual violence is often portrayed as a "weapon" or "tool of war." The incidence of sexual violence nevertheless varies significantly between conflicts and groups. In many conflicts, sexual assault is employed by multiple combatant organizations and for different purposes; motivations may vary between units, individuals, and settings within a larger war. In Sierra Leone's 1992-2002 civil war, for example, in which the majority of conflict-affected women and girls were reportedly subjected to rape, a study found that combatants inflicted sexual violence on civilian populations both amid the anarchy of fighting and as a tool of political intimidation. In conflict settings, sexual violence often occurs amid—and reinforces—a general breakdown in the rule of law, social systems, and discipline within combatant groups. Sexual violence may be more or less opportunistic and indiscriminate, as combatants experience a sense of impunity for their actions. Indeed, rape in African conflict settings has frequently been associated with combatant groups that lack an effective chain of command or disciplinary mechanisms, for example in CAR, Chad, and DRC. Furthermore, women in conflict zones, due to their relative lack of economic resources, may be particularly vulnerable to exploitation in order to meet material needs. Situations in which sexual violence is widely perpetrated by combatant groups often see a concurrent increase in sexual assault by civilians, due to the same breakdown in social order as well as the normalization of sexual violence within conflict-affected communities. Rape and other forms of sexual assault may also be encouraged by commanders in the field as a way of placating or "paying" their troops. Even without active encouragement, combatants who do not regularly receive wages may view rape—like the looting of food and other goods from local populations—as "justified" as part of their upkeep. Similar dynamics also sometimes lead to the abduction of women and children as sexual slaves, a practice in which LRA fighters have reportedly frequently engaged, for example. Describing the high incidence of looting during Liberia's civil war, one account noted, "to judge from the frequency with which male fighters committed rape or abducted women as concubines and servants, women were also included in the category of consumer items ripe for plunder." In addition to opportunism, sexual violence may be "systematically employed for a variety of purposes, including intimidation, humiliation, political terror, extracting information, rewarding soldiers, and 'ethnic cleansing.'" Indeed, in 2008, U.N. Security Council Resolution 1820 affirmed that the widespread and/or systematic perpetration of sexual violence can constitute a war crime, a crime against humanity, or a constitutive act of genocide. In several ongoing conflicts in Africa, notably those in DRC, Darfur, and Ethiopia's Ogaden region, sexual violence has reportedly been used by one or more conflict parties as a tool of war. For example, in DRC, both the military and non-state combatants have reportedly employed sexual assault as a strategy to destroy or humiliate civilians perceived as sympathizing with their opponents. In the Ogaden, the Ethiopian military has been accused of raping women accused of supporting anti-government insurgents. Sexual violence is also sometimes carried out as "revenge" for an armed assault carried out by opposing forces; instances of this have been reported in the Niger Delta region of Nigeria as well as in the other conflicts cited. By terrorizing or incapacitating women in rural areas, in particular, combatants may also seek to deprive communities of food security and nutrition, as women are often responsible for food gathering and cultivation. In some African conflicts, both active and recent, sexual violence such as mutilation appears to have been carried out through methods seen as culturally and historically resonant, in order to further terrify civilians and potential enemies. As a tool of ethnic cleansing or genocide, sexual violence may be used to spread terror among a particular targeted group, disrupt its social structures, drive the group off its land, or preclude its members from reproducing; sexual violence also sometimes precedes murder. In several African conflicts, women have been made vulnerable by being portrayed as "symbolic bearers of their cultural or ethnic identity, and as producers of future generations." Sudanese security forces and pro-government militia have repeatedly been accused of employing sexual violence as a tactic of ethnic cleansing in Darfur, eastern Chad, and previously in South Sudan. In Rwanda, systematic rape was a feature of the 1994 genocide, fueled by long-standing propaganda efforts to paint Tutsi women as "enemies of the state"; sexual violence by pro-government and Hutu nationalist forces was later found to be "a step in the process of deconstruction of the Tutsi group" by the International Criminal Tribunal for Rwanda. In these and other conflicts, sexual violence has been interpreted as "a step in the process of group destruction." While sexual violence is often most prevalent where active combat is taking place, it can also spike in and near camps for internally displaced persons (IDPs) and refugees. This may be because displaced women and girls are particularly vulnerable: they are often unaccompanied by male relatives or community members, and protection en route to or within camps may be limited. Displaced women and children are also often potential victims of human trafficking; this has reportedly been the case, for example, in Somalia. Moreover, displaced populations, such as Darfuris in eastern Chad, often rely on women and children foraging for firewood or other fuel, which can put them at risk of assault by nearby armed groups. Countries transitioning from conflicts in which sexual violence was prevalent also often continue to experience high levels of sexual violence. This could be due to shifts in social norms and the weakening of rule of law during conflict, as well as the reintegration of former combatants into society. High levels of sexual violence are reported in post-conflict settings in Burundi, Côte d'Ivoire, Liberia, and Sierra Leone, for example. (These countries are post-conflict in a relatively recent sense, and retain elements of political instability.) Sexual violence has been perpetrated by the security forces of several African states as a tool of political repression, outside the context of armed conflict. For example, in Guinea, members of the security forces reportedly sexually assaulted dozens of women during a crackdown on opposition demonstrators in late September 2009. In Kenya, sexual violence—including rape, gang rape, and mutilation—was a feature of the violence that erupted in early 2008 following disputed presidential elections. Subsequent investigations suggest that the violence in Kenya was carried out by members of the government security forces as well as militias, humanitarian workers, and other individuals, often on the basis of perceived ethnic or political affiliation, but also opportunistically. In Zimbabwe, forces affiliated with the government have also been accused of orchestrating sexual violence for political intimidation. Survivors of sexual violence often suffer from short-term and long-term consequences with regard to their health, psychological well-being, and social integration. In addition to physical injuries, potential health consequences include sexually transmitted diseases (including HIV/AIDS), miscarriages, forced pregnancy, and traumatic fistula—debilitating tears in the tissue of the vagina, bladder, and rectum. Access to treatment and follow-up care is particularly challenging in African conflict settings, where facilities and trained staff are often insufficient, located in places that are difficult for rural inhabitants to reach, or under threat from combatants. The lingering health and reproductive effects of sexual assault can contribute to, and entrench, victims' social isolation. Researchers and advocates have reported extensively on family rejections of, and societal stigma against, rape victims in African conflict settings. Survivors of sexual violence are often shunned by spouses, their families, and their communities, as are the children born to women who have been raped. Survivors often fear reprisals by the perpetrators of abuse, who are rarely prosecuted. Individuals who attempt to report assaults may also face reprisals from law enforcement or military forces; in some countries, a woman who has been sexually assaulted can be prosecuted for adultery. In addition, societal upheaval and impunity for perpetrators may reinforce norms in which rape and other forms of sexual abuse are tolerated. Reports by humanitarian organizations suggest that male victims of sexual violence face particular challenges. While men and boys are thought to make up a minority of sexual violence victims in African conflicts, in some cases they have nonetheless been targeted for rape, sexual torture, sexual slavery, sexual humiliation, and forced incest. Just as in cases affecting women, societal stigma and legal impediments can act as barriers to assistance and treatment; indeed, male victims may be even less likely to report sexual abuse than women. Beyond the breakdown in social and political order that may occur in any warzone, African conflicts present particular challenges to efforts to prevent and respond to sexual violence. These stem from various factors, including the capacity and political will of African governments and militaries to prosecute sexual crimes; the legal and societal status of women in many countries, which may derive in turn from widespread poverty, illiteracy, and inadequate access to education; and severe pre-existing gaps in the provision of health services. At the same time, African women are not uniquely passive victims of conflict. Women have served in combatant groups in several recent African conflicts, and are often engaged as politicians and activists. In many African countries, domestic health services, particularly in rural areas, are severely overstretched, under-resourced, or near-nonexistent even in the absence of disruption related to conflict. Health clinics often lack sufficient trained personnel and supplies, including materials for treating victims of sexual violence or testing for sexually transmitted diseases. The difficulty of accessing assistance—both emergency and long-term care—is further exacerbated in conflict zones, where pre-existing health structures may have been uprooted, while humanitarian organizations' ability to operate may be threatened by logistical difficulties, threats from combatant groups, and generalized insecurity. Women and girls may also hesitate to seek care for sexual violence due to stigma; health clinics may not guarantee safety or confidentiality, further reducing the likelihood that victims will seek care. Clinic workers rarely systematically collect medical evidence of rape that can be used in judicial investigations and prosecutions. Conflict further heightens economic insecurity, making paid health care a luxury for many. In conflict settings, human rights advocates argue, there is often insufficient will on the part of all parties to reduce abuses; most recent African conflicts have been marked by frequent reported violations of international humanitarian law. In addition, advocates contend that many African countries lack sufficient domestic legal frameworks for the prosecution of sexual violence. Rape may not be codified as a crime, and victims may have difficulty accessing the justice system; instead, sexual violence is often seen as the domain of traditional or religious justice mechanisms. Some countries do not include male victims in their legal definitions of sexual violence. In several states, laws concerning sexual violence are framed so as to be unfavorable to the victim. For example, with regard to Darfur, according to Physicians for Human Rights, Sudan's laws concerning rape effectively prevent access to justice for rape victims. The law as written defines rape as the Shari'a crime of adultery ( zina )…. If a woman who claims she was raped is unable to prove that she did not consent to intercourse, she may be charged with the crime of zina , which entails corporal punishment, because she has confessed to sexual penetration outside of marriage. In addition to these serious evidentiary hurdles, members of the military, security services, police, and border guards enjoy broad immunity for their actions and permission to file a legal complaint against an alleged rapist in any of these categories must be granted by the individual's superior officer. Janjaweed [pro-government Arab militias] are integrated into the Popular Defense Forces, which is also exempt from prosecution. While some African governments, under pressure from donors and local civil society groups, have recently passed new legislation specifically addressing sexual violence—such as Kenya, Liberia, and DRC in 2006, and Sierra Leone in 2007—prosecutions are rare even in countries with appropriate laws in place. In many countries, there are multiple sources of law and legal interpretation, including the formal judicial system; religious laws; and traditional justice mechanisms. Shortfalls in law enforcement and judicial capacity also represent significant hurdles. Many African law enforcement systems lack sufficient financial resources for investigations, judicial personnel with sufficient legal training, access to and knowledge of existing legislation, and expertise in handling sexual violence cases. Obtaining medical documentation of rape is challenging in many African countries, where healthcare systems are often severely overstretched, particularly in conflict-affected areas. Moreover, judicial corruption and political influence are common phenomena throughout the continent. In addition to perceived gaps in criminal and procedural laws, in many cases the military code of justice either does not contain provisions prohibiting sexual assault, or is not strictly enforced by commanders and military leaders. Military courts, like their civilian counterparts, generally lack resources, facilities, and sufficient trained personnel, and may operate on an ad-hoc basis. Insufficient or dysfunctional military justice systems can have an impact beyond military institutions: in some countries, such as DRC, military courts have jurisdiction over various types of crimes that may be committed by civilians, including certain forms of armed assault. As in other regions, many African constitutions and statutes do not accord women equal rights under the law, which can negatively affect women's ability to inherit property, retain control of assets following divorce, or bring legal suits against men. For example, family law in DRC restricts management of property to male heads of household and prohibits married women from initiating legal actions without their husbands' authorization. In many cases, women's inferior legal status reflects wider phenomena of societal discrimination. While many African countries have ratified international human rights treaties, African domestic courts often do not take these agreements into consideration in their rulings. The international community has sought to address sexual violence in African conflicts through a variety of mechanisms. Donor countries frequently provide financial and logistical assistance for sexual violence programs, both on a bilateral basis and through multilateral humanitarian organizations. The issue has also been taken up at various times by the U.N. Security Council, both in sessions focusing on the issue of women, peace, and security, and in connection with specific African countries on the Council's agenda. U.N. agencies—such as UNIFEM, the U.N. High Commissioner for Refugees (UNHCR), and the U.N. High Commissioner for Human Rights (UNHCHR)—regularly report on sexual violence; they also oversee and implement a wide variety of efforts on a global, national, or local level to address the issue. Other international actors and inter-governmental entities engaged in the issue include NGOs, the World Health Organization, the International Organization for Migration, the World Bank, and the European Union. In addition, international courts and tribunals have been used to try combatants accused of perpetrating sexual violence in some African conflicts. The U.N. Security Council has adopted at least three resolutions focused uniquely on sexual violence in conflict. Most recently, Security Council Resolution 1888, adopted on September 30, 2009, requests that the U.N. Secretary-General appoint a Special Representative on the issue and constitute a team of experts to work with governments to prevent and address it. Resolution 1888 was adopted after Security Council Resolution 1325 (2000), which addresses the impact of war and conflict on women and highlights the need for protection of women and girls from human rights abuses; and Security Council Resolution 1820 (2008), which demands "the immediate and complete cessation by all parties to armed conflict of all acts of sexual violence against civilians with immediate effect." Pursuant to these resolutions, the U.N. Secretary-General compiles regular reports detailing conflict-related sexual violence in countries on the Security Council agenda and reporting on the status of the resolutions' implementation. The Security Council has also included provisions on the protection of civilians and the promotion of human rights, including references to sexual and gender-based violence, in the mandates of various multilateral peacekeeping missions in Africa, including those in DRC (MONUSCO), Burundi (BINUB), Côte d'Ivoire (UNOCI), Darfur (UNAMID), and Liberia (UNMIL). Reports to the U.N. Security Council by the U.N. Secretary-General on African conflict situations often include a discussion of sexual and gender-based violence. Members of the U.N. Human Rights Council support the work of the U.N. Special Rapporteur on Violence Against Women, its Causes and Consequences, who has undertaken a number of missions to African conflict settings, including DRC and Darfur; in November 2008, the Council held a special session on the situation of human rights in eastern DRC. In addition, 46 African states are parties to the U.N. Convention on the Elimination of All Forms of Discrimination Against Women (CEDAW). The U.N. Secretary-General and Department of Peacekeeping Operations (DPKO) have also attempted to enforce standards and exert oversight to diminish the reported incidence of sexual abuse and exploitation by U.N. peacekeeping troops. The recognition that sexual violence committed in wartime can be prosecuted under international law is relatively recent. This legal interpretation has evolved along with international norms prohibiting the abuse of civilians by parties to armed conflict. Notably, the 1949 Geneva Conventions classify sexual assault as a violation of the law of war and designate combatant groups as primarily responsible for preventing abuses. A number of individuals have faced international prosecution for sexual violence committed during African conflicts. Cases have taken place before country-specific special tribunals and before the International Criminal Court, which came into existence in 2002. International judicial forums have focused, to date, on sexual violence in connection with the Rwandan genocide (1994), the civil war in Sierra Leone (1992-2002), the 2002-2003 conflict in CAR, the LRA insurgency in central Africa (1986-present), the conflict in Darfur (2003-present), and the conflict in eastern DRC (1990s-present). The statutes of both the International Criminal Tribunal for Rwanda (ICTR, established by the U.N. Security Council in 1994), and the Special Court for Sierra Leone (SCSL, established in 2000 by agreement between the United Nations and the government of Sierra Leone) qualify systematic and widespread sexual violence as a war crime and crime against humanity. The ICTR has prosecuted over 60 suspects on charges of sexual violence committed during the 1994 Rwandan genocide. The first suspect to be prosecuted for sexual violence before the ICTR was a former mayor, Jean Paul Akayesu, who was tried in 1997 on accusations that he failed to prevent sexual violence against displaced women who had sought refuge in the commune over which he held authority, among other charges. The Akayesu prosecution, now considered to be a landmark case in international law, was amended to include sexual violence following efforts by advocacy groups to publicize the systematic perpetration of rape during the genocide. Crimes of sexual violence have also been a component of all but one SCSL prosecution, including the cases against leaders of the Armed Forces Revolutionary Council (AFRC) junta, against the Revolutionary United Front (RUF) rebel group, and against former Liberian President Charles Taylor, who is being tried on charges linking him to crimes committed by the RUF. The International Criminal Court (ICC) has sought to prosecute several cases pertaining to sexual violence committed in the context of African conflicts. The statute of the ICC codifies and asserts jurisdiction over serious crimes of sexual and gender-based violence, and the Court has also worked to establish procedures for the proper treatment of victims and witnesses in such cases. To date, ICC prosecutions have focused on CAR, the situation of the Lord's Resistance Army, and conflicts in Darfur and eastern DRC. Individuals sought by the Prosecutor for sexual crimes (among other alleged offenses) are: Omar Hassan al-Bashir, the president of Sudan; and Ahmad Muhammad Harun and Ali Muhammad Ali Abd-Al-Rahman ("Ali Kushayb"), respectively a former Sudanese minister of state for the interior and an alleged leader of the janjaweed militia, for alleged crimes in Darfur; Joseph Kony and four other commanders of the LRA, for alleged crimes in northern Uganda; Jean-Pierre Bemba Gombo, a former Congolese rebel leader, vice president, and senator, for alleged crimes in CAR; Germain Katanga and Mathieu Ngudjolo, both Congolese militia leaders, for alleged crimes in Ituri district, eastern DRC; and Callixte Mbarushimana, a Rwandan national and alleged leader in exile of a militia operating in eastern DRC. The Obama Administration has sought to emphasize international women's issues as a foreign policy focus. State Department officials have repeatedly referred to sexual violence as a "weapon of war" and an issue that requires U.S. attention. Secretary of State Hillary Clinton and Melanne Verveer, the Obama Administration's Ambassador-at-Large for Global Women's Issues, have spearheaded the Administration's public efforts through multiple statements, official travel, writings, and actions at the United Nations. On September 30, 2009, Clinton chaired a U.N. Security Council session on women, peace, and security in armed conflict; the session resulted in the unanimous passage of Security Council Resolution 1888, which pertains to sexual violence in conflict situations. President Obama stated that the resolution reinforced the importance his Administration places on issues of violence against women and children. In October 2010, the Administration announced its decision to develop a "National Action Plan" on the implementation and promotion of U.N. Security Council Resolution 1325 (2000), which addresses the impact of war and conflict on women and highlights the need for protection of women and girls from human rights abuses. USAID and the Department of State (DOS) are the primary U.S. government entities engaged in programs responding to international sexual and gender-based violence. Within each, functional and regional bureaus contribute to such programs, as do Embassy personnel and field staff. At DOS, these include the Bureau of African Affairs; the Bureau of Democracy, Human Rights, and Labor (DRL); the Bureau of International Narcotics and Law Enforcement Affairs (INL); the Bureau of Political-Military Affairs (PM); the Bureau of Population, Refugees, and Migration (PRM); the Office of the U.S. Global AIDS Coordinator; and the Office of Global Women's Issues (GWI). At USAID, these include the Africa Bureau; the Bureau of Global Health; the Bureau of Economic Growth, Agriculture, and Trade (EGAT); and the Bureau of Democracy, Conflict, and Humanitarian Assistance (DCHA). Other departments that support programs include the Department of Defense (DOD) and Department of Justice (DOJ). However, most U.S. entities do not consistently disaggregate efforts to address sexual violence in conflict settings from broader violence against women, women's empowerment, refugee protection, and security assistance efforts. This can make total funding and programming difficult to track. The United States maintains a number of programs aimed at addressing and preventing sexual violence in African conflict zones. Programs take many different approaches, ranging from the direct provision of medical assistance to efforts to address long-term issues seen as causal factors. In addition to bilateral assistance programs, the United States provides significant support to multilateral organizations engaged in providing care to victims, ensuring the protection of refugees and displaced persons, and managing aid focused on women and vulnerable populations. This report's case study on DRC and overview of U.S. programs there provide examples of the range and context of U.S. assistance in this area. As the issue of sexual violence in conflict zones is often rolled into larger humanitarian, security, governance, and economic development programs, precise figures on the overall level of U.S. assistance related to this issue are not available from the various participant agencies. Programs aimed at responding to sexual violence often include the provision of medical and psychological treatment or other forms of assistance to survivors or the funding or training of health service providers and counselors. Care may include the treatment of sexually transmitted diseases and medical conditions such as fistula. For example, USAID has provided funding to the Panzi Hospital in South Kivu and Heal Africa Hospital in North Kivu, which specialize in treating sexual violence victims in conflict-affected areas of eastern DRC. USAID has also supported women's health teams in rural Liberia, and PRM has funded programs to provide medical and psychological assistance to sexual violence survivors in Ethiopia, Liberia, and Sudan. Another area of assistance lies in protecting refugees and displaced populations that may be particularly vulnerable to sexual violence. Toward this end, PRM supports the work of the U.N. High Commissioner for Refugees (UNHCR) and the International Committee of the Red Cross (ICRC) to protect women and other vulnerable community-members displaced by conflict. In addition, DCHA has funded an International Rescue Committee program promoting a coordinated strategy aimed at protecting displaced women displaced by conflict or disasters from sexual violence by addressing their need for cooking and heating fuel. Separately, anti-trafficking programs have, in some cases, focused on African conflict settings. At least one program, overseen by PRM, aims to assist the victims of trafficking amid conflict in an African country; the program provides protection, return, and reintegration assistance to Congolese IDPs who were the trafficked by Ugandan military forces stationed within DRC during the 1998-2003 civil war. Content on sexual and gender-based violence is also a component of U.S. foreign police, judicial, and military training programs, in accordance with congressional directives contained in annual appropriations legislation. These programs include International Military Education and Training (IMET), INL police training programs, and the Africa Contingency Operations Training and Assistance Program (ACOTA), which, as part of the U.S. Global Peace Operations Initiative (GPOI), aims to enhance the capabilities of African militaries to serve as peacekeepers. In a few countries, notably DRC, training aimed at preventing sexual and gender-based violence has been a core component of U.S.-supported security sector reform efforts. In addition to providing assistance and training, some U.S. programs work to address underlying issues that may contribute to high rates of sexual violence. In many cases, this entails providing policy support to governments that wish to shore up legal protections against sexual violence. Some programs focus on longer-term economic empowerment as a means to address women's socio-economic status (for example, through enhanced educational opportunities for girls) and change attitudes toward sexual violence. Programs have included training for enhanced media capacity to report on the issue and capacity-building programs for legal professionals and advocates. For example, DRL has funded a project in Chad to enhance citizens' access to locally developed and broadcasted news and information on gender-based violence and women's rights issues in remote communities. USAID's economic growth activities have supported an initiative aimed at increasing awareness of gender-based violence response and prevention programs among conflict-affected populations in Liberia, Rwanda, southern Sudan, and Uganda through the use of community media. The Women's Justice and Empowerment Initiative (WJEI), a $55 million State Department program aimed at improving legal rights for victims of gender-based violence, initially focused on Benin, Kenya, South Africa, and Zambia, none of which are affected by armed conflict; the program was expanded in 2010 to include DRC. The following case study is included in this report due to the relative gravity of sexual abuse perpetrated in DRC, and due to recent high levels of attention from U.S. policy-makers, including within the Obama Administration and Congress. Active U.S. programs aimed at addressing sexual violence in DRC constitute a large share, in funding and number, of U.S. policy efforts focusing on sexual violence in African conflicts. Rape and other forms of sexual violence have been a feature of conflict in DRC going back to at least the civil war of the mid-1990s and subsequent civil and regional conflict of 1998-2003. U.N. officials have characterized sexual violence in DRC as the worst in the world, a "weapon of terror," and a war crime. The brutality of sexual violence is reportedly extreme: a study by the Harvard Humanitarian Initiative noted that sexual violence in DRC "has features rarely seen in peace-time, or indeed most wartime, settings including: forced incest; gang rape; rape in public; rape with foreign objects, and urogenital mutilation." Sexual violence survivors also often witness the torture and murder of their children and spouses. The psycho-social and health consequences, particularly for the rural populations of eastern DRC, have been devastating: pregnancy, infertility, sexually transmitted disease, and genital mutilation are prevalent among survivors, as are post-traumatic psychological impacts. Rape is highly stigmatized and frequently results in spousal abandonment, inability to marry, expulsion from the community, and homelessness. Though precise statistics are lacking, UNICEF estimated in 2008 that "hundreds of thousands" of women and girls had been raped in DRC since the mid-1990s. According to the U.N. Population Fund, over 17,500 cases of sexual and gender-based violence were reported in 2009, up from 15,500 in 2008; these figures are still thought to reflect under-reporting. Sexual violence has been reported in multiple regions, but it is particularly prevalent in the conflict-ridden east, and especially in North and South Kivu, where there is a long-running pattern of armed groups and state security forces committing brutal human rights abuses against civilian populations. Doctors without Borders reports that sexual violence in the Kivu provinces is "a problem of catastrophic proportions." The Congolese military, known as the FARDC ( Forces Armées de la R épublique Démocratique du Congo ), has largely failed to protect civilians in conflict zones, and indeed most reports state that Congolese troops are among the largest perpetrators of violence against civilians, including sexual violence, in conflict areas. Some FARDC abuses have reportedly been carried out by former combatants of the CNDP ( Congrès National pour la Défense du Peuple ) rebel group, who were integrated into the military in 2009 but have reportedly maintained unit cohesion and command structure. The Congolese police and intelligence agents have also been accused of sexual assault. Other groups implicated in widespread sexual violence include the Lord's Resistance Army (LRA), which originated in northern Uganda but is now based partly in northeast DRC, and the FDLR ( Forces Démocratiques pour la Libération du Rwand a ), a group based in eastern DRC and partly led by former participants in Rwanda's 1994 genocide. Sexual assault is sometimes reportedly carried out as part of a coordinated armed attack in which the intent appears to be "to terrorize communities into accepting their control or to punish them for real or supposed links to opposing forces." Individual fighters and groups of combatants have also reportedly frequently engaged in opportunistic rape of women and girls, at times concurrently with other apparent motives: Human Rights Watch reported in 2007 that in North Kivu, "in some cases soldiers raped women as part of the punishment meted out to communities believed hostile to their control… In other cases, soldiers raped women in the course of a theft or looting property." While women and girls are the primary targets of sexual violence, men and boys have also been victims. Displaced persons have also been frequently targeted. The prevalence of sexual violence has been attributed to the eroded status of women, weak state authority, a deeply flawed justice system, and a breakdown in community protection mechanisms. Sexual violence by the military has also been linked to waves of integration of rebel organizations into the military through successive peace accords, with little accompanying attention to military discipline or the chain of command. Military troops are poorly paid, and troops deployed in conflict areas are not provided adequate food or supplies, which is thought to encourage looting and other abuses. While most sexual crimes are carried out by members of armed groups in conflict zones, incidents of rape by civilians are also reportedly increasing, as rape may have "become trivialized and has been increasingly perpetrated in zones of relative stability." Between July 30 and August 2, 2010, an estimated 303 women were raped in a rebel attack on a group of villages near the mining town of Walikale, in North Kivu province, eastern DRC. The attackers were reportedly members of the Democratic Forces for the Liberation of Rwanda (FDLR, after the group's French acronym) and the Mai Mai-Cheka, a faction of a loose, uncoordinated network of militia fighters who broadly identify with "indigenous" Congolese ethnic groups. U.N. and humanitarian officials said the attack was unusual for its size and for the number of gang rapes: one humanitarian worker who visited the area said that most women "were raped by two to six men at a time." The U.N. special representative on the prevention of sexual violence in conflict stated that the victims were deliberately assaulted in front of family members and others as part of a systematic attempt "to put fear into society." The incident drew widespread criticism of international stabilization efforts in Congo because it occurred less than 20 miles from a forward operating base for U.N. peacekeepers, who reportedly failed to protect villagers from the attack and said they only became aware of the incident a week after the rapes took place. A U.N. official who carried out an investigation into the attack concluded that at least 257 more women had been raped elsewhere in North and South Kivu provinces during the same approximate period. In October, a leader in the Mai Mai-Cheka was arrested in connection with the Walikale rapes during a joint operation in the area by the Congolese military and U.N. peacekeepers. The Congolese parliament also condemned the mass rapes and called for reform of the security and justice sectors. On February 21, nine soldiers, including their commanding officer, were convicted of mass rape and looting following a two-week trial before a donor-supported "mobile court." The rapes allegedly occurred on New Year's Day. The commanding officer, Lt. Col. Kibibi Mutware, is one of the highest-ranked officers to stand trial for sexual violence-related offenses. Although the trial was seen as a significant demonstration of Congolese will and capacity to prosecute senior military officers for rape, it was strongly assisted by the U.N. peacekeeping mission in DRC (MONUSCO) and non-government organizations, including the American Bar Association (which receives U.S. funding for its DRC sexual violence prosecutions program) and the Open Society Initiative. The State Department hailed the verdict as a "significant milestone" and applauded the Congolese government for "taking swift and appropriate legal action" against military personnel who had perpetrated sexual violence in a conflict setting. Observers report that impunity is the norm for perpetrators of sexual crimes, and indeed most grave human rights abuses, in DRC. Still, the Congolese government has taken several steps to combat sexual violence in recent years. In 2006, the government passed new laws aimed at protecting victims and facilitating the prosecution of sexual crimes. In 2009, the Congolese government released a national gender-based violence strategy, and in mid-2009, the Congolese military announced a "zero-tolerance" policy toward soldiers who commit rape. Government authorities have initiated several prosecutions, some of which have resulted in convictions. According to the United Nations, the national police force (PNC) is "leading the establishment of sexual violence special units within PNC and is assisting to coordinate … the training of those units." The Ministry of Justice has also reportedly adopted a road-map, developed with the support of the United Nations, which, among other efforts, establishes a standard medical certificate for victims of sexual violence. Reports suggest that these efforts, however, have been limited and insufficiently implemented overall. Prosecutions remain the exception, there are no provisions for victim or witness protection, and sentences are generally minimal and rarely enforced. According to the U.N. Secretary-General, "there appears to be a lack of will to investigate and prosecute high-level military and other officials who have allegedly committed sexual violence." The U.N. peacekeeping mission in DRC, MONUSCO (formerly, MONUC), which has been in DRC since 1999, had over 22,000 uniformed personnel as of October 2010, including over 19,000 troops, of which the majority are based in North and South Kivu. MONUSCO's most recent mandate renewal, in May 2010, places the highest priority on the protection of civilians. The peacekeeping mission is also mandated to monitor human rights issues and to support the Congolese government in implementing its "zero tolerance" policy toward human rights abuses by military personnel, including by assisting military justice officials in prosecuting abuse perpetrators. In 2009, U.N. agencies and MONUSCO released a Comprehensive Strategy in the Fight Against Sexual Violence in DRC, which has been endorsed by the Congolese government and the donor community. It is structured around four pillars: (1) combating impunity; (2) prevention and protection; (3) security sector reform; and (4) multi-sectoral response for survivors. Each pillar has a U.N. lead agency and Congolese government counterpart. The Congolese Ministry of Gender is the lead partner. U.N. peacekeepers have nonetheless come under criticism for allegedly failing to protect civilians. Peacekeepers have also been criticized for providing military and logistical support to Congolese military units accused of engaging in human rights abuses, including sexual violence, though a new practice of conditioning such support on respect for human rights was announced in late 2009. Some have argued that peacekeepers should cease support for all FARDC operations in light of ongoing FARDC abuses; others have called for U.N. operations that would directly interdict FARDC attacks on civilians. In November 2009, the U.N. mission announced it would withdraw support for FARDC units accused of deliberately killing 62 civilians in one widely publicized incident. At the same time, while acknowledging "moral and practical dilemmas," U.N. peacekeeping officials maintain that withdrawal of all U.N. support for the FARDC would lead to even greater civilian suffering. Peacekeepers serving under the U.N. peacekeeping mission in Congo have been periodically accused of sexual exploitation and abuse of women and children. Such behavior is a violation of the U.N. code of conduct, and troop-contributing countries hold the responsibility to prosecute their nationals for alleged abuse while serving under U.N. peacekeeping missions. Despite various U.N. efforts, including the declaration in 2005 of a "zero tolerance" policy toward sexual exploitation and abuse, investigations by outside groups and U.N. internal oversight entities indicate that abuses by peacekeeping personnel are ongoing. Human Rights Watch contended in 2008 that "serious allegations of illegal behavior by UN peacekeepers in Congo have been ignored, minimized, or shelved, and that there is rarely accountability for the crimes that are acknowledged." MONUSCO has sought to prevent such abuses through awareness training for personnel, field assessment visits, monitoring, and investigations. The State Department characterizes DRC as a "priority focus" for U.S. efforts to prevent and respond to violence against women and girls. In August 2009, Secretary of State Clinton traveled to the city of Goma in eastern DRC, where she met with rape survivors, medical providers, health care activists, and displaced Congolese. In a speech at a hospital that treats rape victims, Clinton stated, "The United States condemns these attacks and all those who commit them and abet them. And we say to the world that those who attack civilian populations using systematic rape are guilty of crimes against humanity." The Secretary also announced $17 million in "new funding" to assist women in areas including North and South Kivu. The funds comprised an existing $7 million contract for the International Rescue Committee along with $10 million in funding designated in the Supplemental Appropriations Act, 2009 [ P.L. 111-32 ], passed two months earlier, in June 2009. Senior Administration officials continue to draw attention to the problem of sexual violence in Congo. In August 2010, following mass rapes near Walikale (see " Walikale Mass Rapes (2010) ," above), Secretary of State Clinton stated that the United States "will do everything we can to work with the U.N. and the DRC government to hold the perpetrators of these acts accountable, and to create a safe environment for women, girls, and all civilians living in eastern Congo." U.S. Ambassador to the United Nations Susan Rice also condemned the attacks and noted that they occurred despite U.N. peacekeeping patrols in the affected area; Rice said the United States would press the U.N. peacekeeping mission to enhance communication with rural communities. In October 2010, following reports of rapes along the Angola-DRC border during Angolan operations to expel Congolese migrants, State Department spokesman P. J. Crowley called for an investigation, noting that "the United States has repeatedly condemned the epidemic of sexual violence in conflict zones around the world and continues to speak out on this issue." In response to a congressional requirement contained in the FY2010 Consolidated Appropriations Act ( P.L. 111-117 ; see " Congressional Activities ," above), the Obama Administration submitted a document outlining a "U.S. Strategy to Address Sexual Violence and Gender-Based Violence in the Democratic Republic of the Congo" to Congressional committees of jurisdiction in early 2011. While acknowledging that "conditions in the DRC present a difficult environment in which to effect change," the strategy defines four objectives: reduce impunity for perpetrators of sexual and gender-based violence (SGBV); increase prevention of, and protection against, SGBV for vulnerable populations; improve the capacity of the Congolese security forces to address SGBV; and increase access to quality services for survivors. The strategy document stated that future executive branch budget requests would be developed with these goals "in mind," and that the U.S. Embassy in Kinshasa had created a working group on sexual and gender-based violence to coordinate interagency efforts to implement the strategy and monitor progress toward its objectives. In a snapshot conducted in mid-2010, the Administration identified over $170 million budgeted for active programs administered by the State Department, USAID, and the Defense Department that were aimed in part or in whole at addressing sexual and gender-based violence in DRC. These programs included broad projects aimed at encouraging good governance and the rule of law, as well as the direct provision of health assistance and counseling; the protection of refugees and displaced persons; the provision of policy support at the national level; police and military training efforts; the strengthening of military justice systems; and contributions to certain multilateral organizations. It is difficult, in connection with some of the programs identified by the Administration, to disaggregate funding for sexual and gender-based violence programs from broader program objectives. The Administration indicated that it would allocate an additional $12.8 million in FY2010 funds for programs related to sexual and gender-based violence. According to USAID, its programs in DRC have provided care and treatment services for over 100,000 sexual and gender-based violence survivors since 2002. In May 2010, the President's Emergency Plan for AIDS Relief program (PEPFAR) committed an additional $30 million to support DRC and two other African countries (Mozambique and Tanzania) in scaling up gender-based violence prevention and response efforts. The Defense Department and its U.S. Africa Command (AFRICOM) have also emphasized training in military justice, human rights law, and the law of armed conflict since mid-2009. According to AFRICOM Commander Gen. William Ward, one of the three U.S. objectives for a February-September 2010 program to train and equip a model FARDC light infantry battalion was to "reduce sexual and gender-based violence by the military." In its FY2012 Congressional Budget Request for Foreign Operations, the Administration has indicated that $59.9 million in Economic Support Funds (ESF) requested for DRC will be used partly to support "the prevention and treatment of sexual and gender-based violence," among other goals. It also requested $19 million in Peacekeeping Operations (PKO) funds toward efforts to reform DRC's military; such efforts have, in the past, been partly directed toward the prevention of sexual violence by Congolese troops. Similarly, $6 million requested in International Narcotics Control and Law Enforcement (INCLE) funds and $500 thousand in International Military Education and Training (IMET) for DRC may be partly allocated for police reform and military training (respectively), which may include training in the prevention of sexual violence. Many observers have praised the Obama Administration for its attention to the issue of sexual violence in African conflicts. Secretary of State Clinton's visit to Goma, for example, was lauded by human rights advocates and humanitarian organizations. At the same time, a number of concerns have been raised regarding the coordination, scale, and effectiveness of U.S. programs. Some have also questioned whether post-conflict (or "peaceful") settings, where sexual violence levels may be equally high, receive sufficient attention and funding. An overriding concern, as with many foreign assistance issues, is whether partner nations share U.S. priorities over the scale of the problem and the choice of programs and policies to counter it. Perceived gaps in political will, including a refusal among some governments to acknowledge rule-of-law shortcomings or recognize that state security forces play a role in the perpetration of sexual violence, may negatively impact the success of bilateral assistance programs. In some ways, debates over program design and approach highlight this issue's multi-faceted nature, which includes diverse elements related to justice sector effectiveness, military professionalism, human security, and women's socio-economic status. The emphasis of U.S. efforts to combat sexual violence in African conflicts has also evolved over time. In many instances, U.S. programs have centered around the provision of health assistance to survivors, and support to multilateral entities that provide protection to vulnerable displaced and refugee populations. However, in recent years, some policy-makers have come to see sexual violence in conflict as a security issue, and one that requires a security-oriented response; this has led to a growing interest in incorporating sexual violence issues into foreign military and police training, and on promoting the roles of women in peace processes. At the same time, the policy response to sexual violence may, in some instances, focus on the justice sector, or on long-term economic development and the socio-political empowerment of women. Some argue that donor interventions should focus attention on policy and legal advising for partner government actors. In turn, these policy evolutions have sparked debates over whether to focus assistance efforts on the direct provision of care, or on long-term support to domestic institutions, the direct results of which may be difficult to ascertain. Some maintain that sexual violence in conflict zones cannot be disaggregated from wider security trends, and that policy efforts to prevent violence should therefore be primarily aimed at providing security on the ground for all civilians. Others argue that policies should emphasize long-range attempts to address shortfalls in the health sector and the perceived societal underpinnings of sexual violence. Some further maintain that policies are, at times, designed with little input from local communities, and emphasize solutions that may not be feasible in impoverished, conflict-affected regions of Africa. Concerns have also been raised with regard to training programs, including those aimed at enhancing military professionalism and building capacity to prosecute sexual violence. In some cases, for example, insufficient infrastructure and expertise on the part of partner agencies and individual recipients of training may inhibit their ability to implement new practices. Moreover, training programs for foreign military and law enforcement personnel often last only a few days or weeks, and may not address underlying problems such as massive gaps in capacity and expertise, insufficient salaries and resources, or an inept or non-existent chain of command. Many conflict-torn African countries lack sufficient numbers of courtrooms and trained personnel, including judges, prosecutors, and investigators, to staff them; many also lack prisons or barracks in which to intern those convicted of sexual crimes. Enhanced police professionalism may not be effective in the face of a weak or corrupt judiciary. It is difficult to evaluate the impact of training programs; many agencies rely on the metric of how many individuals received training, rather than attempting to measure the holistic results or benefit of such training. The mass rapes in mid-2010 in the Walikale region of DRC caused many analysts and policy-makers to reiterate concerns over the role of U.N. peacekeeping missions in preventing sexual violence. This debate is situated within a larger inter-agency and international discussion over civilian protection in the context of multilateral peacekeeping operations, which increasingly take place in intra-state conflicts marked by high levels of human rights atrocities. While many advocates have urged troop contributors and commanders to integrate strategies for civilian protection into their activities, some argue that peacekeeping mandates and doctrine often do not provide sufficient guidance and prioritization. Moreover, advocates argue that peacekeeping missions often lack sufficient trained personnel, access to intelligence data and analysis, and "enabling assets" such as road and air transport vehicles, to effectively ensure civilian protection. Critics contend that as multi-national entities with competing policy interests, peacekeeping missions are ill-equipped to shoulder responsibility for the protection of civilians in war-torn, impoverished states. In DRC, this debate has been further influenced by the fact that the U.N. peacekeeping mission—MONUSCO—is mandated to support and assist Congolese military troops in counter-insurgency operations. The goal of this mandate is ostensibly to build capacity among Congolese troops while also directly carrying out missions to forcibly disarm and demobilize foreign-origin armed groups operating in eastern Congo, as called for under Congo's peace process. However, U.N. support for the military is controversial because Congolese troops are reportedly among the top perpetrators of abuses, including sexual assault. As noted above (see " U.N. Peacekeeping Activities "), some have argued that peacekeepers should cease support for all military operations in light of ongoing abuses, while others have called for U.N. operations that would directly interdict military attacks on civilians; U.N. peacekeeping officials maintain that withdrawal of all U.N. support for Congolese forces would lead to even greater civilian suffering. Few reliable statistics exist on sexual violence in most African conflicts, and data collection is not a component of most U.S. programs. Furthermore, little is known about the effectiveness of individual programs in reducing the scale of violence. Given necessarily limited resources, it is a matter of debate whether sexual violence programs should budget funding for data collection or monitoring and evaluation efforts. Some argue that better information is needed on the prevalence and context of sexual assault in order to inform policy decisions, and that better evaluation would allow for the establishment of best practices. Others counter that budgeting funds for data collection can reduce the amount of money available for programs themselves. Many critics allege that U.S. policy responses to address sexual and gender-based violence lack strategic focus and coordination. Some attribute this to the fact that there is no lead agency or foreign operations budgetary line item for sexual and gender-based violence programs; such programs are often funded through accounts such as Economic Support Funds (ESF), Peacekeeping Operations (PKO), International Narcotics Control and Law Enforcement (INCLE), Section 1207 authority, earmarked funds, and other sources, which may inhibit long-term planning. The U.S. response to sexual violence in African conflicts tends to be fragmented among many different agencies and implementers, often with reportedly little collaboration, cooperation, or coordination in design or implementation. The health sector is also often treated separately from the security sector, in lieu of an integrated approach. Some humanitarian advocates maintain that U.S. resources would be most effective if channeled into multilateral efforts, such as those led by U.N. agencies and programs, which may have broad expertise in Africa and the ability to coordinate assistance from various sources. Opponents emphasize that U.N. agencies may not act with the same efficiency as other potential implementers, and that U.N. activities may not always align with U.S. priorities.
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Civilians in Africa's conflict zones—particularly women and children, but also men—are often vulnerable to sexual violence, including rape, assault, mutilation, and sexual slavery. This violence is carried out by a range of actors, including government security forces, rebel groups, militias, and criminal organizations. Some abuses appear to be opportunistic, the product of a larger breakdown in the rule of law and social order that may occur amid conflict. In other cases, attacks appear to be carried out systematically by combatants as a strategic tool to intimidate and humiliate civilian populations. While such abuses are by no means limited to Africa, weak institutions in many African states can mean that victims have little redress. In addition to health and psychological consequences, survivors are also often shunned by their families and communities. Within Africa, the issue of sexual violence in conflict has been particularly prevalent in eastern Democratic Republic of Congo (DRC), where security forces, rebel organizations, militias, and other armed groups have inflicted sexual violence upon the civilian population on a massive scale. This report provides a detailed case study of DRC and an overview of the U.S. strategy to counter sexual violence there. The issue of sexual violence in conflict is complex, with implications for international programs and policies related to health, humanitarian relief, global women's issues, the justice sector, the security sector, and multilateral activities. Multiple U.S. government agencies and implementing partners contribute to efforts to prevent and respond to sexual violence in African conflicts, including the Department of State, the U.S. Agency for International Development (USAID), the Department of Justice, and the Department of Defense, among others. Secretary of State Hillary Clinton and Melanne Verveer, the Obama Administration's Ambassador-at-Large for Global Women's Issues, have taken the lead on the Administration's initiative to address the issue and have focused attention through speeches, official travel, public remarks, writings, and actions at the United Nations. Still, concerns remain among some analysts that programmatic responses to the issue have lacked coordination between donors and among implementers. Potential issues for Congress include the authorization and appropriation of targeted assistance programs and oversight of Administration policies and participation in multilateral activities. The 111th Congress repeatedly expressed interest in bringing attention to the issue of sexual violence in African conflicts and support for programs to address it through legislation, hearings, and other congressional actions. Related legislation introduced during the 111th Congress included H.Res. 1676 (Carnahan); H.R. 5121 (Clarke); S. 2982 (Kerry); H.R. 4594 (Delahunt); H.Res. 931 (Carson); and H.J.Res. 10 (Jackson-Lee). The "conflict minerals" amendment to the Dodd-Frank Wall Street Reform and Consumer Protection Act (H.R. 4173, passed into law on July 21, 2010, as P.L. 111-203), which is expected to lead to new regulations for U.S. companies that rely on certain minerals mined in central Africa, references reported links between illicit mining activities and high levels of sexual and gender-based violence in DRC. On January 7, 2011, H.J.Res. 12 (Jackson Lee), on international gender-based violence, was introduced in the House. For further background, see CRS Report RL34438, International Violence Against Women: U.S. Response and Policy Issues, coordinated by [author name scrubbed].
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The Health Insurance Portability and Accountability Act (HIPAA) of 1996 was enacted to improve the availability and continuity of health insurance coverage; promote long-term care insurance and the use of health savings accounts; and combat waste, fraud, and abuse, particularly in Medicare and Medicaid. Many of those provisions have since been expanded and superseded by other laws, most notably by the Patient Protection and Affordable Care Act (ACA). HIPAA also included a series of requirements under the subtitle "Administrative Simplification" to promote electronic record-keeping and claims processing in the health care system and to protect the privacy of electronic health information. The Secretary of Health and Human Services (HHS) was instructed to adopt electronic format and data standards for certain administrative and financial transactions that occur routinely between health care providers and payers (e.g., patient eligibility, claims processing), and list the code sets that must be used in these electronic transactions to identify specific diagnoses and clinical procedures. The Secretary also was directed to adopt unique identifiers (ID numbers) for health care providers, health plans, and employers for use in standard electronic transactions. Finally, the Secretary was required to adopt security standards—administrative, physical, and technical safeguards—to ensure the integrity and confidentiality of electronic health information and protect it against unauthorized access, use, or disclosure. HIPAA specified that the Administrative Simplification standards apply to the following three types of entities, collectively referred to as covered entities: (1) health plans, (2) health care clearinghouses, and (3) health care providers. At the end of the Administrative Simplification subtitle, lawmakers added language instructing the HHS Secretary to submit to Congress within 12 months of the law's enactment detailed recommendations for standards to protect the privacy of individually identifiable health information. The recommendations were to address patient privacy rights, procedures for exercising those rights, and uses and disclosures of patient information that should be authorized or required. Lawmakers also included a three-year deadline for enacting health privacy legislation. If Congress and the President were unable to enact such legislation by the deadline, the Secretary was instructed by regulation to adopt privacy standards based on the recommendations. HIPAA stipulated that the standards would not preempt (i.e., supersede) state health privacy laws that are more protective of medical information. On September 11, 1997, the Secretary submitted to Congress a framework and set of recommendations for health privacy legislation (see text box). Several legislative proposals were introduced and debated, but lawmakers could not reach agreement and were unable to meet the deadline (i.e., August 21, 1999) they had set for themselves to enact legislation. Consequently, the Secretary proposed and finalized a set of health privacy standards by regulation. The HIPAA Privacy Rule was published by the Clinton Administration in December 2000 and modified by the Bush Administration in August 2002. The compliance deadline for most covered entities was April 14, 2003. A companion Security Rule, composed of a set of standards to safeguard health information from unauthorized access, use, or disclosure, was published in February 2003, with a compliance deadline for most covered entities of April 20, 2005. The HHS Office for Civil Rights (OCR) administers and enforces the Privacy and Security Rules. HIPAA established civil monetary penalties for failure to comply with the Administrative Simplification standards, including the privacy and security standards. It also created criminal penalties for certain instances involving the wrongful acquisition or disclosure of individually identifiable health information in violation of the standards. OCR refers such cases to the Department of Justice (DOJ) for criminal prosecution. OCR maintains an extensive website with information on the HIPAA privacy and security standards, including information on compliance and enforcement activities. HHS finalized a HIPAA Enforcement Rule in February 2006. The rule addressed the investigation of noncompliance with the Administrative Simplification standards and the imposition of civil monetary penalties. It covered the investigation process, bases for liability, determination of the penalty amount, grounds for a waiver, conduct of hearings, and the appeals process. The Privacy and Security Rules have been contentious and the subject of ongoing debate since they were first implemented. Privacy advocates have complained about the limited scope of the rules. HIPAA applies all the Administrative Simplification standards to three entities—health plans, health care clearinghouses, and health care providers—but personal health information is handled by many other types of organizations that are not covered under the law. In an effort to address this issue, HHS took steps when it promulgated the Privacy and Security Rules to broaden their scope so that they apply to the business associates of HIPAA-covered entities. These actions were further strengthened by Congress in subsequent legislative action (discussed later in this report) to expand the HIPAA standards. Another key concern is whether the Privacy Rule strikes the right balance between protecting individual privacy and supporting important societal goals. The Secretary's 1997 recommendations recognized the importance of balancing the privacy rights of individuals and the amount of control they have over the use and disclosure of their health information, with the need to permit health information to be used not just for routine health care activities (e.g., treatment and payment) but also for other purposes related to health care that are in the public interest (e.g., oversight, research, law enforcement, public health and safety). Researchers, in particular, have criticized the Privacy Rule. They claim its privacy protections are unnecessarily impeding their access to and use of health information. These concerns, some of which have been addressed administratively by HHS, are part of a broader set of challenges posed by the rapid digitization of medical information. Since 2009, the federal government has spent over $30 billion to promote the adoption of electronic health records (EHRs) and the development of an infrastructure that allows providers, patients, and other stakeholders to share electronic health information in ways that improve health care quality and outcomes. But in order to realize the full value of EHR use, researchers need to be able to access and analyze clinical data from patient records to identify best practices, and then share those findings with others to create a learning health care system. To ensure public trust in the analytic uses of health data for learning purposes, patient privacy concerns must be effectively addressed. A lack of trust in the privacy of medical information can have important implications for both individual and population health. Surveys show that individuals may avoid needed care, withhold information from providers, or lie about their medical conditions if they are concerned about the privacy and security of their health information. The HIPAA privacy standards were developed in the late 1990s, when most medical information was still paper-based. While many privacy advocates view the Privacy Rule as a good start, one that creates a foundation of privacy protections, they are concerned that the rule does not sufficiently protect digital health information maintained and exchanged by EHR systems. Implementation of the Privacy Rule continues to challenge covered entities. The rule is complex and seeks largely to preserve the traditional right of health care providers to exercise discretion and professional judgment in deciding whether and how to use or disclose patient information. Providers who are unsure of the rule's requirements, and who perhaps have been warned of the potential penalties for violating it, will sometimes err on the side of caution. They will refuse to disclose health information in an otherwise routine situation—for example, to a family member who calls inquiring about a hospital inpatient—claiming (incorrectly) that the disclosure is prohibited by HIPAA. In fact, the Privacy Rule accommodates such routine circumstances and neither requires nor prohibits the provider from using or disclosing health information. Instead, the rule leaves that decision up to the provider. The growing number of breaches of electronic health data also has led to renewed criticism of the Security Rule, whose standards are intended to protect electronic information when stored in place and during transmission from one location to another. The standards are technology-neutral and scalable, based on the size and complexity of the organization. HIPAA-covered entities have considerable latitude in how they implement them. Congress addressed some of the concerns about the Privacy and Security Rules in the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009. The HITECH Act expanded and strengthened the privacy and security standards, principally by addressing enforcement of the standards and by establishing a breach notification requirement. The Genetic Information Nondiscrimination Act (GINA) of 2008 also amended the Privacy Rule. In addition, HHS has made other changes through administrative (non-statutory) action. This report is intended to introduce the reader to the HIPAA Privacy and Security Rules, and the accompanying enforcement and breach notification requirements. It begins with an overview of each rule as it was originally promulgated. Those sections are followed by a discussion of the HITECH Act and other significant modifications that have been made. A list of all the HIPAA Administrative Simplification standards and their location in the Code of Federal Regulations (CFR) is provided in the Appendix . The HIPAA Privacy Rule established a set of federal standards for the protection of personal health information. First, it required covered entities (i.e., health plans, health care clearinghouses, and health care providers that conduct HIPAA electronic transactions) to put in place safeguards to protect health information from unauthorized access, use, or disclosure. Second, it described the circumstances under which covered entities are permitted to use or disclose an individual's health information. Finally, the rule gave individuals certain rights with respect to their health information. Those rights include the right of access to inspect and obtain a copy of their medical information, the right to amend inaccurate or incomplete information, and the right to an accounting of certain types of disclosures of the information. The Privacy Rule covers "protected health information" (PHI) that is created or received by a covered entity. PHI is broadly defined as individually identifiable information in any form or format—oral, paper-based, electronic—that "[r]elates to the past, present, or future physical or mental health or condition of an individual; the provision of health care to an individual; or the past, present, or future payment for the provision of health care to an individual." The rule includes a de-identification standard. Health information is de-identified if 18 specified types of identifiers are removed, or if a qualified statistician, using accepted principles, determines that the re-identification risk is very small. De-identified information that meets this standard is not subject to the rule and may be used or disclosed by covered entities without regard to the rule's requirements. In the broadest sense, the Privacy Rule prohibits a covered entity from using or disclosing PHI except as expressly permitted or required by the rul e . The rule specifies only two circumstances when a covered entity is required to disclose PHI. A covered entity must disclose PHI to the individual who is the subject of the information (i.e., patient right of access), and to HHS officials investigating potential violations of the rule. The rest of the rule describes a wide range of circumstances under which it is permissible to use or disclose PHI. In all such instances, covered entities can choose whether to use or disclose PHI based on their professional ethics and using their own best judgment. Thus, the Privacy Rule seeks to preserve the discretion that health care professionals have traditionally exercised when using or disclosing patient or beneficiary information. For all uses or disclosures of PHI that are not otherwise permitted or required by the rule, covered entities must obtain a patient's written authorization. The Privacy Rule includes a minimum necessary standard for the use or disclosure of PHI. It requires a covered entity that uses or discloses PHI, or requests such information from another covered entity, to make reasonable effort to limit the information to the minimum amount necessary to accomplish the intended purpose of the use or disclosure. There are several circumstances in which the minimum necessary standard does not apply. These include health care providers sharing a patient's PHI for treatment purposes, disclosures to individuals who request access to their information, any use or disclosure for which an authorization was obtained, and uses or disclosures that are required by other law. In most instances, covered entities do not need to make a minimum necessary determination for each separate use or disclosure. The rule instructs covered entities to implement policies and procedures governing routine and recurring uses and disclosures of PHI. These include identifying persons or categories of persons within an organization who need specific types of information and limiting their access to just that information. Disclosures that are not made on a routine and recurring basis must be individually reviewed to determine the minimum amount of PHI necessary to accomplish the specified purpose. Health plans and health care providers routinely hire companies and consultants to help them operate as businesses and meet their responsibilities to patients and beneficiaries. These third parties provide claims processing, billing, legal, actuarial, accounting, transcription, data management, peer review, quality assurance, accreditation, and financial services, among others. Most of them need access to at least some patient information in order to perform those functions. Initially, the Privacy Rule did not directly regulate such "business associates" of covered entities. However, HHS in its rulemaking required covered entities to manage their business associates through contractual relationships. Covered entities were required to obtain satisfactory written assurance in the form of a Business Associate Agreement, or BAA, that their business associates would, among other things (1) use PHI only for the purposes permitted or required by the contract, and (2) implement appropriate safeguards to prevent misuse of PHI. The Privacy Rule specifies the types of information that must be included in an authorization form. Initially, the rule prohibited combining an authorization with any other legal permission to create a "compound" authorization, with a few specified exceptions. However, as discussed later in this report, the restriction on compound authorizations has since been loosened. Health care providers may not require an individual to sign a HIPAA authorization as a condition of treating the individual, unless the treatment is being provided as part of a research study. However, health plans may condition enrollment in a plan, or eligibility for benefits, on obtaining an authorization prior to an individual's enrollment in the plan, if the plan is seeking access to PHI for eligibility or enrollment determinations, or for other underwriting purposes. In general, covered entities may use or disclose PHI for the purposes of treatment, payment, and other routine health care operations with few restrictions. A covered entity may use or disclose PHI for its own treatment, payment, or health care operations. In addition, a covered entity may disclose PHI for the treatment or payment activities of a health care provider; for the payment activities of another covered entity; and for certain health care operations of another covered entity, if each entity has or had a relationship with the individual who is the subject of the PHI, and the requested information pertains to that relationship. An individual has the right to request restrictions on uses or disclosures of PHI for treatment, payment, or health care operations. For example, an individual may request that a particular medical procedure be kept confidential and not shared with other providers. The covered entity is not required to agree to such a restriction. But if they do, they must abide by the agreement, except in emergency circumstances. Under certain other circumstances (e.g., disclosures to family members and friends, disclosures from public directories maintained by hospitals and other facilities, fundraising), the Privacy Rule requires covered entities to give the individual the opportunity to object to the disclosure (i.e., opt out). The rule also permits the use or disclosure of PHI for specified "national priority purposes" that are not directly connected to the treatment of the individual. These uses and disclosures, which are summarized in the text box below, are permitted by the rule in recognition of the important uses made of health information outside of the health care context. The Privacy Rule established a series of administrative obligations for covered entities. First, they must provide individuals with a written notice that includes the following information: (1) a description of patients' rights under the rule and how to exercise those rights; (2) the legal duties of the covered entity; (3) a description of the required and permissible uses and disclosures of PHI; (4) how an individual can file a complaint with the covered entity or the HHS Secretary; (5) how the covered entity will provide a revised notice if it needs changing; and (6) a contact person for additional information. Second, covered entities are required to adopt reasonable administrative, technical, and physical safeguards in order to protect PHI from unauthorized access, use, or disclosure. The Security Rule—applicable only to PHI in electronic form—established specific standards for those safeguards. Finally, the rule requires a covered entity to designate a privacy official to develop and implement its policies and procedures for protecting PHI under the Privacy Rule. Each covered entity must train all members of its workforce on those policies and procedures. The Privacy Rule includes provisions that apply to specific types of organizations that perform health care functions covered by the rule but do not fit neatly within the definition of a covered entity. For example, an organization that is a single legal entity and conducts both covered and non-covered functions (e.g., a manufacturing company that operates a health clinic) has the option to become a "hybrid entity" under the rule. This requires the company to designate in writing the segments of its business that perform covered functions as one or more "health care components." Once this designation is made, most of the rule's requirements apply only to the health care components. They are prohibited from sharing PHI with the larger organization unless the disclosure has been authorized by the individual or is otherwise permitted by the rule. The rule's treatment of employers as sponsors of group health plans is of particular interest given the fact that so many individuals obtain their health insurance coverage through their employer. Employers are not HIPAA-covered entities, but they may need access to individual health information to administer the group health plan that they sponsor. Employees, on the other hand, are concerned that health information shared with employers may be used inappropriately to make employment decisions. In an attempt to reconcile these competing interests, the rule permits a health insurance issuer or HMO (with respect to a group health plan) to disclose certain PHI to the plan sponsor (i.e., employer) for plan administration purposes, but prohibits disclosure for employment-related actions (e.g., promotion, termination). Specifically, the following PHI may be disclosed to a plan sponsor: information on whether an individual is, or is no longer, enrolled in the plan; summary claims information stripped of all identifiers other than five-digit zip codes for the sponsor to use to obtain premium bids for providing health insurance coverage through the group health plan, or to modify, amend, or terminate the group health plan; or enrollee PHI for the plan sponsor to use to administer the plan. For such disclosures to occur, the plan documents must be amended to limit the uses and disclosures of PHI by the sponsor to those that are consistent with the rule. Furthermore, the sponsor must certify that it will not use the information for employment-related purposes, and that it will establish adequate firewalls so that only those personnel who need the information to perform functions on behalf of the group health plan have access to such information. An individual or organization who believes a covered entity is not complying with the Privacy Rule may file a complaint with OCR. The rule lists the requirements for filing a complaint. It also describes the responsibilities of covered entities to provide records and compliance reports and to permit access to information for investigations and compliance reviews. HIPAA established civil and criminal penalties for violations of all its Administrative Simplification standards, including the Privacy and Security Rules. Initially, OCR could impose a civil monetary penalty (CMP) on any covered entity that it determined had violated an Administrative Simplification requirement of not more than $100 per violation, up to a maximum of $25,000 per year for multiple violations of the same requirement. CMPs could not be imposed if (1) the violation was a criminal offense under HIPAA's criminal penalty provisions; (2) the person did not have actual or constructive knowledge of the violation; or (3) the failure to comply was due to reasonable cause and not willful neglect, and was corrected within 30 days. For certain wrongful PHI disclosures, OCR may refer the case to DOJ for criminal prosecution. The criminal penalty for a person who knowingly obtains or discloses PHI in violation of HIPAA is a fine of up to $50,000 and/or up to one year in prison. The penalty increases to $100,000 and/or up to five years in prison if the wrongful conduct involves false pretenses. It further increases to $250,000 and/or up to 10 years in prison if the offense is committed with the intent to sell, transfer, or use the information for commercial advantage, personal gain, or malicious harm. There is no private right of action under HIPAA. Individuals cannot sue covered entities or business associates for violations of the law. However, HIPAA violations may result in a variety of claims against covered entities and business associates under state law. Covered entities must comply with both the HIPAA Privacy Rule and any applicable state privacy laws unless the state laws are contrary to the Privacy Rule, in which case they are preempted by it. Contrary means that it would be impossible for a covered entity to comply with both the state and federal requirements, or that the state law is an obstacle to accomplishing the full purpose of HIPAA. There are a number of exceptions to this general preemption requirement. If the contrary state privacy law is "more stringent" than the Privacy Rule, meaning that it provides greater privacy protection, then the state law takes precedence. A state law is more stringent when it prohibits or restricts a use or disclosure that would be permitted under the Privacy Rule, or when it provides individuals with greater access to their information. Thus, HIPAA establishes a federal floor for protecting health information privacy that allows states to implement additional privacy protections. In addition, the Privacy Rule does not preempt state laws that provide for the reporting of a disease or injury, child abuse, birth, or death, or for conducting public health investigations. Nor does it preempt state laws that require health plans to report or grant access to health information for the purpose of audits, evaluation, or licensure, even if they are less protective of individuals' privacy. The HIPAA Security Rule requires covered entities and business associates to ensure the confidentiality, integrity, and availability of all electronic PHI (ePHI) that they create, receive, maintain, or transmit (see text box). Covered entities and business associates are to protect against any reasonably anticipated threats or hazards to the security of ePHI, and any reasonably anticipated uses or disclosures of such information that are in violation of the Privacy Rule. U nlike the Privacy Rule, which applies to PHI in any form or format, the Security Rules applies only to ePHI. The Security Rule and the Privacy Rule are closely interconnected. While the Privacy Rule established standards for who may have access to PHI, and for what purposes, the Security Rule created the standards for ensuring that only those who should have access to ePHI will in fact have access. When it developed the Security Rule, HHS adhered closely to the requirements of the Privacy Rule. As noted in the previous section, the Privacy Rule requires covered entities to adopt reasonable administrative, technical, and physical safeguards in order to protect PHI from unauthorized access, use, or disclosure. But the Privacy Rule does not specify what those safeguards should be. That is the purpose of the Security Rule, under which each of the safeguards—administrative, physical, and technical—is composed of a number of standards. Covered entities and business associates have considerable discretion and flexibility in how they implement the security standards. Each standard generally consists of one or more implementation specification (i.e., detailed instructions for implementing the standard) that are either "required" or "addressable." If an implementation specification is required, the organization must adopt the policies and/or procedures described for that specification. If an implementation specification is addressable, the organization must assess whether it is a "reasonable and appropriate safeguard in its environment." If the organization chooses not to implement an addressable implementation specification based on its assessment, it must document the reasons and implement an "equivalent alternative measure if reasonable and appropriate." Table 1 lists all the security standards and provides a brief summary of the policies, procedures, or programs that must be implemented to meet each one. The table also shows the implementation specifications, if any, associated with each standard and indicates whether they are required or addressable. The security standards are designed to be flexible and scalable from the largest and most complex organizations to the smallest provider practices. In deciding which security measures to use, a covered entity or business associate must take into account the size, complexity, and capabilities of the organization; its technical infrastructure, hardware, and software security capabilities; the costs of security measures; and the probability and impact of potential risks to ePHI. The security standards are technology-neutral to accommodate the continual emergence of new technologies. They do not prescribe the use of specific technologies. The initial, and most important, actions that covered entities and business associates are required to take under the Security Rule are to conduct an accurate and thorough risk analysis and develop a risk management strategy (see Table 1 ). These actions form the foundation upon which all subsequent security activities are based. The purpose of the risk analysis is to identify all the potential risks and vulnerabilities to the confidentiality, integrity, and availability of ePHI, and to determine the likelihood and magnitude of those risks. Risk management is the process used to identify and implement security measures to reduce risk to a level that is reasonable and appropriate given the organization's circumstances, and that enables it to comply with the general requirements of the Security Rule. Covered entities and business associates must ensure that risk analysis and risk management are ongoing and dynamic processes—not just a one-time activity—that reflect changes to their operations and environment. The HITECH Act included a series of provisions designed to expand and strengthen the HIPAA privacy and security standards. Many of the changes were enacted to address the concerns of privacy advocates and other stakeholders. These groups had complained that there was no notification requirement in the event of a breach of PHI, and that OCR was not adequately enforcing the Privacy and Security Rules. Among its provisions, the HITECH Act (1) established four categories of violations of the rules to reflect increasing levels of culpability, and four corresponding tiers of CMPs that significantly increased the minimum penalty amount for each violation; (2) required HHS to investigate all complaints indicating violations due to willful neglect; (3) made business associates of covered entities—and their subcontractors—directly liable for violations of Privacy and Security Rules; and (4) required covered entities and their business associates to notify individuals whose PHI was breached. In addition, the HITECH Act established new limitations on the use and disclosure of PHI for marketing and fundraising purposes; prohibited the sale of PHI in an otherwise permissible disclosure; and expanded individuals' rights to access their PHI, restrict certain disclosures to health plans, and obtain an accounting of routine disclosures of ePHI. GINA also amended the Privacy Rule by clarifying that genetic information is PHI, which was already the case, and prohibiting health plans from using or disclosing genetic information for eligibility or enrollment determination, or other underwriting purposes. As noted earlier, the Privacy Rule permits health plans to use or disclose PHI—other than genetic information—for such purposes. Most of the HITECH Act amendments to the HIPAA privacy and security standards and their enforcement, as well as the changes required by GINA, were finalized in a January 2013 "omnibus" rule. The omnibus rule also included technical and other non-statutory revisions to the HIPAA standards to improve their workability and effectiveness, most notably regarding authorizations for the use or disclosure of PHI for research. The text box summarizes significant changes made by the HITECH Act and GINA to the HIPAA standards. It includes the new requirements for research authorizations. Several of these provisions are discussed in more detail below. Prior to the HITECH Act, HIPAA applied directly to covered entities but not to business associates, which as noted earlier were regulated through contractual agreements (i.e., BAAs). Covered entities were not liable for, or required to actively monitor, their business associates. However, if a covered entity found out about a material breach or violation of the BAA, it had to take reasonable steps to remedy the situation and, if unsuccessful, terminate the contract. If termination was not feasible, then the covered entity had to notify HHS. The HITECH Act made business associates directly liable and subject to civil and criminal penalties for violations of HIPAA or their BAAs (see text box). It also clarified that subcontractors of a business associate are themselves business associates. Thus, subcontractors along the contractual chain are subject to the same compliance obligations and are directly liable for HIPAA violations. Just as business associates may use or disclose PHI only as permitted by the BAA or required by law, and may not use or disclose PHI in a manner that would violate the Privacy Rule, so subcontractors are subject to the same limitations, as documented in subcontracts. A covered entity (or a business associate) that knows of a pattern of activity or practice of its business associate (or subcontractor) that constitutes a material breach or violation of the BAA must take reasonable steps to remedy the problem and, if such steps are unsuccessful, terminate the contract. Neither covered entities nor their business associates (including subcontractors) may intimidate, threaten, discriminate against, or take any other retaliatory action against an individual who files a complaint, cooperates with investigators, or opposes unlawful actions. Pursuant to the HITECH Act, Patient Safety Organizations, health information exchange organizations and e-prescribing gateways are business associates. The omnibus rule also clarifies that while a data transmission service—acting merely as a conduit for the flow of information (including temporary storage that is incidental to the transmission service)—is not a business associate, a service that provides more persistent storage (e.g., cloud EHRs) is a business associate. The HIPAA breach notification program was established in 2009, pursuant to the HITECH Act. Under the program, covered entities and their business associates must notify all individuals affected by a breach of unsecured ePHI without unreasonable delay, but no later than 60 days after the discovery of the breach (see text box). Unsecured ePHI means information that has not been rendered unusable, unreadable, or indecipherable to unauthorized individuals through encryption. The law exempted encrypted PHI from the definition of a breach in an effort to encourage the practice of encrypting health information. Covered entities also must notify the HHS Secretary of breaches of unsecured PHI. A "major" breach affecting 500 or more individuals must be reported to the Secretary at the same time the affected individuals are notified. Entities may maintain a log of breaches involving fewer than 500 individuals and submit the log to HHS annually. OCR is required to maintain a website listing all the major breaches (i.e., affecting at least 500 individuals). The HITECH Act defines a breach as the "unauthorized acquisition, access, use, or disclosure of [PHI] which compromises the security and privacy of such information.... " The definition excludes unintentional access or use of PHI, inadvertent disclosures, and disclosures where the covered entity has a good faith belief that an unauthorized person to whom the disclosure was made would not reasonably have been able to retain the information. In its initial rulemaking to implement the breach notification program, HHS stated that the phrase "compromises the security and privacy of PHI" means "poses a significant risk of financial, reputational, or other harm to the individual." Covered entities and business associates faced with an incident involving the unauthorized acquisition, access, use or disclosure of PHI first had to determine whether it met this harm threshold. If it did, and the incident constituted a breach, then notification was required. The harm threshold was controversial. Consumer advocacy organizations and others criticized it for being too subjective and for discouraging reporting. They argued for its modification or elimination. HHS responded in the omnibus rule by removing the harm threshold and modifying the risk assessment portion of the breach notification rule to require the use of a more objective assessment. An impermissible use or disclosure of PHI "is presumed to be a breach unless the covered entity or business associate ... demonstrates that there is a low probability that the [PHI] has been compromised based on a risk assessment.... " The modified rule lists the factors that must be included in the risk assessment. Now the default is notification, and the burden is on the covered entity or business associate to perform a risk assessment to determine whether there is a low probability that PHI was compromised. If that determination is made (and documented), then the covered entity or business associate need not provide notification. The Secretary is required annually to submit a report to Congress on the number and nature of the breaches reported to OCR, and the actions taken in response to such breaches. To date, the Secretary has submitted two reports, each analyzing two years of information. The first report covers 2009-2010, and the second one covers 2011-2012. Cumulatively, through December 31, 2012, OCR received 710 reports of major breaches affecting a total of approximately 22.5 million individuals. Over the same period, OCR received 77,420 reports of breaches affecting fewer than 500 individuals. In all, these breaches affected approximately 400,000 individuals. Thus, while the major breaches made up about 1% of breach reports, they accounted for more than 98% of all the individuals who were affected by a breach of their PHI. Of all the categories of causes of breaches, theft accounted for about half of all incidents. OCR identified the following lessons learned from the two breach reports: Ensure that an organization's risk analysis and risk management plan is thorough and addresses all potential risks and vulnerabilities to ePHI, regardless of location or media. That includes ePHI on computer hard drives, USB drives, laptops, mobile phones, and other portable devices, as well as ePHI transmitted across networks. Ensure that security evaluations are conducted when there are operation changes (e.g., office moves) and technical upgrades for hardware and software so that ePHI remains secure. Ensure that ePHI stored on portable electronic devices is properly secured, including through encryption, with clear policies on the use and removal of such devices from a facility. Implement clear policies and procedures for the proper disposal of PHI in all forms. Ensure physical safeguards are in place to limit access to facilities and workstations that maintain PHI. Ensure that employees are fully trained on the organization's privacy and security policies and procedures. The HITECH Act's provisions to expand and strengthen HIPAA enforcement were in part a response to the approach taken initially by OCR to work with entities in violation of the HIPAA standards and encourage voluntary compliance through corrective action. Privacy advocates criticized the agency for not being more aggressive in its enforcement activities and for not penalizing noncompliant organizations. At the time of the HITECH Act enactment, OCR had not levied a single civil penalty against a covered entity, though cases had been referred to DOJ for criminal prosecution. The HITECH Act clarified that the criminal penalties for wrongful disclosure apply to individuals who without authorization use or disclose such information maintained by a covered entity, whether they are employees or not. This provision was prompted by a Memorandum Opinion issued by the DOJ Office of Legal Counsel in June 2005 clarifying the scope of HIPAA criminal enforcement. The opinion was interpreted by some to mean that employees of covered entities could not be held liable for a HIPAA criminal violation; only covered entities could be prosecuted directly. Table 2 summarizes the four tiers of CMPs that replaced the original HIPAA penalty of $100 per violation up to an annual maximum of $25,000 for multiple violations of the same requirement. The lowest tier applies to entities that "did not know, and by exercising reasonable diligence would not have known" of the violation. The second tier applies to violations due to reasonable cause and is likely to cover many common violations by otherwise generally compliant covered entities; for example, those that occur due to human error, despite workforce training and appropriate policies and procedures. Reasonable cause covers violations in which the entity "knew, or by exercising reasonable diligence would have known" of the violation, "but did not act with willful neglect." The final two tiers, both dealing with violations due to willful neglect, are distinguished based on whether the entity took corrective action within 30 days. Willful neglect means "conscious, intentional failure or reckless indifference to the obligation to comply." OCR must investigate whenever there is evidence of a possible violation due to willful neglect. However, the omnibus rule states that, absent indications of willful neglect, OCR will continue to seek compliance through informal, voluntary action if appropriate. The HITECH Act requires the Secretary to conduct periodic audits to ensure that covered entities and business associates comply with the Privacy and Security Rules. Unlike complaint investigations or compliance reviews, which are initiated in response to specific events or incidents, audits are based on a set of objective selection criteria. OCR developed and conducted a pilot audit program that targeted 115 covered entities representing a broad range of sizes and complexities. The audits were conducted according to a protocol that identified the processes, controls, and policies of covered entities in three areas: privacy, security, and breach notification. OCR engaged PricewaterhouseCoopers (PwC) to evaluate the pilot audit program and is using PwC's findings to finalize plans for a permanent audit program. OCR has requested additional funding to establish the audit program, which it believes will generate tools for covered entities to self-evaluate and help spread a culture of compliance within the health care sector as entities become aware of the program and its expectations. The HITECH Act requires the Secretary annually to submit a report to Congress that summarizes the number and types of complaints received; the compliance reviews and enforcement actions taken; the number of audits performed and their findings; and the Secretary's plan for improving HIPAA compliance and enforcement for the following year. The Secretary has submitted two such reports to date, each covering the same two-year period as the two breach notification reports submitted to Congress, which were described earlier. In 2009, the Institute of Medicine (IOM) released a report on the Privacy Rule's impact on research. The IOM concluded that the rule does not adequately protect the privacy of health information used for research. It also concluded that the rule, as currently implemented, impedes the conduct of important new research. The report found that there is considerable variation in how organizations that collect and use health data are interpreting and following the rule. It discussed the challenges in reconciling the Privacy Rule with other federal regulations—primarily the Common Rule —that govern human subject research. The report also examined inconsistencies between the Privacy Rule and the Common Rule, neither of which applies uniformly to all health research. For example, the Privacy Rule generally prohibited combining an authorization with any other legal permission to create a "compound" authorization, unless it was for the same study. Thus, a Privacy Rule authorization for a specific research study could be combined with Common Rule informed consent to participate in the research. But any separate research activity, such as collecting specimens or data for a central research database or repository, would require its own authorization. Unlike Common Rule informed consent, Privacy Rule authorizations also had to be study-specific; authorizations for future research were prohibited. The omnibus rule addressed some of these inconsistencies. The Privacy Rule now permits compound authorizations for any type of research activity (with limited exceptions) and allows authorizations for future research, provided the description of the future research uses is sufficiently clear that it would be "reasonable for an individual to expect that his or her protected health information could be used or disclosed for such future research."
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The Privacy Rule, which was promulgated pursuant to the Health Insurance Portability and Accountability Act (HIPAA) of 1996, comprises a set of federal standards governing the use of personal health information. The Privacy Rule generally applies to individually identifiable health information created and maintained by payers and providers of health care, collectively referred to as covered entities. The rule establishes certain individual rights, including the right to inspect and obtain a copy of one's health information; describes the circumstances under which covered entities are permitted to use or disclose health information; and requires covered entities to put in place administrative, physical, and technical safeguards to protect health information from unauthorized access, use, or disclosure. Broadly speaking, the Privacy Rule prohibits a covered entity from using or disclosing "protected health information" (PHI) except as expressly permitted or, in two instances, required by the rule. The Privacy Rule describes a wide range of circumstances under which it is permissible to use or disclose PHI. In so doing, the rule seeks to preserve the discretion that health care professionals have traditionally exercised when using or disclosing patient information. For all uses or disclosures of PHI that are not otherwise permitted or required by the rule, a covered entity must obtain a patient's written authorization. Under the Privacy Rule, covered entities generally may use or disclose PHI for the purposes of treatment, payment, and other routine health care operations. Under certain other circumstances, the rule requires covered entities to give individuals the opportunity to object to the use or disclosure of their PHI. The rule also permits the use or disclosure of PHI for various specified activities not directly connected to treatment (e.g., research, law enforcement, public health). The Privacy Rule does not specify the types of safeguards that need to be implemented to protect PHI from misuse. That is the purpose of the companion HIPAA Security Rule, under which each of the safeguards—administrative, physician, and technical—is composed of a number of standards. The security standards are designed to be scalable to the size and complexity of the covered entity, as well as technology-neutral. They include implementing security management policies and procedures, workforce security procedures, facility access controls, and controls on access to information technology (IT) systems. Each standard consists of one or more implementation specifications (i.e., detailed instructions for implementing the standard). Covered entities have considerable discretion and flexibility in how they implement the security standards. The Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 included a series of modifications to the HIPAA privacy and security standards. Many of the changes were enacted to address the concerns of privacy advocates and other stakeholders. The HITECH Act created a notification requirement for breaches of unsecured (i.e., unencrypted) PHI, increased the civil monetary penalties for violating HIPAA, and expanded and strengthened enforcement activities by the Office for Civil Rights. It also made business associates of covered entities (i.e., companies and consultants with whom covered entities share PHI to help them operate) directly liable and subject to civil and criminal penalties for HIPAA violations.
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As attention continues to focus on juvenile offenders, some question the way in which they are treated in the U.S. criminal justice system. Since the late 1960s, the juvenile justice system has undergone significant modifications as a result of United States Supreme Court decisions, changes in federal and state law and the growing perception that juveniles were increasingly involved in more serious and violent crimes. As a result, federal and state juvenile justice systems have focused less on rehabilitation and more on punishment, which may have significant ramifications for juvenile offenders once they reach adulthood. For example, recidivist statutes such as the Armed Career Criminal Act (ACCA) impose mandatory minimums based on prior convictions, including juvenile adjudications. As such, adult criminal defendants are exposed to longer terms of imprisonment based on prior juvenile misconduct. Despite this shift in focus to one more closely resembling the adult criminal justice system, juvenile offenders are not generally afforded the full panoply of rights provided to adult criminal defendants. The establishment of a juvenile court in Cook County, Illinois, in 1899 marked the first statewide implementation of a separate judicial framework whose sole concern was the problems and misconduct of children. The juvenile court was designed to be more than a court for children. The underlying theory behind a separate juvenile court system was that the state has a duty to assume a custodial and protective role over individuals who cannot act in their own best interest. As such, the separate system for juvenile offenders was predicated on the notion of rehabilitation—not punishment, retribution, or incapacitation. Because the juvenile court focused on protection rather than punishment, the juvenile proceeding was conceptualized as a civil proceeding (not a criminal one), with none of the trappings of an adversarial proceeding. By the mid-20 th century, questions arose regarding the fairness and efficacy of the juvenile justice system and its ability to effectively rehabilitate young offenders. Concerns that the differences between the adult and juvenile systems were illusory prompted the need to preserve the legal rights of children adjudicated in the juvenile justice system. As such, state courts began to expand the legal rights of juvenile offenders. The emerging focus on juveniles' rights in the state courts prompted intervention from the U.S. Supreme Court, which had traditionally deferred to the states. Beginning in the mid-1960s, the Court examined the due process rights of minors in four landmark cases: Kent v. United States , In re Gault , In re Winship , and McKeiver v. Pennsylvania . Through these cases, the Court left an indelible mark on the juvenile justice system by restricting the discretion of juvenile court judges and enumerating the constitutional rights retained by juveniles during adjudication. These decisions resulted in a hybrid juvenile justice system that renders some of the procedural rights afforded to adult criminal defendants. Some argue that this hybrid system blurs the historical distinction between the juvenile justice and adult criminal systems. The Court first recognized that the U.S. Constitution guaranteed juveniles due process rights in Kent v. United States . In Kent , the Court reviewed a District of Columbia case in which the petitioner challenged the validity of the juvenile court's decision to waive jurisdiction over him, on the ground that the procedure used by the court in reaching its decision constituted a denial of due process of law. The U.S. Supreme Court held that the waiver of jurisdiction was a "critically important" stage in the juvenile process and must be attended by minimum requirements of due process and fair treatment required by the Fourteenth Amendment. In reaching its decision, the Court expressed concern that the non-criminal nature of the juvenile proceeding was an invitation to "procedural arbitrariness" including broad judicial fact-finding. In In re Gault , the Court held that the informal procedures of juvenile courts amount to a denial of juveniles' fundamental due process rights. Although the Court recognized that juvenile courts were attempting to help juveniles, it reasoned that this worthy purpose failed to justify informal procedure, particularly when a juvenile's liberty was threatened. After a thorough examination of the history of the juvenile court system, the Court reiterated much of the criticism it raised in Kent , specifically expressing concern about the juvenile court's informality and the broad discretion of its judges. To ensure that juveniles receive the essentials of fair treatment during an adjudicatory hearing, the Court found that juveniles were entitled to certain due process rights afforded to adult criminal defendants under the U.S. Constitution. These rights include the right to reasonable notice of the charges, the right to counsel, the right to confrontation, and the right against self-incrimination. In In re Winship , the Court continued to expand the rights of juveniles by holding that the state must show proof beyond a reasonable doubt to adjudicate a minor as delinquent for an act that would be a crime if committed by an adult. The state of New York charged Samuel Winship with delinquency for stealing $112 from a woman's pocketbook in a furniture store. Having already established that juvenile proceedings must conform to due process and fair treatment, the Court considered a single issue: whether due process and fair treatment require a state to demonstrate proof beyond a reasonable doubt to hold a juvenile accountable for committing an adult criminal act. Although a New York juvenile court found Winship to be delinquent under a statute that required the state to show guilt merely by a preponderance of the evidence, the Court reversed, emphasizing that criminal charges have always required a higher burden of persuasion than civil cases. The Court expressly held that the Due Process Clause of the Fourteenth Amendment protects the accused against conviction except upon proof beyond a reasonable doubt of every fact necessary to constitute the crime with which he or she is charged. Finding that juveniles are constitutionally entitled to the reasonable doubt standard, the Court stated, "[t]he same considerations that demand extreme caution in fact-finding to protect the innocent adult apply as well to the innocent child." The Court rejected the state's argument that the delinquency adjudication is a civil proceeding that did not require due process protections, calling this argument the "civil label of convenience." By 1970, the Supreme Court had ruled that the due process notion of fundamental fairness entitled juveniles to various procedural protections in juvenile court. However, in McKeiver v. Pennsylvania , the Court held that juveniles do not have a fundamental right to a jury trial when being adjudicated in the juvenile justice system. McKeive r was a consolidation of three similar appeals involving minors adjudicated delinquent in juvenile court by judges who had rejected their requests for a jury to serve as fact-finder at their hearing. The Court narrowed the issue presented to whether the Due Process Clause of the Fourteenth Amendment ensured the right to trial by jury in the adjudicative phase of a juvenile court delinquency proceeding. After reviewing its previous juvenile court jurisprudence, the Court first considered whether the right to a jury was automatically guaranteed to minors by the Sixth and Fourteenth Amendments. Although it had never expressly characterized juvenile court proceedings as criminal prosecutions within the meaning and reach of the Sixth Amendment, the Court reiterated that the juvenile court system reflected many of the adult criminal court's punitive aspects. However, a plurality of the Court rejected the argument that adjudicatory proceedings were substantively similar to criminal trials, reasoning that a jury trial was only constitutionally required if due process required fact-finding by a jury. In support of its conclusion that a jury is unnecessary for fair fact-finding, the plurality noted that equity cases, workmen's compensation cases, probate matters, deportation cases, and military trials, among others, had been traditionally decided by judges without juries. In reaching its decision, the Court expressed doubt as to whether imposing such a right would improve the fact-finding ability of juvenile courts. In addition, the Court reasoned that imposing such a right would jeopardize the unique nature of the juvenile system and blur the distinctions between juvenile court and adult criminal court. To do so would make the juvenile system obsolete. The plurality's holding signaled the Court's return to the more paternalistic approach it had rejected in its previous opinions and marked the end of the era of expansion of procedural rights in juvenile adjudications. Arguably, the absence of a jury trial requirement in adjudicatory proceedings presents a host of questions that may warrant a reexamination of the issue. First, some are likely to argue that the increasingly punitive nature of cases adjudicated in the juvenile justice system calls into question the validity of the Court's reasoning underlying its holding in McKeiver that juveniles are not entitled to the right to a jury trial. When the Court decided McKeiver , it did so to maintain the civil and rehabilitative nature of the juvenile justice system. At the time of the decision, juvenile adjudication hearings were closed to the public, the system was informal, and the records of the juvenile adjudications were confidential and not relied on in criminal prosecutions. Currently, some juvenile adjudication hearings are open to the public, the system is more formal and adversarial, and juvenile adjudications are frequently used in criminal prosecutions for sentence enhancement. From their perspective, the civil and rehabilitative nature of the juvenile justice system has shifted to a more punitive one which more closely resembles the adult criminal justice system. Central to the McKeiver ' s holding was the Court's conclusion that juries were not essential to accurate fact-finding. However, this premise may be called into question in light of the Court's reemphasis on the importance of a jury. In a series of cases, the U.S. Supreme Court has recognized and emphasized the important role that juries play in criminal proceedings. In Duncan v. Louisiana , the U.S. Supreme Court held that the right to jury trial is fundamental and guaranteed by due process. In Williams v. Florida , the Court reaffirmed that the "purpose of the jury trial ... is to prevent oppression by the Government." The U.S. Supreme Court recognized the superiority of group decision-making over individual judgments in Ballew v. Georgia , which defined the constitutional minimum number of jurors that a state must empanel in a criminal prosecution. In Ballew , the Court, relying on empirical data, found that a jury composed of less than six members was less likely to foster effective group deliberation and more likely to lead to inaccurate fact-finding and incorrect application of the community's common sense to the facts. In addition, the court concluded that a smaller panel could increase the risk of convicting an innocent person. More recently, the Court has stressed the constitutional necessity of juries, rather than judges, making factual determinations upon which sentences are based. The Court's reasoning in Ballew and subsequent cases regarding fact-finding by juries during sentencing may call into question the Court's conclusion in McKeiver that a jury would not improve the fact-finding ability and fairness of juvenile courts. An argument can also be made that the absence of a jury trial in the adjudicatory process could lead to inequities in other criminal proceedings. For example, recidivist statutes such as the Armed Career Criminal Act impose mandatory minimums based on prior convictions, which by definition include juvenile adjudications. As such, adult criminal defendants are subjected to longer terms of imprisonment based on prior juvenile misconduct. Some state and lower federal courts have found that equating juvenile adjudications with a conviction as a predicate offense for the purposes of state recidivism statutes subverts the civil nature of the juvenile adjudication to an extent that makes it fundamentally unfair and, thus, violative of due process. One way to remedy the perceived inequities in using non-jury juvenile adjudication as sentence enhancements, critics of the current system maintain, might be to grant juveniles a right to a jury trial during adjudicatory hearings.
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As more attention is being focused on juvenile offenders, some question whether the justice system is dealing with this population appropriately. Since the late 1960s, the juvenile justice system has undergone significant modifications resulting from U.S. Supreme Court decisions, changes in federal and state law, and the growing belief that juveniles were increasingly involved in more serious and violent crimes. Consequently, at both the federal and states levels, the juvenile justice system has shifted from a mostly rehabilitative system to a more punitive one, with serious ramifications for juvenile offenders. Despite this shift, juveniles are generally not afforded the panoply of rights afforded to adult criminal defendants. The U.S. Constitution requires that juveniles receive many of the features of an adult criminal trial, including notice of charges, right to counsel, privilege against self-incrimination, right to confrontation and cross-examination, proof beyond a reasonable doubt, and double jeopardy. However, in McKeiver v. Pennsylvania, the Court held that juveniles do not have a fundamental right to a jury trial during adjudicatory proceedings. The Sixth Amendment explicitly guarantees the right to an impartial jury trial in criminal prosecutions. In Duncan v. Louisiana, the U.S. Supreme Court held that this right is fundamental and guaranteed by the Due Process Clause of the Fourteenth Amendment. However, the Court has since limited its holding in Duncan to adult defendants by stating that the right to a jury trial is not constitutionally required for juveniles in juvenile court proceedings. Some argue that because the Court has determined that jury trials are not constitutionally required for juvenile adjudications, courts should not treat or consider juvenile adjudications in subsequent criminal proceedings. In addition, some argue that the use of non-jury juvenile adjudications in subsequent criminal proceedings violates due process guarantees, because juvenile justice and adult criminal proceedings are fundamentally different. Has the juvenile justice system changed in such a manner that the Supreme Court should revisit the question of jury trials in juvenile adjudications? Are the procedural safeguards in the juvenile justice system sufficient to ensure their reliable use for sentence enhancement purposes in adult criminal proceedings? To help address these questions, this report provides a brief background on the purpose of the juvenile system and discusses procedural due process protections provided by the Court for juveniles during adjudicatory hearings. It also discusses the Court's emphasis on the jury's role in criminal proceedings and will be updated as events warrant.
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T he Social Security system provides monthly benefits to qualified retirees, disabled workers, and their spouses and dependents. Before 1984, Social Security benefits were exempt from the federal income tax. Congress then enacted legislation to tax a portion of those benefits, with the share gradually increasing as a person 's income rose above a specified income threshold. In 1993, a second income threshold was added that increased the share of benefits that are taxable. These two thresholds are often referred to as first tier and second tier. In general, the Social Security and Tier I Railroad Retirement benefits of most recipients are not subject to the income tax. However, up to 85% of Social Security benefits can be included in taxable income for recipients whose "provisional income" exceeds either of two statutory thresholds (based on filing status). Provisional income is adjusted gross income, plus certain otherwise tax-exempt income (tax-exempt interest), plus the addition (or adding back) of certain income specifically excluded from federal income taxation (interest on certain U.S. savings bonds, employer-provided adoption benefits, foreign earned income or foreign housing, and income earned in Puerto Rico or American Samoa by bona fide residents), plus 50% of Social Security benefits. The first tier thresholds, below which no Social Security benefits are taxable, are $25,000 for taxpayers filing as single, head of household, or qualifying widow(er) and $32,000 for taxpayers filing a joint return. In the case of taxpayers who are married filing separately, the threshold is also $25,000 if the spouses lived apart all year, but it is $0 for those who lived together at any point during the tax year. If provisional income is between the first tier thresholds and the second tier thresholds of $34,000 (for single filers) or $44,000 (for married couples filing jointly), the amount of Social Security benefits subject to tax is the lesser of (1) 50% of Social Security benefits or (2) 50% of provisional income in excess of the first threshold. If provisional income is above the second tier threshold, the amount of Social Security benefits subject to tax is the lesser of (1) 85% of benefits or (2) 85% of provisional income above the second threshold, plus the smaller of (a) $4,500 (for single filers) or $6,000 (for married filers) or (b) 50% of benefits. Because the threshold for married taxpayers filing separately who have lived together any time during the tax year is $0, the taxable benefits in such a case are the lesser of 85% of Social Security benefits or 85% of provisional income. None of the thresholds are indexed for inflation or wage growth. Table 1 summarizes the thresholds and calculation of taxable benefits. The two examples in Table 2 illustrate how taxable Security benefits may be calculated for a single retiree in tax year 2016. The retiree is at least 62 years of age and receives $15,000 in annual Social Security benefits—about the average for a retired worker. The examples include other (non-Social Security) income of $20,000 or $30,000. The calculation of taxable Social Security benefits depends on the level of benefits and the level of non-Social Security income. Holding benefits constant, as non-Social Security income increases, provisional income increases, and therefore the amount of taxable Social Security benefits increases. Holding non-Social Security income constant, as Social Security benefits increase, the amount of Social Security benefits that is taxable increases. Those two perspectives are illustrated in the two figures below. (The figures are for single retirees only, but they would be similar for married couples.) Figure 1 shows taxable Social Security benefits for single retirees with four different amounts of annual Social Security benefits ($10,000, $15,000, $20,000, and $25,000) as non-Social Security income increases from zero to $45,000. (Provisional income, which equals non-Social Security income plus half of Social Security benefits, is not shown directly in the figure.) Once provisional income exceeds the first tier threshold of $25,000, each additional dollar of non-Social Security income results in 50 cents of additional taxable income. For example, for someone with Social Security benefits of $10,000, no benefits are taxable unless non-Social Security income exceeds $20,000, in which case provisional income would exceed $25,000 (which equals $20,000 plus half of $10,000). Once provisional income exceeds the second tier threshold, each additional dollar of non-Social Security income results in an additional 85 cents of taxable income. As described above, the second tier threshold occurs when provisional income exceeds $34,000, at which point taxable Social Security benefits exceed $4,500. In the figure, a horizontal line marks $4,500 of taxable Social Security benefits. The amount of Social Security benefits that are taxable continues to increase as non-Social Security income increases until 85% of Social Security benefits are taxable. After that, the amount of taxable benefits is constant, as shown by the flat portions of the lines on the right-hand side of the figure. Note that the additional tax owed is less than the additional taxable income . The additional tax owed equals the additional taxable income multiplied by the taxpayer's marginal tax rate. Figure 2 shows taxable Social Security benefits for single retirees with three different levels of non-Social Security income ($20,000, $30,000, and $40,000) as Social Security benefits increase. (Provisional income, which equals non-Social Security income plus half of Social Security benefits, is not shown directly in the figure.) For people with $10,000 of Social Security benefits, those benefits would be untaxed unless non-Social Security income exceeded $20,000, at which point provisional income would exceed the $25,000 threshold (which equals half of $10,000 plus $20,000). As noted above, the additional tax owed is less than the additional taxable income , because the additional tax owed equals the additional taxable income multiplied by the taxpayer's marginal tax rate. For the same levels of non-Social Security income and Social Security benefits, a married couple will have lower taxable Social Security benefits than a single retiree. Consequently, Figure 1 and Figure 2 do not reflect the impact of taxation on a married couple filing a joint tax return. There are special considerations in which the application of the taxation of benefits formula may vary. These include lump sum distributions, repayments, coordination of workers' compensation, treatment of nonresident aliens, and withholding from wages. Each of these issues is discussed in more detail in the Appendix to this report. Although the Railroad Retirement Act prohibits states from taxing railroad retirement benefits, including any federally taxable Tier I benefits (45 U.S.C. §231m), states may tax Social Security benefits. In general, state personal income taxes follow federal taxes. That is, many states use as a beginning point for the state income tax calculations either federal adjusted gross income, federal taxable income, or federal taxes paid. All of these beginning points include the federally taxed portion of Social Security benefits. States with these beginning points for state taxation must then make an adjustment, or subtraction from income (or taxes), for railroad retirement benefits. A state may also make an adjustment for all or part or the federally taxed Social Security benefits. Some states do not begin the calculation of state income taxes with these federal tax values but instead begin with a calculation based on income by source. The state may then include part or all of Social Security benefits in the state calculation of income. As shown in Table 3 , 30 states and the District of Columbia fully excluded Social Security benefits from the state personal income tax. Seven states tax all or part of Social Security benefits but differ from the federal government, and six states follow the federal government in their tax treatment of Social Security benefits. The remaining seven states have no personal income tax. Because the income thresholds to determine the taxation of Social Security benefits are not indexed for inflation or wage growth, the share of beneficiaries affected by these thresholds increases over time. The Congressional Budget Office (CBO) projected that 49% of Social Security beneficiaries (25.5 million people) were affected by the income taxation of Social Security benefits in tax year 2014. That share has almost doubled since 1998, when 26% of beneficiaries were affected by taxation of benefits. Table 4 shows CBO's estimates for tax year 2014 of the number of Social Security beneficiaries and of the number and share of beneficiaries affected by the taxation of Social Security benefits, by level of income. The percentage of Social Security beneficiaries affected increases sharply with income. Table 5 shows how the share of benefits that are taxed increases with income. The proceeds from taxing Social Security and Railroad Retirement benefits at the 50% rate are credited to the Social Security's two trust funds—the Old-Age and Survivors Insurance (OASI) and Disability Insurance (DI) trust funds—and to the Railroad Retirement system, on the basis of the source of the benefits taxed. Proceeds from taxing benefits at higher rates are credited to Medicare's Hospital Insurance (HI) trust fund. In 2016, the OASI and DI (collectively referred to as OASDI) trust funds were credited with $31.6 billion from taxation of benefits, or 3.4% of the funds' total income. Income from the taxation of benefits in the HI fund in 2016 was $20.2 billion, or 7.3% of total HI fund income. Because the income thresholds used to determine the share of benefits that is taxable are not indexed for inflation or wage growth, income taxes on benefits will become an increasingly important source of tax revenues for Social Security and Medicare. Currently, about 35% of the total Social Security benefits are subject to income tax. CBO estimates that proportion will increase to over 50% by 2046. The income taxes collected from Social Security benefits are projected to grow from 0.2% of GDP in 2016 to 0.3% of GDP in 2046. Under the intermediate assumptions, the Social Security and Medicare trustees project that over the next 30 years, income taxes will grow from 4% of Social Security's tax revenue (i.e., non-interest income) to 6.5%. Additionally, the share will continue to grow, to over 7% by 2095. For Medicare, income tax on benefits as a share of total tax revenue (non-interest income) increases from just over 3% to around 4.7% in 2040 and later. Revenue from benefit taxes will be a smaller share of total Medicare program revenues, because in addition to tax revenue, it receives interest on trust fund balances (as does OASDI), and Medicare receives income from premiums and from general revenue. Until 1984, Social Security benefits were exempt from the federal income tax. The exclusion was based on rulings made in 1938 and 1941 by the Department of the Treasury, Bureau of Internal Revenue (the predecessor of the Internal Revenue Service). The 1941 Bureau ruling on Social Security payments viewed benefits as being for general welfare and reasoned that subjecting the payments to income taxation would be contrary to the purposes of Social Security. Under these rules, the treatment of Social Security benefits was similar to that of certain types of government transfer payments (such as Aid to Families with Dependent Children (AFDC), Supplemental Security Income (SSI), and benefits under the Black Lung Benefits Act). This was in sharp contrast to then-current rules for retirement benefits under private pension plans, the federal Civil Service Retirement System (CSRS), and other government pension systems. Benefits from those pension plans were fully taxable, except for the portion of total lifetime benefits (using projected life expectancy) attributable to the employee's own contributions to the system (and on which he or she had already paid income tax). Currently (and as in 1941), under Social Security the worker's contribution to the system is half of the payroll tax, officially known as the Federal Insurance Contributions Act (FICA) tax. The amount the worker pays into the Social Security system in FICA taxes is not subtracted to determine income subject to the federal income tax, and is therefore taxed. The employer's contributions to the system are not considered part of the employee's gross income, and are deductible from the employer's business income as a business expense. Consequently, neither the employee nor the employer pays taxes on the employer's contribution. The 1979 Advisory Council on Social Security concluded that because Social Security benefits are based on earnings in covered employment, the 1941 ruling was wrong and that the tax treatment of private pensions was a more appropriate model for tax treatment of Social Security benefits. The council estimated that the most anyone who entered the workforce in 1979 would pay in payroll taxes during his or her lifetime would equal 17% of the Social Security benefits he or she would ultimately receive. (This was the most any individual would pay; in the aggregate, workers would make payroll tax payments amounting to substantially less than 17% of their ultimate benefits.) Because of the administrative difficulties involved in determining the taxable amount of each individual benefit and to avoid "taxing more of the benefit than most people would consider appropriate," the council recommended instead that half of everyone's benefit be taxed. They justified this ratio as a matter of "rough justice" and noted that it coincided with the portion of the tax (the employer's share) on which income taxes had not been paid. This position to tax Social Security benefits was in contrast to the position of the National Commission on Social Security, established by Congress in the Social Security Amendments of 1977 ( P.L. 95-216 ). The commission did not, in its 1981 final report, include a recommendation to tax Social Security benefits. The National Commission on Social Security Reform (often referred to as the "Greenspan Commission"), appointed by President Reagan in 1981, recommended in its 1983 report that, beginning in 1984, 50% of Social Security cash benefits and Railroad Retirement Tier I benefits be taxable for individuals whose adjusted gross income, excluding Social Security benefits, exceeded $20,000 for a single taxpayer and $25,000 for a married couple, with the proceeds of such taxation credited to the Social Security trust funds. The commission did not include any provisions for indexing the thresholds. The commission estimated that 10% of Social Security beneficiaries would be subject to taxation of benefits. The commission acknowledged that the proposal had a "notch" problem, in that people with income at the thresholds would pay significantly higher taxes than those with only one dollar less, but trusted that it would be rectified during the legislative process. In enacting the 1983 Social Security Amendments ( P.L. 98-21 ), Congress adopted the commission's recommendation to tax Social Security benefits, but with a formula that gradually increased the taxable share as a person's income rose above the thresholds, up to a maximum of 50% of benefits. The formula calculated taxable benefits as the lesser of 50% of benefits or 50% of the excess of the taxpayer's provisional income over thresholds of $25,000 (for single filers) and $32,000 (for married filers). Provisional income equaled adjusted gross income plus tax-exempt interest plus certain income exclusions plus 50% of Social Security benefits. In 1993, the Social Security Administration's Office of the Actuary estimated that, if pension tax rules were applied to Social Security, the ratio of total employee Social Security payroll taxes to expected benefits for current recipients (in 1993) would be approximately 4% or 5%. The actuarial estimates were that for workers just entering the workforce, the ratio would be, on average, about 7%. Because Social Security benefits replaced a higher proportion of earnings of workers who were lower paid and had dependents, and because women had longer life expectancies, the workers with the highest ratio of taxes to benefits would be single, highly paid males. The estimated ratio for these workers (highly paid males) entering the workforce in 1993 was 15%. Applying the tax rules for private and public pensions presents practical administrative problems. Determining the proper exclusion would be complex for several reasons, including the difficulty of calculating the ratio of contributions to benefits for each individual when several people may receive benefits on the basis of the same worker's account. President Clinton proposed (as part of his FY1994 budget proposal) that the portion of Social Security benefits subject to taxation be increased from 50% to 85%, effective in tax year 1994. As under then-current law, only Social Security recipients whose provisional income exceeded the thresholds of $25,000 (for single filers) and $32,000 (for married filers) were to pay taxes on their benefits. Also as under then-current law, the first step was to add 50%, not 85%, of benefits to adjusted gross income. Because the thresholds and definition of provisional income did not change, the measure would only affect recipients already paying taxes on benefits. However, the ratio used to compute the amount of taxable benefits was increased from 50% to 85%. Taxing no more than 85% of Social Security benefits (the estimated portion not based on contributions by a recipient, including highly paid males) would ensure that no one would have a higher percentage of Social Security benefits subject to tax than if the tax treatment of private and civil service pensions were actually applied. The proceeds from the increase (from 50% to 85%) were slated to be credited to the Medicare Hospital Insurance program, which had a less favorable financial outlook than Social Security. Doing so also avoided possible procedural obstacles (budget points of order that can be raised regarding changes to the Social Security program in the budget reconciliation process). This measure was included in the 1993 Omnibus Budget Reconciliation Act (OBRA), which passed the House on May 27, 1993. The Senate version of the bill included a provision to tax Social Security benefits up to 85% but imposed it only after provisional income exceeded new thresholds of $32,000 (for single filers) and $40,000 (for married filers). When the House and Senate versions of the budget package were negotiated in conference, the conference agreement adopted the Senate version of the taxation of Social Security benefits provision and raised the thresholds to $34,000 (for single filers) and $44,000 (for married filers). President Clinton signed the measure into law (as part of P.L. 103-66 ) on August 10, 1993. Although other changes in tax law have since affected the amount of taxes paid on Social Security benefits, there have been no direct legislative changes regarding taxation of Social Security benefits since 1993. Lump Sum Distributions A Social Security beneficiary may receive a lump sum distribution of benefits owed for one or more prior years. In this situation, a beneficiary may choose between two methods for calculating the taxable portion of the lump-sum distribution: (1) include all of the benefits for prior years in calculating the taxable benefits for the current year or (2) re-calculate the prior year taxable benefits using prior year income and take the difference between the recalculated taxable benefits and the taxable benefits reported in each prior year. In either case, the additional taxable benefits are included in taxable income for the current year. In computing the taxable portion of benefits in prior years, some income sources generally excluded from the provisional income calculation are included. Repayments Sometimes a Social Security beneficiary must repay a prior overpayment of benefits. In this case, the calculation of taxable Social Security benefits is based on the net benefits—gross benefits less the repayment—even if the repayment is for a benefit received in a previous year. For married taxpayers filing a joint return, net benefits equal the sum of the couple's Social Security gross benefits less the repayment. If, however, the repayment results in negative net Social Security benefits, there are two consequences: (1) there are no taxable benefits and (2) the taxpayer may take a miscellaneous deduction as part of itemized deductions or a credit for the negative net Social Security benefits. Coordination of Workers' Compensation For individuals under the full retirement age, Social Security benefits are reduced by a portion of any workers' compensation payments (or payments from some other public disability program) received by the individual. Workers' compensation is generally not taxable. Any reduction in Social Security benefits due to the receipt of workers' compensation is still considered to be a Social Security benefit, however, so income taxes are computed based on the full (unreduced) benefit amount. Treatment of Nonresident Aliens Citizenship is not required for receipt of Social Security benefits. Nonresident aliens, under IRS definitions, may receive benefits provided they have engaged in covered employment and otherwise meet eligibility requirements. The IRS defines a nonresident alien as a noncitizen who (1) is not a lawful permanent resident (this is known as the Green Card Test) and (2) has been physically present in the United States for fewer than 31 days in the previous calendar year and 183 days in the previous three-year period, counting all the days in the calendar year and a portion of the days in the two previous calendar years (this is known as the Substantial Presence Test). In general, 85% of the Social Security benefits for nonresident aliens is taxable (i.e., none of the thresholds apply) at a 30% rate. However, there are a number of exceptions to this general rule on the basis of tax treaties such that nonresident aliens or U.S. citizens living abroad may not have U.S. Social Security benefits subject to U.S. income taxes. Withholding In general, withholding for a wage earner is based on the estimated income taxes for a full year of earnings at the periodic (weekly, bi-weekly, monthly, etc.) rate. Taxable Social Security benefits, and the associated taxes, are based on the amount of non-Social Security income earned by a recipient during the tax year. The Social Security Administration, without knowledge about the amount of other income received by a beneficiary, is unable to properly determine the amount of taxes that should be withheld from Social Security benefits. Like other taxpayers, Social Security recipients can make quarterly estimated income tax payments. The Uruguay Round Agreements Act ( P.L. 103-465 ) amended the Internal Revenue Code (IRC) to allow individuals to request that monies be withheld from certain federal payments to satisfy their income tax liability; this is commonly referred to as voluntary tax withholding. An amendment to Section 207 of the Social Security Act allowed this voluntary tax withholding from Social Security benefits. Voluntary tax withholding became effective with payments issued in February 1999. The Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA; P.L. 107-16 ) permitted voluntary withholding from Social Security benefits at rates of 7%, and equal to the bottom three tax bracket tax rates (currently 10%, 15%, and 25%). The Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 ( P.L. 111-312 ) extended the EGTRRA provisions to tax year 2012. The American Taxpayer Relief Act of 2012 (ATRA; P.L. 112-240 ) made the EGTRRA provisions permanent. Nonresident aliens residing outside the United States are subject to different tax withholding rules. Section 871 of the Internal Revenue Code imposes a 30% tax withholding rate on almost all of the U.S. income of nonresident aliens, unless a lower rate is fixed by treaty. Thus, 30% of 85% (or 25.5%) of a nonresident alien's Social Security benefits may be withheld for federal income taxes.
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Social Security provides monthly cash benefits to retired or disabled workers and their family members and to the family members of deceased workers. Those benefits were exempt from federal income tax, but in 1983, Congress approved recommendations from the National Commission on Social Security Reform (also known as the Greenspan Commission) to tax the benefits of some higher-income Social Security beneficiaries. Beginning in 1984, up to 50% of Social Security and Railroad Retirement Tier I benefits became taxable for individuals whose provisional income exceeds $25,000. The threshold is $32,000 for married couples. Provisional income equals adjusted gross income (total income from all sources recognized for tax purposes) plus certain otherwise tax-exempt income, including half of Social Security and Railroad Retirement Tier I benefits. The proceeds from taxing Social Security and Railroad Retirement Tier I benefits at up to the 50% rate are credited to the Old-Age and Survivors Insurance (OASI) Trust Fund, the Disability Insurance (DI) Trust Fund, and the Railroad Retirement system, respectively, based on the source of the benefit taxed. In 1993, the Omnibus Budget Reconciliation Act (OBRA) increased the share of some Social Security and Railroad Retirement Tier I benefits that are taxable. That law taxes up to 85% of benefits for individuals whose provisional income exceeds $34,000 and for married couples whose provisional income exceeds $44,000. The additional proceeds from that law are credited to the Medicare Hospital Insurance (HI) Trust Fund. In 2016, the federal government received $51.8 billion in revenue from taxation of those benefits. Of that, $31.6 billion was credited to the Social Security trust funds, accounting for 3.4% of its total income. The remaining $20.2 billion was credited to the Medicare HI trust fund, which equaled 7.3% of its total income. The Congressional Budget Office (CBO) projected that 49% of Social Security beneficiaries (25.5 million people) were affected by the income taxation of Social Security benefits in tax year 2014. That share will grow over time because the income thresholds used to determine the share of benefits that is taxable are not indexed for inflation or wage growth. As a result, income taxes on benefits will become an increasingly important source of income for Social Security and Medicare.
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Policy-makers and patient advocates are concerned that Medicare patients are cycling in and out of acute care hospitals too frequently and that high hospital readmission rates may be a marker of poor quality of care. Nearly 20% of Medicare beneficiaries aged 65 and over who were hospitalized in 2005 were readmitted within 30 days following their initial hospital discharge. The Medicare Payment Advisory Commission (MedPAC) estimated that these readmissions cost $15 billion per year in hospital payments and that as much as two-thirds of these readmissions may be preventable. As Medicare hospital stays have become shorter and beneficiaries' post-acute care becomes more fragmented, the movement of inpatients out of hospitals into other health care settings and the transition of Medicare beneficiaries between different post-acute providers have been identified as areas that need attention. In MedPAC's view, existing incentives to coordinate care across providers and settings are limited, because Medicare pays each provider separately and because payments to these providers are not affected by their ability or efforts to coordinate care across settings. In fact, under the existing fee-for-service (FFS) payment system, hospitals that devote resources to reducing readmissions may suffer financially (unless other patients fill the unused beds). Changes that address hospital readmissions among Medicare's FFS beneficiaries, such as placing a greater emphasis on effective discharge planning, adoption of different care management programs, and payment reforms, may improve patient care and generate cost savings for the program. The implementation of these changes becomes more complicated because readmission rates, the use of post-acute services, and hospital utilization in general, vary substantially among geographic locations. Communities with higher admission rates tend to have higher readmission rates and perhaps a greater dependence on hospitals as a site of care. Also, the type of post-acute care (if any) a beneficiary receives after the initial discharge can vary and may affect readmission rates. After a hospital stay, roughly 40% of Medicare beneficiaries are discharged to a post-acute setting providing skilled nursing care or rehabilitation services. Rates of 30-day hospital readmissions among beneficiaries discharged to skilled nursing facilities (SNFs) have been increasing over time; almost one-quarter of the Medicare beneficiaries discharged from a hospital to a SNF in 2006 were readmitted to the hospital within 30 days. MedPAC has found that the risk-adjusted rate at which Medicare covered SNF patients with any of five potentially avoidable conditions (congestive heart failure, respiratory infection, urinary tract infection, sepsis and electrolyte imbalance) were rehospitalized in 2009 was 14.2%, with considerable variation among SNFs. Under current Medicare FFS payment rules, hospitals and post-acute providers lack financial incentives to address hospital readmissions by coordinating beneficiaries' care, improving clinical information sharing, ensuring appropriate placement across the range of different post-acute settings, or addressing other inefficiencies across providers. Hospitals must comply with standards established by Medicare's Conditions of Participation (COP) to bill the program. Medicare's COP requires hospitals to have a discharge planning process that applies to all patients. Under existing regulations, hospitals are expected to evaluate whether a patient is expected to experience adverse health consequences upon discharge, develop a discharge plan and arrange for its initial implementation, and counsel the patient, family members or interested parties about the availability of post-hospital care. However, hospital discharge planning is viewed as limited in scope and influence on patient behavior. (Other factors associated with rehospitalizations and the effectiveness of hospital discharge planning are discussed in Appendix A .) Transitional care models are intended to supplement the existing hospital discharge planning process, provide patients with services both prior to discharge and after discharge from the hospital, and often emphasize targeting care for "vulnerable" chronically ill patients (those who are older, in poor health, or who have been hospitalized previously) most at risk for hospital readmission. Generally, a readmission is seen as an outcome that is preceded by a number of intermediary events that, in certain circumstances, may be addressed and remedied. From August, 2008 through July, 2011, as part of their 9 th Statement of Work (SOW) Medicare's Quality Improvement Organizations (QIOs) in 14 states have been assessing primary factors affecting readmissions to develop interventions to target these factors. In their view, the causes of readmission include Fragmented documentation of medical conditions or failure to communicate need for medical treatment; Poor patient self-management; Inadequate follow-up in the post-discharge setting; Community infrastructure and awareness problems; Insufficient patient support, including support from family caregivers; and Medication discrepancies that occur during an initial admission or following a discharge and which may result in illness or harm to a patient. QIO's work-to-date suggests readmissions can be reduced by bringing together community stakeholders to create standardized processes to support patients before and after discharge from the hospital. Other QIO readmission efforts have focused on improvements to patient and caregiver education, medication management, or use of common patient health records to improve communication of patient health information between providers within and outside the hospital setting. As discussed later in " Current Medicare Care Transition Initiatives ," QIOs efforts to address readmissions are continuing in their 10 th SOW. QIOs are also providing technical assistance to candidates seeking to participate in the Community Care Transitions Program established by the Patient Protection and Affordable Care Act (ACA as amended, P.L. 111-148 ). This report is intended to help Congress understand the complex issue of hospital readmissions and Medicare's ongoing and future activities to address those rehospitalizations. To that end, the next sections of the report will discuss factors that may influence hospital readmissions, Medicare's readmission measures, existing payment incentives for FFS reimbursement and the existing hospital COPs. The report will then discuss Medicare's efforts to provide technical and financial assistance to hospitals' efforts to improve discharge procedures and manage patients' care transitions. The final section of the report will discuss Medicare's upcoming payment initiatives to address hospital readmissions, specifically the Hospital Readmission Reduction Program (HRRP) and the bundled payment demonstrations currently proposed by the Center for Medicare and Medicaid Innovation (CMMI). There is an ongoing debate in the academic literature and among industry advocates about which factors influence hospital readmissions, and whether and how much control hospitals have over these underlying factors. The challenge facing Medicare in attempting to reduce hospital readmissions is to provide appropriate incentives, including targeted technical assistance, to encourage hospitals to address the underlying causes and then work to minimize rehospitalizations, particularly since readmissions generate additional Medicare payments for hospitals. Medicare's efforts are further complicated by a large body of research which identifies possible causes that are associated with readmissions, with limited consensus about which should be included for a fair assessment of hospital performance. The following discussion examines some of the research on these factors, including a description of the mixed evidence of their importance. Generally, research has found that Medicare beneficiaries with certain medical conditions and demographic characteristics are more likely than others to be readmitted to the hospital after a discharge. Medicare FFS claims data from 2003 to 2004 indicate that readmission rates range broadly by condition and procedure. More than three-quarters of all rehospitalizations occurred after initial admissions for medical conditions, not surgical conditions. Most rehospitalizations (regardless of whether the initial admission was for a surgical or a medical condition) were for medical conditions. Relatively high readmission rates are found for Medicare beneficiaries with multiple chronic illnesses. , , An additional factor that may be associated with readmissions is a patient's history of prior rehospitalizations. Patients with worse health—as indicated by higher clinical severity scores—have higher 30-day readmission rates than patients with lower severity scores. The differences in these readmission rates between the two groups have increased over time. Demographic characteristics, such as race, age, gender, and socio-economic status have been studied as factors influencing the likelihood of readmissions, with mixed results. The different studies of readmission risk factors varied by the target condition(s) included, analytic approach, follow-up period, and handling of deaths and hospital transfers among other features. Generally, across a number of studies assessing the significance of various risk factors for hospital readmission, there is no evidence that demographic characteristics like age, gender, or factors such as income or education consistently predict hospital readmissions. There is some evidence indicating variation in readmission rates by race and socio-economic status, cited by advocates who wish to have those factors reflected in the readmission models. , , One study examined the readmission rates of black and elderly Medicare patients receiving care at minority-serving hospitals (defined as inclusion in the top 10% of hospitals by proportion of black patients served) and non-minority serving hospitals from 2006 to 2008. It found that older black Medicare patients had higher readmission rates than white patients for three common medical conditions: acute myocardial infarction (AMI), congestive heart failure (CHF) , and pneumonia (PN), but concluded that the association of readmission rates with the site of care was consistently greater than the association with race. Some have cautioned that the inclusion of certain non-clinical factors, such as race and socio-economic status, should be avoided in statistical models used for the public reporting of health outcomes, because these factors may be related to patient quality of care that are important to capture and for hospitals to address. One concern is that including an adjustment for race or socioeconomic status lowers the performance bar for hospitals that serve a high proportion of these patients and does not provide comparable incentives to work to minimize readmissions as other hospitals. Alternatively, hospital advocates maintain that, without such an adjustment, safety-net hospitals serving these patient populations will be disproportionately affected and the resulting financial penalties (when the hospitals may already be financially strained) could reduce quality of care provided to such patient populations. Also, in their view, without such a risk adjustment, other hospitals may have an incentive to avoid treating minority and low-income patients if those populations are seen as having higher readmission rates. Simply stated, it can be difficult to assess whether the high readmission rates associated with certain categories of patients should be attributed to them or the hospitals that they predominantly use. As an additional complication, patients may not properly manage their own health conditions or use of medications and thus may be at risk for readmissions. The post-discharge period is a "vulnerable phase" for patients who may have worsening clinical conditions; without appropriate support from family members or caregivers, patients discharged from the hospital may not follow through with nutrition and diet, medication usage, and other therapies. A patient who is discharged from the hospital but does not see a primary care provider outside the hospital, may be susceptible to readmission if the patient's condition deteriorates and there is no adequate follow-up care. These situations may be mitigated if the physician who treated the patient in the hospital communicates with the patient's primary care physician or other family members, but this does not occur routinely. Moreover, families of patients may not know what post-acute care options are available to them. Alternatively, available, accessible options for post-acute or follow-up care may be limited within certain communities. Certain hospital processes and procedures could be implicated in readmissions. For instance, a hospital that does not properly assess the medications a patient was taking prior to admission may unknowingly prescribe a medication which has an interaction with one of the patient's existing medications; this could lead to an adverse event and result in a readmission. In other instances when diagnostic information or the treatment course provided to the patient during the hospitalization is not recorded, the patient's primary care provider outside the hospital may not be able to correctly diagnose or assist with the patient's condition. Additionally, communication by hospital staff and physicians to patients within the hospital is important—better patient satisfaction scores at hospitals (including patient satisfaction with discharge planning, for heart failure and pneumonia, but not for AMI) are associated with lower risk-adjusted 30-day readmission rates. Finally, hospitals currently do not have financial incentives to avoid rehospitalizations or to delay discharges. Under the current FFS system, Medicare does not reimburse for supportive services for patients (including those with complex medical conditions) even if such activities may reduce readmissions. Medicare also does not pay hospitals or other providers for transitional care services, another activity thought to reduce readmissions. For example, hospitals and other providers may not provide telephone reminders about follow-up medical appointments, medication reminders, in-home check-ups, or care coordination with outpatient providers on behalf of the patient post-discharge because these extra services are not rewarded and result in extra costs for hospitals or other providers. Additionally, shorter lengths of stay under Medicare's FFS payment system have been posited as an explanation for higher readmission rates; however, compared to higher-cost hospitals, lower-cost hospitals (which are likely to discharge patients earlier) do not have significantly higher 30-day readmission rates. Although certain studies indicate that readmission rates are associated with age, patient illness, and other factors, the specific reasons such persons are readmitted may warrant continued investigation. A variety of adverse events might occur before a hospital admission, during a hospital stay, as a patient is being discharged, or after a patient is home or in another setting that could result in rehospitalization. The reasons for readmission likely vary by person, by hospital, and by care setting, if not by locality. The Centers for Medicare & Medicaid Services (CMS) has drawn increased attention to the topic of hospital readmissions by establishing readmission measures for three common Medicare hospitalizations as quality indicators and including that data on its Hospital COMPARE website to permit public assessment of hospitals' performance in this area. The readmission measure for patients treated for heart failure (HF) was finalized in the FY2009 inpatient prospective payment system (IPPS) rule published in the Federal Register on August 19, 2008; the two other measures for readmitted patients treated initially for AMI and PN were finalized in the CY2009 hospital outpatient final rule published November 18, 2008, after endorsement of the measures by the National Qualify + (NQF). Starting June, 2009, Hospital COMPARE indicates whether a hospital's risk-adjusted relative 30-day hospital readmission rates for Medicare patients initially admitted for HF, AMI, and PN were higher, lower, or no different than the U.S. national average. Beginning in FY2010, CMS's Inpatient Quality Reporting (IQR) program also included the readmission data used to construct risk-adjusted 30-day readmission rates for these Medicare patients as quality measures. Accordingly, since then, the amount that a hospital's inpatient payment rate is increased each year could depend upon reporting the required quality data on readmission measures. As discussed in Appendix B , the three readmission models estimate hospital-specific, risk-standardized, all-cause 30-day readmission rates for patients discharged alive to a non-acute care setting with a principal diagnosis of HF, AMI, and PN. The measures include admissions to all short-stay acute-care hospitals for people age 65 years and older who are in FFS Medicare and who have a complete-claims history for 12 months prior to admission. The measures are risk-adjusted to account for Medicare patients' age, gender, past medical history, and other diseases, conditions or comorbidities that increase readmission risks. The three condition-specific readmission measures are adjusted for patient-level risk factors and account for a hospital quality of care effect using hierarchical regression modeling techniques. The FY2012 IPPS final rule indicates that CMS has adopted the same three measures for comparing hospital's readmission rates under the HRRP established by Section 3025 of ACA. Under this program, hospitals with higher-than-expected spending on readmissions for Medicare FFS beneficiaries initially hospitalized with one of these three principal diagnoses will be penalized starting in FY2013. The penalty will be capped at 1% of a hospital's base payments for all its Medicare discharges in FY2013, 2% in FY2014, and 3% in FY2015 and subsequently. CMS has established its three readmission measures as all-cause readmissions of an aged beneficiary to the same hospital or a different hospital within 30 days of the original (index or initial) admission, with limited exclusions of subsequent admissions. Academics, other policy makers, and organizations have used different time periods and definitions to measure readmissions. Also, unlike an all-cause measure, other approaches to readmission measures attempt to identify preventable admissions and use different methods to distinguish those readmissions that might be avoided and those that might not be avoided. As noted by certain hospitals and their advocates, these different methods can result in different relative readmission rates for hospitals, a comparative analyses that may have financial implications for their Medicare payments starting in FY2013 when the penalties are implemented. Also, although Medicare's all-cause readmission measures do exclude certain readmissions, according to hospital advocates they do not exclude a sufficient number of planned readmissions related to the original admission or, as directed by statute, a sufficient number of unrelated readmissions. Finally, hospital advocates fear that the HRRP program may end up penalizing hospitals unfairly for those factors affecting readmissions that are out of their control. This is expressed as a particular concern for safety-net hospitals that serve challenging patient populations within limited financial if not clinical resources. However, as discussed subsequently, CMS has implemented other policy initiatives and demonstration projects to provide technical and financial assistance to address fundamental causes of rehospitalizations, particularly for certain low-performing providers. Policy makers have longstanding concerns about the financial and quality incentives in a FFS payment system. Generally, under FFS, a provider receives a payment, set in advance, for each service, bears the risk for the number and costs for inputs that comprise that service, but has no limit on the number of services provided. Most typically, payment is made regardless of quality or outcomes. The current design of Medicare's IPPS for acute care hospitals in particular (and FFS generally) does not provide incentives to hospitals to contain avoidable readmissions for beneficiaries or to improve the quality of care provided. Medicare now pays for all readmissions except when patients are rehospitalized within 24 hours after discharge for the same condition for which they were originally hospitalized. Under existing payment incentives, hospitals could lose income by reducing readmissions, as fewer rehospitalizations would result in fewer billable discharges. Under Medicare FFS, hospitals and physicians are usually paid separately, even if a physician is working in the hospital. In fact, although IPPS hospitals are usually paid on a per-case basis, physicians are typically paid on a per-service basis. Similarly, post-acute care providers of post-hospital care are each paid separately and receive more reimbursement for each Medicare admission or episode of home health care. Under IPPS, Medicare pays for most acute-care hospital stays using a prospectively determined payment for each discharge, intended to cover the services provided during a hospital stay; any differences between Medicare payments and hospital costs, either profits or losses, are absorbed by the hospital. In essence, hospitals are financially rewarded for the efficient delivery of medical and surgical care and are more likely to discharge patients earlier. These incentives to provide efficient care also extend to the amount of resources that hospitals dedicate to discharge planning. Hospitals that participate in the Medicare program are required by Medicare's COP to provide discharge care instructions to Medicare beneficiaries. These requirements are subject to survey and recertification efforts by state agencies or by CMS-approved accrediting bodies. The Medicare discharge-planning COP regulation (42 CFR 482.43) requires Medicare participating hospitals (more than 90% of all acute-care hospitals in the United States) to have a discharge planning process that applies to all patients. The hospital is required to identify all patients who are expected to experience adverse health consequences upon discharge at an early stage of hospitalization. The hospital must provide a discharge-planning evaluation to these patients and to other patients upon request; this evaluation must be done on a timely basis and must include an evaluation of the patient's likely need for and availability of post-acute services. This information must be included in the patient's medical record and the hospital must discuss the evaluation results with the patient or patient's representative. The hospital must develop any necessary discharge plan and arrange for its initial implementation. The hospital must counsel the patient, family members or interested parties as necessary to prepare them for post-hospital care and advise them of its availability. The hospital must transfer or refer patients along with necessary medical information to appropriate facilities, agencies, or outpatient services as needed for follow-up or ancillary care. Despite these requirements, some studies have found instances in which discharge planning is incomplete and necessary information is not provided by hospitals to physicians and post-acute providers in a timely manner. A literature review of 55 observational studies published between 1970 and 2005 indicated that primary care physicians considered the following information to be among the most important components of discharge information: a patient's main diagnosis; pertinent physical findings; results of procedures and laboratory tests; and discharge medications, with reasons for any changes to the previous medication regimen; among other information. However, these studies also found that audits of hospital discharge documents, which are often physician-dictated and transcribed, demonstrated a frequent absence of such information. In addition, only between 12% and 34% of physicians treating a patient after a hospital discharge had a copy of the patient's hospital discharge summary. Another analysis of discharge summaries of adults 70 years and older at an academic teaching facility found that 74% of summaries did not include pending test results and 82% of the summaries did not include information regarding patient's final cognitive status. Generally, outpatient physicians who do not have complete and timely information about a patient's case may not make adequate follow-up care decisions. The evidence regarding the impact of hospital discharge planning activities as now conducted on hospital readmissions may depend upon measures used to assess discharge planning. A study used two different discharge planning measures to evaluate CHF and PN readmissions. It found no association between CHF readmission rates and a measure based on whether discharge planning was documented in the medical record chart. (As noted by the author, this measure may simply capture whether hospitals document their activities, not the adequacy of the process or the sufficiency of the information conveyed to patients, caregivers, and post-acute providers.) There was only a modest association between PN and CHF readmissions and a readmission measure based on the patient-reported experience with discharge planning. In fact, there was only a weak correlation between the two discharge measures. As discussed in the next section, there is a body of work that supports the importance of comprehensive and timely discharge planning as a strategy to reduce hospital readmissions. A meta-analysis of 8 studies of HF patients receiving comprehensive discharge planning, which generally entails post-discharge activities, had 75% the risk of hospital readmission compared to patients with HF treated with usual care. A systematic review of 21 randomized controlled trials with patients having a mix of medical and surgical conditions found that patients with an individualized discharge plan, compared to those without an individualized discharge plan, had 85% of the readmission risk. In its June 2011, report, MedPAC recommended that the hospital COP be updated to encourage the adoption of different processes that are thought to improve patient outcomes. For instance hospitals could be required to get discharge instructions to the appropriate community provider within 48 hours of discharge (which is thought to reduce hospital readmission rates). On October 24, 2011, CMS published proposed changes to the hospital (and critical access hospital) COP, primarily to streamline burdensome or dated regulations. These regulations were finalized on May 16, 2012 and become effective July 16, 2012. There were no modifications to the existing hospital discharge planning requirements. The following section will discuss recent and ongoing efforts to identify certain systemic causes and structured approaches to address Medicare rehospitalizations within specific providers and communities, including the recently implemented pilot project, the Community Based Care Transitions Program. Prior to the enactment of ACA, from August 2008, through July 2011, during its 9 th SOW, QIOs in 14 states collaborated with providers in selected communities to identify the underlying causes of hospital readmissions in their communities and then develop different strategies to prevent those rehospitalizations. QIOs sought to identify causes of poor transitional care and to develop targeted intervention strategies in order to improve patient outcomes, such as reducing 30-day readmission rates. The Care Transitions Quality Improvement Organization Support Center (QIOSC)—which assisted Medicare QIOs in the care transition project—found three fundamental causes of patient readmissions: (1) declining health conditions that were not being properly managed, (2) medication regimens that were not appropriate, and (3) inappropriate use of emergency rooms (rather than using other types of medical services). The QIOSC attributed these problems to three systemic gaps in care for patients: Lack of engagement or activation of patients and families into effective post-acute self management, Lack of standard and known processes among providers for transferring patients and medical responsibility, and Ineffective or unreliable sharing of relevant clinical information. To address these gaps, QIOs worked on different approaches to (1) engage (or activate) patients; (2) develop standard, known discharge processes, including scheduling necessary follow-up care; and (3) ensure that clinicians and providers have necessary, timely information on the patient's condition and need for follow-up care. Table 1 provides a brief summary of underlying causes of hospital readmissions, their significance for readmissions as well as specific interventions thought to address those contributing factors. This information is supplemented by the discussion in Appendix A of this report. As part of the 10 th SOW which began August 1, 2011, QIOs will work to reduce readmissions 20% by 2013 which would prevent the rehospitalization of an estimated 1.6 million hospital patients, among other goals. QIOs will also provide technical assistance to candidates seeking to participate in Community Care Transitions Program (discussed next) and other communities. Section 3026 of the ACA establishes a five-year community-based care transitions program (CCTP) for eligible entities beginning January 1, 2011, to test models for improving care transitions for high-risk Medicare beneficiaries. An eligible entity is an IPPS hospital with high readmission rates or certain community based organizations (CBOs) that provide care transition services. Consideration is given to CBOs working with multiple high readmission hospitals in the community. Preference is given to entities that participate in the care transitions program administered by the AoA or that provide services to medically underserved populations, small communities, and rural areas. Consideration is given to physician practices (particularly primary care practices) that meet the statutory CBO definition, to programs that have established care management interventions with state Medicaid programs and those who have established relationships with primary care medical homes serving Medicare beneficiaries (described subsequently). As noted by CMS, awardees are expected to work closely with accountable care organizations (ACOs) and medical homes developed in their communities, as it is ultimately the responsibility of the delivery system to manage care transition and the services needed to support them. The goals of the CCTP are to improve transitions of high-risk beneficiaries from the inpatient hospital setting to other care settings, to improve quality of care, to reduce readmissions for high-risk beneficiaries, and to document measureable savings to the Medicare program. To this end, Medicare plans to spend $500 million for this five-year program beginning in January 1, 2011. CCTP may be continued or expanded if the Office of the Actuary (OACT) certifies that the expansion would reduce Medicare spending without reducing quality. CMS has published a solicitation for applications from entities interested in participating in the CCTP. CCTP applications must describe the root cause analysis that informed the selection of the proposed intervention and target population. These applications also include information about the beneficiary notification process which tells them about participation in the program and information about the applicant's implementation strategy (including recruitment strategy and contingency plans for achieving beneficiary participation thresholds). Applicants must have prior experience with successfully managing care transitions and reducing readmissions. Entities are awarded a two-year agreement that may be extended—based on their performance—on an annual basis for the remaining three years. Applicants must provide a budget and a per eligible discharge rate for transitional care services. Entities selected to participate are paid a per eligible discharge rate to cover the direct costs of care transition services, and are paid by CMS on a monthly basis for services delivered in the previous month. CMS has selected the Lewin Group, a health care consulting organization, to provide support to entities selected to provide transitional care services. The Lewin Group and its team will provide technical assistance and guidance for an estimated 500 CBOs and hospitals expected to be involved in the project. Lewin will gather best practices through site visits and facilitate peer-to-peer information sharing through online collaboration and national meetings. On November 18, 2011, CMS made the first seven site selections for CCTP. An additional 23 sites were selected to participate in CCTP on March 14, 2012. Other awards will be issued on a rolling basis until the $500 million funding ceiling is reached. The statutory language establishing the CCTP indicated that the care transition interventions could include (1) initiating transition services no later than 24 hours prior to discharge, (2) arranging timely post-discharge follow-up to educate patients and caregivers about responding to their own health symptoms, (3) providing assistance to ensure productive and timely interactions between patients and post-acute and out-patient providers, (4) providing self-management support (or caregiver support), and (5) conducting medication review, counseling, and management support. The intervention may not include payment for discharge planning services required under Medicare COP. In the CTTP solicitation, CMS provides information about certain evidence-based care transitions models that were jointly funded by AoA and CMS. Entities participating in the program are not required to use these transition models, but consideration is given to applicants proposing to use the following care transition models: The Care Transitions Initiative (CTI) is a four-week program which provides a nurse transition "coach" (an advanced practice nurse) to assist patients with complex care needs, and their families, in being more assertive during care transitions, to have continuity of care across settings, and have their needs met in any care setting. In a randomized controlled trial involving 750 subjects aged 65 and older in a large, integrated delivery system in Colorado, patients receiving the CTI had lower readmission rates at 30 days and at 90 days and lower mean hospital costs than those patients without the CTI intervention. In addition, a qualitative review of the results appeared to indicate improved self-management and confidence about what was required by study participants who received the intervention. A number of hospitals and health systems have implemented the CTI model, including the implementation of CTI in 2007 in 10 California locations as part of a one-year, $650,000, effort funded by the California Health Care Foundation. The Transitional Care Model (TCM) created by a team based at the University of Pennsylvania (including testing in three completed National Institutes of Health funded randomized, controlled clinical trials), establishes a transitional care team led by an advanced practice nurse who has a masters degree in nursing. This transitional care nurse (TCN) treats a patient before, during, and after discharge from the hospital and specifically targets chronically ill high-risk older adults. In a multi-site randomized control trial for persons age 65 and older and hospitalized with heart failure, the intervention TCM group had fewer readmissions in one year following hospital discharge. The total cost of care for the intervention group was 39% lower per patient than for the control group. Project BOOST (Better Outcomes for Older Adults through Safe Transitions) has a toolkit which aims to improve care transitions for older adults. The intervention sponsored by the Society of Hospital Medicine and the John A. Hartford Foundation, involves a risk assessment of the patient on eight dimensions with risk-specific interventions developed to target specific patients. The patient's understanding of his or her situation as well as readiness to be discharged is assessed at different points during the hospital stay. Project BOOST is associated with improved quality of life, increased involvement and satisfaction with hospital discharge care and improved communication between the hospital and physicians. Re-Engineered Design (RED) consists of a set of 11 actions taken primarily during a hospital stay by discharge advocates (registered nurses) to address care transition elements. In a study involving Project RED, 370 patients participating in the project were one-third less likely to be readmitted to the hospital or visit the emergency department than patients who did not participate in the project. Compared to roughly one-third of patients not in the project who left the hospital with a follow-up appointment, almost all project participants had an appointment at that time. Also, more than 90% of participants' primary care physicians received patient discharge information within one day of leaving the hospital. Medication review by pharmacists of project participants also successfully identified a number of medication errors. and Transforming Care at the Bedside (TCAB) was created through a partnership between the Institute for Healthcare Improvement and the Robert Wood Johnson Foundation in 2003 in order to address safety and quality of patient care in hospitals and to improve staff satisfaction. One aspect of TCAB addresses transitional care and encompasses (1) assessing the patient's post-discharge options at the time of hospital admission ; (2) educating the patient and family caregiver and confirming their understanding of discharge instructions; (3) providing medication information to outpatient providers seen after leaving the hospital; and (4) scheduling post-acute care follow-up for high-risk patients, or providing a follow-up phone call and scheduled physician office visit to moderate risk patients. An assessment found the intervention was associated with reductions in patient wait times and an increase in patient and staff satisfaction, among other benefits. Generally, these models aim to provide (1) care coordination between the hospital and post-hospital settings and providers; (2) education of patient and family caregivers; (3) follow-up monitoring of a patient's health status after discharge; and (4) care from a transitional coach or team to manage clinical, psychosocial, rehabilitative, nutritional, and pharmacy needs after discharge. The scope of the intervention (and therefore the associated costs) with respect to patients targeted, as well as the duration and types of services involved, will vary by care transition model. Table 2 summarizes key features of the five different care transition models. Among other goals, CCTP seeks to document whether Medicare can realize measurable program savings by paying for care transition services. Evaluations of the earlier Medicare Care Coordination Demonstration (MCCD) or the Medicare Health Support (MHS) Pilot Program did not find that care coordination programs resulted in clear improvements to patient quality of care or lower Medicare's costs. Still, an examination of the more successful MCCD participants indicates that care coordinators should interact with patients in person rather than by telephone only and should collaborate closely with patients' physicians to influence their care. At this point, experts suggest that the most effective intervention for care coordination with respect to cost savings and quality improvement would include a proven care transitions program. However, hospitals or other entities may face certain difficulties in implementing or sustaining care transitions initiatives. Patient participation rates in these programs have been low, as a substantial proportion of patients were not interested in enrolling in the transitions programs or receiving home visits. One study found that exposing heart failure patients to a transitions program led to a nearly 50% reduction in 30-day readmission rates. Looking at the program expenditures, hospital costs and patient revenues, the study found that the contribution of each patient to the hospital's profit margin was reduced by $227 using a care transitions program, compared to the status quo. Each participating hospital lost roughly $750 of revenue on average for each patient participating in the program. The authors speculate that even after implementation of the readmission penalties, hospitals still would not have a financial incentive to pay for transitions programs. In their view, potential future payment reforms, such as bundled payments or payment based on episodes of care, may be necessary to encourage integration of the delivery system along with the effective use of coordination of care and improved transitional care programs. These conclusions were supported in a cost analysis of different clinical interventions and a simulation of alternative payment incentives using data from New York state. Generally, a hospital's response would depend both on its circumstances and the payment incentives established by the different payors. The study examined pay-for-performance (P4P) and episode-based payments. The P4P simulation assumed that each hospital would receive a reduced payment if its readmissions exceeded a benchmark. With this payment design, a payer would retrieve savings immediately even if hospital behavior did not change because low-performing providers were paid less when they exceeded the benchmarks. High-performing hospitals' payments were not adjusted. Although high performers have no financial incentive to reduce readmissions further, low-performing hospitals were seen as having the greatest potential for reducing aggregate readmissions. In this simulation however, only 7% of low-performing hospitals respond to the payment penalty by implementing a program, such as CTI or Project RED, to reduce readmissions. As discussed in the next section, the financial incentives for episode-based payments are markedly different than bundled payments under FFS. Under episode-based payment structures as modeled in the simulation, at least half of the hospitals in New York state could be motivated to implement either CTI or Project RED. As well as establishing CCTP to assist certain high readmission hospitals with care transitions, ACA included several payment initiatives to encourage FFS providers, particularly hospitals, to work to minimize rehospitalizations, if not coordinate patient care across settings. This section will discuss the Hospital Readmission Reduction Program (HRRP), the national pilot program included in ACA, and the national bundled payment pilot program established by the Center for Medicaid and Medicare Innovation (CMMI). Section 3025 of ACA establishes the HRRP which will reduce Medicare's payments to hospitals with higher than expected readmission rates starting for discharges on October 1, 2012. In FY2013 and FY2014, CMS has been directed to select high-volume and high-expenditure conditions that have readmission measures that are endorsed by NQF. In FY2015, the readmission measures will be expanded (to the extent practicable) to include the additional four conditions identified by MedPAC in its June 2007, Report to Congress and to other appropriate conditions. For those measures, the Secretary may use measures without NQF endorsement as long as due consideration is given to any endorsed measures. Under the program, acute-care hospitals with excess readmissions will have their base operating DRG payment amounts (for all Medicare discharges) reduced by an adjustment factor. The adjustment factor selected is the one that would result in the least amount of penalty for the hospital. Specifically, the HRRP adjustment in a fiscal year will be the greater of: (1) a floor adjustment factor of 0.99 in FY2013; 0.98 in FY2014 and 0.97 in FY2015 and beyond or (2) an excess readmissions ratio based on a hospital's adjusted actual or predicted readmissions versus adjusted expected readmissions (which is used to calculate the amount of excess payments for the applicable conditions and then divided by the hospital's total operating base payments for Medicare to derive a penalty percentage). MedPAC has estimated that the aggregate HRRP penalties will be approximately 0.2% of Medicare's IPPS payments in 2013. CMS is implementing this program over two years. In the FY2012 IPPS rate-setting process, CMS finalized the readmission measures and related methodology, the calculation of the readmission rates, and the public reporting of the data. While the 2012 rule included a general discussion of the payment adjustment model, specific information regarding the payment adjustment will be included in next year's IPPS rule. In FY2013, the program will include three readmissions measures for Medicare inpatient hospital readmissions involving three high-volume and/or high-rate conditions, PN, AMI, and HF, which account for approximately 12% of all Medicare admissions. As endorsed by NQF, Medicare's time frame for a readmission is 30 days. As CMS stated, a 30- day timeframe incorporates "a substantial proportion of readmissions attributable to an index [or initial] hospitalization" and is short enough so that hospitals and other community entities would be able to improve patient outcomes with appropriate hospital care and transitional care. For the FY2013 hospital readmission program, CMS will assess hospital performance on readmissions using a three-year measurement period (the applicable period) starting in July 1, 2008 through June 30, 2011. IPPS hospitals with a small number of cases in the selected conditions (less than 25 cases in three years) would not be subject to the HRRP penalty (but their cases would be included in the national data). Critical access hospitals and other IPPS exempt hospitals will not be subject to the readmission penalty. As noted earlier, CMS did not propose specific policies with respect to the HRRP payment adjustment in the FY2012 rule, but did receive public comments on certain issues. (See the discussion of the CMS' all-cause measure in Appendix B for additional information on implementation issues raised during the FY2012 IPPS public comment period.) HRRP's risk-adjustment is intended to control for differences across hospitals in patient characteristics. Some contend, however, that certain factors affecting readmissions are not accounted for in the existing risk adjustment and that some hospitals may find it more difficult than others to reduce readmission rates. Because of the patients that they treat or due to other factors, hospitals with more complex patient populations or those in certain locations, may have greater difficulty than other hospitals in responding to high readmission rates. Some fear that these hospitals may have limited resources to spend investing in strategies to reduce preventable readmissions. This problem may be compounded because the payment penalty applies to only hospitals and not to other providers that may care for a patient following a patient discharge. Finally, hospitals may be located in areas where access to post-acute care or supportive services within the community following a hospitalization (during the time period for measuring readmissions) is limited and thus hospitals treating patients in those areas may be less able to prevent readmissions. Other factors confronting hospitals may compete with HRRP's incentives to reduce readmissions. First, hospitals will continue to be paid for each readmission; despite the payment penalty applied to the per discharge Medicare reimbursement, hospitals can potentially reduce losses from the penalty with income from the readmissions. Second, there are annual caps on the payment penalty, which could create an incentive for some hospitals to limit their investments in patient safety and other readmission reduction strategies if the costs of such investments are greater than the potential payment penalty. Third, hospitals may be able to change coding practices, alter transfer policies or use of outpatient observation to avoid countable readmissions. For instance, hospitals could change coding practices to avoid identifying patients with AMI, HF, or PN; alternatively, hospitals might have increased incentives to transfer such initial admissions to other hospitals or readmit such patients on an outpatient basis for observation services rather than rehospitalize them. Fourth, since the initial readmission rate is based only on three conditions, hospitals may elect to target Medicare patients admitted with those diagnoses (in order to minimize resources expended and perhaps any associated reduction in patient volume) rather than adopting a broadly based care transition program across all conditions and all patients. Finally, the emphasis on preventing readmissions, although laudable, may come at the expense of other quality improvement or patient safety efforts. The final sections of this report will briefly describe the National Payment Bundling Pilot Program included in Section 3023 of ACA and then discuss the Bundled Payment for Care Improvement Initiative announced by CMMI. Under a bundled payment method, a single payment is made for a defined group of services rather than individual payments for each service. Depending upon the scope of services included in the bundle, it may be used to pay for items or services furnished by a single provider or those furnished by several providers in different health care settings. Bundled payments are increasingly seen as a way to move away from the existing FFS incentives and to reduce Medicare costs, increase coordination of care, and improve the quality of care. As established by Section 3023 of ACA, beginning no later than January 1, 2013, a voluntary pilot program will pay a single health care entity for all services delivered during an entire care episode centered on a hospitalization. CMS has deferred implementation of this national pilot program, so few details about its design are available. Moreover, the statutory language provides only general guidance about the design of the pilot program and leaves many implementation decisions to the Secretary such as: Which entities can receive bundled payments? What is an effective payment design and rate-setting method? What period of time after a hospitalization should constitute an episode? What additional services should be included in the bundle? What medical conditions should be included in the pilot? How should quality of care be measured? What constitutes an adequate post-acute provider referral network? and What patient assessment instrument should be used? The statutory language defines a care episode as three days prior to a hospital admission, the hospital stay, and the first 30 days following discharge (unless another time period is selected). In addition to Medicare's traditional acute and post-acute services, participating providers will be expected to deliver care coordination, medication reconciliation, discharge planning, transitional care services and other appropriate services. The pilot can cover up to 10 conditions which may include a mix of chronic or acute conditions, or surgical or medical conditions. The selected conditions might be those with a significant variation in readmission or post-acute spending or those with high volume and high post-acute spending. These conditions might be deemed most suitable for bundled payments across the spectrum of care given the range of practice patterns or those where evidence indicates that costs could be reduced without affecting quality. The pilot's payment methods may include bundled payments and bids from entities for episodes of care. An appropriate patient assessment instrument to evaluate the beneficiary's condition and ensure the most clinically appropriate post-acute site for care will be used in the pilot. Site neutral quality measures for an episode of care and for post-acute care will be developed. Also, participating entities must provide an adequate choice of providers and suppliers to beneficiaries. However, payments for all services provided during the episode must meet a budget neutrality standard; spending cannot exceed an estimate of what would otherwise have been spent on these beneficiaries in the absence of the pilot. Finally, if the Secretary determines that the expansion of this program would reduce Medicare spending without reducing quality of care and the Chief Actuary for CMS certifies that such an expansion would reduce Medicare spending, the duration and scope of the pilot can be expanded after January 1, 2016. Bundling payments for acute and post-acute care has the potential to reduce costs without compromising outcomes by changing some of the incentives within FFS Medicare. An entity's financial returns will be higher if the patient is discharged to the community earlier or uses the least costly post-acute care setting. Since the entity bears the financial risk of both a readmission and the costs of all post-acute care, there is a strong incentive to coordinate care across settings, provide necessary post-acute care in the least expensive setting and not discharge patients prematurely. However, identifying a mix of providers that will agree to share payments may be challenging for that entity, unless provider groups are already organized under a single umbrella entity. Further, whether and how well providers can deliver coordinated care across an episode remains unclear. With bundled payments, there are strong incentives to take an active role in monitoring the provision of post-hospital care which could lead to unintended adverse consequences with respect to limiting access to necessary post-acute care or restricting patients' choice of post-acute providers. Moreover, bundled payments alone would not necessarily create an incentive to lower the volume of patients served because hospitals and providers could profit from additional episodes of care. CMS has made implementation decisions with respect to a separate payment bundling effort. Under its authority to test innovative payment and service delivery models, CMMI issued a request for applications in August 2011, for its Bundled Payments for Care Improvement Initiative (Bundled Payment Initiative). The three-year project starting in 2012 will encompass four different bundled payment models. Generally, CMS will make one payment for the services a Medicare beneficiary receives during an episode of care. The eligible awardees (participating organizations), eligible suppliers and providers, scope of services included in the episode, and payment methods vary by model. Subject to certain standards, a participating organization may determine the conditions, length of an episode of care, target price, discount and other organizational components, including participating suppliers and providers. All models are subject to a post-episode monitoring period to ensure that that aggregate Medicare Parts A and B spending for the included beneficiaries does not increase as a result of the initiative; the awardees will pay Medicare for aggregate expenditures that exceed the trended baseline spending (based on historic claims experience including ''risk threshold" set by CMS). Three of the models use a retrospective bundled payment method where the participating providers and suppliers are paid for services at a negotiated discount. Two of those models will compare those payments to a target price. If below the target, the awardees may share the savings with their participating providers. If above the target, the awardees will remit the difference to CMS. In the fourth model, the participating organization will be paid a single prospectively determined bundled payment for the episode. Generally, all bundled payment models will permit gainsharing arrangements where participants will be able to share any financial benefits that occur because of the efficiencies that result from better coordinated care. Mandatory participation in any gainsharing arrangement is not permitted. Table 3 illustrates the differences in eligible services included in the different bundled payment models. In Model 1, Medicare will continue to pay acute care hospitals under IPPS, but participating hospitals will be paid a reduced amount that reflects the applicable discount percentage on all MS-DRGs. Medicare Part B payments to physicians and other practitioners are not included as part of the episode and will not change under this model. The hospital is financially responsible if aggregate Medicare Parts A and B expenditures increase beyond a threshold for the period of the inpatient stay or during the 30 days after discharge, compared to historical expenditures. Model 2 spans the widest scope of services, from initial hospitalizations through related professional services and post-acute care (PAC) as well as care associated with related readmissions. Model 3 is similar to Model 2, but the episode begins with the first PAC service within 30 days of a patient's discharge from an IPPS hospital for an agreed upon condition. The IPPS hospitalization is not included in the Model 3 payment bundle. In Models 2 and 3, Medicare will continue to pay each provider through the traditional claims processing mechanism at the full FFS rates for the dates of service, but these payments will be retroactively reconciled with the target price. After an episode of care concludes, the aggregate Medicare expenditures for that episode of care will be compared to the target price. If the actual expenditures are less than the target price, Medicare will pay the difference. If the actual expenditures are more than the target price, the difference will be repaid to Medicare. In Model 4, Medicare will make a single, prospectively established bundled payment to the acute-care hospital where a beneficiary is hospitalized. Unlike the bundled payments under Models 2 and 3, the Model 4 episode does not include PAC services. All Part A services and Part B physicians' services furnished during the inpatient stay are included in the bundled payment, and the hospital will be responsible for distributing the payment to the other providers caring for the patient. Payment will be based on historical spending trends for all hospital facility and professional services during the initial hospitalization and related readmissions. The awardee (whether or not it is the admitting hospital) will be financially responsible for Medicare expenditures for any related readmissions for at least 30 days. Unlike the Medicare Acute Care Episode (ACE) demonstration project, none of the program savings will be shared with beneficiaries. A participating provider will receive a bundled payment for all Medicare beneficiaries who receive care and meet the episode definition. Beneficiaries who meet the eligibility criteria and receive care from a model participant cannot opt out of the bundled payment program for that particular provider. These beneficiaries will be notified of the provider's participation and have the right to get care from a different provider who is not involved in the bundled payment initiative. Table 4 summarizes key features of the four bundled payment models in CMMI's bundled payment initiative. Hospitals are required by Medicare's COP to have a discharge planning process that applies to all patients. However, the incentives for a hospital to expend significant resources on an effective discharge planning process within the existing Medicare FFS payment system are blunted. Medicare is striving to encourage hospitals to adopt care-transition programs and will modify FFS payment incentives so that hospitals will be more attentive to how this transition care is provided and the costs of such care. As a positive inducement, CMS is providing technical and financial assistance to hospitals to enable the adoption of care models so they can better manage the patient discharge process and address problem areas associated with hospital readmissions. Future penalties for hospitals with higher than expected readmissions may also motivate change. Since June, 2009, CMS has included comparisons of hospitals' 30-day risk-adjusted readmission rates for aged Medicare patients with AMI, HF, and PN on its Hospital Compare website. Starting in October, 2012, the importance of the publically reported data will be magnified as low-performing hospitals will be subject to readmission penalties. The adoption of bundled payment methods holds the promise of providing clear incentives to avoid service overutilization and enhance care coordination between providers. Medicare seeks to align financial and other incentives so that hospitals will proactively identify and track patient problems longitudinally, rather than treat emergent care crises after they have occurred. On the other hand, certain issues have been raised about the level of control that hospitals have over readmissions, particularly since the FFS payment system will still reimburse the majority of providers and health care professionals for the volume of services they provide. While some hospitals will be penalized for having too many readmissions and others will be paid a bundled payment for certain services, these payment changes are limited in scope and do not correct for some of the over-riding incentives within the majority of Medicare's payment systems. Also, as noted by hospital advocates, readmissions do not depend solely on the quality of inpatient care or the extent of the care transitions services rendered to a particular beneficiary. Readmissions can be contingent on the quality and the availability of post-acute and outpatient care, an individual's access to such care, an individual's access to caregivers at home or other unique circumstances. In the view of CMS, the existing measures adjust for key factors that are clinically relevant and have strong relationships with patient outcome. The agency seeks to motivate hospitals to work with their communities to lower readmission rates and improve patient care. These initiatives are necessary first steps to understand how to address the complicated (and expensive) problem of Medicare readmissions; CMS has acknowledged the need to monitor its implementation carefully to prevent untoward impacts on beneficiary access to quality care. Appendix A. Hospital Actions That May Mitigate Against Readmissions The QIOs, in their 10 th Statement of Work's Care Transitions Theme, and other experts in care transitions have considered a number of factors that are responsible for hospital readmissions. A discussion of selected factors is provided in this appendix. Improving Hospital Discharge Procedures Hospital discharge planning is intended to provide clear, timely, and understandable information or instructions to the patient and his or her caregiver or family members, as well as to other providers outside the hospital setting. This process may include addressing needed post-discharge services, medications, and equipment, setting up follow-up appointments, coordinating with families as well as providing some education to patients (and their caregivers) about the transition to home or other settings, upon discharge. Experts recommend that the discharge process within a hospital be standardized with an explicit delineation of roles and responsibilities among hospital staff to ensure that the patient leaves the hospital under the best possible circumstances and avoids adverse events that could lead to rehospitalization. Ideally, the discharge process begins before the decision that the patient should be discharged is made and education of the patient and the caregiver should occur throughout the hospitalization, not just at the time of discharge. Advocates of a standardized discharge process maintain that the discharge summary should be completed before discharge and updated at time of discharge. A personalized patient health record may complement the formal hospital discharge summary and should include information regarding the patient's medications and dosages, a checklist of items to be completed by the time of discharge, questions the patient may have for providers outside the hospital setting, among others. Recently, MedPAC discussions have included adding a COP requirement that hospitals provide patients' discharge instructions to the appropriate community provider within 48 hours of discharge. This COP change has not been proposed by CMS. Lapses in the hospital discharge planning process can lead to problems with post-discharge care and with the quality of the patient's discharge summary. Prior to discharge, a number of different hospital personnel can provide information to patients about results from laboratory tests, prescribed medications, and other clinical or therapeutic information as well as instructions about how to care for a condition and whether post-discharge follow-up care is required. Upon leaving the hospital, patients may not have a clear idea of what post-acute or community, outpatient care they require or how best to facilitate their own care. Generally, fragmented documentation can indicate a problem with hospital discharge planning and have a significant impact on post-hospital providers' ability to render competent care. For example, a patient can be discharged from the hospital before the results of ordered tests have been completed and included in the discharge summary. As recommended by the Society of Hospital Medicine's Quality and Patient Safety Committee, the checklist in an ideal discharge summary would include a list of pending tests and the responsible person to whom the results should be sent. One study (of approximately 700 patients in two medical facilities) found large deficiencies in documenting tests with pending results as well as including information on the follow-up provider. With appropriate documentation of patient information, providers outside of the hospital setting have access to timely information regarding the patient's condition, prior treatment history, medication usage, and laboratory test results, among others. Improving Patient-Provider Communication A number of factors may influence the ability of the patient or the caregiver to appropriately manage the patient's condition or illness. Ineffective communication between physicians or other hospital staff and their patients has been identified as a factor leading to lack of prescribed medication compliance. First, a patient may not sufficiently understand his or her condition. For example, written discharge information may be given to patients with limited literacy or English proficiency; alternatively, these instructions may conflict with a patient's cultural values. Other contributing factors may include cognitive impairment and lack of access to services. The range and complexity of choices that patients confront—including whether and when to seek care, how to reconcile conflicting opinions from various providers or family members, and the introduction of technology into everyday decisions—may make patient engagement challenging. Transitional care teams have emphasized educating patients about warning signs or "red flags" indicating deterioration in the patient's health condition. Coaching has been used, with the intent to "activate" patients, in an effort to make them better advocates for their own care, to teach patients and their caregivers the steps to take in the event of an emergency, and to improve patients' ability to communicate with other providers they encounter. "Activation" itself—an emerging topic of study in health services research—has been associated with better quality of care. However, adequate patient follow-up can also be also dependent on the availability of patient resources, such as housing and the presence of informal caregivers, factors that are outside the control of the hospital. In addition, studies suggest that post-discharge contact with patients by hospital personnel or transitional care staff can address patient-provider communication gaps and patient compliance issues. There has been mixed evidence from the substantial amount of research evaluating the benefit of post-discharge telephone calls, either as one part of a transitional care program or as a separate intervention. However, certain proponents support the implementation of a post-discharge phone call program to reinforce discharge instructions, medication changes and follow-up care plans as well as to monitor clinical developments of these patients and to intervene if necessary. Given the resources necessary for the program, targeting high risk patients may be warranted. Targeting Patients at Risk of Readmission Generally, determining which readmissions are appropriate or which readmissions may be preventable involves a complex set of questions that are subject to intense debate among hospital advocates, researchers and policy makers. Academics have developed predictive models to identify which patient populations are at greatest risk for hospitalizations and rehospitalizations. However, these clinical models used to predict readmission risk have limited success with such predictions. Alternatively, hospitals can identify patients who have a high risk of readmissions and are appropriate candidates for intervention, such as those with a history of a recent admission or readmission, those with longer-than-expected stays or high-risk diagnoses and those with diabetes. As currently structured, the HRRP program provides some incentive for hospitals to focus on managing the readmissions for Medicare patients initially admitted with one of the three applicable conditions, (at least until additional measures can be adopted in FY2015). Alternatively, hospitals may see attempts to target efforts to select patient populations as more costly than implementing systemic procedural and programmatic changes to address readmissions, particularly if the HRRP program is seen as likely to expand to other conditions or if other insurers are apt to become concerned with readmissions. As noted previously in Table 2 , transitional care interventions frequently target patients with certain characteristics and individual circumstances, so hospitals could focus on managing the readmissions of the patients best situated to stay out of the hospital for 30 days. Simply, the response of any given hospital is difficult to predict in the abstract. Accessing and Training Available Caregivers Caregivers—family and friends who provide care generally without compensation—can play a significant role in the hospital discharge as well as post-discharge activities of Medicare beneficiaries. The ability of Medicare beneficiaries to perform activities of daily living, and also to make doctor's appointments and handle financial transactions may be compromised as they age or suffer from cognitive impairments. Those patients who have access to caregiver support may be at less risk for a hospital readmission than patients who live alone and have restricted access to caregivers. , Caregivers and patients may work together to address the patient's primary needs—medication management, management of the patient's condition, and the patient's confidence in knowing how to care for himself or herself following the hospital discharge. A number of the transitional care models emphasize inclusion of the caregiver during "coaching" sessions with patients in the hospital prior to discharge as well as during follow-up after the discharge. This training of caregivers can enhance the quality of the assistance that they provide to patients and hence could minimize readmissions. Of course, a hospital has no control over whether a patient has access to an engaged caregiver. The hospital's goal would be to enable any available caregiver to give the strongest possible support to the discharged patient. Minimizing Medical Errors There is evidence that avoidable medical errors occur in the inpatient hospital setting and that these errors can cause adverse events resulting in readmissions for some Medicare beneficiaries. Medical errors, which may result in ineffective or incorrect treatments as well as preventable injuries or death, include errors related to diagnosis or treatment; medication errors, such as prescribing, modification, and administration of medications to patients; and surgical errors, which are mistakes or omissions made during and around the performance of surgical procedures (such as wound infections, deterioration of a clinical condition, postoperative complications). One study found that, of patients undergoing a major surgery, those who experience a postsurgical adverse event are at substantially higher risk (one-third higher) of a hospital readmission than patients not experiencing such an adverse event. Although it is unlikely that all medical and surgical errors that result in readmissions could be eliminated, additional efforts might be made to minimize such errors and their implications. Options may include the implementation of system-wide quality improvements in hospitals, such as the establishment of new medical and surgical protocols (and checklists related to those protocols), payment incentives to providers for additional quality improvements or penalties for the lack of such improvements, and the addition of new training requirements for hospital staff, among others. Arranging for Post-Discharge Care Medicare COP requires a hospital (1) to develop any necessary discharge plan and arrange for its initial implementation; (2) to counsel the patient, family members or interested parties as necessary to prepare them for post-hospital care and advise them of its availability; and (3) to transfer or refer patients along with necessary medical information to appropriate facilities, agencies, or outpatient services as needed for follow-up or ancillary care. In the view of CMS, "hospitals can communicate effectively with post-acute providers and take other measures that can better prepare a patient for discharge to reduce the risk of readmission." Half of Medicare patients with a medical condition who were readmitted within 30 after discharge did not have an outpatient physician claim submitted within that time period. Transitional care teams or others within hospitals may be able to assist patients by scheduling appointments for the patient following the hospital discharge or communicating with the outpatient provider. As mentioned earlier, these teams may also ensure that the providers in the outpatient setting have access to a complete and detailed history of the patient's treatment, medications, and other information. Care teams in the hospital can also collect provider contact information and create useful resource compendiums for patients. For instance, under the Project RED program, the discharge advocate creates an after-hospital care plan with provider contact information, a calendar with appointment and test dates, a medication schedule, and other resources intended to be user-friendly. As discussed earlier in this report, other transitional care programs have similar tools designed to assist patients with post-discharge care. Several of these programs last four weeks or longer and include telephone or in-person contact with the patient, such as visiting the patient's home or accompanying the patient to a skilled nursing facility or outpatient provider. In one of the care models, the "coach" communicates with the outpatient provider following the first patient visit subsequent to hospital discharge. Again, the extent to which a hospital decides to adopt these interventions and the benefit to a particular patient will vary. Developing Collaborations between Providers and Community Organizations Hospital readmissions may be associated with problems that are beyond the "four walls" of the hospital or other institutions that treat patients. To improve transitions in care and, perhaps, reduce readmissions, providers must collaborate across organizational and service-line boundaries and enlist the resources of community organizations to provide complementary services. Readmissions can reflect care provided by hospitals but also by outpatient physicians and post-acute providers, as well as supportive services to seniors or disabled adults within the community. A number of programs target the health of those who can be at risk for readmissions. These can include programs run through local or state agencies, including Departments of Public Health. However, such coordination is difficult because the different entities may not share information or have existing financial or referral relationships. Also, communities may have different infrastructures or practices when it comes to providing hospital or post-acute care. The supply of resources in particular communities may also affect health care utilization, including readmissions. , Researchers have found that collective action among community providers, including hospitals and other health care providers, can be useful in creating an efficient health care system; this in turn may result in lower readmission rates for hospitals in such communities. To help hospitals reduce readmissions, QIOs and others have focused on bringing together providers and community organizations to build coalitions to understand common patient populations and their care deficiencies, and implement necessary improvements in the different health care settings. , One of the necessary steps towards understanding readmissions patterns will depend upon the ability to track patients across providers and systems. As noted by Jencks, individual hospitals need access to all-hospital (perhaps all-payer) data to track their readmissions since 20% to 40% of patients are rehospitalized in other facilities. To that end, CMS is required to collect and report on the hospital readmissions for all patients. Appendix B. Different Readmission Measures and Methodologies Generally speaking, a hospital readmission is an admission to a hospital within a certain time frame, following an original admission and discharge. A readmission rate is the number of rehospitalizations (numerator) divided by the number of index (or initial) discharges (denominator) in a given period of time. However, different definitions of the "number" of readmissions and the definition of the "number" of discharges, result in a wide divergence of readmission measures. For example, a readmission measure is dependent on the definitions of the universe of patients who are included as part of the measure, what types of cases are excluded as index admissions, what types of cases are excluded as countable rehospitalizations, the risk-adjustment methodology used to adjust the numerator and/or denominator, how multiple readmissions for the same patient are counted, whether to consider only clinically related admissions, and whether to distinguish and exclude planned surgical, planned medical or other readmissions. Not only can these technical decisions result in different readmission rates, but also in different hospital performance rankings with respect to those relative readmission rates. Although several entities have worked to identify preventable readmissions, there is no consensus on the method to distinguish readmissions that might be avoided from those that are unavoidable. Different approaches result in different potentially preventable readmission (PPR) rates. Answers to these questions may help to define PPRs: Does a clinical relationship exist between the admission and a readmission? Which conditions or procedures should be counted as potentially preventable and which should not be counted as such (e.g., malignant cancers)? and, Should readmissions to a different acute-care hospital be added to the count of readmissions for the hospital with the initial admission? This appendix will discuss five approaches to determining readmission measures: (1) the Jencks framework which categorizes readmissions as planned and unplanned and then potentially preventable or not; (2) the warranty provided by the Geisinger Health System that covers specified adverse events and/or readmissions resulting from a particular surgery and (3) the all-cause measure used by UnitedHealthcare (a health care insurer) which defines PPR more narrowly than Jencks; (4) the 3M approach which defines certain preventable readmissions as readmissions related to selected medical conditions; and (5) the NQF all-cause readmission calculation adopted by CMS, which generally does not account for the relationship between the index discharge and the readmission. The Jencks Readmission Framework Dr. Stephen Jencks used the following framework to discuss which cases might be identified as PPRs in a presentation before the National Medicare Readmissions Summit in Washington, DC in June 2009. In general, unplanned readmissions within 30 days constitute 90% of all 30-day readmissions. Reducing these readmissions could reduce Medicare expenditures. Table B -1 provides four categories of readmissions, depending on whether or not they are related and/or planned. Related and Unplanned. Some readmissions can be considered both related to the initial admission and unplanned. For instance, a person may be readmitted to a hospital to address an adverse event caused by an infection or sepsis, which resulted from problems occurring during a surgery. Another example is a person with heart failure who is readmitted for chest pain. Related and Planned. Other readmissions are those that are related to the initial hospitalization and are scheduled in advance by a hospital in order to deliver follow-up medical care, perform medical procedures, or both. For example, a patient may be admitted for heart failure and readmitted later for the placement of a cardiac stent. Such readmissions are often part of the treatment plan for certain conditions. Unrelated and Planned. Still other readmissions are those that are unrelated and planned. For example, an admission for chronic obstructive pulmonary disorder (COPD) could be followed by a readmission for a scheduled hip replacement surgery. Unrelated and Unplanned. Finally, some readmissions are unrelated to the initial hospitalization and are also unplanned. For example, readmissions for burns or traumas that are caused by accidents can be both unrelated and unplanned. Another example might be an initial admission for a gastrointestinal disorder followed by a readmission for skin cancer. Geisinger and UnitedHealthcare Group (UHG) Approaches Payers, providers, hospitals, and health systems have defined PPRs in different ways. The Geisinger Health System and UHG, for example, are two entities that have tried to define PPRs for the purpose of implementing strategies to reduce hospital readmissions rates. Under the Geisinger ProvenCare program, preoperative, inpatient and postoperative care within 90 days for nonemergency coronary artery bypass graft (CABG) surgery is covered by one fixed price; Geisinger physicians performing these CABGs on patients covered by the Geisinger Health Plan agreed not to be paid for readmissions within 90 days that were "not unrelated" to the initial surgery. Examples of such readmissions include atrial fibrillation; venous thrombosis; infections due to an internal prosthetic device, implant, or graft; and postoperative infections. By using this approach to defining readmissions, Geisinger avoids having to finely distinguish between readmissions that are clearly related and those that are possibly related to the surgery. In its reporting of readmission rates for California hospitals, UHG uses a different approach. As discussed by MedPAC, only readmissions that are billed under the same Medicare payment diagnostic category (MS-DRG), or those that are for infections, are considered reasonably preventable. For example, if the initial hospitalization and a readmission both were coded as MS-DRG-313 (chest pain), the readmission would be considered reasonably preventable. Conversely, if the initial hospitalization was coded as MS-DRG 304 (hypertension with major complications/comorbidities) and the readmission was coded as MS-DRG 313, the readmission would not be considered reasonably preventable. To adjust for patient risk severity, the UHG approach compares each patient with all other patients statewide with the same initial DRG. 3M's PPR Approach MedPAC examined the issue of hospital readmissions and its implications for the Medicare program using 3M's proprietary software. Broadly speaking, in the 3M PPR approach, readmissions for a medical condition that follow an initial medical or surgical admission are likely to be considered preventable, whereas surgical readmissions are not likely to be preventable. A medical readmission would include, among others, heart failure, pneumonia, and chronic obstructive pulmonary disease (COPD), and a surgical readmission would include, among others, cardiac stent placement, major hip or knee surgery, and vascular surgery. Under this definition, however, unintended results might occur. For example, a patient who is admitted with a heart attack and then readmitted to the hospital for diabetes would be considered a PPR. On the other hand, readmission for an appendectomy following an admission for pneumonia would not considered preventable. All Patient Refined Diagnosis Related Groups (APR-DRGs) are used to classify patients according to their reason for admission and to establish the existence of a clinical relationship between an initial admission and a readmission. APR-DRGs are also stratified according to the patient's severity of illness (SOI) level, which is based upon secondary patient diagnoses. The 3M approach aims to refine the definition of preventable readmission and to ensure that the readmission is clinically related to the initial admission by using expert panels. The experts assess whether or not there was a reasonable expectation that the readmission could have been prevented by (1) provision of quality of care in the hospital; (2) adequate discharge planning; (3) adequate post-discharge follow-up; and/or (4) improved coordination between hospitals and providers outside of the hospital setting. For the purposes of this definition, exclusions include major or metastatic malignancies, multiple trauma, burns, certain chronic conditions (such as cystic fibrosis that are seen as not preventable or are expected to require follow-up care) and neonatal and obstetrical admissions. The analysis also excludes patients who left the hospital against medical advice. The algorithm created by 3M identifies readmissions within 7 to 30 days following the index hospital admission, depending upon the length of stay parameters specified by the user. A readmission chain includes the initial admission and any subsequent readmissions determined to be related to the initial admission. Under the 3M approach, an adjusted PPR rate is calculated using the number of readmission chains as the numerator, rather than the total number of PPRs. The denominator consists of all candidate admissions defined as those admissions that could have been linked to a PPR. APR-DRGs and SOI levels, as well as age and the presence or absence of mental health or substance abuse comorbidities, are then used to create a hospital's expected number of PPRs. Finally, the hospital's adjusted PPR rate is calculated by dividing a hospital's actual number of PPRs by the hospital's risk-adjusted expected number of PPRs. CMS addressed the use of the 3M PPR approach for HRRP in the FY2012 final rule in response to a public comment. Although Florida uses the 3M PPR measure, after review by NQF in 2009, the measure was not endorsed. According to CMS, the NQF steering committee expressed concerns about the reliability of the methodology used to specify 98,000 admission-readmission pairs (such as an HF admission followed by a readmission for a fall) as either clinically related (and therefore preventable) or not related (and not preventable). The NQF Steering Committee did not think those judgments were reliable and rejected the measure in part on this issue. CMS agreed that a measure cannot accurately determine what is related and not related simply on the basis of the coded diagnosis for the admission and readmission. CMS' All-Cause Readmission Measure As noted earlier, CMS adopted the NQF-endorsed, risk-standardized 30-day readmission measures which is currently publically reported on the Hospital Compare website as part of their FY2012 rulemaking process. The methodology calculates an all-cause readmission measure using administrative claims data for Medicare FFS beneficiaries who are age 65 and over for three conditions (HF, PN and AMI). In 2015, this will be expanded to seven conditions. Only one readmission during the 30 days following the discharge from the initial hospitalization will count as a readmission. A subsequent admission to a different hospital is counted as a readmission for the hospital in which the original, index admission took place. Section 1886(q)(5)(A) of the SSA establishes that the measures should exclude readmissions that are unrelated to the index admission (such as a planned readmission or a transfer to another acute hospital). However, only the AMI 30-day risk-standardized readmission measure excludes certain planned follow-up procedures when counting readmissions. The AMI measure also excludes patients who are discharged alive on the same day of admission. Other types of patient events are excluded from all three measures: patients who die during the initial hospitalization, same day readmissions to the same hospital for the same condition, patients who are transferred out of the hospital to another acute care facility, and patients who are discharged against medical advice. In the view of CMS, many cases with seemingly unrelated diagnoses may correspond to the patient diagnosis during the original hospitalization and therefore determining whether the readmission is related to the original admission cannot be made solely on the basis of the admitting diagnosis for the readmission. Also, in their view, rehospitalizations that are unrelated to the original admission should not affect some hospitals disproportionately, because similarly situated patients should have the same probability of readmission, regardless of where the initial hospitalization occurred. Finally, the exclusions of transfers to other applicable hospitals is seen as sufficient to meet the requirement that certain unrelated readmissions be excluded from the measures. Hospital advocates maintain that the small set of existing exclusions does not meet the statutory requirement that unrelated readmissions not be counted; in their view, without additional exclusions from the existing measures, hospitals will be penalized for readmissions beyond their control. To that end, hospital advocates suggest that CMS conduct a study to determine the common reasons for readmissions and identify unrelated readmissions. In the meantime, these advocates recommend that patients with certain conditions (such as cancer, trauma, burns, substance abuse or psychiatric disorders) be excluded; that a claims modifier be implemented so a hospital can identify planned readmissions; and that other existing classification schemes (discussed above) be used to identify related readmissions. CMS declined to make such exclusions in its FY2012 rulemaking because they viewed this action as inconsistent with the statutory requirement that CMS adopt the measures as endorsed by NQF. CMS stated that additional readmissions seen as properly excluded from the existing readmission measures would be brought to NQF for review and potential endorsement. Any revised and endorsed measure would be subsequently included in future rulemaking actions. As endorsed by NQF, Medicare's time frame for a readmission is 30 days. For the FY2013 hospital readmission analysis, CMS will assess hospital performance on readmissions using a three-year measurement period (the applicable period) starting in July 1, 2008 through June 30, 2011. While the 30-day readmission time frame did not raise industry concerns, the use of a three-year performance period beginning before ACA's enactment date (as well as the 25 minimum case threshold) did generate public comments. Although CMS finalized its proposal to use 25 cases and a 3-year data set, it is conducting an analysis to determine if a different sample size or a shorter time period can yield reliable data. The risk-standardization method is designed to adjust for the unique mix of patients that each hospital treated during the study period, including patients' past medical history (for the past 12 months) and patients' comorbid conditions. The hierarchical logistic regression used by CMS also adjusts for the patient's age, gender, and a hospital-specific quality component. The measures do not adjust for a patient's admission source and discharge disposition, because these factors are associated with the structure of the health care system and not patient clinical risk factors. The model does not account for patient socioeconomic status (SES) either. As noted in the measures report, the association between SES status and health outcomes can be due, in part, to differences in the quality of health care provided to patients; thus, including SES in the risk adjustment may suggest that hospitals that treat lower SES patients are held to different readmission standards than those hospitals treating higher SES patients. This risk adjustment methodology attracted significant public comment during the FY2012 rulemaking process. As noted by CMS, many commenters argued that the measures should be adjusted for patient characteristics beyond medical diagnosis, age, and gender which are currently included in the risk adjustment methodology. Commenters believed that the methodology should include risk adjustment for patient race, language/English proficiency, life circumstances, environmental factors and that SES should be included in the methodology because of the potential impact of these factors on health outcomes. Omission of these factors, according to those commenters, may disproportionately affect hospitals serving a large number of minorities and ultimately adversely affect the quality of and access to care for minorities. CMS did not agree that the NQF-endorsed risk adjustment methodology used in the HRRP would harm minorities. In the view of CMS, the current methodology adjusts for case-mix differences based on the clinical status of the patient at the time of admission to the hospital and would account for the extent that race or SES would influence the disease burden in certain patient groups. Also, these adjustments are not seen as appropriate by CMS because the association between these factors and health outcomes can be due, in part, to differences in the quality of care received by these groups of patients that should not be obscured. As CMS noted, risk-adjusting for patient race, for instance, may suggest that hospitals with a high proportion of minority patients are held to different standards of quality than hospitals treating fewer minority patients. As directed by statute, the risk-standardized readmission ratio is calculated as the number of adjusted actual or predicted readmissions divided by the number of expected readmissions at a given hospital. The ratio is measure of relative performance: if a hospital performs better than the average hospital that admitted similar patients (in terms of the measured risk factors for the included demographic characteristics and comorbidities), the ratio will be less than one. Those hospitals performing worse than the average hospital, after risk adjustment, will have a ratio greater than one. As finalized by CMS, the NQF-endorsed measures calculated the risk- standardized ratio using hierarchical logistic regression modeling to account for each hospital's unique quality of care for its patient population and which produces a predicted over expected ratio. Finally, several criticisms have been raised about the hierarchical model used in CMS measure development. The shrinkage affect reduces the variation of hospital performance which can obscure differences in provider performance and render the information not as useful to consumers. Also, the model masks the performance of small hospitals, because these entities get a rate close to the national mean. As noted by MedPAC, the smaller the hospital, the less of its information is used and the more of the national average is used. In their view, this method will tend to underestimate excess readmissions, especially for small hospitals with high readmission rates. Moreover, this methodology is also difficult to explain to the public and other stakeholders who are more familiar with the results of a methodology that uses an observed over expected ratio determined in a logistic regression model. As discussed in the next section, depending upon the methodology used—such as what is included in the numerator and denominator, the time period used, and the choice of the statistical model—readmission rates can vary considerably. Measure Design Can Affect Hospitals' Readmission Rates Using Massachusetts hospital discharge data, Boutwell and Jencks measured the statewide 30-day readmission rates (for medical conditions only) under three different methodologies. The 3M PPR readmission rate was 10.7%; the UHG readmission rate was 19.3%; and CMS all-cause readmission rate was 21.9%. Individual hospital performance rankings (by readmission rate) also varied significantly; a hospital that ranked first with the CMS methodology was ranked ninth with the 3M PPR methodology and ranked forty-third with the UHG methodology. Finally, the time interval or the period of time between the date of initial discharge and the date of readmission will also affect readmission measures. CMS (and NQF) have adopted 30 days as the readmission period, but readmissions have also been established within 7, 15, or 30 days following discharge from the initial hospital stay. For some purposes, the time frame can also be defined as the period up to 2, 3, 4, or 12 months following discharge. Simply, the use of longer time frames when establishing readmission rates could result in larger savings for Medicare. MedPAC states that annual Medicare spending on PPRs is $5 billion for 7-day, $8 billion for 15-day, and $12 billion for 30-day readmissions. Yet, such longer time frames raise challenges for identifying whether a readmission is related to an initial admission and if so, which entities would be held responsible for avoiding the rehospitalization. Appendix C. Illustrative Example of the Hospital Readmission Reduction Program Calculation This appendix provides an illustrative example for CMS's Hospital Readmission Reduction Program (HRRP) calculation. A full description of HRRP is provided previously in the report. This appendix describes each of the components of the formula, followed by a hypothetical example of how that formula will be applied in practice. Each component of the formula is described in statute as follows: Determine the excess readmissions ratio for the hospital defined as the risk-adjusted predicted readmissions divided by the risk-adjusted expected readmissions; Determine the aggregate payments for excess readmissions for the hospital defined as the product of three components: o The base operating DRG payments for the applicable conditions, o The number of admissions for those conditions, and o The hospital's excess readmissions ratio; Determine the aggregate payment for all discharges for the hospital defined as the sum of base operating DRG payments for all discharges for all conditions in the hospital; Determine the excess readmissions payment ratio defined as 1 minus the ratio of the aggregate payments for excess readmissions for the hospital to the aggregate payments for all discharges—which can be displayed as: Determine the adjustment factor by using greater of the excess readmissions payment ratio or the floor adjustment factor (of 0.99 of the discharge payments in FY2013, 0.98 of the discharge in FY2014, 0.97 in FY2015 and in subsequent fiscal years (effectively limiting the adjustment to no more than a 1% reduction in FY2013, 2% in FY2014 and 3% thereafter); Determine the adjustment to the hospital payments for excess readmissions by multiplying the base operating DRG payment amount for discharges from the hospital by the applicable adjustment factor. To summarize, to calculate the penalty, the amount of excess payments made for each applicable condition is determined as the product of the number of patients with that condition, the base DRG payment for those patients and the percentage of readmissions above the expected readmissions for that hospital. That calculation is done for each of the applicable conditions. These excessive payments are summed and then divided by the hospital's total operating base payments for Medicare to derive a penalty percentage. However, that penalty is capped, depending upon the year. The application of the formula is best understood through an illustrative example for FY2013 which may not represent the final calculation as implemented by CMS. Consider the situation of hospital A with 260 initial admissions for the applicable conditions and 3,250 total Medicare discharges. In this example, the hospital's excess payment ratio is not the adjustment factor used to calculate its readmission penalty, because that reduction of 2% is larger than would be permitted according to statute. Instead in FY2013, the floor of 0.99 (or a 1% reduction) would be applied to the hospital's base operating payment per discharge used to reimburse that hospital for all Medicare discharges in that fiscal year. As noted by CMS, some commenters believe that the penalty should only be applied to readmissions for the applicable conditions and not to all the hospital's Medicare discharges. Others have stated the readmission payment penalty should be applied to the number of excessive number of readmissions for the applicable conditions, instead of a penalty on all Medicare discharges. Certain hospital advocates have stated that the excess readmissions ratio was incorrectly established in statute and the existing formula will result in penalties far greater than Medicare's payments for excess readmissions. Accordingly, they argued Congress should redefine the excess readmissions ratio as the percentage of Medicare excess readmissions to total Medicare admissions (not as a ratio of predicted to expected admissions); at a minimum, with the readmission penalty capped at the amount of actual Medicare payments for excess readmissions. MedPAC has indicated that the formula in the law produces a higher count of excess readmissions than if the calculation were based on the difference between the actual and expected readmissions and will produce a higher estimate of Medicare spending on readmissions. This tendency is offset by the hierarchical models used to establish the readmission measures which blend the experience of the hospital with the average experience in the country. In MedPAC's view, any reexamination of the readmission policy should consider both of these aspects. However, if the penalties are designed to motivate hospitals to work to minimize readmissions, there is some question whether smaller penalties will provide sufficient incentives to hospitals to dedicate adequate resources to address systemic hospital processes affecting readmissions. Some believe that the existing HRRP penalty may not provide adequate incentives for hospitals to address readmissions and suggest that it should be restructured. Hospitals with lower than average readmission rates for all three conditions face no financial penalty. Hospitals facing penalties may be better off financially if they maintain the status quo, given the costs of implementing transition care interventions and the lost revenue from readmissions. These issues and others associated with the HRRP payment adjustment are likely to garner significant attention over the upcoming IPPS rulemaking cycle.
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Nearly 20% of Medicare beneficiaries aged 65 and over who were admitted to a hospital in 2005 were readmitted within 30 days following their initial discharge. The Medicare Payment Advisory Commission (MedPAC) estimated that these readmissions cost the Medicare program as much as $15 billion per year and that perhaps as much as two-thirds of these readmissions may be preventable. Many policymakers believe that different care transition programs coupled with payment reforms can constrain hospital readmissions among Medicare's fee-for-service (FFS) beneficiaries, could improve patient care, and may generate cost savings for the program. Hospital readmissions are associated with a number of factors and are not necessarily attributable to problems with the quality of patient care, but strong evidence indicates specific interventions to better manage care transitions at the time of hospital discharge could reduce readmissions for certain conditions. Medicare is building on past work by Quality Improvement Organizations (QIOs) to help providers identify the underlying causes of hospital readmissions in their communities and then develop different strategies to prevent those rehospitalizations. In their newest round of Medicare contracts, which began August 1, 2011, QIOs will work to reduce readmissions 20% by 2013 and provide technical assistance to participants in the Community Care Transitions Program (CCTP), a $500 million, five-year demonstration program established by the Patient Protection and Affordable Care Act (ACA as amended, P.L. 111-148) to help participating hospitals improve discharge procedures and manage patients' care transitions more effectively. CCTP may be continued or expanded if the Office of the Actuary (OACT) certifies that the expansion would reduce Medicare spending without reducing quality. By mid-March 2012, 30 sites had been selected. As well as establishing CCTP, ACA included several payment initiatives to encourage FFS providers, particularly hospitals, to work to minimize rehospitalizations and coordinate patient care across settings. Two initiatives in particular are discussed in this report, the Hospital Readmission Reduction Program (HRRP) and bundled payments. The HRRP will penalize an acute care hospital with higher than expected readmission rates by as much as 1% of its base payments starting in FY2013. Initially, the HRRP must use the three existing readmission measures that are endorsed by the National Quality Forum (NQF) and are included on Medicare's Hospital COMPARE website (where publically reported data can be used to assess hospital performance). Hospitals and industry advocates have expressed concerns about the existing measures and the effect of the readmission penalties on certain safety-net hospitals; issues that are likely to attract significant Congressional attention as the program's implementation date approaches. CMS is also exploring bundled payment methods where a single payment is made for a defined group of services rather than individual payments for each service. The national bundled payment pilot program established by the Center for Medicaid and Medicare Innovation (CMMI) is a three-year project starting in 2012 that will encompass four different bundled payment models. Changing these FFS financial incentives may be Medicare's most effective strategy for addressing hospital readmissions. This report examines the complex issue of hospital readmissions along with Medicare's ongoing efforts and future activities to reduce unnecessary readmissions.
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Article III of the Constitution established the judicial branch of the United States, consisting of the Supreme Court and of any "inferior Courts as the Congress may from time to time ordain and establish.... " To staff such courts, the Constitution empowered life-tenured and salary-protected judges to adjudicate certain "cases" or "controversies," including cases arising under the Constitution. The Supreme Court, in Marbury v. Madison, held that the judicial power to interpret the Constitution necessarily includes the power of judicial review —that is, the power to countermand the decisions by other government agents because a given decision contravenes the Constitution. Judicial review is not only a potent tool for the judiciary—it is also a controversial one, in that unelected federal judges possess the power to undo the decisions of the branches that are theoretically the most responsive to the people. From the early days of the republic to the New Deal to modern times, the history of the United States is replete with examples of conflicts between the political branches and the judiciary over the latter's use of the power of judicial review. Indeed, over the last two terms of the Supreme Court, the High Court, whether in striking down Section 3 of the federal Defense of Marriage Act (DOMA) in United States v. Windsor or Section 441 of the Federal Election Campaign Act (FECA) in McCutcheon v. FEC , has shown a willingness to exercise its power to invalidate a congressionally enacted law, and, in turn, the Supreme Court's exercise of the power of judicial review has led to sharp criticisms of the Court and accusations of judicial "activism" thwarting the will of the majority. Notwithstanding the recent high-profile matters in which the Court has exercised its often controversial power of judicial review, judicial invalidation of democratically enacted laws on constitutional grounds remains relatively rare at the Supreme Court. Of the 75 opinions issued by the Roberts Court in the October 2013 term, only one decision— McCutcheon— invalidated a congressionally enacted law on constitutional grounds, and three cases declared a positive enactment under state law to be unconstitutional. The Court's apparent reticence in using judicial review is supported by long-standing case law cautioning against judicial review and counseling courts to "avoid" unnecessarily broad rulings on constitutional questions. For example, the Supreme Court has established a "time-honored presumption" that a congressionally enacted law is constitutional, and, as a general rule, courts should not "pass on questions of constitutionality ... unless such adjudication is unavoidable." Indeed, the Supreme Court has established a host of loosely related rules generally called the constitutional avoidance doctrine that discourage a federal court from issuing broad rulings on matters of constitutional law. After providing general background on the power of judicial review and the major theories justifying the constitutional avoidance doctrine, this report explores the various rules that allow a court to avoid a broad ruling that invalidates a democratically enacted law and the logic behind those rules. The report concludes with an exploration of how the doctrine of constitutional avoidance has influenced some of the recent jurisprudence of the Roberts Court, criticisms of the doctrine, and the implications for Congress. In establishing the federal tripartite government, the Framers of the Constitution, while proponents of democracy, were wary of any form of unchecked power, even when that power was lodged in a democratic majority. As a consequence, the Framers envisioned a written Constitution, which protected specific values, principles, and rights, as a limit of what could be changed through ordinary political processes. Because the political branches may not be expected to always adhere to the constitutional limitations placed on each body, as these branches are most directly responsive to the often temporary whims of the people, the federal judiciary established under Article III was deliberately designed by the Framers of the Constitution to be a "countermajoritarian" branch that interpreted the written Constitution and protected its principles. The Constitution did this by "insulating the federal judiciary" from potential pressures, from either the political branches or the public, which could potentially "skew the decision making process or compromise the integrity or legitimacy of federal court decisions." The key sources of the judiciary "insulation" from the political processes are the Good Behavior Clause and the Compensation Clause of Article III. For the Framers, the Good Behavior Clause, by creating a "permanent tenure of judicial offices," ensures an "independent spirit in judges," and the Compensation Clause, by creating a "fixed provision for [the judiciary's] support," prevents the political branches from having power over a judge's subsistence and, with that, "power over his will." While the Constitution itself is silent on the power of judicial review, in Marbury v. Madison, Chief Justice John Marshall formally concluded that the logic of the written Constitution coupled with an independent judiciary necessitated the federal judiciary's unique role in being able to invalidate the acts of other branches of government that contravened the Constitution. In contrast to the political branches, the federal judiciary as envisioned by the nation's founding document arguably raised few concerns and was the subject of little debate for the Framers of the Constitution. Records from the Constitutional Convention of 1787 consist of "surprisingly little" on the federal judiciary. Most delegates to the Convention took "for granted" even the seemingly most controversial aspect of the federal judicial power, the power of judicial review. Moreover, the Constitution itself devotes—relative to the other branches—very little attention to the role of the judiciary: less than 500 words. And in the midst of the debate over whether to ratify the Constitution, Alexander Hamilton famously downplayed anti-federalist concerns regarding the power of the federal courts, calling the judiciary the "least dangerous branch" because the judiciary possesses neither the power of the purse, like the legislative branch, nor the power of the sword, like the executive branch. In sharp contrast to the views of the Framers, American history has been replete with examples of outcry at the scope of the powers provided to the unelected federal judiciary. Thomas Jefferson, in the wake of his presidency, disavowed the power of judicial review, arguing that "[e]ach of the three departments has equally the right to decide for itself what is its duty under the constitution, without any regard to what the others may have decided for themselves under a similar question." Andrew Jackson, in vetoing the reauthorization of the Bank of the United States, dismissed the 1819 case McCulloch v. Maryland that upheld the constitutionality of the Bank, contending that "the opinion of the judges has no more authority over Congress than the opinion of Congress has over the judges, and on that point the President is independent of both." In the wake of Dred Scott v. Sandford and its declaration that African Americans had "no rights which the white man was bound to respect," Abraham Lincoln, in his first inaugural address, famously noted that, if the policy of government upon vital questions ... is to be irrevocably fixed by decisions of the Supreme Court ... the people will have ceased to be their own rulers, having ... practically resigned their government into the hands of that eminent tribunal. While modern criticisms of the Court have eschewed explicitly disputing Marbury's central holding, controversies over the power of judicial review have extended into the 20 th and 21 st centuries. In 1935, Franklin Roosevelt prepared a message announcing that he would ignore the Court's decision in the Gold Clause Cases , deterred only by a favorable ruling by the High Court. And the Supreme Court's invalidation of several of the central features of Roosevelt's New Deal spurred the President's infamous "court packing" plan aimed at limiting the power of the Court to invalidate progressive legislation. Two decades later, the Court's decision in Brown vs. Board of Education ending racial segregation in public schools spurred intense backlash against the Court in the South, with one prominent southern Senator going so far as to describe Brown as a "legislative decision by a political court.... " By the late 1960s, Richard Nixon coined the phrase "judicial activism" to describe the constitutional jurisprudence of the Warren Court and pledged to appoint "strict constructionists" to the Court to "restore" a proper "balance," leading some scholars to suggest that Nixon's message in 1968 was centered on the anti- Marbury proposition that it was "not for the Court to be deciding major constitutional issues." And President Obama, following oral argument regarding the constitutionality of the Affordable Care Act, expressed concern that an "unelected group of people" would take the "unprecedented, extraordinary step of overturning a law that was passed by a strong majority of a democratically elected Congress." The Framers' treatment of the judiciary's powers juxtaposed with the political branches' often-fractious relationship with the judiciary illustrates the "root difficulty" with the power of judicial review. On one hand, an independent judiciary is needed to ensure that the core norms of our society, as embodied in the Constitution, are enforced against temporary populist interests. After all, according to Professor Alexander Bickel in his seminal work The Least Dangerous Branch, "when the pressure for immediate results is strong enough and emotions ride high enough," the political branches may "prefer to act on expediency rather than take the long view." In contrast to acting on "expediency," the federal judiciary, per Bickel, acts on "principle" and, therefore, should be expected to be the central governmental actor that, for example, enforces the First Amendment to "protect unpopular individuals from retaliation—and their ideas from suppression—at the hand of an intolerant society." And when the Court opts to shirk its duty to act on "principle" and instead upholds a law that may not in actuality adhere to core constitutional norms, the High Court "legitimates" or validates that law, and, in so doing, risks damage to the basic values undergirding our system of government. On the other hand, when a court "declares unconstitutional a legislative act or the action of an elected executive, [the court] thwarts" the enforcement of an act that presumably reflects the will of the voters. As a result, judicial review necessarily invites conflict with the political branches. This "countermajoritarian difficulty" —a phrase coined by Professor Bickel—creates a fundamental dilemma for a court, because the judiciary, lacking either the power of the "sword" or "purse," cannot enforce its own decisions and must rely on external support to "compel recalcitrant parties" to comply with a given ruling. As a consequence, the "Court's power lies ... in its legitimacy, a product of substance and perception that shows itself in the people's acceptance of the Judiciary as fit to determine what the Nation's law means and to declare what it demands." In turn, a Court that is overly aggressive in its exercise of judicial review or simply abuses that power risks losing its legitimacy and, with that, invites political and cultural backlash that can undermine the role of the judiciary in our system of government. More broadly, aggressive use of judicial review can "seriously ... weaken the democratic process." After all, by striking down legislation on a constitutional ground a court not only voids the law that is being challenged, but generally prohibits any future version of that law from being enacted. And if a court's act of judicial review is simply mistaken or proves to be unwise, the constitutional nature of a decision forecloses a legislature from correcting the error. As a result, at its worst, judicial review can "foreclos[e] all democratic outlet for the deep passions" on a particular issue and invite intense conflict within the nation. Given the challenges posed by the countermajoritarian difficulty, ultimately the question for the Supreme Court is how to maintain the "peaceful coexistence of the countermajoritarian implications of judicial review and the democratic principles upon which our Federal Government ... rests." In The Least Dangerous Branch, Professor Alexander Bickel proposed a solution to the countermajoritarian difficulty, a solution that has deep roots in the High Court's constitutional jurisprudence and has been the inspiration for many members of the judiciary when approaching difficult constitutional questions. Bickel argued that when the Supreme Court is faced with a difficult question of constitutional law, the Court need not as a matter of course exercise the power of judicial review and serve in either a legitimating or countermajoritarian role. Instead of validating a law or striking down a piece of legislation, Bickel noted that the Court " may do neither " and simply "stay[] its hand." The Supreme Court can opt for the third route by practicing the so-called "passive virtues," a set of tools, such as the justiciability doctrines and the Court's discretionary certiorari power, with which the Court can return an unsettled constitutional problem to the political realm for resolution. For Bickel, by employing the "passive virtues" and exercising judicial review only when constitutional principles are sufficiently clear for resolution, the Court can avoid unnecessary entanglement in controversial and sensitive constitutional issues, protecting the judiciary from potential backlash by the political branches and preserving the Court's role as the protector of established constitutional principles. At the same time, the use of the "passive virtues," according to Bickel, encourages constitutional dialogue within the other branches and the public and allows the Court to better gauge what is the appropriate constitutional principle animating a particular issue. Put another way, for Professor Bickel, the value of the "passive virtues" can be summarized in a short quote from Justice Louis Brandeis: "The most important thing we do is not doing." Professor Cass Sunstein's work on "judicial minimalism" is often seen as the modern continuation of Professor Bickel's work. In contrast to Bickel's focus on a court's silence in response to a controversial constitutional question, however, Sunstein's approach to constitutional adjudication is geared toward the type of response the Supreme Court should provide when it reaches the merits of the constitutional question that has been presented to the Court. Specifically, Professor Sunstein advocates for "judicial minimalism"—that is, in deciding cases, judges should "say[] no more than necessary to justify an outcome, and leav[e] as much as possible undecided.... " In particular, courts, according to Sunstein, should strive to make rulings that are both narrow—decisions that are no broader than necessary to resolve the case at hand —and shallow—decisions that avoid questions of basic principle and reach "concrete judgments on particular cases, unaccompanied by abstract accounts about what accounts for those judgments." Sunstein, echoing Bickel, justifies his theory of minimalism on two separate grounds. First, Professor Sunstein argues that minimalism reduces burdens on the judiciary in trying to reach a decision. For Sunstein, at least with respect to the Supreme Court, attempting to wholly resolve a broad and complex constitutional legal issue by a "multimember court, consisting of diverse people who disagree on a great deal," in a single opinion may be time-consuming, resource-draining, and poorly suited to the competencies of the Court. Second, and perhaps most important to Sunstein, minimalism makes "judicial errors less frequent and (above all) less damaging," as a court that "leaves things open will not foreclose options in a way that may do a great deal of harm." As a consequence, Sunstein views judicial minimalism to go hand-in-hand with democratic deliberation, as minimalist rulings on major constitutional issues "increase the space for further reflection and debate at the local, state, and national levels, simply because [such rulings] do not foreclose subsequent decisions." In this sense, like Bickel, Sunstein proposes a judicial philosophy aimed at successfully responding to the "countermajoritarian difficulty." Professor Bickel's "passive virtues," Professor Sunstein's "minimalism," and the general theories of constitutional avoidance are not grounded purely in theory, but instead have their basis in long-standing Supreme Court case law. As Justice Felix Frankfurter wrote over 70 years ago, "[i]f there is one doctrine more deeply rooted than any other in the process of constitutional adjudication, it is that we ought not pass on questions of constitutionality ... unless such adjudication is unavoidable." To understand the modern influence of constitutional avoidance on judicial decision making, the starting point is the most famous articulation of the constitutional avoidance doctrine and the various "passive virtues": Justice Brandeis's concurring opinion in Ashwander v. Tennessee Valley Authority (TVA) . In Ashwander, George Ashwander and other preferred shareholders of the Alabama Power Company, after unsuccessfully petitioning the company, sued the corporation and the TVA over a contract between the government agency and the power company. Specifically, the plaintiffs challenged the legality of a contract that the company had entered into with the government agency to (1) purchase the company's property and transmission facilities and (2) sell the company surplus power generated by the government-owned Wilson Dam in northern Alabama. Among the legal theories espoused by the plaintiffs was that the TVA acted in excess of the federal government's constitutional authority when it entered into the contract. A plurality opinion, written by Chief Justice Hughes, ruled against the plaintiffs, upholding Congress's constitutional authority to both construct the Wilson Dam and dispose of electric energy generated at the dam based on Congress's war power, the commerce power, and the power to dispose of property belonging to the United States. In an opinion epitomizing Professor Bickel's advocacy for the "passive virtues," Justice Brandeis, joined by three other Justices, wrote a concurring opinion in which he argued that while he agreed with the Court's resolution of the constitutional questions posed by the case, the constitutional questions in Ashwander should have been avoided by the Court. Specifically, Brandeis argued that because the plaintiffs had already unsuccessfully voiced their complaints to the corporation, the plaintiffs had no "right to interfere" in corporate governance under the substantive law and, therefore, lacked a sufficient injury necessary to bring the lawsuit. In addition, the concurrence noted that the stockholders could not show an "irreparable injury" to the plaintiffs' own property rights that would result from the allegedly illegal conduct of the government. Finally, Justice Brandeis argued that even if the plaintiffs did possess a sufficient injury to maintain the lawsuit, the Court, in its discretion, can simply "refuse an injunction unless the alleged invalidity [of the law establishing the TVA] is clear." Placing his views in a broader context, in perhaps the most famous and quoted aspect of the Ashwander concurrence, Justice Brandeis listed a "series of rules under which [the Court] has avoided passing upon a large part of all the constitutional questions pressed upon it for decision." The seven rules contained within Brandeis's Ashwander concurrence and their corresponding modern doctrines are listed in Table 1 . It is important to note Justice Brandeis's rules and the entire avoidance doctrine are not unitary in nature, but rather consist of seven loosely related principles and canons that allow a court to avoid making broad rulings on constitutional grounds. Some of the Ashwander rules, such as the rule against feigned or collusive suits or the rule of constitutional estoppel, rarely arise in constitutional law litigation. Moreover, other Ashwander rules have been largely subsumed by core Article III concerns, and to the extent a court dismisses a case based on a jurisdictional defect premised from a "principled interpretation[]" of Article III, the court would arguably not be acting solely out of a concern to "avoid" ruling on a constitutional question in line with the views of Justice Brandeis. Nonetheless, the rules articulated by Justice Brandeis in his Ashwander concurrence form the basis for Professor Bickel's "passive virtues" and Professor Sunstein's "minimalism" and remain important tools used by federal courts to avoid making broad constitutional rulings. Perhaps the two most controversial opinions issued by the Roberts Court are the Court's decisions in Citizens United v. FEC, respecting restrictions on corporate independent expenditures on political speech, and NFIB v. Sebelius, regarding the constitutionality of the Affordable Care Act's individual mandate and spending conditions imposed upon the states. In both opinions, the Court opted to not issue a ruling on a non-constitutional ground, choosing instead to answer the broad constitutional questions posed in each case. Critics of the decisions have accused the Court of "overreach" in each case, and both cases have been cited by scholars as examples of the Roberts Court's alleged disdain for the perils of the countermajoritarian difficulty. While cases like Citizens United and NFIB certainly garner the attention of constitutional scholars and even the public, and while arguments can be made about the necessity of the scope of both of those rulings, broad rulings on matters of constitutional law are a rarity at the Roberts Court. Indeed, the vast majority of opinions issued by the Supreme Court simply do not centrally involve a question of constitutional law. Moreover, as will be discussed below, when the Supreme Court is squarely faced with a major constitutional question, the Roberts Court has frequently either avoided answering the question posed to it or resolved the constitutional question on narrow grounds, illustrating the continued viability of the Ashwander doctrine. The recent jurisprudence of the Roberts Court has, at times, relied on a rule cited by Justice Brandeis's Ashwander concurrence that the "Court will not pass upon the validity of a statute" when the plaintiff has "failed to show that he is injured by its operation," a rule that has taken on a constitutional dimension in the years since Ashwander . Specifically, whenever an individual "invo[kes] ... [a] federal court['s] jurisdiction" and formally asks a federal court to exercise its "remedial powers on his [or her] behalf," the Supreme Court has interpreted the case-or-controversy requirement of Article III of the Constitution such that the "party seeking judicial resolution of a dispute [must] 'show that he personally has suffered some actual or threatened injury as a result of the putatively illegal conduct'" of the other party. The injury must be both "concrete and particularized" and "actual or imminent, not conjectural or hypothetical." In addition to suffering an injury, the "irreducible constitutional minimum" of "standing" also requires that there be a "causal connection" between the injury and the conduct that is complained of, such that the injury is "fairly traceable" to the challenged action. Finally, constitutional standing requires that it be likely that the injury will be redressed by a favorable decision. In contrast to the Article III concept of standing, the Ashwander concurrence and its progeny frames the issue of standing (and more generally, the doctrine of constitutional avoidance) as a prudential matter that can be invoked by the discretion of a federal court. Nonetheless, the rationale for constitutional standing stems from many of the values implicit in the works of Professors Bickel and Sunstein. Specifically, the constitutional standing doctrine stems from the recognition that a federal court, in exercising judicial power, has the ability to "profoundly affect the lives, liberty, and property of those to whom it extends," and, accordingly, the power to seek relief from a federal court must be placed in the hands of those who have a "direct stake" in the outcome of the case and not merely in the "hands of 'concerned bystanders.'" In turn, having parties with a "personal stake" in the outcome of the case "assure[s] ... concrete adverseness which sharpens the presentation of issues upon which the court so largely depends for illumination," allowing the court to be properly informed of the competing values before it. Perhaps more importantly, standing has its roots in the countermajoritarian difficulty, as the doctrine is based, in part, on limiting the Court's interference with the decisions made by the political branches. Echoing Professor Bickel's advocacy for the "passive virtues," Justice O'Connor noted in Allen v. Wright that the standing doctrine "makes possible the gradual clarification of the law through judicial application" and ensures that federal courts "exercise power only 'in the last resort, and as a necessity.'" The October 2012 term witnessed the Roberts Court avoiding ruling on two of the most controversial legal issues currently being debated in the United States through the use of the standing doctrine. First, in Clapper v. Amnesty International, the Court avoided opining on the constitutionality of certain foreign surveillance practices conducted by the executive branch through the use of the standing doctrine. Specifically, Amnesty International presented a constitutional challenge to Section 702 of the Foreign Intelligence Surveillance Act of 1978 (FISA), a 2008 amendment to FISA that generally provides the federal government with the authority to engage in eavesdropping to gather intelligence information from foreign nations and non-state actors. The Court, in a 5-4 ruling written by Justice Alito, held that the plaintiffs—a group of lawyers and human rights activists who claimed that Section 702 deterred their ability to speak with overseas clients who may be subject to foreign surveillance—lacked standing to bring the lawsuit, as the plaintiffs had failed to demonstrate that their alleged injuries arising from the 2008 law would be "certainly impending," as opposed to being merely probable. In so doing, the Court noted that its ruling was based in part out of concern for the countermajoritarian difficulty. Specifically, Justice Alito noted that the ruling, at its base, was founded on "separation-of-powers principles" that "serve[] to prevent the judicial process from being used to usurp the powers of the political branches," a purpose that is particularly important with respect to the politically sensitive "fields of intelligence gathering and foreign affairs." Second, in Hollingsworth v. Perry, the last opinion issued by the Roberts Court during the October 2012 term, the Court again declined to rule on the merits of a controversial constitutional law question—the constitutionality of a state ban on same-sex marriage—and instead opted to resolve the case on standing grounds. Specifically, in Hollingsworth, the Court considered an Equal Protection and Due Process challenge to Proposition 8, a law that amended the California Constitution to provide that only marriage between a man and a woman is valid or recognized in California. Because the state officials had declined to appeal an adverse district court ruling, the official "proponents" of the proposition defended the law on appeal, prompting the question of whether the proponents had standing to appeal the district court's decision. The Court, in 5-4 ruling written by the Chief Justice, held that the appellants lacked standing to defend Proposition 8 on appeal, as they lacked a "direct stake" in the outcome of their appeal and "their only interest in having the District Court order reversed was to vindicate the constitutional validity of a generally applicable California law." In rejecting what the Court viewed as a "generalized grievance," the Court emphasized the standing doctrine's role in avoiding the potential perils of the countermajoritarian difficulty. Specifically, the Court noted that by "[r]efusing to entertain generalized grievances," the Court "respects 'the proper—and properly limited—role of the courts in a democratic society.'" In the wake of both Amnesty International and Hollingsworth , new litigants with far stronger standing defenses have brought nearly identical constitutional claims to those heard in both 2013 rulings. For example, following the Court's ruling in Amnesty International, litigants who unquestionably have suffered an injury because of Section 702 of FISA—criminal defendants who are being prosecuted because of evidence obtained under the authority provided by the 2008 law—have begun to challenge Section 702 in district courts throughout the country, meaning the Court may, in the near future, revisit the underlying Fourth Amendment question posed by the Amnesty International litigants. Similarly, after Hollingsworth, a host of challenges to various prohibitions on same-sex marriage have been defended by state officials who unquestionably have the authority under state law, and therefore have suffered the requisite injury, to defend a same-sex marriage ban. In this sense, Amnesty International and Hollingsworth both illustrate the Roberts Court's use of one of the "passive virtues"—the standing doctrine—to "stay its hand" on major constitutional law questions, allowing those questions to percolate in the lower courts and in the political branches until the Court can more confidently resolve the underlying issues in the case. The standing doctrine is not the only rule invoked in Justice Brandeis's Ashwander concurrence that the Roberts Court has relied on in recent years. In fact, in one of the most anticipated cases of the October 2013 term— Bond v. United States — the Court invoked two of the Ashwander rules in resolving the case: the "last resort rule" and the "avoidance canon." The last resort rule states that a court should "not pass upon a constitutional question ... if there is also present some other ground upon which the case may be disposed of." The rule tends to be invoked when a party that claims "relief on federal constitutional grounds also asserts a right to relief under a federal statute or regulations or on state law grounds." The avoidance canon is a rule of statutory construction that states that "[w]hen the validity of an act ... is drawn in question, and even if a serious doubt of constitutionality is raised, ... [the Court] will first ascertain whether a construction of the statute is fairly possible by which the question may be avoided." The avoidance canon has been described as the "most important and controversial" of the avoidance rules. Bond concerned the ability of the federal government to prosecute an embittered spouse, Carol Anne Bond, who had attempted to poison her husband's lover by coating her car door handles and mailbox with a mixture of toxic chemicals purchased on Amazon.com. Federal prosecutors charged Ms. Bond with violating 18 U.S.C. Section 229, the Chemical Weapons Convention Implementation Act (CWCIA), which prohibits a person from "knowlingly" "us[ing" a "chemical weapon." In turn, the CWCIA defines the term "chemical weapon" in a broad manner to include using a "toxic chemical"—that is, " any chemical through its chemical action on life processes can cause death, temporary incapacitation, or permanent harm to humans or animals." On its face, the statute arguably applied to the conduct of Carol Bond when she attempted to expose her romantic rival to an arsenic-based compound and potassium dichromate, a combination that was, according to the Court, "toxic to humans" and "potentially lethal" in high doses. In her defense, Ms. Bond challenged whether the application of the CWCIA to a purely local crime was constitutionally valid, as, in her view, the law "exceeded Congress's enumerated powers and invaded powers reserved to the States by the Tenth Amendment." The government defended Bond's challenge to the statute, arguing that the CWCIA was constitutionally enacted according to the President's constitutional treaty making power, coupled with the power of Congress to enact legislation that is "necessary and proper" to carry into execution the treaty power. In short, the Bond case presented the Court with "significant" and long-debated constitutional questions respecting the "powers of federalism" and the scope of the treaty power. Nonetheless, invoking the Ashwander doctrine, Chief Justice Roberts, writing for a six-person majority, declined to reach the weighty constitutional issues posed by Ms. Bond's prosecution. The Bond opinion avoided the constitutional question regarding the scope of the treaty power by first noting that Ms. Bond raised a non-constitutional argument in her defense—that Section 229 did "not cover her conduct." Citing to Justice Brandeis's concurrence, Chief Justice Roberts invoked the last resort rule, stating that the "Court will not decide a constitutional question if there is some other ground upon which to dispose of the case." As a result, the Court turned to the statutory question, and, relying on the avoidance canon, the Court held that the CWCIA simply did not reach Ms. Bond's activities. For the Court, because under the Constitution Congress "possesses only limited powers" and typically does not have the power to criminalize "an act committed wholly within a State," the CWCIA should "be read consistent with the principles of federalism inherent in our constitutional structure." While the term "chemical weapon" as used in the CWCIA has a potentially broad import, Chief Justice Roberts concluded that without a "clear indication" from Congress that Section 229 was to be read so expansively to reach purely local matters, the term "chemical weapon" in the act must be read narrowly and in light of the specific purposes of the CWC to prevent chemical warfare. As such, just as the Court refused to reach questions regarding the constitutional propriety of U.S. foreign surveillance efforts and same-sex marriage bans in the October 2012 term, so too Bond arguably demonstrated a continued hesitancy by the Roberts Court to resolve divisive political issues through the process of judicial review. Perhaps of all of the Ashwander rules, the one relied on by the Roberts Court most frequently is the rule that forms the basis of Professor Sunstein's judicial minimalism: the Court should not "formulate a rule of constitutional law broader than is required by the precise facts to which it is applied." Notwithstanding rulings like Citizens United and NFIB, constitutional law scholars have frequently described the Roberts Court as being minimalist in nature. Indeed, recent scholarship comparing aggregate voting patterns of the Roberts and the Rehnquist Courts has concluded that the Roberts Court is "considerably more minimalist" and "there has been a decided shift in favor of minimalist behavior since Roberts became Chief." And while a lively debate exists over whether the Roberts Court's use of minimalism is sufficiently minimalist or should be equated with judicial modesty, the last two terms of the Roberts Court have witnessed the Court embracing some form of minimalism in its constitutional law jurisprudence, with the Court issuing rulings that could have had the potential to be far broader in their implications and were largely limited to the facts of the case at hand. For example, in the final week of the October 2012 term, the Court issued three rulings that arguably exemplify the Roberts Court's embrace of more "narrow" and "shallow" rulings in constitutional law cases. For example, on June 24, 2013, the Court issued a 7-1 ruling in Fisher v. University of Texas, reversing a lower court decision upholding the University of Texas's affirmative action program. However, in lieu of, as some suspected, issuing a broad ruling settling long-debated questions on the constitutionality of affirmative action in higher education, the Court resolved the case on the more narrow ground that the lower court in Fisher had inappropriately deferred to University of Texas's judgment about the necessity of the affirmative action program in achieving diversity, a judgment that implicitly reaffirmed that diversity could serve as a compelling interest justifying affirmative action under the Equal Protection Clause of the Fourteenth Amendment. In other words, Fisher was a ruling that was both confined to the facts of the case and narrow in its holding, epitomizing Sunstein's minimalism. Three days later, the Court, in Shelby County v. Holder, struck down Section 4(b) of the Voting Rights Act (VRA), a portion of the act that contains the coverage formula that determines what jurisdictions' voting laws are subject to preclearance by the federal government before a given law can go into effect. While Shelby County 's holding has been criticized by some, the decision did not go so far as some, such as Justice Thomas, would have wished. Specifically, the Court declined to reach the question of whether Section 5 of the VRA, which establishes the preclearance formula, was constitutionally permissible. Instead, the Court went so far as to invite Congress to reenact a more specific and updated version of the coverage formula. As a result, an argument can be made that Shelby County can be viewed as a narrow opinion that does not wholly foreclose all democratic debate on the underlying constitutional issues, the hallmarks of a minimalist decision. A day later, the Court issued its ruling in United States v. Windsor, striking down Section 3 of DOMA, finding that the law's "traditional" definition for marriage amounted to a "deprivation of the equal liberty of persons that [is] protected by the Fifth Amendment." While the ruling in Windsor certainly will have implications for future litigation on same-sex marriage bans, the Windsor Court confined its ruling to the specific issues posed by the case—the constitutionality of Section 3 of DOMA denying federal benefits to married same-sex couples. In other words, the Court in Windsor declined to opine more broadly on the constitutional legitimacy of a state prohibition on same-sex marriage, leaving that issue for another day. The October 2013 term of the Roberts Court similarly showed a tendency toward minimalism in even the most controversial of the Court's rulings. For example, in Schuette v. Coalition to Defend Affirmative Action, the Court upheld the constitutionality of the state of Michigan's referendum prohibiting the use of race-based preferences as part of the admissions process for state universities. In so doing, in contrast to the concurring opinion of Justice Scalia, the controlling plurality of the Court refused to overturn nearly 50-year-old precedent holding that the Fourteenth Amendment prohibited restructuring the political process in such a way that diminished the participatory rights of minorities. Instead, as noted in the concurring opinion of Justice Breyer, Schuette was distinguished from the so-called "political process doctrine" cases on the grounds that the Michigan referendum did not diminish the political participation of minority voters because the referendum merely moved decision-making authority from unelected actors (school administrators) and "placed it in the hands of the voters." Similarly, Justice Kennedy's plurality opinion confined the ruling to the unique facts presented by the Michigan referendum at issue in Schuette and refused to question the continued viability of the political process doctrine. Likewise in a public employee free speech case, Lane v. Franks, Justice Sotomayor's unanimous opinion declined to question the validity of the much-debated Garcetti v. Ceballos decision, a 2006 case that held that "when public employees make statements pursuant to their official duties, the employees are not speaking as citizens for First Amendment purposes, and the Constitution does not insulate their communications from employer discipline." Instead, in Lane , the Supreme Court narrowly tailored its opinion to the facts of the case before the Court, holding that the First Amendment "protects a public employee who provides truthful sworn testimony, compelled by subpoena, outside the scope of his ordinary job responsibilities." In this sense, the ruling in Lane can be viewed as a narrow opinion tied to the particular facts of the case with limited import for the central holding of Garcetti . On the final day of the October 2013 term, the Court issued another arguably minimalist opinion in Harris v. Quinn . In Harris, Justice Alito, in a 5-4 ruling, struck down on First Amendment grounds an Illinois law requiring personal health assistants paid under the state-run Medicaid program to pay the "fair share" of the due to a public employee union. In so doing, the Court severely criticized Abood v. Detroit Board of Education, the central precedent that generally allows state employees who choose not to join a public-sector union to be compelled to pay an agency fee to support union work related to the collective-bargaining process. Nonetheless, the Court did not go so far as to formally overrule Abood , keeping its decision confined to the "new situation ... before" the Court—that is, the question of whether "quasi-public employees" like the personal assistants in Harris could be compelled to pay public union dues. In short, Harris mirrors themes from Lane and Schuette , by eschewing a broad constitutional ruling that overrules past precedent in favor of a more narrow and confined opinion. Notwithstanding the near omnipresence of the constitutional avoidance doctrine at the Roberts Court, the doctrine and the work of Professors Bickel and Sunstein are not without their critics, both inside and outside of the Court. In fact, the doctrine has been attacked both with respect to its underlying assumptions and to how the doctrine has been deployed. In addition, the different strands of the constitutional avoidance doctrine, such as the rule counseling judicial minimalism and the constitutional avoidance canon, have been critically assessed by both legal scholars and jurists. The idea that courts should actively avoid resolving constitutional disputes arguably stands in contrast to the role envisioned for the federal courts by Alexander Hamilton in the Federalist Papers and echoed by Chief Justice John Marshall in Marbury. In noting that interpreting the law is the "proper and peculiar province of the courts," Hamilton in Federalist #78 argued that the federal courts have the "superior obligation" to prefer the "fundamental law" of the Constitution to any law passed by a legislature. Echoing Hamilton's themes nearly 200 years later, Professor Herbert Wechsler wrote in what was once the second most cited law review article that courts have "both the title and duty when a case is properly before them to review the actions of the other branches in light of constitutional provisions.... " For Wechsler and his disciples, courts "cannot escape the duty of deciding whether actions of the other branches of government are consistent with the Constitution," raising the question of whether the avoidance doctrine is a means by which a court can evade its most basic constitutional duties. The criticism that constitutional avoidance is diametrically opposed to the Court's constitutional duties finds favor from both judicial conservatives and liberals. With respect to the former, jurists like Justice Antonin Scalia, in contrast to Professor Bickel's suggestion that the Supreme Court should protect fundamental principles of our society—including "the evolving morality of our tradition"—embrace a view that the Court should protect "permanent," as opposed to "evolving," values that are embodied in an understanding of the original intent of the Framers. As a consequence, when a constitutional question is properly presented to the Court and the original understanding of the Constitution dictates a particular result, jurists like Justice Scalia reject the idea that the Court should "stay" its hand in answering the question presented. In this vein, Justice Scalia's concurrence in Bond voiced his disagreement with the Chief Justice's majority opinion that avoided the constitutional question regarding the treaty power posed by the case, arguing that the Court "shirk[ed] its job" in failing to reach the constitution issue. Other jurists who envision the Supreme Court's constitutional role to be centered on improving the democratic character of the political process may voice slightly different disagreements with the avoidance doctrine. Such a judicial philosophy is perhaps best represented by the "most famous footnote in all of constitutional law," footnote four of United States v. Carolene Products. Footnote four discusses when the "presumption of constitutionality" should not stand and democratically enacted law should be subject to more "exacting judicial scrutiny." Specifically, laws that violate rights that are preconditions for a functioning democracy and laws that uniquely prejudice groups that may be excluded from the democratic process "may call for" a "more searching judicial inquiry." For jurists who embrace footnote four's view of judicial review, the constitutional avoidance doctrine can be seen as being contrary to the judiciary's central constitutional role, as avoiding a constitutional ruling or issuing a "minimalist" constitutional ruling in a case respecting the functioning of the democracy obviates the role of the judiciary in protecting core civil rights. As such, Justice Sotomayor, in her dissenting opinion in Schuette , decried the plurality's narrow reading of the political process doctrine, as she "firmly believe[s]" that the role of judges includes broadly "policing the process of self-government and stepping in when necessary to secure the constitutional guarantee of equal protection." Beyond the critiques related to the theoretical bases for the avoidance doctrine, the Ashwander doctrine has also been criticized because of the dangers in how the doctrine can be deployed by judges. Perhaps the most pointed criticism of Professor Bickel's work came from Professor Gerald Gunther in an article published two years after the release of the Least Dangerous Branch . For Gunther, Bickel's "passive virtues" "are 'passive in name and appearance only," as Bickel's theories encourage a "free-wheeling interventionism" that allows judges to manipulate the various rules counseling restraint in an effort toward a particular result. The concern that the "passive virtues" can be manipulated to produce desired judicial results has certainly been voiced in the context of discussions regarding the Court's jurisprudence on standing. And this criticism is echoed in both (1) Justice Breyer's dissent in Amnesty International , where he contends that the majority opinion's view on standing is in contrast to what "commonsense inference and ordinary knowledge of human nature" dictates; and (2) Justice Kennedy's dissent in Hollingsworth , where he accuses the majority opinion of "misconstruing the principles of justiciability to avoid the subject" of ruling on the constitutionality of a same-sex marriage ban. Beyond the issue of whether the "passive virtues" can be manipulated by judges, another central concern with respect to constitutional avoidance is the doctrine's lack of clarity with respect to when a constitutional question should be affirmatively answered. Professor Bickel argued that a genuinely principled Court "will enforce as law only the most widely shared values," but it may be impossible for the Supreme Court to determine what truly are "widely shared values" and when the judiciary has truly engaged in principled judicial review protecting such values. As a result, constitutional avoidance can at times lead to inconsistent results by the judiciary. For example, one may question why on the same day the Court in Hollingsworth refused to rule on the merits of Proposition 8, the Court did reach the merits of the constitutionality of Section 3 of DOMA, despite perhaps even stronger reasons counseling the Court to "stay its hand" in the Windsor case. Specifically, the fact that both the plaintiff and defendant in Windsor agreed on the outcome of the case arguably made the case one of the rare instances of "friendly, non-adversary, proceeding" reaching the High Court. The net result of Windsor and Hollingsworth was that the Court on the same day held that the official proponents of Proposition 8 did not have the requisite interest in the litigation to ensure that there was an adverse lawsuit before the Court, but that the Department of Justice's wholehearted agreement with the plaintiff in Windsor regarding the merits of her lawsuit did not destroy the adversity necessary for the Court to hear the case, a seemingly bizarre result that can potentially be attributed to the often unpredictable applications of the various Ashwander rules. In addition to the arguably bizarre outcomes of the "gay marriage" cases, inconsistency has been—at times—the hallmark of the Court's treatment of another one of the Ashwander rules, the last resort rule, as the Court has at times created doctrines that necessitate or encourage making non-outcome-determinative rulings on constitutional questions as an initial matter in a case. For example, under the "harmless error" doctrine, a court will generally first determine whether a violation of the Constitution during the course of a criminal conviction occurred and only then will proceed to determine whether the error was harmless. Moreover, pursuant to the "good faith" exception to the Fourth Amendment's exclusionary rule, a court, having found that a police officer's search was obtained in violation of the Constitution, will then allow the introduction of evidence if the officer's mistake was the result of negligence. Perhaps the most common exception to the last resort rule occurs in the context of the qualified immunity doctrine, where the Court's precedent dictates that it is "often appropriate" for a court to first look at whether a government officer has violated the Constitution and then proceed to determine whether the violated right was "clearly established" at the time of the alleged violation to determine liability. Beyond the various criticisms of the general concept of constitutional avoidance, many have voiced disagreements with specific Ashwander rules, including the rules promoting judicial minimalism and avoiding interpreting a law in a way that raises a constitutional issue. Justice Brandeis's rule requiring constitutional rulings to be on the narrowest possible grounds and Professor Sunstein's work on judicial minimalism have generated a robust debate amongst academics, which, much like the criticisms of the avoidance doctrine as a whole, has centered on both the logic of minimalism and how minimalism can be deployed by judges. With respect to the logic of minimalism, critics of Professor Sunstein have questioned the value of the Court issuing narrow and shallow rulings. Professor Neil Devins, for example, has argued that minimalism is "flawed" because federal judges, having life tenure, are "less likely to be driven by political expediency" and, therefore, are more capable than any other institution in government to articulate broad principles of law to guide the other branches of government and society as a whole. In contrast, according to Professor Devins, minimalist decisions are often "ambiguous" and "fact-specific," and, as a result, such decisions "lack[] moral force" and fail to influence government decision making. Put another way, as then-Professor Neal Katyal noted in a 1998 law review defending the role of the federal judiciary as "advicegivers," while minimalism may have the advantage of "leaving ... courts out of many political disputes," the doctrine can be potentially "problematic because it often offers no guidance to the other branches about what is and is not permissible." The criticism that minimalist Supreme Court decisions fail to provide needed guidance and clarity has been voiced at times by members of the High Court. For example, in a much quoted letter, Justice Harlan Fiske Stone wrote to then-Professor Felix Frankfurter criticizing a narrow ruling by the Hughes Court, stating, I can hardly see the use of writing judicial opinions unless they are to embody methods of analysis and of exposition which will serve the profession as a guide to the decision of future cases. If they are not better than an excursion ticket, good for this day and trip only, they do not serve even as protective coloration for the writer of the opinion and would much better be left unsaid. Moreover, even when a Justice has agreed with the result in a particular case, that Justice may find fault with the narrow scope of the majority opinion. For example, in NASA v. Nelson, a 2011 decision rejecting that certain federal contract workers could voice constitutional objections to a "standard employment background investigation," Justice Scalia concurred in the judgment, scolding the majority for "assuming without deciding" that a constitutional right to informational privacy existed. For Justice Scalia, by not resolving the scope of the underlying constitutional right, the majority opinion was a "vague" one that "provide[d] no guidance for the lower courts." Justice Scalia closed his concurrence in Nelson by arguing that "Whatever the virtues of judicial minimalism, it cannot justify judicial incoherence" and by quoting from Marbury' s famous command that the "judicial department" must "say what the law is." Similarly, Justice Thomas has voiced concerns when an arguably minimalist majority opinion has provided insufficient guidance for the judiciary and the political branches. For example, in Shelby County, Justice Thomas concurred, arguing that the Court should not only have struck down the VRA's preclearance coverage formula , but that the Court should have taken the further step to invalidate Section 5 of the VRA that allows for federal preclearance of certain state election laws in the first place. For Justice Thomas, the Court's more narrow ruling in Shelby County striking down the preclearance formula demonstrated the "the inevitable conclusion" that the concept of preclearance in and of itself was unconstitutional. As a consequence, Justice Thomas, in his Shelby County concurrence, voiced disappointment that the Court did not rule more broadly and instead, in his view, "needlessly prolong[ed] the demise of [the preclearance] provision" contained in Section 5 of the VRA. Perhaps the most prevalent criticism of judicial minimalism focuses not so much on whether minimalism is a desirable goal for the Court, but instead centers on the consistency with which minimalism is applied and whether minimalism is used as a means toward certain political ends. Such criticism of minimalism has come from both ends of the political spectrum. Frequent Supreme Court practitioner Charles Cooper has condemned minimalism as a "litigation strategy designed to bring about judicial imposition of the liberal social agenda more gradually." And Professor Sai Prakash has similarly argued that "[f]or many on the left minimalism and its respect for precedent is the flavor of the month" that will be discarded once a minimalist approach conflicts with the desired political outcome in a case. At the same time, some legal progressives have been equally suspicious of judicial minimalism. Indeed, for many critics from the left, Chief Justice Roberts has "used the rhetoric of 'minimalism' and 'restraint' to" disguise what they see as deep substantive changes in constitutional law being pursued by the Court. For example, in the wake of the Shelby County decision, Professor Richard Hasen wrote in an opinion piece in the New York Times arguing that Chief Justice Roberts's majority opinion "hides behind a cloak of judicial minimalism" an effort to "cripple[] Section 5 of the" VRA. In this sense, in the view of Professor Hasen, the Chief Justice uses minimalism as a part of his "long game" to advance a conservative agenda on the Court. Regardless of the truth of the criticisms of minimalism from both the left and the right, as Professor Tara Smith has argued, the political ubiquity of charges that minimalism can be and is deployed in "bad faith" may indicate a broader problem with the doctrine—namely that, while minimalism is founded on broad principles, the doctrine, at bottom, "lacks a definite identity," resulting in a failure "either to discipline or to guide its would-be practitioners." The seventh rule of Ashwander —that a court should construe a statute to avoid a construction that raises constitutional problems —has generated significant criticism, as well. First, legal scholars and jurists alike have questioned whether adherence to the constitutional avoidance canon is compatible with the central "objective" of statutory construction: to give effect to the intent of Congress. Critics have argued that it is unrealistic to assume that Congress, in enacting a particular statute, both contemplated a reading of the law that would raise constitutional problems and wished to not test the limits of the potential constitutional issue. In this sense, a court, in avoiding a construction of a statute that raises grave constitutional doubts, may adopt an interpretation of a law wholly unintended by the legislature that enacted the law. As a result, the avoidance canon can lead to undemocratic results and can undermine its role as a "vehicle of judicial restraint." For example, as Professor John Manning has argued, if a court misconstrues a statute using the avoidance canon, the interpretation of the statute will remain in place if either house of Congress or the President prefers the court's interpretation, "enshrin[ing] a result that could not have been adopted ex ante ." Such a criticism of the avoidance canon was provided by Justice Scalia in his concurring opinion in Bond, where he accused the majority of the Court of "performing Congress's" job by "rewrit[ing]" the CWCIA, even though—in Scalia's view—"it [was] clear beyond doubt that [the Act] covers what Bond did." Second, the avoidance canon has been criticized on the grounds that in avoiding to adopt a construction of a statute that raises constitutional doubts, the court must make some sort of pronouncement on a constitutional norm, defeating the entire purpose of the canon as a means toward avoiding answering broad constitutional questions. In this vein, Judge Richard Posner has argued that the avoidance canon's "practical effect" is to enlarge the reach of constitutional law to prevent Congress from legislating in an area that has the mere potential to raise serious constitutional questions, "creat[ing] a judge-made 'penumbra' that has much the same prohibitory effect" as a ruling on the underlying constitutional question itself. This "penumbra" effect can potentially be seen in Chief Justice Roberts's majority opinion in Bond . The Bond ruling, while narrow in the sense that it only reached the statutory question posed by the case, is broad in the language it uses, stating that federal laws that criminalize purely local acts "would fundamentally upset the Constitution's balance between national and local power" and would "mark a dramatic departure from that constitutional structure and a serious reallocation of criminal law enforcement authority between the Federal Government and the States." The net result of the Bond decision, therefore, is that the Court was able to avoid the constitutional question regarding the scope of the treaty power by making arguably broad pronouncements on Congress's power to enact laws that criminalize local activity, resulting in Bond being a case with potentially broad import for constitutional law. Regardless of the relative merits of constitutional avoidance as a judicial strategy and philosophy, the doctrine of constitutional avoidance appears to have a broad following at the Supreme Court, as demonstrated by the recent terms of the Roberts Court. And the continued viability of the constitutional avoidance doctrine could have significant implications for Congress. In a world with increasing gridlock in Congress, the temptation may be for the legislative branch to draft legislation in a broad, and perhaps vague, manner or wholly ignore major legal questions, with the hopes that the unelected judiciary can help resolve the most pressing legal issues facing the country. This temptation may be especially pronounced with respect to major questions of constitutional law, such as whether the Constitution protects the concept of marriage equality or the limits the Fourth Amendment provides on the ability of the President to conduct foreign intelligence gathering. Nearly 20 years ago, Senator Robert Byrd echoed these concerns during the midst of debate over the drafting of the line-item veto: Why are we trying to pass a bill that raises such serious and substantial constitutional questions? We should be resolving those questions on our own. All of us take an oath of office to support and defend the Constitution. During the process of considering a bill, it is our duty to identify—and correct—constitutional problems. We cannot correct these here because we cannot amend the conference report. It is irresponsible to simply punt to the courts, hoping that the judiciary will somehow catch our mistakes. To the extent Congress "punts" to the Court on an issue of constitutional importance, the constitutional avoidance doctrines raises the possibility that the Court may send the "political football" back to the democratic arena and force the political branches to resolve major constitutional questions on their own. In this sense, the avoidance doctrine may be a means of reinforcing and correcting congressional intransigence on major legal issues, potentially casting into doubt Alexis de Tocqueville's famous observation that "Scarcely any political question arises in the United States that is not resolved, sooner or later, into a judicial question." At the same time, as demonstrated by the criticisms of the avoidance doctrine and the Court's willingness to answer major constitutional questions, the Ashwander doctrine often does not operate as a comprehensive or cohesive theory. More broadly, the Roberts Court "cannot simply avoid answering difficult moral, social, and political questions altogether," and the High Court may indeed find it conducive to its role in government to provide clarity with respect to certain questions of constitutional law. As a result, the extent to which the federal judiciary ignores the constitutional avoidance doctrine will necessarily dictate Congress's co-equal role in interpreting the Constitution and will, more broadly, animate the extent of dialogue amongst the political branches on matters of constitutional law. In turn, the constitutional avoidance doctrine necessarily becomes the starting point by which the federal judiciary chooses to set forth the chief constitutional rules that police every action of Congress, making the doctrine potentially fundamental to understanding the roles of the judiciary and the political branches in the federal tripartite system of government.
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Article III of the Constitution established the judicial branch of the United States, staffing the branch with life-tenured and salary-protected judges. Amongst the powers of the federal judiciary is the power of "judicial review"—that is, the power to invalidate the acts of other branches of government and the states that contravene the Constitution. The Framers of the Constitution established this "countermajoritarian" role for the judiciary to help protect the written Constitution and its principles against incursions from the political branches. The power of judicial review is both a potent and controversial power, as American history has been replete with examples of outcry at when unelected federal judges invalidate the acts of a democratically elected branch of government. The potential for backlash to judicial review by the political branches has resulted in what late Professor Alexander Bickel termed a "countermajoritarian difficulty," as the judiciary is needed to protect the basic principles of the Constitution, but is also necessarily dependent on the political branches to enforce the judiciary's mandates. In other words, judicial review, while necessary to protect the mandates of the Constitution, is inherently antidemocratic, risking an erosion of the judiciary's role in the American constitutional form of government. The prominent solution to the potential perils of the countermajoritarian difficulty, as espoused by Professor Bickel, is that the judiciary—and in particular the High Court—should exercise the "passive virtues," a set of tools, such as the justiciability doctrines, with which a court can return an unsettled and controversial constitutional problem to the political realm for resolution. The logic of Bickel's theory is that by "staying its hand" a court can avoid unnecessary entanglement in controversial and sensitive constitutional issues, while simultaneously allowing the judiciary to better gauge what is the appropriate constitutional principle animating a particular issue. Professor Bickel's work has been built on by Professor Cass Sunstein, who has argued that when the Supreme Court does reach the merits of a constitutional question (as opposed to avoiding the question entirely), the Court should practice "judicial minimalism,"—that is, in deciding cases, judges should say no more than necessary to justify an outcome and leave as much as possible undecided. Sunstein justified his theories on the grounds that minimalism reduces burdens on the Supreme Court and promotes democratic dialogue on difficult constitutional law questions. The works of Professors Bickel and Sunstein are anchored in "deeply rooted" precedent from the Supreme Court in a doctrine called the constitutional avoidance doctrine. The doctrine was perhaps best articulated in a concurrence by Justice Louis Brandeis in Ashwander v. TVA, in which Justice Brandeis listed seven different loosely related rules that allow a court to avoid issuing broad rulings on matters of constitutional law. A host of recent cases from the Roberts Court on some of the most controversial legal issues currently facing the nation—including foreign surveillance, gay marriage, voting rights, the scope of Congress's enumerated powers, affirmative action, and mandatory union dues—have deployed the Ashwander rules to avoid having the Supreme Court issue broad rulings on the Constitution. After providing general background on the power of judicial review and the major theories on the constitutional avoidance doctrine, this report explores the various rules that allow a court to avoid a ruling that invalidates a democratically enacted law and the logic behind those rules. The report concludes with an exploration of how the doctrine of constitutional avoidance has influenced some of the recent jurisprudence of the Roberts Court, criticisms of the doctrine, and the implications for Congress.
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Figure 1. DOD Share of Federal R&D Source: CRS analysis of FY2017 data from Analytical Perspectives, Budget of the United States Government, Fiscal Year 2019. The Department of Defense (DOD) receives nearly 40% of all federal research and development (R&D) appropriations, and more than 43% that of the next largest federal recipient, the Department of Health and Human Services. The work funded by these appropriations plays a central role in the nation's security as well as an important role in U.S. global leadership in science and technology. This report provides an introduction to the structure of DOD's research, development, test, and evaluation (RT&E) budget for staff attempting to understand DOD RDT&E appropriations. In its annual budget request to Congress, DOD presents its RDT&E by organization and program and by the character of the work to be performed. The RDT&E request is summarized in a supporting budget document titled "Research, Development, Test, & Evaluation Programs (R-1)," which is often referred to simply as the R-1. DOD RDT&E appropriations are provided annually through the defense appropriations act, one of the 12 regular appropriations acts that provide most of the discretionary funding for operation of the federal government. Generally, DOD RDT&E funding is provided in four of the act's titles (see box). More than 95% of DOD's RDT&E funding is appropriated in Title IV (Research, Development, Test, and Evaluation), which includes RDT&E appropriations for the Army, Navy, Air Force, a Defense-wide RDT&E account, and the Director of Operational Test and Evaluation. Within each of these accounts are dozens of program elements (PEs) that specify funding for particular activities (e.g., night vision technology, aviation survivability, cyber operations technology development). RDT&E funds are also appropriated for programs in other parts of the act. For example, RDT&E funds are appropriated as part of the Defense Health Program and the Chemical Agents and Munitions Destruction Program, and sometimes as part of the National Defense Sealift Fund. The Defense Health Program (DHP) supports the delivery of health care to DOD personnel and their families. DHP funds (including any RDT&E funds) are appropriated in Title VI. The program's RDT&E funds support congressionally directed research on breast, prostate, and ovarian cancer; traumatic brain injuries; orthotics and prosthetics; and other medical conditions. The Chemical Agents and Munitions Destruction Program supports activities to destroy the U.S. inventory of lethal chemical agents and munitions. Funds for this program are requested through the Defense-wide Procurement appropriations request. Congress appropriates funds for this program in Title VI (Other Department of Defense Programs). The National Defense Sealift Fund supports the procurement, operation and maintenance, and research and development of the nation's naval reserve fleet and supports a U.S.-flagged merchant fleet that can serve in time of need. The RDT&E funding for this effort is requested in the Navy's Procurement request and appropriated in Title V (Revolving and Management Funds) of the appropriation act. RDT&E funds also have been requested and appropriated as part of DOD's separate funding to support Overseas Contingency Operations (OCO, formerly the Global War on Terror (GWOT)). Typically, the RDT&E funds appropriated for OCO activities in Title IX support specified PEs in Title IV. However, they are requested and accounted for separately. The Bush Administration requested these funds in separate GWOT emergency supplemental requests. The Obama Administration included these funds as part of its regular budget request, not in emergency supplemental requests, although it sometimes asked for additional OCO funds in supplemental requests. The Trump Administration included these funds as part of its regular budget requests. The Joint Improvised-Threat Defeat Fund (JITDF, formerly the Joint Improvised Explosive Device Defeat Fund) works to counter improvised threats (e.g., improvised explosive devices (IEDs)) through tactical responsiveness and anticipatory, rapid acquisition. Some of the funds appropriated to JIDF are used for RDT&E. Under the President's FY2019 request, "In accordance with congressional intent ... all appropriations requested for the [Joint Improvised-Threat Defeat Organization] will be transitioned to Defense-wide appropriation accounts," including the RDT&E account. In addition, OCO-related requests and appropriations have included funds for a number of transfer accounts. In the past, these have included the Iraqi Freedom Fund (IFF), the Iraqi Security Forces Fund, the Afghanistan Security Forces Fund, and the Pakistan Counterinsurgency Capability Fund. Congress typically makes a single appropriation to each of these funds and authorizes the Secretary of Defense to make transfers to other accounts, including RDT&E, subject to certain limitations. These transfers are eventually reflected in prior-year funding figures for DOD Title IV. While DOD Title IV appropriations are made by organization (e.g., Research, Development, Test and Evaluation, Army), the DOD R-1 and congressional appropriations reports and explanatory statements also typically characterize this funding by the character of work to be performed. This characterization is provided in seven categories, each with a budget activity code (6.1 through 6.7) and a description (see Table 1 ). DOD's Financial Management Regulation (DoD 7000.14-R) provides a detailed description of the types of activities supported in each budget activity category: [6.1] Basic Research. Basic research is systematic study directed toward greater knowledge or understanding of the fundamental aspects of phenomena and of observable facts without specific applications towards processes or products in mind. It includes all scientific study and experimentation directed toward increasing fundamental knowledge and understanding in those fields of the physical, engineering, environmental, and life sciences related to long-term national security needs. It is farsighted high payoff research that provides the basis for technological progress. Basic research may lead to: (a) subsequent applied research and advanced technology developments in Defense-related technologies, and (b) new and improved military functional capabilities in areas such as communications, detection, tracking, surveillance, propulsion, mobility, guidance and control, navigation, energy conversion, materials and structures, and personnel support… [6.2] Applied Research. Applied research is systematic study to understand the means to meet a recognized and specific need. It is a systematic expansion and application of knowledge to develop useful materials, devices, and systems or methods. It may be oriented, ultimately, toward the design, development, and improvement of prototypes and new processes to meet general mission area requirements. Applied research may translate promising basic research into solutions for broadly defined military needs, short of system development. This type of effort may vary from systematic mission-directed research beyond that in [6.1] to sophisticated breadboard hardware, study, programming and planning efforts that establish the initial feasibility and practicality of proposed solutions to technological challenges. It includes studies, investigations, and non-system specific technology efforts. The dominant characteristic is that applied research is directed toward general military needs with a view toward developing and evaluating the feasibility and practicality of proposed solutions and determining their parameters. Applied Research precedes system specific technology investigations or development. … [6.3] Advanced Technology Development (ATD). This budget activity includes development of subsystems and components and efforts to integrate subsystems and components into system prototypes for field experiments and/or tests in a simulated environment. [6.3] includes concept and technology demonstrations of components and subsystems or system models. The models may be form, fit, and function prototypes or scaled models that serve the same demonstration purpose. The results of this type of effort are proof of technological feasibility and assessment of subsystem and component operability and producibility rather than the development of hardware for service use. Projects in this category have a direct relevance to identified military needs. Advanced Technology Development demonstrates the general military utility or cost reduction potential of technology when applied to different types of military equipment or techniques. Program elements in this category involve pre-Milestone B efforts, such as system concept demonstration, joint and Service-specific experiments or Technology Demonstrations and generally have Technology Readiness Levels of 4, 5, or 6. (For further discussion on Technology Readiness Levels, see the Assistant Secretary of Defense for Research and Engineering's Technology Readiness Assessment (TRA) Guidance.) Projects in this category do not necessarily lead to subsequent development or procurement phases, but should have the goal of moving out of Science and Technology (S&T) and into the acquisition process within the Future Years Defense Program (FYDP). Upon successful completion of projects that have military utility, the technology should be available for transition. [6.4] Advanced Component Development and Prototypes (ACD&P). Efforts necessary to evaluate integrated technologies, representative modes, or prototype systems in a high fidelity and realistic operating environment are funded in this budget activity. The ACD&P phase includes system specific efforts that help expedite technology transition from the laboratory to operational use. Emphasis is on proving component and subsystem maturity prior to integration in major and complex systems and may involve risk reduction initiatives… [6.5] System Development and Demonstration (SDD). System Development and Demonstration (SDD) programs [conduct] engineering and manufacturing development tasks aimed at meeting validated requirements prior to full-rate production. This budget activity is characterized by major line item projects... Prototype performance is near or at planned operational system levels. Characteristics of this budget activity involve mature system development, integration, demonstration... conducting live fire test and evaluation, and initial operational test and evaluation of production representative articles.... [6.6] RDT&E Management Support. This budget activity includes management support for research, development, test, and evaluation efforts and funds to sustain and/or modernize the installations or operations required for general research, development, test, and evaluation. Test ranges, military construction, maintenance support of laboratories, operation and maintenance of test aircraft and ships, and studies and analyses in support of the RDT&E program are funded in this budget activity. Costs of laboratory personnel, either in-house or contractor operated, would be assigned to appropriate projects or as a line item in the Basic Research, Applied Research, or ATD program areas, as appropriate. Military construction costs directly related to major development programs are included in this budget activity. [6.7] Operational System Development. This budget activity includes development efforts to upgrade systems that have been fielded or have received approval for full rate production and anticipate production funding in the current or subsequent fiscal year… Funding in budget activity codes 6.1-6.3 is referred to by DOD as the science and technology (S&T) budget. This portion of DOD RDT&E is often singled out for attention by analysts as it is seen as the pool of knowledge necessary for the development of future military systems. In contrast, 6.4, 6.5, and 6.7 funds are focused on the application of existing scientific and technical knowledge to meet current or near-term operational needs. The funds in 6.6 are for RDT&E management may support work in any of the other RDT&E budget accounts. Within the S&T program, basic research (6.1) receives special attention, particularly by the nation's universities. DOD is not a large supporter of basic research when compared to the National Institutes of Health or the National Science Foundation. However, nearly half of DOD's basic research budget is spent at universities. DOD funding represents a substantial source of federal funds for R&D at institutions of higher education in some fields, including 60.6% of aerospace, aeronautical, and astronautical engineering R&D; 53.9% of electrical, electronic, and communications engineering R&D; 52.5 of industrial and manufacturing engineering R&D; 42.9% of mechanical engineering R&D; and 41.9% of computer and information sciences R&D. For FY2017 and subsequent years, the Office of Management and Budget (OMB) replaced the R&D category "development" with a subset referred to as "experimental development" in an effort that OMB asserts would better align its data with the survey data collected by the National Science Foundation, and to be consistent with international standards. Using this standard omits DOD budget activities 6.6 and 6.7 funding from federal calculations of research and development funding. The Office of Management and Budget characterizes federal R&D funding in four categories: basic research, applied research, development, and facilities and equipment. With respect to Title IV funding, in general, DOD 6.1 funding is reported under OMB's basic research classification and 6.2 funding is reported as applied research. Historically, 6.3-6.7 funding has been reported as development. However, OMB no longer includes 6.7 funding in its R&D reporting. Some DOD 6.1-6.5 funding may be reported under OMB's facilities and equipment classification. The National Science Foundation (NSF) collects R&D appropriations and performance data from all federal R&D agencies through its annual Survey of Federal Funds for Research and Development . The survey requests most agencies to identify their R&D activities in three categories: basic research, applied research, and development. NSF uses a modified survey for collecting DOD R&D data in which the development category is divided into two subcategories: advanced technology development and major systems development. DOD uses the following crosswalk to respond to the NSF survey: 6.1 funding is reported under NSF's basic research category, 6.2 funding is reported as applied research, 6.3 is reported as advanced technology development (experimental development), 6.4–6.6 funding is reported as major systems development (experimental development), and 6.7 is reported as operational systems development (non-experimental development). This section provides a number of figures that illustrate DOD RDT&E expenditure trends for the FY1996-FY2017 period. Figure 3 illustrates DOD Title IV and OCO RDT&E expenditures in current dollars by character of work. DOD RDT&E funding provided in other appropriations titles are not included in the character of work (6.1-6.7) taxonomy; inclusion of these funds might affect the balance among the categories. Figure 4 illustrates DOD RDT&E funding for FY1996-FY2017 in constant FY2017 dollars. Between FY2000 and FY2007, total DOD RDT&E funding rose by 73% in constant dollars, remained flat through FY2010, then fell by 27% between FY2010 and FY2015. Between FY2015 and FY2017, total DOD RDT&E funding rose by 13.5% in constant dollars. Figure 5 illustrates the composition of RDT&E in FY2017 by character of work. Operational System Development was the largest component (36.7%). Science and technology (6.1–6.3) accounted for 18.8% of total RDT&E. Figure 6 illustrates the composition of Title IV RDT&E funding by organization in FY2017. Title IV (base) and OCO appropriations provided $73.8 billion of $76.4 billion (96.6%) of total DOD RDT&E in FY2017. Through the authorization and appropriations processes, Congress grapples with a wide-variety of issues related to the magnitude, allocation, and strategic direction of defense RDT&E. These decisions play an important role in U.S. national security and economic strength. This section identifies several of these issues: the level of DOD RDT&E funding, the level of DOD S&T funding, the level of DOD basic research, and the balance between incremental-focused and revolutionary-focused DOD RDT&E. While S&T and basic research are integral components of the DOD RDT&E whole, these elements are treated separately in this analysis. In practice, appropriations decisions are generally made about specific programs within the context of the available funding. The levels of RDT&E, S&T, and basic research funding are the result of many decisions made during DOD budget formulation and congressional appropriations, and in the end, are calculated on a post-facto basis. Nevertheless, an analysis of the kind that follows may be useful in assessing the "big picture" and in seeing funding trends in the context of an historical arc that may provide strategic insight and guidance. Each year Congress makes decisions about funding for DOD RDT&E. Authorization and appropriations levels, as well as programmatic priorities, are influenced by a wide range of factors, including current military engagements and international commitments, near-term national security threats, the perceived need for technology capabilities to address emerging and unanticipated threats, RDT&E funding and capabilities of adversaries and potential adversaries, RDT&E funding of allies, prior commitments to multi-year programs, competing demands for resources to support non-RDT&E DOD (e.g., personnel, acquisitions) and other federal non-DOD activities, the prior year's funding level, anticipated government revenues, and appropriations constraints (e.g., budget caps). The question "What is the appropriate funding level for DOD RDT&E?" does not lend itself to a clear objective answer, in part because such an assessment necessarily depends on subjective assumptions about need and adequacy. Nevertheless, the question has been a focus of analysis and debate in Congress and DOD for some time. For example, in June 1998, the Defense Science Board (DSB) Task Force on the Defense Science and Technology Base for the 21 st Century proposed the use of a standard industry benchmark—R&D as a share of sales—substituting total DOD funding for sales. The report stated: Using the pharmaceutical industry as a model, [the data show] about 14% of revenue devoted to research and development. With current DoD funding of about $250 billion, a total DoD research and development funding level of about $35 billion is indicated or close to the current DoD level. Figure 7 illustrates DOD Title IV RDT&E for the period FY1996-FY2017. Between FY1996 and FY2001, RDT&E grew slowly. Between FY2000 and FY2010, RDT&E grew more rapidly, more than doubling in current dollars from $38.8 billion to $80.7 billion. (In constant dollars, RDT&E grew by 68.1% from FY2000 to FY2010.) Between FY2010 and FY2015, RDT&E fell 20.5%to $64.1 billion, and then rose 16.7% to $74.8 billion in FY2017. As a percentage of DOD's total obligational authority (TOA), RDT&E generally ranged between 13% and 14% between FY1996 and FY2006, but then slid to around 11% in FY2011 and remained there through FY2015. Between FY2015 and FY2017, RDT&E's percentage of TOA grew from 11.3% to 12.3%. (See Figure 8 .) One challenge of using the metric of RDT&E as a share of DOD TOA is that during times of conflict, DOD TOA can increase substantially due to the cost of operations, replacing expended munitions, and increased force size. Thus even when RDT&E is increasing, it may decline as a share of DOD TOA. This is illustrated in Figure 7 and Figure 8 between FY2004 and FY2008, a period in which RDT&E grew by 23.4% and DOD TOA grew by 46.8% in support of U.S. post-9/11 military operations in the Middle East. Congress and others have also expressed concerns about the adequacy of funding for the piece of DOD RDT&E known as defense science and technology (6.1-6.3). The scientific and technological insights that emerge from this funding, often referred to as the department's "seed corn," are seen by many as the pool of knowledge available to DOD and the industrial base for future defense technology development. For this reason, defense S&T funding has sometimes been singled out for attention by Congress. As with overall RDT&E, the DSB's June 1998 report suggested two conceptual frameworks for S&T funding. The first approach, using industrial practice as a guide, proposed setting S&T funding at 3.4% of total DOD funding: The DoD S&T budget corresponds most closely to the research component of industrial R&D. Using 3.4% of revenue (typical of high-tech industries shown [elsewhere in the report]), the DoD S&T funding should be about $8.4 billion, which is a billion dollars greater than the FY98 S&T funding. To address this perceived shortcoming in funding, the FY1999 defense authorization bill ( P.L. 105-261 , Section 214) expressed the sense of Congress that DOD S&T funding should be increased by 2% or more above the inflation rate each year from FY2000 to FY2008. Subsequently, the FY2000 defense authorization bill ( P.L. 106-65 ) expressed the sense of Congress that the Secretary of Defense has failed to comply with the funding objective for the Defense Science and Technology Program, especially the Air Force Science and Technology Program, as stated [P.L. 105-261], thus jeopardizing the stability of the defense technology base and increasing the risk of failure to maintain technological superiority in future weapon systems. The act further expressed the sense of Congress that the Secretary of Defense should increase DOD S&T, including the S&T programs within each military department, by 2% or more above the inflation rate each year from FY2001 to FY2009. In 2009, the Senate-passed version of the National Defense Authorization Act ( S. 1390 ) included a provision (Sec 217) that would have stated a sense of Congress that the Secretary of Defense should increase DOD S&T by a percent that is at least equal to inflation. Congress embraced the DSB's three percent recommendation and underlying rationale in the conference report accompanying the National Defense Authorization Act for Fiscal Year 2003: The conferees commend the Department of Defense commitment to a goal of three percent of the budget request for the defense science and technology program and progress toward this goal. The conferees also note the finding in the Defense Science Board report that successful high technology industries invest about 3.5 percent of sales in research (equivalent to the DOD S&T program) and the recommendation that S&T funding should be increased to ensure the continued long-term technical superiority of U.S. military forces in the 21 st Century. The conferees believe that the Department must continue to provide the necessary investments in research and technologies that ensure a strong, stable, and robust science and technology program for our Armed Forces. Other organizations have proposed using the same metric, but with a 3% as the level for S&T funding as a share of total DOD funding. A 2001 report based on the Quadrennial Defense Review (QDR), a legislatively mandated review by DOD of its strategies and priorities , called for "a significant increase in funding for S&T programs to a level of three percent of DOD spending per year." In 2004, the Council on Competitiveness, a leadership organization of corporate chief executive officers, university presidents, labor leaders, and national laboratory directors, reiterated the 3% recommendation of the QDR. Following a period of strong growth in the early 2000s, S&T funding peaked in current dollars at $13.3 billion in FY2006, then declined to $11.0 billion in FY2013 before rebounding to $13.4 billion in FY2017. (See Figure 9 .) In constant dollars, S&T funding peaked in FY2005 before falling 27.8% through FY2013; between FY2013 and FY2017, S&T funding recovered somewhat, growing by 14.9%. Viewed as a share of DOD total obligational authority (TOA), S&T declined from about 3.0% in the late 1990s to about 1.7% in 2011, rebounding to about 2.2% in FY2017. (See Figure 10 .) While the growth in the absolute amount of S&T funding that was sought in P.L. 105-261 (red line, Figure 9 ) was achieved, S&T funding would have been higher under the QDR recommendation (3% of DOD TOA, green line, Figure 9 ). The DSB's second proposed framework, also based on industrial practice, was to use the metric of S&T as a share of DOD RDT&E: Another approach to this question is to note that the ratio of research funding to total R&D funding in high-technology industries, such as pharmaceuticals, is about 24%. When this percentage ratio is applied to the FY98 R&D funding of about $36 billion, the result is about $8.6 billion, well above the actual S&T funding. In 2015, a coalition of industry, research universities, and associations, the Coalition for National Security Research, asserted that DOD S&T funding should be 20% of DOD RDT&E. Figure 11 illustrates S&T's share of DOD RDT&E for FY1996-FY2017. At the time of the DSB report, S&T's share of DOD RDT&E was approximately 20%. After rising to 21.5% in FY2000, the share fell to 15.2% in FY2011, recovering to 18.8% in FY2015. The share fell to 18.1% in FY2016 and to 17.9% in FY2017. Within the S&T program, basic research (6.1) is singled out for additional attention, due in part to its perceived value in advancing breakthrough technologies and in part to the substantial role it plays in supporting university-based research in certain physical sciences and engineering disciplines. Basic research funding is seen by some to be particularly vulnerable to budget cuts or reallocation to other priorities because of the generally long time it takes for basic research investments to result in tangible products and other outcomes (i.e., reductions in funding can be made with minimal short term consequences) and to the uncertainty of the benefits that will be derived from the results of basic research. In 2004, the Council on Competitiveness asserted that DOD basic research should be at least 20% of DOD S&T. In 2015, the Coalition for National Security Research also recommended 20% of DOD S&T. DOD basic research funding grew steadily from FY1998 through FY2015, more than doubling in current dollars, then fell somewhat in FY2016 and FY2017. (See Figure 12 .) As a share of 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, its highest level in 20 years, then fell in FY2016 to 17.4% and in FY2017 to 16.4%. (See Figure 13 .) Another key issue of concern to Congress is the balance in the RDT&E portfolio between funding focused on incremental or evolutionary improvements and funding focused on exploratory research that might lead to revolutionary technologies. The latter is frequently referred to as "high risk, high reward" research as it involves R&D activities that have low or unknown likelihood of success, but that, if successful, may yield revolutionary technological advances. The DSB's 1998 report noted industry's practice of allocating about 1/3 of the total available research funding to exploratory or potentially revolutionary projects. The other 2/3 of the effort is typically focused on identified product needs in the form of evolutionary improvements in current product lines. In accordance with this industrial practice, DSB recommended that DOD [ensure] that approximately 1/3 of the S&T program elements are devoted to revolutionary technology initiatives. DARPA should play a major role in executing these efforts along with the Services. Applied to the FY2017 S&T budget, this formula would allocate approximately $4.5 billion to revolutionary technology initiatives. In 2004, S.Rept. 108-46 accompanying the National Defense Authorization Act for Fiscal Year 2004 ( S. 1050 ) expressed the committee's concerns that the DOD "investment in basic research has remained stagnant and is too focused on near-term demands." DOD does not report funding for revolutionary research. The Defense Advanced Projects Research Agency (DARPA) has been the lead DOD agency focused on revolutionary R&D since its establishment in 1958 following the Soviet launch of the first man-made satellite, Sputnik, in 1957. For this report, CRS examined DARPA funding as a surrogate measure of at least a portion of DOD's investments in revolutionary research. DARPA describes its mission as making "pivotal investments in breakthrough technologies for national security." DARPA funding has remained generally steady since FY2003, ranging between $2.5 billion and $3.0 billion. (See Figure 14 .) Similarly, DARPA's funding as a share of defense S&T has remained generally steady since FY1999, between 22% and 25%. In FY1996, DARPA funding accounted for about 30% of S&T funding, before sliding to 22% in FY2000 (See Figure 15 .) In its 2007 Rising Above the Gathering Storm report, the National Academies recommended that At least 8% of the budgets of federal research agencies should be set aside for discretionary funding managed by technical program managers in those agencies to catalyze high-risk, high-payoff research. Using DARPA once more as a surrogate measure of a portion of DOD's high risk, high payoff research, Figure 16 shows DARPA funding as a percent of DOD RDT&E. Between FY1996 and FY2008, DARPA's share of RDT&E fell by nearly half, from 6.4% in FY1996 to 3.4% in FY2008. DARPA's share subsequently rose to 4.5% in FY2015, and then fell again in FY2016 to 4.1% and in FY2017 to 3.9%. Based solely on DARPA funding, DOD funding for high risk, high payoff research is well below the 8% recommended by the National Academies. It is unclear how investments in high risk, high payoff research from other DOD accounts might affect this picture. DOD RDT&E investments are highly complex and can be parsed in many ways. Some of these are highlighted in this report. Other ways of parsing RDT&E funding—such as allocation by performing organization (e.g., industry; universities; government-owned, government-operated facilities; federally-funded research and development centers (FFRDCs)), size of industrial performers, intramural and extramural performance—may also be important for the effective allocation of DOD RDT&E resources. Similarly, many DOD RDT&E stakeholders have asserted the importance of stability in funding streams. Among the many other factors that may affect the effectiveness of the performance of RDT&E are: organizational structures and relationships; management; workforce recruitment, training and retention; and policies related to cooperative research and technology transfer. As Congress undertakes defense annual authorization and appropriations, it may wish to consider the issues raised in this report related to the magnitude and composition of funding for DOD RDT&E, as well as the other issues such as those identified above.
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The Department of Defense (DOD) conducts research, development, testing, and evaluation (RDT&E) in support of its mission requirements. The work funded by these appropriations plays a central role in the nation's security and an important role in U.S. global leadership in science and technology. DOD alone accounts for nearly 40% of all federal R&D appropriations ($49.2 billion of $125.3 billion, or 39.3%, in FY2017). In its annual congressional budget requests, DOD presents its RDT&E requests by organization and by its own unique taxonomy aligned to the character of the work to be performed. More than 95% of DOD RDT&E funding is provided under Title IV of the annual defense appropriations act. These funds are appropriated for RDT&E in the Army, Navy, Air Force, a Defense-wide RDT&E account, and the Director of Operational Test and Evaluation. RDT&E funding is also provided for the Defense Health Program in Title VI; the Chemical Agents and Munitions Destruction Program in Title VI; and previously the National Defense Sealift Fund in Title V, though the President's FY2019 budget does not request RDT&E funds for this purpose. In addition, some of the funds appropriated to the Joint Improvised-Threat Defeat Fund (JIDF, formerly the Joint Improvised Explosive Device Defeat Fund) have been used for RDT&E though the fund does not contain an RDT&E line item. In some years, RDT&E funds also have been requested and appropriated as part of DOD's separate funding to support Overseas Contingency Operations (OCO, formerly the Global War on Terror (GWOT)). These funds have typically been appropriated for specific activities identified in Title IV. Finally, some OCO funds have been appropriated for transfer funds (e.g., the Iraqi Freedom Fund (IFF), Iraqi Security Forces Fund, Afghanistan Security Forces Fund, and Pakistan Counterinsurgency Capability Fund) which can be used to support RDT&E activities, among other things, subject to certain limitations. Parsing RDT&E funding by the character of the work, DOD has established seven categories identified by a budget activity code (numbers 6.1-6.7) and a description. Budget activity code 6.1 is for basic research; 6.2 is for applied research; 6.3 is for advanced technology development; 6.4 is for advanced component development and prototypes; 6.5 is for systems development and demonstration; 6.6 is for RDT&E management support; and 6.7 is for operational system development. DOD uses crosswalks to report its RDT&E funding to the Office of Management and Budget and to the National Science Foundation. These crosswalks use different taxonomies than DOD's for accounting for R&D funding.
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Under the authorization of the Adult Education and Family Literacy Act (AEFLA), the federal government makes grants to states to support services to improve literacy and other basic skills among adults who are not enrolled in school. Commonly called "adult education," the activities funded by AEFLA provide educational services to adults at the secondary level and below, as well as English language training. AEFLA-supported adult education services are typically provided by local entities. Students include those seeking to develop basic skills, those seeking to obtain a secondary credential, and English language learners of various educational backgrounds. Curricula and other programmatic details vary based on local student needs and objectives. AEFLA programs are administered at the federal level by the U.S. Department of Education (ED) through its Office of Vocational and Adult Education (OVAE). AEFLA was originally enacted as Title II of the Workforce Investment Act of 1998 (WIA, P.L. 105-220 ). AEFLA authorized such sums as necessary to carry out its functions from FY1999 through FY20003. The General Education Provisions Act (GEPA) automatically extended AEFLA authorization through FY2004. After this extension expired, the programs authorized by the act continued to be funded through the annual appropriations process. In July 2014, AEFLA was reauthorized as Title II of the Workforce Innovation and Opportunity Act of 2014 (WIOA, P.L. 113-128 ). WIOA authorizes appropriations through FY2020. The AEFLA provisions of WIOA are scheduled to be incrementally implemented over the next several years. This means that, as of this writing, both the federal government and states are operating their adult education programs under the WIA provisions of AEFLA while preparing to implement the WIOA provisions. This report will focus on the WIOA provisions of AEFLA, though it will discuss prior WIA provisions as necessary. Note on terminology : Both WIA and WIOA authorized a group of workforce programs. In each law, Title II was called the Adult Education and Family Literacy Act. This report will refer to the prior adult education law as "the AEFLA provisions of WIA" and the 2014 provisions as "the AEFLA provisions of WIOA." The AEFLA provisions of WIOA maintained the general program structure established by the AEFLA provisions of WIA in 1998: the large majority of funding under the act is granted to state agencies that are required to subgrant the bulk of their federal funds to local agencies that provide the actual services. Smaller portions of the funds support activities of statewide and national significance. WIOA amended AEFLA to increase emphasis on transitions from adult education programs to employment and postsecondary education. As part of this increased emphasis, WIOA requires states to develop a unified state plan that coordinates and aligns the group of core WIOA-authorized workforce programs, including adult education. Previously, states developed a dedicated adult education plan. WIOA also aligns workforce programs by establishing a set of common performance indicators across the core WIOA programs that emphasizes employment outcomes and the attainment of credentials. Under prior law, adult education programs had their own set of indicators. WIOA authorizes AEFLA appropriations from FY2015 through FY2020. Nominal authorization levels increase each year. The authorization level for FY2015 is $577,667,000. Between FY2015 and FY2016, the authorization level increases 7.7%. Between FY2016 and FY2020, annual increases in authorization levels are between 2.1% and 2.4%. In FY2020, the authorization level is $678,640,000. Exact authorization levels for each year are in the "Authorization Level" row of Table 1 . Under the WIOA provisions, Section 202 of AEFLA specifies that the purpose of the legislation is to create a partnership between the federal government, states, and localities to provide services to (1) assist adults to become literate and obtain the knowledge and skills necessary for employment and economic self-sufficiency; (2) assist adults who are parents or family members to obtain the education and skills that- (A) are necessary to becoming full partners in the educational development of their children; and (B) lead to sustainable improvements in the economic opportunities for their family; (3) assist adults in attaining a secondary school diploma and in the transition to postsecondary education and training, including through career pathways; and (4) assist immigrants and other individuals who are English language learners in- (A) improving their- (i) reading, writing, speaking, and comprehension skills in English; and (ii) mathematics skills; and (B) acquiring an understanding of the American system of Government, individual freedom, and the responsibilities of citizenship. These provisions in WIOA represent an expansion of the purpose specified in the WIA version of AEFLA. Paragraph (3) expands the program purpose to include transition to postsecondary education and training. Paragraph (4) is a new provision in WIOA and has no direct counterpart in prior law. WIOA also amended the definition of "adult education" in statute to reflect an increased emphasis on the relationship between AEFLA-funded services and subsequent transitions to postsecondary education and employment. Under WIOA, adult education is defined as: [A]cademic instruction and education services below the postsecondary level that increase an individual's ability to— (A) read, write, and speak in English and perform mathematics or other activities necessary for the attainment of a secondary school diploma or its recognized equivalent; (B) transition to postsecondary education and training; and (C) obtain employment. Under WIA, the definition of adult education did not include employment or postsecondary education, though other provisions of the bill did mention these outcomes. Under the AEFLA provisions of WIOA, Sections 211 and 221 reserve or limit funds for specific purposes or activities. The collective effects of these provisions, as specified in statute, are summarized below. Total Appropriation Reservation for National Leadership Activities (2% of total appropriation) Unreserved funds (98% of total appropriation) English Literacy and Civics Education State Grants (12% of unreserved funds) Adult education state grant funds (88% of unreserved funds) Subgrants to local providers (at least 82.5% of adult education state grant funds) State leadership activities (up to 12.5% of adult education state grant funds) Administrative costs (up to 5% of adult education state grant) As noted in Table 1 , the AEFLA provisions of WIOA repealed two reservations that were enacted in the AEFLA provisions of WIA. Under the AEFLA provisions of both WIA and WIOA, statute specifies that the state grant funds that are allotted to the states are the funds that remain after the statutory reservations. As such, the repeals of two "off-the-top" reservations have the practical effect of increasing the portion of the AEFLA appropriation that is allotted to the states. Under the AEFLA provisions of WIOA, the 98% of the annual AEFLA appropriation that is not reserved for National Leadership Activities is granted to the states via two formula grants. Of the formula grant funds, 12% are reserved for English Literacy and Civics Education State Grants (EL-Civics) and allotted to the states via formula. (See the " English Literacy and Civics Education State Grants " section later in this report.) The remaining 88% of the unreserved funds is allocated to adult education state grants and allotted to the states using a second formula. The AEFLA provisions of WIOA specify a two-step process by which state grant funds are distributed. First, there is an initial allotment of $250,000 to each state and $100,000 to each eligible outlying area. The second step of the allotment process distributes the remainder of the funding by formula, which is based on each state's share of qualifying adults. Qualifying adults are individuals who are at least 16 years of age, are beyond the age of compulsory school attendance in their state, do not have a secondary school diploma or its recognized equivalent, and are not enrolled in secondary school. States must match their grants so that 25% of the state's total adult education resources are from non-federal sources. Non-federal matches may be cash or in-kind. In outlying areas, the non-federal share must be at least 12%. AEFLA's hold harmless provisions specify that states and outlying areas shall receive grants equal to at least 90% of the grant they received in the previous fiscal year. AEFLA's maintenance of effort provisions require each state and outlying area to expend at least 90% of what it spent in the prior year on adult education activities. WIOA did not change the factors, weights, or hold harmless provisions from the formula in the AEFLA provisions of WIA. Statute specifies that states may allocate up to 12.5% of their grants for state leadership activities and up to 5% for administrative expenses. At least 82.5% of their grants must be subgranted to local providers of adult education services. States may allocate up to 12.5% of their grants to state leadership activities (activities of statewide significance). The AEFLA provisions of WIOA specify four required state leadership activities: The alignment of adult education activities with other WIOA core programs and One-Stop partners to implement strategies identified in the unified state plan. (See " Unified State Plans " section later in this report.) The establishment or operation of professional development programs to improve instruction by local providers and dissemination of information and promising practices related to such programs. Technical assistance to local service providers, including the development and dissemination of instructional and programmatic practices, information on the role of adult education providers as partners in the workforce system, and assistance in the use of technology. The monitoring and evaluation of adult education activities and dissemination of models and proven or promising practices within the state. In addition to the required state leadership activities, AEFLA lists a number of allowable statewide activities related to program development, alignment with other programs, and "other activities of statewide significance that promote the purpose of this title." At least 82.5% of a state's formula grant must be subgranted to local providers through a competitive grant process. States must provide "direct and equitable access" to all eligible providers. When selecting subgrantees, states must consider a group of 13 factors detailed in law. Many of these considerations relate to a provider's ability to serve high-need populations, deliver high-quality services, and coordinate with other programs and services. AEFLA defines an eligible provider as "an organization that has demonstrated effectiveness in providing adult education and literacy activities[.]" Eligible providers may include a local educational agency; a community-based organization or faith-based organization; a volunteer literacy organization; an institution of higher education; a public or private nonprofit agency; a library; a public housing authority; and a nonprofit institution that has the ability to provide adult education and literacy activities to eligible individuals. A consortium or coalition of entities in the above list is also considered to be an eligible provider, as is a partnership between an employer and an entity in the above list. Local subgrantees are required to establish or operate programs that provide adult education and literacy activities. AEFLA defines these activities as [P]rograms, activities, and services that include adult education, literacy, workplace adult education and literacy activities, family literacy activities, English language acquisition activities, integrated English literacy and civics education, workforce preparation activities, or integrated education and training. Section 225 of WIOA specifies that each state will subgrant funds to support educational activities for individuals in correctional institutions and for other institutionalized individuals. Statute does not specify a minimum funding level and no more than 20% of subgrants to local providers may support these activities. Under WIOA, 12% of AEFLA formula grant funds are reserved for "Integrated English Literacy and Civics Education" (EL-Civics State Grants). The AEFLA provisions of WIOA define EL-Civics activities as [S]ervices provided to English language learners who are adults, including professionals with degrees and credentials in their native countries, that enables such adults to achieve competency in the English language and acquire the basic and more advanced skills needed to function effectively as parents, workers, and citizens in the United States. Such services shall include instruction in literacy and English language acquisition and instruction on the rights and responsibilities of citizenship and civic participation, and may include workforce training. EL-Civics grant funds are allotted to the states by formula on the basis of each's state relative share of recent immigrants admitted for legal permanent residence (LPR). Specifically 65% of EL-Civics funds are allotted on the basis of each state's share of LPRs for the 10 most recent years; 35% of EL-Civics funds are allotted on the basis of each state's share of LPRs for the 3 most recent years; and no state may receive an EL-Civics grant of less than $60,000. While the codification of EL-Civics State Grants was new to WIOA, EL-Civics grants had been funded through set-aside provisions in annual appropriations legislation since FY2000. The allotment formula in WIOA is the same as the formula that was typically specified in appropriations legislation for allotting EL-Civics State Grant funding. To be eligible for AEFLA grant funds, a state must have an approved state plan. A major change in WIOA is the state-level alignment and coordination of AEFLA-funded programs with other WIOA-authorized programs. Under the new law, programs are coordinated through a single unified state plan and performance is aligned through a set of common measures. Under the AEFLA provisions of WIOA, each state had an AEFLA-specific state plan as well as separate plans for other programs authorized under WIA. Similarly, the performance accountability system under AEFLA was limited to adult education programs and not directly comparable to data from other WIA-authorized programs. Under WIOA, each state must submit a unified state plan (USP) that establishes a four-year strategy for the core WIOA-authorized programs in the state, including adult education. Generally, these plans must assess the state's labor needs and workforce development system and describe how the core WIOA programs will be aligned and coordinated to meet these needs. The plan must also describe how each program will be assessed each year. The unified state plan is developed by the State Workforce Development Board (WDB). The WDB includes representatives from business, the workforce, and government. Government representatives include the lead state official from each core program and, as such, the lead official from each state's adult education agency will be on the state WDB. In addition to the unified components of the state plan, WIOA also requires state plans to address several specific issues related to activities carried out under AE FLA. These requirements include descriptions of how the state will if applicable, align content standards for adult education with state-adopted academic content standards, as adopted under Title I-A of the Elementary and Secondary Education Act (ESEA); apply statutory considerations when awarding subgrants, including subgrants for correctional education, EL-Civics, and integrated education and training; use the funds to carry out state leadership activities; use funds to carry out EL-Civics activities; and assess the quality of providers and actions to improve such quality. Similar to the unified state plans, WIOA also developed common performance accountability measures across all core WIOA-authorized programs. Generally, these metrics focus on employment and credential attainment. The alignment of performance indicators for adult education and other employment programs reflects WIOA's increased emphasis on the transition from adult education to employment and/or postsecondary education. Section 116 of WIOA specifies six performance accountability measures: 1. the percentage of program participants who are in unsubsidized employment during the second quarter after exit from the program; 2. the percentage of program participants who are in unsubsidized employment during the fourth quarter after exit from the program; 3. the median earnings of program participants who are in unsubsidized employment during the second quarter after exit from the program; 4. the percentage of program participants who, during participation in or within one year after exit from the program, obtain either (1) a recognized postsecondary credential or (2) a secondary school diploma or its recognized equivalent and subsequently enter employment or are in a program leading to a recognized postsecondary credential; 5. the percentage of program participants who, during a program year, are in an education or training program that leads to a recognized postsecondary credential or employment and who are achieving measurable skill gains toward such a credential or employment; and 6. the indicators of effectiveness in serving employers (to be established by the Secretary of Education and the Secretary of Labor). Each state must identify an expected level of performance for each indicator for each core WIOA program. In practice, this means that data limited to AEFLA grantees will be reported on each of the six performance metrics. Expected levels of performance are negotiated between the state and the Secretary of Labor in conjunction with the Secretary of Education and will be included in each unified state plan. Under WIOA, 2% of AEFLA appropriations are reserved for National Leadership Activities (NLA). Section 242 of WIOA describes NLA as "activities to enhance the quality and outcomes of adult education and literacy activities and program nationwide." Statute establishes four required activities: providing assistance to help states meet the performance accountability requirements in Section 116 of WIOA; upon request by a state, providing assistance to local providers in using performance accountability measures and data systems for the improvement of adult education activities; carrying out research on and evaluation of adult education activities and estimating the number of adults functioning at the lowest levels of literacy proficiency, which shall be coordinated across relevant federal agencies, including the Institute for Education Sciences; and carrying out an independent evaluation of the programs and activities under AEFLA at least once every four years. Statute also specifies a group of allowable activities under NLA. These include using NLA funds for technical assistance to states and local providers as well as supporting activities to identify best practices, support networks of providers, increase program effectiveness, and evaluate programs. Appendix A. AEFLA Funding, FY2000-FY2014 Under the Workforce Investment Act Appendix B. Estimated Allotments of State Grant Funds, FY2014
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The Adult Education and Family Literacy Act (AEFLA) is the primary federal legislation that supports basic education for out-of-school adults. Commonly called "adult education," the programs and activities funded by AEFLA typically support educational services at the secondary level and below, as well as English language training. Actual educational services are typically provided by local entities. AEFLA was created by Title II of the Workforce Investment Act of 1998 (WIA; P.L. 105-220). The authorization of appropriations under WIA lapsed after FY2003, though the program continued to be funded through the appropriations process. In 2014, AEFLA was reauthorized by Title II of the Workforce Innovation and Opportunity Act of 2014 (WIOA, P.L. 113-128). This report will discuss AEFLA as amended by WIOA. WIOA made a number of changes to the authorizing law but maintained the program's primary function of authorizing federal grants to state agencies for adult education activities. State agencies may use a portion of federal funds for statewide activities, but the bulk of their grants must be subgranted to local providers. Eligible local providers include local educational agencies, institutions of higher education, community-based organizations, and other qualified entities. Under WIOA, federal AEFLA grants are allotted to states via two formula grants: 88% of state grant funds are allotted to the states based on a formula that considers each state's relative share of adults who do not have a high school diploma or equivalent and who are not enrolled in school. These funds may support basic education services, coursework toward a secondary school diploma or equivalent, English language training or other adult education services. 12% of funds are allotted to the states based on a formula that considers each state's relative share of immigrants who were admitted for legal permanent residence in past years. These funds support "integrated English literacy and civics education" for English language learners. WIOA requires that state agency grantees submit and have an approved unified state plan that aligns adult education with other core WIOA programs to meet local labor force needs. State grantees must also report on program performance using a set of metrics that applies across core WIOA programs, including adult education. While the large majority of annual appropriations support grants to state agencies, statute reserves 2% of annual AEFLA appropriations for National Leadership Activities. These national activities include technical support for state agencies and assistance in meeting the performance accountability requirements of WIOA. Congress appropriated $578 million for AEFLA-authorized activities in FY2014. WIOA authorizes the same appropriation level for FY2015. Between FY2015 and FY2020, WIOA authorizes annual increases in AEFLA appropriations, with an authorization level of $679 million in FY2020.
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On February 2, 2012, the Senate passed S. 2038 , the Stop Trading on Congressional Knowledge Act of 2012 (STOCK Act). Title II of the STOCK Act, added as the Leahy-Cornyn amendment on the Senate floor, carries forward much of what had appeared in S. 401 , when it emerged from the Senate Judiciary Committee. Title II, styled the Public Corruption Prosecution Improvements Act, closely tracks the amended language of H.R. 2572 , which the House Judiciary Committee unanimously approved on December 1 of last year. The House, however, stripped Title II from S. 2038 , and the bill was enacted into public law without it. In the discussion that follows, Title II refers to Title II of the STOCK Act as initially passed by the Senate. H.R. 2572 refers to the bill ordered to be reported as reflected in the Manager's Amendment in the Nature of a Substitute, as amended in Judiciary Committee markup. Federal officials prosecute corruption—public and private; federal, state, local, territorial, and tribal—under a number of statutes including those that outlaw bribery, bribery involving federal programs, mail fraud, and/or wire fraud. The bills would expand the scope of these and related federal statutes, increase the penalties for those convicted, and amend related procedures to facilitate prosecution. The bills represent a merger of two prior efforts. One involved reactions to the Supreme Court's Skilling decision which limited honest services mail and wire fraud prosecutions to cases of bribery and kickbacks. The other involved a more general concern over the state of law in the area of public corruption. The Senate Judiciary Committee addressed this second concern when it reported S. 1946 to the floor during the 110 th Congress. The bills are reminiscent of many of the provisions in that earlier proposal. They also mirror proposals offered in the last Congress in the wake of Skilling . Public Officials: Undisclosed Self-Dealing : Federal public corruption statutes have a long history. Federal bribery statutes date back almost to the dawn of the Republic. The mail fraud statute, which forbids the use of the mail in conjunction with a scheme to defraud another of money or property, originated in the mid-eighteenth century. The mail fraud statute's companion, the wire fraud statute, was not enacted until the mid-twentieth century. Shortly thereafter, federal officials had begun to prosecute corrupt state and local officials under the federal mail and wire fraud statutes. Application of the statutes to public corruption was based on the theory that the mail and wire fraud statutes protected both tangible as well as intangible property and that such intangible property included the right of an employer or the public to the honest services of an employee or public official. The Supreme Court, however, found that interpretation too open ended. In McNally , it declared that, "[r]ather than construe the statute in a manner that leaves its outer boundaries ambiguous and involves the Federal Government in setting standards of disclosure and good government for local and state officials, we read §1341 as limited in scope to the protection of property rights." Congress answered McNally with the enactment of 18 U.S.C. 1346, which defines the term "scheme to defraud" in mail and wire fraud statutes to include schemes to "deprive another of the intangible right to honest services." Faced with vagueness challenges, the lower federal courts devised a number of standards to limit the scope of honest services mail and wire fraud. Rather than endorse any of these standards, the Supreme Court in Skilling opted for a narrow construction of honest services fraud. It concluded that "[i]n proscribing fraudulent deprivations of 'the intangible right to honest services,' §1346, Congress intended at least to reach schemes to defraud involving bribes and kickbacks. Construing the honest-services statute to extend beyond that core meaning ... would encounter a vagueness shoal." As it had done in McNally , the Court in Skilling urged Congress to speak clearly should it elect to expand the reach of honest services mail and wire fraud. H.R. 2572 and Title II both would expand the mail and wire fraud definition of the term "scheme to defraud" to include a scheme "by a public official to engage in undisclosed self-dealing." The proposals cover federal, state, and local officials, employees, and agents. "Undisclosed self-dealing" has two components. One involves a conflict of interest; the other an obligation to disclose it. The first encompasses a public official's performance of an official act for the purpose, at least in material part, of furthering his own financial interest or that of a spouse, minor child, close business associate, or in some instances, that of someone from whom the official has received something of value. Official acts include those actions, decisions, and courses of action that come within the official's duties. The second element of undisclosed self-dealing consists of the public official's knowingly failing to disclose material information that he is required by law to disclose. "Material information," as the term is used in the second element is defined to include information relating to pertinent financial matters of the covered officials and those covered by virtue of their relation to those officials. The proposal defines neither "material," "any thing or things of value," nor "financial interest," as those terms are used in the first element. The omissions may not be problematic. In the absence of a statutory definition, interpretation begins with the ordinary meaning of a term, and may take into account how the term is defined or understood in similar contexts. The dictionary describes "material" as something "having real importance or great consequences." In the context of other statutes relating to fraudulent conduct, something is considered material "if it has a natural tendency to influence" a decision. The bills speak of a public official performing an act for "the purpose, in whole or in material part, of furthering or benefitting a financial interest." This would seem to mean that an intent to further or benefit a particular financial interest must play an important or influential part in the official's decision to perform the act. The terms "thing of value," or "anything of value" are likewise used with some regularity elsewhere in federal criminal law. There is some suggestion that "anything of value" should be read more broadly as "all things of value." In any event, the terms "thing of value" and "anything of value" are understood to refer to a diverse range of both tangible and intangible things including campaign contributions, employment, sex, expunged criminal records, and casual pretrial release supervision. The meaning of "financial interest" may be a little less transparent. It is not a term regularly used or defined in federal criminal law, but it is a familiar concept in federal conflict of interest provisions. A Justice Department witness emphasized this point when she testified at a congressional hearing on the House bill: "[I]n order to define the scope of the financial interests that underlie improper self-dealing, the provision draws content from the well-established federal conflict-of-interest statute, 18 U.S.C. §208, which currently applies to the federal Executive Branch." Perhaps more to the point, the proposed undisclosed self-dealing section only applies to those financial interests which the law obligates the public official to disclose. The qualifying reporting statute or regulation would ordinarily make clear the financial interests whose disclosures it requires. In the Justice Department's endorsement of the proposal the same witness testified that, "[U]nder the proposed statute, no public official could be prosecuted unless he or she knowingly conceals, covers up, or fails to disclose material information that he or she is already required by law or regulation to disclose. Because the bill would require the government to prove knowing concealment and that any defendant acted with the specific intent to defraud, there is no risk that a person can be convicted for unwitting conflicts of interest or mistakes." A representative of the criminal defense bar, however, criticized the proposal as constitutionally suspect, contrary to federalism principles, duplicative, and overly simplistic. He argued that the section fails to heed Skilling Court's plea for clarity. He envisioned First Amendment implications in the proposal's application to campaign contributions to elected officials. He also characterized the proposal as a "classic example of overcriminalization" that would replicate existing law and intrude upon state prerogatives. Finally, the witness contended that the proposal is at odds with the realities of part-time legislators and other state and local officials. Even after Skilling , the honest services mail and wire fraud statutes reach bribery and kickbacks. The proposal adds unreported self-dealing in public corruption cases. It leaves unchanged the law governing self-dealing in private cases. Section 20 1 : The bills also seek to overcome Sun Diamond and Valdes , two judicial interpretations of the basic federal bribery and illegal gratuities statute, 18 U.S.C. 201. Subsection 201(b) outlaws soliciting or offering anything of value in exchange for an official act. Subsection 201(c) outlaws soliciting or offering anything of value in gratitude ("for or because of") for the performance of an official act. The distinction between the two is the corrupt bargain, the illicit quid pro quo, that marks bribery. The issue in Sun Diamond was whether an illegal gratuities conviction might be based solely on gifts given a public official because of his office, without reference to any particular official act, or whether the conviction could only stand if gifts were sought or provided with a specific official act in mind. The Court unanimously concluded that "in order to establish a violation of 18 U.S.C. §201(c)(1)(A), the Government must prove a link between a thing of value conferred upon a public official and a specific 'official act' for or because of which it was given." Justice Scalia, writing for the Court, asserted this construction, along with the definition of a qualifying "official act," precludes unintended application of the gratuities subsection. The official act requirement plays no less significant a role in avoiding unintended coverage, for as the Court observed, "when the violation is linked to a particular 'official act,' it is possible to eliminate the absurdities through the definition of that term . When, however, no particular 'official act' need be identified, and the giving of gifts by reason of the recipient's mere tenure in office constitutes a violation, nothing but the Government's discretion prevents the foregoing examples from being prosecuted." The bills would enlarge both the illegal gratuities prohibition and the definition of "official acts." They would also devise an alternative means of avoiding the type of unintended results mentioned in Sun Diamond . First, they would amend the proscriptions of subsection 201(c) to prohibit offering or soliciting a gift for or because of "the official's or person's official position," in order to supplement the existing prohibition against gifts for or because of an "official act." The amendment would bring within the scope of the illegal gratuities subsection "status" and "good will" gifts and contributions, without requiring prosecutors to show that they were sought or provided with an eye to any specific official act. As the earlier committee report explained, "This would allow the statute to reach its intended range of corrupt conduct, including benefits flowing to public officials designed to curry favor for non-specified future acts or to build a reservoir of good will." Second, they would amend the gratuities offense to create a safe harbor for gifts and campaign contributions permitted by rule or regulation, a term they would define for both bribery and illegal gratuities purposes. The earlier committee report noted that in any event most campaign contributions would not be implicated by the gratuities prohibition. The prohibition is confined to things given to the official personally, and campaign contributions ordinarily are not. The report also confirmed that the exception would help avoid the "horribles" found in Justice Scalia's Sun Diamond opinion. The report may have introduced a hint of ambiguity in the exception when it suggested that rules or regulations would rest beyond the pale if they left the particulars of an exception to individual Member or agency discretion. Third, the bills would establish a $1,000 threshold for the illegal gratuities offenses, although each does so in its own distinctive manner. H.R. 2572 would limit the offenses in 18 U.S.C. 201—bribery and illegal gratuities alike—to cases involving $1,000 or more. Title II would apply the $1,000 limitation only in the case of illegal gratuity status gifts. Finally, the bills would amend the definition of official act, applicable to both the bribery and gratuities offenses. The change is designed to repudiate the construction of the term "official act" announced by the D.C. Court of Appeals in Valdes . Valdes, a police officer, had received cash in connection with license plate identification and outstanding warrant information he had provided an informant he believed to be a judge. Indicted for bribery, Valdes was convicted of the lesser included offense of receiving an illegal gratuity. The Court of Appeals reversed, declaring, "§201 is not about officials' moonlighting, or their misuse of government resources, or the two in combination." Instead, the term "any question, matter, cause, suit, proceeding or controversy" in the definition of official act "refers to a class of questions or matters whose answer or disposition is determined by the government," the court held. Not every subsequent federal appellate court has concurred. The phrase in the bills, "any act within the range of official duty," is designed to overcome the Valdes interpretation of "official act," and "to ensure that the bribery statute applies to all conduct of a public official within the range of the official's duties." The bills would add the term "course of conduct" to the definition of official act to avoid requiring prosecutors to "establish a one-to-one link between a specific payment and a specific official act." The change would apply to both bribery and illegal gratuity offenses. The bills' illegal gratuity subsection would feature a safety valve for campaign contributions. The bribery subsection would not. Yet, bribery would be prosecutable only in the presence of a corrupt proposal to influence official conduct in exchange of something of value. The House bill would change the word "means" to the word "includes." The Senate bill would not. Under the Senate bill the definition limits; under the House bill it exemplifies. Section 666 : Section 666 outlaws bribery, embezzlement, and other forms of theft, involving more than $5,000, in relation to federal programs. The bills propose several changes in the language of Section 666. They would lower the threshold for federal prosecution from $5,000 to $1,000. The new threshold corresponds to that found in the statute that outlaws embezzlement or other theft of federal property. The defense bar contends, however, that the modification would undo a limitation imposed in the interest of federalism and to avoid federal over criminalization. The bills would increase the maximum term of imprisonment associated with the offense from, 10 to 20 years. The new maximum would match those under the mail and wire fraud statutes as well as the 20-year maximum that the bills would establish for the bribery of federal officials under Section 201. Section 641 outlaws the embezzlement or other theft of money or anything else of value belonging to the United States or one of its agencies or departments. The District of Columbia Code outlaws embezzlement or other forms of theft, regardless of the victim. Violations of the D.C. provision carry a maximum 10-year term of imprisonment, if the value of the property exceeds $1,000 and a maximum of 180 days in other cases. The bills would increase the maximum term of imprisonment for a violation of Section 641 from 10 to 20 years. Only H.R. 2572 would also fold the property of the D.C. government and its agencies and departments into the coverage of Section 641. When penalty increases were proposed for various federal public corruption offenses during the 110 th Congress, the committee report noted that the increases would reflect "the Committee's view of the serious and corrosive nature of these crimes, and ... harmonize the punishment of these public corruption-related offenses with similar statutes." Moreover, the committee was of the opinion that "[i]ncreasing penalties in appropriate cases sends a message to would-be criminals and to the public that there are severe consequences for breaching the public trust." Reacting to the same proposals replicated in the House and Senate bills, a representative of the defense bar contended that the proposals would "dramatically expand already lengthy prison sentences ... without any evidence of whether such an expansion is necessary or what the costs of such an expansion would be." Specifically, the House and Senate bills would increase the maximum term of imprisonment for the following existing federal public corruption offenses: bribery/theft relating to a federal program (10 years increased to 20); theft of U.S. property (10 years increased to 20); promise of a U.S. job for political activity (1 year increased to 3 years); denial of U.S. benefit for want of political contribution (1 year increased to 3 years); soliciting political contributions from fellow U.S. employees (3 years increased to 5); intimidation to secure political contributions (3 years increased to 5); soliciting political contributions in U.S. buildings (3 years increased to 5); coercion of U.S. employees for political activities (3 years increased to 5). H.R. 2572 , alone, would increase the penalty for bribery of U.S. officials from 15 to 20 years, and for illegal gratuities from 2 to 5 years. The bills would direct the United States Sentencing Commission to examine the Guidelines applicable in the case of a conviction under 18 U.S.C. 201 (bribery of federal officials), 641 (theft of federal property) and 666 (theft or bribery in relation to federal programs). The Commission would be instructed to amend the Guidelines "to reflect the intent of the Congress that such penalties be increased in comparison to those currently provided." Statute of Limitations : Capital offenses and certain child abduction and sex offenses have no statute of limitations and can be tried at any time. Elsewhere statute of limitations have been established to encourage prompt law enforcement and to avoid the need to defend against stale charges. Most other federal crimes must be prosecuted within five years. The statute of limitations for certain securities fraud cases, for instance, is six years. Both bills would establish a six-year statute of limitations for the following public corruption offenses or conspiracies or attempts to commit them: 18 U.S.C. 201 (bribery and illegal gratuities involving federal officials or employees); 18 U.S.C. 666 (bribery or theft involving federal programs); 18 U.S.C. 1341 (mail fraud) (honest services fraud involving public officials only); 18 U.S.C. 1343 (wire fraud) (honest services fraud involving public officials only); 18 U.S.C. 1951 (Hobbs Act) (extortion under color of official right only); 18 U.S.C. 1952 (Travel Act) (bribery cases only); and 18 U.S.C. 1962 (RICO) (only when the predicate offenses include bribery under state law, or violations of one of the offenses listed above other than the Travel Act). The proposal in both bills has certain drafting eccentricities. It would establish a six-year statute of limitations for a series of bribery offenses, but only one embezzlement offense (18 U.S.C. 666). It would apply to honest services mail and wire fraud, but not the proposed self-dealing mail and wire fraud. It would apply to the more narrow money laundering statute (18 U.S.C. 1952), but not the more general (18 U.S.C. 1956). Finally, the bills would create a six-year statute of limitations for attempt to commit any of the listed crimes. Yet it is not a crime to attempt to commit some of them. It is a crime to attempt to violate the mail or wire fraud statutes, the Hobbs Act, or the Travel Act; but it is not a separate crime to attempt to violate the bribery provisions of 18 U.S.C. 201 or 666 or the RICO provisions. Nevertheless, the proposal purports to set a six-year statute of limitations for crime and noncrime alike. Venue : The Constitution insists that federal crimes be tried in the states and districts in which they are committed. Congress may provide by statute for the trial of any crime committed outside any state. In the case of continuous crimes or crimes otherwise committed in more than one place, the Supreme Court in Rodriguez-Moreno held that the offense may be tried wherever a conduct element of the offense occurs. Thus, conspiracy may be tried in any district in which an overt act in furtherance of the scheme is committed. The bills would amend the venue statute to permit trial of an offense, involving use of the mail or interstate commerce or entry of individual or goods into the United States, "in any district in which an act in furtherance of the offense is committed." The proposal would extend both to federal public corruption offenses and to any other federal offenses where federal jurisdiction is predicated on interstate commerce or use of the mail. The representative of the defense bar objected that the proposal would impose an unfair hardship upon the accused under some circumstances and might lead to forum shopping for that purpose. The Constitution, however, may limit the proposal's scope to acts in furtherance that constitute conduct elements of the offense. In this context, a recent Second Circuit case may be instructive. In Tzolov , the court rejected the argument that venue was necessarily proper where the defendants committed an act in furtherance of the crime charged. In doing so, it distinguished an earlier case in which the act in furtherance case had been a conduct element of the offense. The House and Senate bills contain other venue proposals, relating to perjury and the obstruction of justice, that would apply in federal public corruption cases and elsewhere. The Supreme Court in Rodriguez-Moreno expressly declined to rule on whether venue may lie in the district impacted by the crime charged. The witness tampering statute now has a subsection under which witness tampering and the obstruction of judicial proceedings may be prosecuted "in the district in which the official proceeding ... was intended to be affected or in the district in which the conduct constituting the alleged offense occurred." The bills would amend the subsection to permit similar treatment for the prosecution of obstructions in violation of 18 U.S.C. 1503 (obstructing judicial proceedings), 1504 (writing to influence a federal juror), 1505 (obstructing Congressional or federal administrative proceedings), 1508 (eavesdropping on federal jury deliberations), 1509 (obstructing the execution of federal court orders), 1510 (obstructing federal criminal investigations). At the same time, they would create a new section that would afford federal perjury and subornation prosecutor the same options. The federal appellate cases announced after Rodriguez-Moreno suggest that the proposal's obstruction and perjury amendments may be limited to cases in which a conduct element occurs. W iretap Authority : Existing law authorizes federal courts to issue orders approving law enforcement installation and use of devices to intercept wire, oral, and electronic communications. The orders are available upon a showing that interception is likely to result in evidence of one of a list specific predicate offenses. Bribery of federal officials, mail fraud, and wire fraud are already predicate offenses. The bills would add offenses under Section 641 (theft of federal property), Section 666 (theft or bribery involving federal programs), and Section 1031 (major fraud against the United States). The Justice Department has testified that "[p]rosecutors often have lamented their inability to use these tools in such cases." Appeals : The United States Attorney must certify that any appeals by the Government are not taken for purposes of delay and that in the case of an appeal relating to the exclusion of evidence must certify that the evidence is substantial proof of a material fact in the pending case. The bills would permit certification as well by the Attorney General, the Deputy Attorney General, or an Assistant Attorney General. H.R. 2572 and Title II are almost identical. There are a few differences, however. The penalty for bribery under 18 U.S.C. 201(b) is now imprisonment for not more than 15 years. The penalty for illegal gratuities under 18 U.S.C. 201(c) is now imprisonment for not more than two years. Title II would leave those penalties in place. H.R. 2572 would increase the maximum term of imprisonment for bribery under subsection 201(b) to 20 years and the maximum term of imprisonment for illegal gratuities under subsection 201(c) to five years. Status gifts now fall outside the illegal gratuities proscriptions of subsection 201(c). Moreover, existing law places no minimum on the value of the bribe or illegal gratuity condemned under subsections 201(b) or (c). Both bills would extend the illegal gratuities offense to include status gifts, but both would limit the offense in status gift cases to gifts of $1,000 or more. H.R. 2572 , unlike Title II, would also limit all other Section 201 bribery or illegal gratuities offenses to cases involving $1,000 or more. Subsection 201(c) now outlaws illegal gratuities "otherwise than as provided by law.... " Both bills would amend the clause to read "otherwise than as provided by law ... or by rule or regulation." Section 641 now prohibits the theft or embezzlement of federal property. H.R. 2572 , unlike Title II, would expand the section to cover property of the District of Columbia. Sponsors have made a number of changes in the provisions of H.R. 2572 and Title II since they were first proposed. Examples include provisions for additional RICO predicates, the Cleveland fix, and penalty increases for certain public corruption offenses. The federal Racketeer Influenced and Corrupt Organizations (RICO) provisions outlaw conducting the affairs of an enterprise whose activities affect interstate commerce through the patterned commission of various state and federal crimes (predicate offenses). Violations are punishable by imprisonment for up to 20 years; may result in as well as the confiscation of related property; and may trigger the application of federal money laundering provisions. Both H.R. 2572 , as introduced, and the predecessor to Title II, S. 401 as approved by the Senate Judiciary Committee, would have enlarged the RICO predicate offense list to include violations of 18 U.S.C. 641 (relating to the theft or embezzlement of federal property), 666 (relating to theft or bribery in connection with federally assisted programs), and 1031 (relating to major fraud against the United States). The mail and wire fraud statutes outlaw the use of mail or wire communications as part of a scheme to defraud another of money or property. The Supreme Court in Cleveland held that the statutes do not reach fraudulent schemes to induce a state to issue licenses, since in the hands of the state unissued licenses do not constitute money or property. H.R. 2572 (as introduced) and S. 401 featured sections apparently designed to overcome the limitation identified in Cleveland . Neither Title II nor H.R. 2572 has comparable sections.
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The House Judiciary Committee has approved an amended version of the Clean Up Government Act (H.R. 2572). The Senate has passed nearly identical provisions as Title II of the Stop Trading on Congressional Knowledge Act (STOCK Act; S. 2038). Title II, however, was dropped from the bill prior to its enactment as P.L. 112-105, 126 Stat. 291 (2012). Among other things, Title II and H.R. 2572 would each: Expand the scope of federal mail and wire fraud statutes to reach undisclosed self-dealing by public officials—in response to Skilling. Amend the definition of official act for bribery purposes—to overcome the Valdes decision. Adjust the federal gratuities provision to reach "goodwill" gifts—in response to Sun Diamond. Increase the criminal penalties that attend various bribery, illegal gratuities, embezzlement statutes, and related provisions. Extend the statute of limitations from five to six years for several corruption offenses. Authorize the trial of perjury and obstruction charges in the district of the adversely effected judicial proceedings. Authorize the trial of multi-district cases in any district in which an act in furtherance is committed. Increase the number of public corruption offenses considered and wiretap predicate offenses. H.R. 2572, alone, would: Increase the maximum penalties under the federal bribery and illegal gratuities statute. Amend the federal law criminalizing the theft or embezzlement of federal property to include property of the District of Columbia. Limit the prosecution of bribery and illegal gratuity cases under 18 U.S.C. 201 to cases involving $1,000 or more. This is an abridged version of a longer report, CRS Report R42016, Prosecution of Public Corruption: An Overview of Amendments Under H.R. 2572 and S. 2038, by [author name scrubbed], without the footnotes, attribution, or citations to authority found in the longer report. Related CRS reports include CRS Report R40852, Deprivation of Honest Services as a Basis for Federal Mail and Wire Fraud Convictions, by [author name scrubbed], and CRS Report R41930, Mail and Wire Fraud: A Brief Overview of Federal Criminal Law, by [author name scrubbed].
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T he U.S. Food and Drug Administration (FDA) has a statutory mission to ensure the safety of all food except for meat, poultry, and certain egg products over which the U.S. Department of Agriculture (USDA) has regulatory oversight. Under the Federal Food, Drug, and Cosmetic Act (FFDCA), the FDA has the authority to regulate the manufacturing, processing, and labeling of food, with the primary goal of promoting food safety. Congress has vested the FDA with the authority to take both administrative and judicial enforcement actions. The agency initiates and carries out administrative enforcement actions while judicial enforcement actions, including seizures and injunctions, require some type of involvement by the federal courts. While the FDA gathers information to recommend a judicial enforcement action, the Department of Justice represents the FDA before a federal court. This report focuses on the statutory authority for both the FDA and federal courts to initiate the following judicial enforcement actions: injunctions, seizures, and criminal prosecution. For more information about FDA administrative enforcement actions, see CRS Report R43794, Food Recalls and Other FDA Administrative Enforcement Actions , by [author name scrubbed]. Section 301 of the FFDCA prohibits the violation of any of the substantive provisions of the act and serves as the basis for the FDA's enforcement actions. Under Section 301, "causing" any of the prohibited acts as well as the act itself is prohibited. The specific enforcement mechanisms available to the agency to enforce the FFDCA are found throughout the act. Section 310(a) states that "all proceedings for the enforcement, or to restrain violations, of this [act] shall be by and in the name of the United States." Thus, private citizens do not have the right to sue to enforce the FFDCA. While the FDA may initiate these enforcement actions, the Department of Justice represents the FDA and the federal government in judicial enforcement proceedings. An injunction is a civil judicial order initiated against an industry participant to stop or prevent a violation of the FFDCA and to halt the flow of violative products in interstate commerce. An injunction also provides an opportunity for the involved parties to correct the conditions that triggered the violation before the FDA takes additional enforcement action. The FFDCA grants federal district courts with the jurisdiction to issue such an order. This section of the report first discusses types of injunctions available to the FDA and then describes the process for filing an injunction by the FDA. The section concludes by examining the legal standard considered by courts for initiating an injunction. The FDA can initiate three types of injunctions: a temporary restraining order, a preliminary injunction, and a permanent injunction. The FDA uses a temporary restraining order (TRO) to respond to an emergency situation where immediate, temporary relief is needed, such as responding to the presence of a public health threat, which the FDA must immediately control. A TRO generally lasts for 10 days, with a possible additional 10-day extension before the FDA must seek additional enforcement action if necessary. A request for a TRO filed in court by the FDA may be subject to an ex parte hearing (where the defendant is not present). Upon gathering evidence in support of a TRO, the FDA should file the request for a TRO within 60 days. As a general rule of practice, a court considers evidence older than 60 days to be "untimely" and insufficient to support a TRO request. A preliminary injunction is a court order that temporarily requires the industry participant to stop the allegedly violative behavior prior to the final determination of the merits of a legal claim. A preliminary injunction filed by the FDA may be subject to a full hearing where the parties present evidence by affidavit or by the testimony of witnesses. A permanent injunction is a final order of the court requiring the industry participant to stop the violative behavior. A federal district court generally issues a permanent injunction following a hearing where the court found that the industry participant violated provisions of the FFDCA and there is a likelihood that the violations would continue without judicial intervention. Defendants in an injunction proceeding and the government may also agree to a "Consent Decree of Permanent Injunction" as the result of a negotiated settlement. Under the consent decree, the industry participant and the government agree to terms relating to the resolution of the past violative conduct by the industry participant. The FDA, in partnership with the Department of Justice, first files a complaint for an injunction after the FDA has presented "timely evidence" of an FFDCA violation. Timely evidence includes the agency's identification of a health hazard or a gross consumer deception that requires immediate action to stop the violative practice. The agency may also seek an injunction if significant amounts of violative products owned by the same industry participant have entered interstate commerce or if an industry participant has refused a voluntary recall or has issued an inadequate recall. The agency may also choose to file for an injunction if a seizure is impractical or uneconomical. However, filing for an injunction does not preclude further enforcement action by the FDA such as a recall or criminal prosecution. The FDA can strengthen its request for an injunction action in the complaint by demonstrating that the agency provided the defendants with adequate notice of the alleged violation(s) and an opportunity to correct the alleged violation(s). While prior notice is not legally required, such information can demonstrate the defendant's resistance to FFDCA compliance to a court, and thus support the agency's request for judicial involvement with an injunction. Types of notice may include letters, meetings, and telephone calls. Notice is adequate if it is given to individuals with authority to prevent or correct violations and includes sufficient information to show that the proper action to correct these violations has not yet been taken. Courts have found that corporate officers as well as the corporate entity itself may be subject to FDA enforcement actions, including an injunction. The Supreme Court has stated that "the public interest in the purity of its food is so great as to warrant the imposition of the highest standard of care on distributors." Because corporate agents and corporate entities both have the ability to inform themselves of the conditions of their facilities, the FDA has the authority to seek relief against executives as well as legal corporate entities. Thus, in order to successfully state a claim against individual defendants for the purposes of an injunction, the government must allege that the individuals had responsible relationships related to the furtherance of the transactions that ultimately violated the FFDCA. Pursuing enforcement action against an agent or corporation does not preclude additional enforcement action against the other. The court in U.S. v. Blue Ribbon Smoked Fish, Inc. found that the injunction against the corporate entity did not preclude an injunction against the agents of that entity due to the agents' supervisory and managerial roles over the food processing and the corresponding responsibility for the sanitation of the plant. The FFDCA expressly authorizes federal district courts to grant injunctive relief to enforce its provisions. After the FDA and the DOJ have filed a complaint requesting an injunction, the court will determine whether the government's complaint meets the legal standard for an injunction. The standard for a statutory injunction initiated by the government, however, differs from the injunction standard for private litigants. A private litigant must establish that he or she is likely to succeed on the merits; that he or she is likely to suffer irreparable harm in the absence of preliminary relief; that the balance of equities weighs in favor of the party seeking the injunction; and that the injunction is in the public interest. The government, however, does not need to prove irreparable harm, as courts presume harm is present when a statutory violation has occurred. In order for the court to make such a presumption, the purpose of the statute at issue must focus on protecting public interest, such as food safety. The elevated standard of care that food processors must meet that is inherent in the FFDCA justifies this difference in legal standards. In order for the court to issue an injunction, the government must show that the defendant has violated the FFDCA and "some cognizable danger of recurrent violation" of the statute is present. When evaluating the risk of recurrent violations, courts may infer a likelihood of future violations from past unlawful conduct. More specifically, courts may consider "the bona fides of the expressed intent to comply, the effectiveness of the discontinuance and, in some cases, the character of past violations" to determine whether the defendant would continue to violate the FFDCA. For example, the court in U.S. v. Chung's Products found a danger of recurrent violations when the defendant refused to provide information about the conditions and records of a facility, impeded entry of FDA investigators, and repeatedly failed to put in place the FFDCA required controls for C. botulinum. This record of noncompliance, according to the court, showed a "cognizable danger of future violations necessitating a permanent injunction." The scope of the injunction depends on the specific legal violations. A court may adjust the scope of the injunction depending on the likelihood that future violations may occur and whether the injunction can prevent these recurring violations. The court in U.S. v. N.Y. Fish, Inc. found multiple FFDCA violations by the defendants and the absence of any credible actions by the defendants to remedy even the most serious of the violations. While the court acknowledged that an injunction where the defendant has already taken remedial measures is overbroad and unnecessary, the court found that a broad injunction was appropriate in this case because of the inaction by the defendants and the likelihood that alleged violations would continue. Courts generally find the possibility that an injunction may put a party out of business as irrelevant with regards to determining the necessity and scope of an injunction. In U.S. v. Blue Ribbon Smoked Fish, the defendant-corporate agents opposed the substance of the government's proposed permanent injunction, arguing that the injunction would force the company out of business. The court, however, disagreed, stating that the injunction would not require the defendant company, Blue Ribbon, to stop processing food altogether, but to stop processing food "that is or has become adulterated." After the court has issued the order for an injunction, the FDA monitors the injunction throughout the entire term of such injunction. The agency may seek civil or criminal contempt of court or other regulatory action if the industry participant violates the injunction. Under Section 304(a)(1) of the FFDCA, the government may seize an article of food in interstate commerce that is adulterated or misbranded. A seizure is a civil action used by the federal government when the removal of adulterated or misbranded goods from interstate commerce is necessary to reduce consumer accessibility to those goods in order to protect public health. The seizure must occur when the goods are in interstate commerce or held for sale after shipment in interstate commerce. The FFDCA broadly defines interstate commerce as "commerce between any State or Territory and any place outside thereof." Goods destined for sale in a state other than the place from which they are shipped qualify as goods in "interstate commerce," even though they may not have yet physically crossed a boundary. In this context, courts have also interpreted "interstate commerce" to mean imported foods held at a port of entry into the United States. Generally, a seizure includes two steps: the U.S. government's physical seizure of the adulterated or misbranded articles of food followed by the judicial condemnation proceeding. The U.S. district court where the article is found has jurisdiction over the seizure proceeding. After a hearing on a seizure action, a district court may decree the "condemnation" of seized articles of food and order the destruction, sale, reconditioning, or export of such food. The FFDCA prohibits multiple proceedings, including seizure actions, against an article of food based upon the same alleged misbranding, except when the FDA has probable cause to believe that the misbranded article is dangerous to health, exhibits fraudulent labeling, or is materially misleading causing injury to the consumer or purchaser. Section 304 does not prohibit multiple seizures of adulterated articles of food. This section of the report first describes the types of seizures conducted by the federal government and the condemnation proceedings the federal government must follow when conducting a seizure. The section then examines the legal standard for condemning seized goods. The section concludes by analyzing the due process issues related to seizure proceedings. The FDA classifies seizures according to various types to facilitate its administration of this enforcement action by tracking seizures by size. These classifications do not carry a specific legal status. A "lot seizure" affects one lot of an adulterated or misbranded product that can be found in a single location. "Multiple seizures" involve more than one action to seize goods located in different jurisdictions. Multiple seizures seek to prevent industry participants from shipping adulterated or misbranded products from different facilities. "Mass seizures" affect a warehouse full of adulterated or misbranded products found at one location. A seizure extends to the article of food and the product labeling as well. However, a seizure does not include the promotional materials for an illegal product unless they "accompany" the product in interstate commerce. In this context, these accompanying materials qualify as labeling and may be seized. An administrative detention may precede a seizure action. The FDA may order the detention of any article of food found during an inspection, examination, or investigation, that the agency has reason to believe is adulterated or misbranded. Such an order may be necessary before a court can issue a seizure action. The FDA initiates the seizure by filing a Complaint for Forfeiture in federal district court. The complaint names the United States as the plaintiff and the goods as the defendant. The federal district court then issues a warrant for the arrest (seizure) of the article of food through in rem jurisdiction. Pursuant to the arrest warrant, a U.S. Marshal then seizes the violative goods and takes them into custody. The U.S. Marshall may physically remove the goods from the industry participant's warehouse or may sequester the goods from inventory in such a way to ensure that the goods subject to the seizure are separated from the rest of the inventory. Neither the industry participant nor the courts are involved in the seizure process until the FDA files a complaint for forfeiture. The industry participant/owner may then intervene as a party in the case. Following a seizure by the government, the owner/potential claimant has three options: (1) do not claim the seized articles; (2) file a claim to the articles and enter into a Consent Decree with the government, admitting the violation and agreeing to pay costs and to destroy or rehabilitate the articles of food; or (3) file a claim to the articles and contest the action by filing an answer to the complaint. At the hearing, the court decides whether the government has proven the allegations in the complaint. If the court finds that the government has successfully met the legal standard, the court orders the condemnation of the food. If the court finds that the government has not met the legal standard, the court will release the goods from seizure. The government must prove by the preponderance of the evidence that the articles seized were food that travelled in interstate commerce and that this food was adulterated or misbranded when introduced into, while in, or while held for sale after shipment in interstate commerce. The government may use warning letters sent to the owner, expert testimony, and samples collected during inspections as evidence. If the owner chooses to argue against the seizure, the owner of the seized articles must show that the articles were improperly subject to seizure because the product is not adulterated or misbranded as defined by the FFDCA. If an owner has not claimed the goods, the court will issue condemnation by default. If there are two or more seizure proceedings involving the same claimant on the same issues of adulteration or misbranding outstanding at the same time, the claimant may apply to the court to consolidate the proceedings in a district court selected by the claimant where one such proceeding is pending or in a district court agreed upon between the parties. A claimant may also follow the procedures outlined in FFDCA's Section 304(b) to consolidate the proceedings in "a district of reasonable proximity to the claimant's principal place of business." After the appropriate proceedings, the court will enter a decree that determines the disposition of the goods. If the owner/claimant did not appear before the court, the government then moves for condemnation under a default decree. Such an order directs the U.S. Marshall to dispose of the article of food in the following manner: constructive destruction, sale, conversion, or destruction. Constructive destruction involves using the article for another purpose, such as donating misbranded food to a charity. The U.S. Marshall may sell the goods, if legally permissible, to recover the costs of the seizure, or may convert the goods to another use, such as for animal food. The government may also destroy the article of food by burning, burial, or dumping, in accordance with other relevant laws, such as the National Environmental Policy Act. If the owner filed a claim to the article of food, the owner may then agree to the entry of a Consent Decree, which would provide for the sale, destruction, or reconditioning of the article, as dictated by the court and agreed to by the federal government. A consent decree generally includes a statement of the condemnation of the article, provision for payment of storage and handling costs accrued by the U.S. Marshal, and a provision that the claimant will bring the article into compliance with the FFDCA under the supervision and to the satisfaction of the FDA. Under the decree, the owner who claims the goods is required to post a penal bond to the court at twice the retail value of the goods seized. The penal bond ensures that the owner complies with the conditions of the decree, as the owner must forfeit the penal bond if the terms and conditions of the decree are not kept. The owner must then destroy, recondition, or sell the article as dictated by the terms of the decree. Available methods of destruction include those followed by the U.S. Marshall as described in the previous paragraph. Reconditioning (such as through reprocessing or relabeling) must bring the article of food into compliance with FFDCA provisions, under FDA supervision. Courts generally defer to the FDA's discretion regarding the supervision of reconditioning plans. The owner bears the cost of bringing such article in compliance. When the court orders the sale of the goods, the owner must pay all money collected during a sale (less legal fees, costs, and charges) into the U.S. Treasury. If the article was imported into the United States, the owner may export the article in lieu of destruction. To obtain a consent decree permitting export, the owner must show that the adulteration, misbranding, or FFDCA violation did not occur after the article was imported into the United States, and that he or she had no cause to believe that it was adulterated, misbranded, or in violation before it was released from customs custody. The owner must also meet the export provisions of the FFDCA and show that the product is within the specifications of the foreign country purchaser and must label the shipping package of the goods "FOR EXPORT ONLY." The owner cannot sell these products domestically. Exportation is not available for articles of food condemned for being poisonous or a deleterious substance injurious to health. The FDA may initiate expedited seizure procedures for perishable food. The FDA regulations define "perishable food" to include food that is not heat-treated, not frozen, and not otherwise preserved in a manner so as to prevent the quality of the food from being adversely affected if held longer than seven calendar days under normal shipping and storage conditions. Under such expedited procedures, the FDA must send the seizure recommendation to the Department of Justice within four calendar days after the agency has issued the detention order. The government generally then follows similar procedures to those described in the previous sections. Throughout the condemnation proceedings, the FDA must act within Due Process restrictions. Under this constitutional provision, the federal government must provide an industry participant with "fair procedures" before depriving the participant of "life, liberty, or property." Courts generally view due process restrictions narrowly in this context due to the public health and safety goal of FDA enforcement. A hearing immediately following the seizure generally has been found to preserve the claimant's due process rights, as long as the owner has an opportunity to present his views before the final order has been issued. At least one court has held that courts do not need to provide the owner with notice and a hearing prior to the seizure of his or her property. The FDA's Office of Criminal Investigations conducts and coordinates criminal investigations and prosecutions against individuals and corporations for violations of the FFDCA. Potential defendants of a criminal prosecution are strictly liable for these violations. Ignorance of the violation, a lack of intent to commit the violative act, or the absence of personal involvement are not defenses against FFDCA violations under the strict liability standard. This section of the report highlights two aspects of the criminal investigation process of particular relevance to FDA enforcement and food safety. The section first examines the FFDCA's Section 305 hearings, a prerequisite to any criminal proceeding. The section then analyzes the Supreme Court's Park doctrine, which grants the government the ability to prosecute both corporations and corporate officials. The section concludes with a brief discussion on statutory penalties. Before the government institutes a criminal proceeding against a person, Section 305 of the FFDCA requires the government to provide that person with notice and an opportunity for a hearing. At the hearing, he or she may present his or her reasons why the FDA should not recommend criminal prosecution to the Department of Justice. The FDA does not need to provide notice and a hearing if the agency believes that such notice would result in the alteration or destruction of evidence or the flight of the prospective defendant to avoid prosecution. A person who has received such notice of a hearing is not legally obligated to appear or answer in any manner. The FDA may criminally prosecute corporations as well as corporate officials for FFDCA violations. When prosecuting an FFDCA violation, the government does not need to prove awareness of the wrongdoing—the conventional requirement for criminal conduct. In the 1975 case U.S. v. Park, the Supreme Court found that a district court's jury instructions appropriately focused on the issue of the defendant's authority over the unsanitary conditions that led to the alleged violations. The defendant, Park, was the chief executive officer (CEO) of Acme Markets Inc. The government charged both the corporation and the defendant with violating the FFDCA. While the corporation pled guilty to the allegations of violating FFDCA's adulteration provisions, the defendant, Park, pleaded not guilty. The district court instructed the jury that in order to find the defendant guilty, he must have had "a responsible relationship to the issue." The Court of Appeals reversed the district court's conviction, finding that the court's instructions may have left the jury with the erroneous impression that the defendant could be found guilty in the absence of "wrongful action" on his part. The Supreme Court reversed the Court of Appeals' decision, finding that the FFDCA imposes upon persons with supervisory authority the responsibility to seek out and remedy violations and to prevent such violations. According to the Court, the government does not need to show that the official had awareness of the criminal conduct due to the public safety context of the FFDCA. The Court justified this interpretation by emphasizing that the corporate official has the ability and opportunity to correct and prevent such violations while the public may not. Thus, under the Park doctrine, a responsible corporate official can be held liable for a first-time misdemeanor under the FFDCA without proof that the corporate official acted with intent or even negligence. Such corporate official does not need to have any actual knowledge of, or participation in, the specific offense to be held liable under this doctrine. The FDA claims that this doctrine has a strong deterrent effect for defendants and other regulated entities. When considering whether to pursue a Park doctrine prosecution against a corporate official, the FDA examines the individual's position in the company and his or her relationship to the violation. The FDA also considers whether the corporate official had the authority to prevent the violation. The Court in Park found that the failure to fulfill this duty imposed by the FFDCA and the position of authority provides a "sufficient causal link" for criminal prosecution and culpability. Section 303 of the FFDCA outlines various penalties to which a person may be subject for FFDCA violations. If a person commits a prohibited act listed under Section 301, then the person will be subject to a penalty of imprisonment for one year or less or fined $1,000 or less or both. If a person commits a violation of Section 301 with the intent to defraud or mislead, then the penalty is raised to imprisonment for three years or less or fine of $10,000 or less or both. However, these statutory penalties do not preclude other fines or payments imposed as a result of a settlement or consent decree. According to the FFDCA, a person shall not be subject to these penalties in certain cases of good faith. The FFDCA also states that a person shall not be subject to these penalties if the violation involved the misbranding of food due to its advertising. Food safety and oversight, including enforcement actions such as those described above, are of a continual interest to Congress. Two bills ( H.R. 609 and S. 287 ) introduced in the 114 th Congress proposing the restructuring of federal oversight of food would impact the federal government's enforcement of various food safety issues. H.R. 609 / S. 287 , known as the Safe Food Act of 2015, would create a single agency that administers and enforces food safety laws and oversees the implementation of federal food safety inspections, labeling requirements, enforcement, and research efforts. Under the proposed bills, related food safety agencies, currently within the jurisdiction of the Department of Agriculture, Department of Commerce, and the FDA, would transfer certain responsibilities to this proposed agency. The bills would also grant the new food safety agency several enforcement authorities, including mandatory recall authority. Under the proposed food safety framework, the administrator of the food safety agency would have the authority to impose both civil and criminal penalties of not more than $10,000 for both civil and criminal provisions and not more than a year of prison for criminal violations. However, the administrator would have the discretion to increase the penalty for severe criminal violations. The bills would permit a person, who has been assessed a civil penalty, to petition for judicial review of the order.
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The U.S. Food and Drug Administration (FDA) has a statutory mission to ensure the safety of all food except for meat, poultry, and certain egg products over which the U.S. Department of Agriculture (USDA) has regulatory oversight. Under the Federal Food, Drug, and Cosmetic Act (FFDCA), the FDA has the authority to regulate the manufacturing, processing, and labeling of food, with the primary goal of promoting food safety. Congress has vested the FDA with the authority to take both administrative and judicial enforcement actions. The agency initiates and carries out administrative enforcement actions while judicial enforcement actions, including seizures and injunctions, require some type of involvement by the federal courts. While the FDA gathers information to recommend a judicial enforcement action, the Department of Justice represents the FDA before a federal court. This report focuses on the statutory authority for both the FDA and federal courts to initiate the following judicial enforcement actions: injunctions, seizures, and criminal prosecution. For more information about FDA's administrative enforcement actions, see CRS Report R43794, Food Recalls and Other FDA Administrative Enforcement Actions, by [author name scrubbed]. Injunctions: An injunction is a civil judicial order initiated against an industry participant to stop or prevent a violation of the FFDCA and to halt the flow of violative products in interstate commerce. An injunction also provides an opportunity for the industry participant to correct the conditions that triggered the violation before the FDA takes additional enforcement action. The FFDCA grants federal district courts with the jurisdiction to issue such an order. Unlike the legal standard for injunctions for private litigants, the government does not need to prove irreparable harm for a court to grant an injunction. Seizure: The government may seize an article of food that is adulterated or misbranded in interstate commerce. A seizure is a civil action used by the federal government when the removal of adulterated or misbranded goods from interstate commerce is necessary to reduce consumer accessibility to those goods. The government proceeds by filing a Complaint for Forfeiture and obtaining a warrant for the arrest directing the U.S. Marshal to seize the article of food. Criminal Prosecution: The FDA's Office of Criminal Investigations conducts and coordinates criminal investigations and prosecutions for violations of the FFDCA. Potential defendants of a criminal prosecution are strictly liable for violations of the act. The government grants potential defendants notice and a hearing before proceeding with any criminal investigations. The government may prosecute both corporations and corporate officials for violations of the FFDCA under the Park doctrine, which grants the government the ability to prosecute both corporations and corporate officials. The FFDCA also outlines various penalties for persons and/or companies found guilty of violations of the act. Food safety and oversight, including enforcement actions such as those described above, are of a continual interest to Congress. H.R. 609 and S. 287, introduced in the 114th Congress, propose restructuring federal oversight of food safety and would impact the federal government's enforcement of various food safety issues.
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Presidential claims of a right to preserve the confidentiality of information and documents in the face of legislative demands have figured prominently, though intermittently, in executive-congressional relations since at least 1792, when President Washington discussed with his Cabinet how to respond to a congressional inquiry into the military debacle that befell General St. Clair's expedition. Few such interbranch disputes over access to information have reached the courts for substantive resolution; the vast majority achieve resolution through political negotiation and accommodation. In fact, it was not until the Watergate-related lawsuits in the 1970s seeking access to President Nixon's tapes that the existence of a presidential confidentiality privilege was judicially established as a necessary derivative of the President's status in the U.S. constitutional scheme of separated powers. Litigation over the scope of executive privilege in direct relation to congressional oversight and investigations has also been quite limited. In total, there have been only four cases dealing with executive privilege in the context of information access disputes between Congress and the executive, and only two of those resulted in decisions on the merits. Indeed, the Supreme Court has never addressed executive privilege in the face of a congressional demand for information. The Nixon era cases initially established the broad contours of the presidential communications privilege. Under those precedents, the privilege, which is constitutionally rooted, could be invoked by the President when asked to produce documents or other materials or information that reflect presidential decision making and deliberations that he believes should remain confidential. If the President does so, the materials become presumptively privileged. The privilege, however, is qualified, not absolute, and can be overcome by an adequate showing of need. Finally, while reviewing courts have expressed reluctance in balancing executive privilege claims against a congressional demand for information, they have acknowledged they will do so if the political branches have tried in good faith but failed to reach an accommodation. However, existing precedent left important gaps in the law of presidential privilege that have increasingly become focal points, if not the source, of interbranch confrontations. The unanimous panel in In re Sealed Case ( Espy ), and the subsequent reaffirmation of the Espy principles in Judicial Watch v. Department of Justice , addressed many of these unresolved questions, albeit in a noncongressional context, in a manner that may alter the future legal playing field in resolving such disputes. Two recent disputes between Congress and the executive branch relate directly to the application of executive privilege in the congressional oversight context. In 2007, an investigation into the removal of nine United States Attorneys drew formal claims of privilege by President George W. Bush. Those privilege claims were successfully challenged in a civil suit brought by the House Judiciary Committee, in which a federal district court held that senior presidential advisers do not enjoy absolute immunity from compelled testimony or production of documents pursuant to a congressional subpoena. In 2012, President Obama invoked executive privilege in response to a subpoena from the House Committee on Oversight and Government Reform that sought information from the Attorney General relating to the Department of Justice's response to the committee's investigation into Operation Fast and Furious. Similar to the U.S. Attorneys controversy, a civil suit was filed to compel the executive branch to comply with the committee subpoena. That case is currently pending before the U.S. District Court for the District of Columbia. In interbranch information disputes since the early 1980s, executive statements and positions taken to justify assertions of executive privilege have frequently rested upon explanations of executive privilege offered by the courts. To better understand the executive's stance in this area, this report will chronologically examine the development of the judiciary's approach to executive privilege and describe how the executive has adapted the judicial explanations of the privilege to support its arguments. In Nixon v. Sirica , the first of the Watergate cases, the Court of Appeals for the District of Columbia Circuit rejected President Nixon's claim that he was absolutely immune from all compulsory process whenever he asserted a formal claim of executive privilege. The court held that while presidential conversations are "presumptively privileged," the presumption could be overcome by an appropriate showing of public need by the branch seeking access to the conversations. In Sirica, "a uniquely powerful," albeit undefined, showing was deemed to have been made by the Special Prosecutor, who argued that the tapes subpoenaed by the grand jury contained evidence vital to determining whether probable cause existed that those indicted had committed crimes. The D.C. Circuit next addressed the Senate Watergate Committee's effort to gain access to five presidential tapes in Senate Select Committee on Presidential Campaign Activities v. Nixon . The appeals court initially determined that "[t]he staged decisional structure established in Nixon v. Sirica" was applicable "with at least equal force here." Thus, in order to overcome the presumptive privilege and require the submission of materials for court review, a strong showing of need had to be established. The appeals court held that the committee had not met its burden of showing that "the subpoenaed evidence is demonstrably critical to the responsible fulfillment of the Committee's function." It elaborated that, in view of the initiation of impeachment proceedings by the House Judiciary Committee, the overlap of the investigative objectives of both committees, and the fact that the impeachment committee already had the tapes sought by the Senate committee, "the Select Committee's immediate oversight need for the subpoenaed tapes is, from a congressional perspective, merely cumulative." Nor did the court feel that the committee had shown that the subpoenaed materials were "critical to the performance of [its] legislative functions ." The court could discern "no specific legislative decisions that cannot responsibly be made without access to materials uniquely contained in the tapes or without resolution of the ambiguities that the [presidentially released] transcripts may contain." The court concluded that the subsequently initiated and nearly completed work of the House Judiciary Committee had in effect preempted the Senate Committee: "More importantly ... there is no indication that the findings of the House Committee on the Judiciary and, eventually the House of Representatives itself, are so likely to be inconclusive or long in coming that the Select Committee needs immediate access of its own." The D.C. Circuit's view in Senate Select Committee , that the Watergate Committee's oversight need for the requested materials was "merely cumulative" in light of the then concurrent impeachment inquiry, has been utilized by the executive as the basis for arguing that Congress's interest in executive information is less compelling when a committee's function is oversight than when it is considering specific legislative proposals. This approach, however, arguably misreads the carefully circumscribed holding of the court, and would seem to construe too narrowly the scope of Congress's investigatory powers. The Senate Select Committee court's opinion took great pains to underline the unique and limiting nature of the case's factual and historical context. Thus it emphasized the overriding nature of the "events that have occurred since this litigation was begun and, indeed, since the District Court issued its decision." These facts included the commencement of impeachment proceedings by the House Judiciary Committee, a committee with an "express constitutional source" of investigative power, whose "investigative objectives substantially overlap" those of the Senate committee; the House committee's present possession of the very tapes sought by the Select Committee, making the Senate committee's need for the tapes "from a congressional perspective, merely cumulative"; the lack of evidence indicating that Congress itself attached any particular value to "having the presidential conversations scrutinized by two committees simultaneously"; that the need to possess the tapes in order to make "legislative judgments has been substantially undermined by subsequent events," including the public release of the tape transcripts by the President; the transfer of four of five of the original tapes to the district court; and the lack of any "indication that the findings of the House Committee on the Judiciary and, eventually, the House of Representatives itself, are so likely to be inconclusive or long in coming that the Select Committee needs immediate access of its own." The appeals court concluded by reiterating the uniqueness of the case's facts and temporal circumstances: "We conclude that the need demonstrated by the Select Committee in the peculiar circumstances of this case, including the subsequent and on-going investigation of the House Judiciary Committee, is too attenuated and too tangential to its functions to permit a judicial judgment that the President is required to comply with the Committee's subpoena." The executive's position arguably ignored the roots of Congress's broad investigatory powers, which reach back to the establishment of the Constitution and have been continually reaffirmed by the Supreme Court. As George Mason recognized at the Constitutional Convention, Members of Congress "are not only Legislators but they possess inquisitorial power. They must meet frequently to inspect the Conduct of the public offices." Woodrow Wilson remarked, Quite as important as legislation is vigilant oversight of administration; and even more important than legislation is the instruction and guidance in political affairs which the people might receive from a body which kept all national concerns suffused in a broad daylight of discussion.... The informing functions of Congress should be preferred even to its legislative function. The argument is not only that a discussed and interrogated administration is the only pure and efficient administration, but, more than that, that the only really self-governing people is that people which discusses and interrogates its administration. The Supreme Court has cited Wilson favorably on this point. Moreover, the Court has failed to make any distinction between Congress's right to executive branch information to use in support of its oversight function versus its responsibility to enact, amend, and repeal laws. In fact, the Court has recognized that Congress's investigatory power "comprehends probes into departments of the Federal Government to expose corruption, inefficiency or waste." Thus, to read Senate Select Committee as downplaying the status of oversight arguably ignores the court's very specific reasons for not enforcing the committee's subpoena under the unique circumstance of that case and creates a distinction between oversight and legislating that has yet to be embraced by the courts. Moreover, the Senate Select Committee panel's "demonstrably critical" standard for overcoming a President's presumptive claim of privilege is not reflected in any of the subsequent Supreme Court or appellate court rulings establishing a balancing test for overcoming the qualified presidential privilege. Two months after the ruling in Senate Select Committee , the Supreme Court issued its unanimous ruling in United States v. Nixon ( Nixon I ), which involved a judicial trial subpoena issued to the President at the request of the Watergate Special Prosecutor requesting tape recordings and documents relating to the President's conversations with close aides and advisers. For the first time, the Court found a constitutional basis for the doctrine of executive privilege in "the supremacy of each branch within its own assigned area of constitutional duties" and in the separation of powers. Although it considered a President's communications with his close advisers to be "presumptively privileged," the Court rejected the President's contention that the privilege was absolute and precluded judicial review whenever it is asserted. The Court acknowledged the need for confidentiality of high-level communications in the exercise of Article II powers, but stated that "a confrontation with other values arises" when the privilege is asserted based on a broad, undifferentiated claim of public interest in the confidentiality of such communications. It held that "absent a need to protect military, diplomatic, or sensitive national security secrets, we find it difficult to accept the argument that even the very important interest in confidentiality of presidential communications is significantly diminished by production of" materials that are essential to the enforcement of criminal statutes. After concluding that the claim of privilege was qualified, the Court moved on to resolving the "competing interests" at stake: the President's need for confidentiality versus the judiciary's need for evidence in a criminal proceeding. Evaluating these interests "in a manner that preserves the essential functions of each branch," the Court held that the judicial need for the tapes, as shown by a "demonstrated, specific need for evidence in a pending criminal trial," outweighed the President's "generalized interest in confidentiality." The Court was careful, however, to limit the scope of its decision, noting that "we are not here concerned with the balance between the President's generalized interest in confidentiality ... and congressional demands for information." In the last of the Nixon cases, Nixon v. Administrator of General Services ( Nixon II ), the Supreme Court again balanced competing interests in President Nixon's White House records. The Presidential Recordings and Materials Preservation Act granted custody of President Nixon's presidential records to the Administrator of the General Services Administration, who would screen them for personal and private materials, to be returned to President Nixon, and preserve the rest for historical and governmental objectives. The Court rejected President Nixon's challenge to the act, which included an argument based on the "presidential privilege of confidentiality." Although Nixon II did not involve an executive response to a congressional probe, several points emerge from the Court's discussion that bear upon Congress's interest in confidential executive branch information. First, the Court reiterated that the executive privilege it had announced in Nixon I was not absolute, but qualified. Second, the Court stressed the narrow scope of that executive privilege. "In [ Nixon I ] the Court held that the privilege is limited to communications 'in performance of [a President's] responsibilities ... of his office' ... and made in the process of shaping policies and making decisions." Third, the Court found that there was a "substantial public interest[]" in preserving these materials so that Congress, pursuant to its "broad investigative power," could examine them to understand the events that led to President Nixon's resignation "in order to gauge the necessity for remedial legislation." Two post-Watergate cases, both involving congressional demands for access to executive information, demonstrate both the judiciary's reluctance to get involved in the essentially political confrontations such disputes represent and a willingness to intervene where the political process appears to be failing. In United States v. AT&T , the D.C. Circuit was unwilling to balance executive privilege claims against a congressional demand for information unless and until the political branches had tried in good faith but failed to reach an accommodation. In that case, the Justice Department sought to enjoin AT&T's compliance with a subpoena issued by a House subcommittee. The subcommittee was seeking FBI letters sent to AT&T requesting its assistance with warrantless wiretaps on U.S. citizens allegedly conducted for national security purposes. The Justice Department argued that the executive branch was entitled to sole control over the information because of "its obligation to safeguard the national security." The House of Representatives, as intervenor, argued that its rights to the information flowed from its constitutionally implied power to investigate whether there had been abuses of the wiretapping power. The House also argued that the court had no jurisdiction over the dispute because of the Speech or Debate Clause. The court rejected the "conflicting claims of the [Executive and the Congress] to absolute authority." With regard to the executive's claim, the court noted that there was no absolute claim of executive privilege in response to congressional requests even in the area of national security: The executive would have it that the Constitution confers on the executive absolute discretion in the area of national security. This does not stand up. While the Constitution assigns to the President a number of powers relating to national security, including the function of commander in chief and the power to make treaties and appoint Ambassadors, it confers upon Congress other powers equally inseparable from the national security, such as the powers to declare war, raise and support armed forces and, in the case of the Senate, consent to treaties and the appointment of ambassadors. Likewise, the court rejected the congressional claim that the Speech or Debate Clause was "intended to immunize congressional investigatory actions from judicial review. Congress' investigatory power is not, itself, absolute." According to the court, judicial intervention in executive privilege disputes between the political branches is improper unless the branches have made a good faith effort at compromise without result. The court held that there is a constitutional duty for the executive and Congress to attempt to accommodate each other's needs: The framers, rather than attempting to define and allocate all governmental power in minute detail, relied, we believe, on the expectation that where conflicts in scope of authority arose between the coordinate branches, a spirit of dynamic compromise would promote resolution of the dispute in the manner most likely to result in efficient and effective functioning of our governmental system. Under this view, the coordinate branches do not exist in an exclusively adversary relationship to one another when a conflict in authority arises. Rather, each branch should take cognizance of an implicit constitutional mandate to seek optimal accommodation through a realistic evaluation of the needs of the conflicting branches in the particular fact situation. The court refused to resolve the dispute because the executive and Congress had not yet made that constitutionally mandated effort at accommodation. Instead, the court "encouraged negotiations in order to avoid the problems inherent in [the judiciary] formulating and applying standards for measuring the relative needs of the [executive and legislative branches]." The court suggested, however, that it would resolve the dispute if the political branches failed to reach an accommodation. The court-encouraged negotiations ultimately led to a compromise. Subcommittee staff were allowed to review unedited memoranda describing the warrantless wiretaps and report orally to subcommittee members. The Justice Department, however, retained custody of the documents. The U.S. District Court for the District of Columbia displayed the same reluctance to intervene in an executive privilege dispute with Congress in United States v. House of Representatives. There the court dismissed a suit brought by the Justice Department seeking a declaratory judgment that the Administrator of the Environmental Protection Agency (EPA), Anne Gorsuch Burford, "acted lawfully in refusing to release certain documents to a congressional subcommittee" at the direction of the President. The Administrator based her refusal upon President Reagan's invocation of executive privilege against a House committee probing the EPA's enforcement of hazardous waste laws. The court dismissed the case, without reaching the executive privilege claim, on the ground that judicial intervention in a dispute "concerning the respective powers of the Legislative and Executive Branches ... should be delayed until all possibilities for settlement have been exhausted.... Compromise and cooperation, rather than confrontation, should be the aim of the parties." As the appeals court had done in AT&T , the district court in United States v. House of Representatives encouraged the political branches to settle their dispute rather than invite judicial intervention. The court would intervene and resolve the interbranch dispute only if the parties could not agree. Even then, the courts advised, "Judicial resolution of this constitutional claim ... will never become necessary unless Administrator Gorsuch [Burford] becomes a defendant in either a criminal contempt proceeding or other legal action taken by Congress." Ultimately the branches did reach an agreement, and the court did not need to balance executive and congressional interests. Existing precedent left important gaps in the law of executive privilege. Many significant issues remained unresolved, including whether the President has to have actually seen or been familiar with the disputed matter; whether the presidential privilege encompasses documents and information developed by, or in the possession of, officers and employees in the departments and agencies of the executive branch outside the Executive Office of the President; whether the privilege encompasses all communications in which the President may be interested or if it is confined to a particular type of presidential decision making; and precisely what kind of demonstration of need can overcome the privilege and justify the release of privileged materials. The U.S. Court of appeals for the District of Columbia Circuit took up many of these issues in In re Sealed Case and Judicial Watch v. Department of Justice . In Espy , the appeals court addressed several important issues left unresolved by the Watergate cases: the precise parameters of the presidential executive privilege; how far down the chain of command the privilege reaches; whether the President has to have seen or had knowledge of the existence of the documents for which he claims privilege; and what showing is necessary to overcome a valid claim of privilege. The case arose out of an Office of Independent Counsel (OIC) investigation of former Agriculture Secretary Mike Espy. When allegations of improprieties against Espy surfaced in March of 1994, President Clinton ordered the White House Counsel's Office to investigate and report to him so he could determine what action, if any, he should undertake. The White House Counsel's Office prepared a report for the President, which was publicly released on October 11, 1994. The Espy court noted that the President never saw any of the report's underlying or supporting documents. Espy had announced his resignation on October 3, to be effective on December 31. The Independent Counsel was appointed on September 9 and the grand jury issued a subpoena for all documents that were accumulated or used in preparation of the report on October 14, three days after the report's issuance. The President withheld 84 documents, claiming both types of executive privilege for all documents. A motion to compel was resisted on the basis of the claimed privilege. After in camera review, the district court quashed the subpoena, but in its written opinion the court did not discuss the documents in any detail and provided no analysis of the grand jury's need for the documents. The appeals court panel unanimously reversed. At the outset, the appeals court's opinion carefully distinguished between the "presidential communications privilege" and the "deliberative process privilege." Both, the court observed, are executive privileges designed to protect the confidentiality of executive branch decision making. But the deliberative process privilege, which applies to executive branch officials generally, is a common law privilege which requires a lower threshold of need to be overcome, and "disappears altogether when there is any reason to believe government misconduct has occurred." On the other hand, the court explained, the presidential communications privilege is rooted in "constitutional separation of powers principles and the President's unique constitutional role" and applies only to "direct decisionmaking by the President." The privilege may be overcome only by a substantial showing that "the subpoenaed materials likely contain[] important evidence" and that "the evidence is not available with due diligence elsewhere." The presidential communications privilege applies to all documents in their entirety, including pre- and post-decisional materials. Turning to the chain of command issue, the court held that the presidential communications privilege covers communications made or received by presidential advisers in the course of preparing advice for the President even if those communications are not made directly to the President. The court rested its conclusion on "the President's dependence on presidential advisers and the inability of the deliberative process privilege to provide advisers with adequate freedom from the public spotlight" and "the need to provide sufficient elbow room for advisers to obtain information from all knowledgeable sources." Thus the privilege will "apply both to communications which these advisers solicited and received from others as well as those they authored themselves. The privilege must also extend to communications authored or received in response to a solicitation by members of a presidential adviser's staff." The court, however, was acutely aware of the dangers of a limitless extension of the privilege to the principles of an open and transparent government. Therefore, it carefully restricted the privilege's reach by explicitly confining it to White House staff that has "operational proximity" to direct presidential decision making. The court held that the privilege did not apply to executive agency staff: We are aware that such an extension, unless carefully circumscribed to accomplish the purposes of the privilege, could pose a significant risk of expanding to a large swath of the executive branch a privilege that is bottomed on a recognition of the unique role of the President. In order to limit this risk, the presidential communications privilege should be construed as narrowly as is consistent with ensuring that the confidentiality of the President's decisionmaking process is adequately protected. Not every person who plays a role in the development of presidential advice, no matter how remote and removed from the President, can qualify for the privilege. In particular, the privilege should not extend to staff outside the White House in executive branch agencies. Instead, the privilege should apply only to communications authored or solicited and received by those members of an immediate White House advisor's staff who have broad and significant responsibility for investigation and formulating the advice to be given the President on the particular matter to which the communications relate. Only communications at that level are close enough to the President to be revelatory of his deliberations or to pose a risk to the candor of his advisers. See AAPS, 997 F.2d at 910 (it is "operational proximity" to the President that matters in determining whether "[t]he President's confidentiality interests" is implicated) (emphasis omitted). Of course, the privilege only applies to communications that these advisers and their staff author or solicit and receive in the course of performing their function of advising the President on official government matters. This restriction is particularly important in regard to those officials who exercise substantial independent authority or perform other functions in addition to advising the President, and thus are subject to FOIA and other open government statutes. See Armstrong v. Executive Office of the President, 90 F.3d 553, 558 (D.C. Cir. 1996), cert denied— U.S.—-, 117 S.Ct. 1842, 137 L. Ed.2d 1046 (1997). The presidential communications privilege should never serve as a means of shielding information regarding governmental operations that do not call ultimately for direct decisionmaking by the President. If the government seeks to assert the presidential communications privilege in regard to particular communications of these "dual hat" presidential advisers, the government bears the burden of proving that the communications occurred in conjunction with the process of advising the President. Because the appeals court limited the presidential communications privilege to "direct decisionmaking by the President," it is important to identify the type of decision making the subpoenaed documents or requested information implicates. Arguably, the opinion restricts the scope of the privilege to encompass only those functions that form the core of presidential authority, involving what the court characterized as "quintessential and non-delegable Presidential power." Although not expressly and unequivocally establishing such a requirement, it appears that the appeals court may have limited the application of the newly formulated presidential communications privilege to Article II functions that are "quintessential and non-delegable." This category appears to include the appointment and removal powers, the commander-in-chief power, the sole authority to receive ambassadors and other public ministers, the power to negotiate treaties, and the power to grant pardons and reprieves. Decision making vested by statute in the President or agency heads, such as rulemaking, environmental policy, consumer protection, workplace safety, and labor relations, among others, may not necessarily be covered by the privilege. Of course, the President's role in supervising and coordinating decision making in the executive branch remains unimpeded, but his communications in furtherance of such activities may not be protected by the constitutional privilege. The District of Columbia Circuit's 2004 decision in Judicial Watch, Inc. v. Department of Justice appears to lend substantial support to the interpretation of Espy discussed above. Judicial Watch involved requests for documents concerning pardon applications and pardon grants reviewed by the Justice Department's Office of the Pardon Attorney and the Deputy Attorney General for consideration by President Clinton. Some 4,300 documents were withheld from a FOIA disclosure on the grounds that they were protected by the presidential communications and deliberative process privileges. The district court held that because the materials sought had been produced for the sole purpose of advising the President on a "quintessential and non-delegable Presidential power"—the exercise of the President's constitutional pardon authority—the presidential communications privilege extended to internal Justice Department documents which had not been "solicited and received" by the President or the Office of the President. The appeals court reversed, concluding that "internal agency documents that are not 'solicited and received' by the President or his Office are instead protected against disclosure, if at all, by the deliberative process privilege." Guided by the Espy ruling, the majority emphasized that the "solicited and received" requirement "is necessitated by the principles underlying the presidential communications privilege, and a recognition of the dangers of expanding it too far." Espy held, the court explained, that the privilege may be invoked only when documents or communications are authored or solicited and received by the President himself or by presidential advisers in close proximity to the President who have significant responsibility for advising him on matters requiring presidential decision making. In rejecting the government's argument that the privilege should apply to all departmental and agency communications related to the Deputy Attorney General's pardon recommendations for the President, the panel majority held that Such a bright-line rule is inconsistent with the nature and principles of the presidential communications privilege, as well as the goal of serving the public interest.... Communications never received by the President or his Office are unlikely to "be revelatory of his deliberations ... nor is there any reason to fear that the Deputy Attorney General's candor or the quality of the Deputy's pardon recommendations would be sacrificed if the presidential communications privilege did not apply to internal documents.... Any pardon documents, reports or recommendations that the Deputy Attorney General submits to the Office of the President, and any direct communications the Deputy or the Pardon Attorney may have with the White House Counsel or other immediate Presidential advisers will remain protected.... It is only those documents and recommendations of Department staff that are not submitted by the Deputy Attorney General for the President and are not otherwise received by the Office of the President, that do not fall under the presidential communications privilege. Indeed, the Judicial Watch panel makes it clear that the Espy analysis precludes Cabinet department heads from being treated as part of the President's immediate personal staff or as part of the Office of the President: Extension of the presidential communications privilege to the Attorney General's delegatee, the Deputy Attorney General, and his staff, on down to the Pardon Attorney and his staff, with the attendant implication for expansion to other Cabinet officers and their staffs, would, as the court pointed out in [ Espy ], pose a significant risk of expanding to a large swatch of the executive branch a privilege that is bottomed on a recognition of the unique role of the President. The Judicial Watch majority took great pains to explain why Espy and the case before it differed from the post-Watergate Nixon cases. According to the court, "[u]ntil [ Espy ], the privilege had been tied specifically to direct communications of the President with his immediate White House advisors." The Espy court, it explained, was confronted for the first time with the question of whether communications made by the President's closest advisers while preparing advice for the President that the President never sees should also be protected by the presidential privilege. The Espy court's answer was to "espouse[ ] a 'limited extension' of the privilege 'down the chain of command' beyond the President to his immediate White House advisors only," recognizing the need to ensure that the President would receive full and frank advice with regard to his non-delegable appointment and removal powers, but was also wary of undermining countervailing considerations such as openness in government.... Hence, the [ Espy ] court determined that while 'communications authored or solicited and received' by immediate White House advisors in the Office of the President could qualify under the privilege, communications of staff outside the White House in executive branch agencies that were not solicited and received by such White House advisors could not. The facts before the Judicial Watch court tested the Espy principles. While the exercise of the President's pardon power was certainly a nondelegable, core presidential function, the officials involved, the Deputy Attorney General and the Pardon Attorney, were deemed to be too removed from the President and his senior White House advisers to be protected by the privilege. The court conceded that functionally those officials were performing a task directly related to the pardon decision, but concluded that an organizational test was more appropriate than a functional test, since the latter could potentially significantly broaden the scope of the privilege. Where the presidential communications privilege did not apply, as here, the lesser protections of the deliberative process privilege would have to suffice. The majority found that privilege insufficient and ordered the disclosure of the 4,300 withheld documents. The important 2008 district court opinion in Committee on the Judiciary v. Miers has also played a role in defining the outer contours of executive privilege. In early 2007, the House Judiciary Committee and its Subcommittee on Commercial and Administrative Law commenced an inquiry into the termination and replacement of a number of United States Attorneys. Six hearings and numerous interviews were conducted by the committees between March and June 2007, focusing on the actions of present and former Department of Justice (DOJ) officials and employees as well as related DOJ documents. On June 13, 2007, Chairman Conyers issued subpoenas to White House Chief of Staff Joshua Bolten, in his role as custodian of White House documents, and to former White House Counsel Harriet Miers. On June 27, 2007, White House Counsel Fred F. Fielding, at the direction of President Bush, wrote to the chairmen of the House and Senate Judiciary Committees notifying the committees that the testimony sought from Ms. Miers was subject to a "valid claim of Executive Privilege," and would be asserted by the President if the matter could not be resolved before the scheduled appearance date. On July 9, 2007, counsel to Ms. Miers informed Chairman Conyers that, pursuant to letters received from the White House Counsel, Miers would not answer questions or produce documents. The next day Ms. Miers's counsel announced that she would not appear at all. Also on July 10, the DOJ Office of Legal Counsel (OLC) issued an opinion stating that "Ms. Miers is [absolutely] immune from compulsion to testify before the Committee on this matter and therefore is not required to appear to testify about the subject." Citing previous OLC opinions, the opinion asserted that since the President is the head of one of the independent branches of the federal government, "If a congressional committee could force the President's appearance, fundamental separation of powers principles—including the President's independence and autonomy from Congress—would be threatened." Consequently, "[t]he same separation of powers principles that protect a President from compelled congressional testimony also apply to senior presidential advisors" because such appearances would be tantamount to the President himself appearing. The fact that Ms. Miers was a former counsel to the President would not alter the analysis since, in OLC's view, "a presidential advisor's immunity is derivative of the President's." Neither Ms. Miers nor Mr. Bolten complied with the subpoenas by the return dates. On July 12 and July 19 the House Subcommittee met and Chairman Sánchez issued a ruling rejecting both Ms. Miers's and Mr. Bolton's privilege claims. The Judiciary Committee filed its report formally reporting a contempt violation to the House in November 2007. After further attempts at accommodation failed, the matter was brought to the floor of the House on February 14, 2008. The House voted in favor of two resolutions. One directed the Speaker to certify the contempt citation detailing Ms. Miers's and Mr. Bolten's refusal to comply with the committee subpoena to the U.S. Attorney for the District of Columbia for presentation to a grand jury pursuant to 2 U.S.C. Sections 192 and 194. The second resolution was passed in apparent anticipation that the U.S. Attorney would not present the criminal contempt citation to the grand jury. That resolution authorized the chairman of the Judiciary Committee to initiate civil judicial proceedings in federal court to seek a declaratory judgment enforcing the subpoena. On February 28, 2008, the Speaker certified the committee's report to the U.S. Attorney. The next day, however, Attorney General Mukasey advised the Speaker that "the Department will not bring the congressional contempt citations before a grand jury or take any other action to prosecute Mr. Bolten or Ms. Miers." On March 10, 2008, the House General Counsel filed a civil action for declaratory judgment and injunctive relief that sought an order directing Ms. Miers to appear before the committee, respond to questions, and only invoke executive privilege if appropriate. On July 31, 2008, the U.S. District Court for the District of Columbia Circuit (D.C. District Court) issued a lengthy opinion rejecting the executive's claim that present and past senior advisers to the President are absolutely immune from compelled congressional process, the court rejected the executive's position: The Executive cannot identify a single judicial opinion that recognizes absolute immunity for senior presidential advisors in this or any other context. That simple yet critical fact bears repeating: the asserted absolute immunity claim here is entirely unsupported by existing case law. In fact, there is Supreme Court authority that is all but conclusive on this question and that powerfully suggests that such advisors do not enjoy absolute immunity. The Court therefore rejects the Executive's claim of absolute immunity for senior presidential aides. In attempting to explain why it should not have to comply here, the executive argued that since the President is absolutely immune to compelled congressional testimony, close advisers to the President must be regarded as his "alter ego" and, therefore, be entitled to the same absolute immunity. The court responded that the same line of argument was rejected by the Supreme Court in Harlow v. Fitzgerald , a suit for damages against senior White House aides arising out of the defendants' official actions. The aides claimed they were "entitled to a blanket protection of absolute immunity as an incident of their offices as Presidential aides." Recognizing that absolute immunity had been extended to legislators, judges, prosecutors, and the President himself, the Supreme Court rejected extending such immunity further, emphasizing that "[f]or executive officials in general, however, our cases make plain that qualified immunity represents the norm." The Court rejected the argument that it had accorded derivative immunity to legislative aides in Speech or Debate cases as "sweep[ing] too far," noting that even Cabinet members "are not entitled to absolute immunity." The Harlow Court did concede that a presidential aide could have absolute immunity if the responsibilities of his office included a sensitive function, such as foreign policy or national security, and he was discharging the protected functions when performing the act for which liability is asserted. The Miers district court concluded that in this matter, since there was no involvement of national security or foreign policy concerns, neither Ms. Miers's nor Mr. Bolten's close proximity to the President was sufficient under Harlow to provide either absolute or qualified immunity. In response to the executive's claim that without absolute immunity there would be a "chilling effect" on the candid and frank advice advisers would provide a chief executive, the court stated, Senior executive officials often testify before Congress as a normal part of their jobs ... Significantly, the Committee concedes that an executive branch official may assert executive privilege on a question-by-question basis as appropriate. That should serve as an effective check against public disclosure of truly privileged communications, thereby mitigating any adverse impact on the quality of advice that the President receives ... Still, it is noteworthy that in an environment where there is no judicial support whatsoever for the Executive's claim of absolute immunity, the historical record also does not reflect the wholesale compulsion by Congress of testimony from senior presidential advisors that the Executive fears. Next, the district court rejected the claim that Nixon I established that a President's immunity is qualified, and not absolute, only when judicial resolution of a criminal justice matter was at stake. The executive argued that this case involved only a "peripheral" exercise of Congress's power, not a core function of another branch. The court responded: Congress's power of inquiry is as broad as its power to legislate and lies at the very heart of Congress's constitutional role. Indeed, the former is necessary to the proper exercise of the latter: according to the Supreme Court, the ability to compel testimony is " necessary to the effective functioning of courts and legislatures ." Thus, Congress's use of (and need for vindication of) its subpoena power in this case is not less legitimate or important than was the grand jury's in United States v. Nixon . Both involve core functions of a co-equal branch of the federal government, and for the reasons identified in Nixon , the President may only be entitled to a presumptive, rather than absolute, privilege here. And it is certainly the case that if the President is entitled only to a presumptive privilege, his close advisors cannot hold the superior card of absolute immunity... Presidential autonomy, such as it is, cannot mean that the Executive's actions are totally insulated from scrutiny by Congress. That would eviscerate the Congress's oversight functions. The Administration appealed the district court decision and asked the D.C. Circuit to stay the district court order pending an expedited final decision by that court. On September 16, 2008, the D.C. Circuit granted the stay, but denied the Administration's request for an expedited schedule. The appeals court had concluded that "even if expedited, this controversy will not be fully and finally resolved by the Judicial Branch … before the 110 th Congress ends on January 3, 2009. At that time, the 110 th House of Representatives will cease to exist as a legal entity, and the subpoenas it has issued will expire." Accordingly, because the committee's subpoenas were likely to expire before the dispute could be resolved, the court saw no reason to expedite the case. In March of 2009, after the arrival of a newly elected Congress and presidential Administration, the parties reached a settlement in which some, but not all, of the requested documents would be provided to the committee. In addition, Ms. Miers would be permitted to testify, under oath, in a closed, but transcribed, hearing. Accordingly, the D.C. Circuit dismissed Miers on October 14, 2009, pursuant to a motion for voluntary dismissal. Thus, the Miers litigation ended more than a year and a half after the committee first filed its suit to enforce the subpoenas. Ultimately, however, the committee was able to gain access to much of the information it had been seeking. Although the district court opinion in Miers is perhaps best characterized as a vindication of congressional oversight prerogatives, or at least a clear limitation on the scope of executive privilege in the face of a congressional investigation, the ultimate impact of the case is unclear. The reasoning adopted by the court may have significant influence in that it so clearly repudiated the executive's claim of absolute immunity for presidential advisers, while reaffirming Congress's essential role in conducting oversight and enforcing its own subpoenas. However, the impact of the ruling may also be limited by the fact that, as a district court decision, it carries only the precedential weight that its reasoning may bear. Moreover, the case did not provide any discussion of the merits of Miers's specific claims of executive privilege, but rather held that although not enjoying absolute immunity from congressionally compelled testimony, Ms. Miers was still free to assert executive privilege "in response to any specific questions posed by the Committee." In Loving v. Department of Defense , the D.C. Circuit reaffirmed the distinction between the deliberative process privilege and the presidential communications privilege that had been carefully explained in Espy and Judicial Watch . The Loving court held that the presidential communications privilege applies only where documents or communications "directly involve the President" or were "solicited and received" by White House advisers. The case was precipitated by a FOIA request filed by Army Private Dwight Loving seeking disclosure of various documents, including a Department of Defense memorandum containing recommendations to the President about Loving's murder conviction by a military tribunal and subsequent death sentence. After noting the two distinct versions of executive privilege, the appeals court determined that the documents in question were indeed protected from disclosure as they fell "squarely within the presidential communications privilege because they 'directly involve' the President." The court also clarified that communications that "directly involve" the President need not actually be "solicited and received" by him. The mere fact that the documents were viewed by the President was sufficient to bring them within the privilege. It is important to note that in its relatively brief discussion of the presidential communications privilege, the Loving court did not reference the discussion of "non-delegable presidential duties" that was included in Espy and Judicial Watch . Committee on Oversight and Government Reform v. Holder , which is currently pending before the D.C. District Court, may provide substantial insight into the contours of executive privilege, especially with regard to balancing the privilege against Congress's constitutionally based oversight authority. The controversy surrounding Operation Fast and Furious erupted in early 2011 when it was reported that firearms found at the scene of a shootout in which a U.S. Border Patrol agent was killed had been allowed to pass to criminals in Mexico by the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF). On February 4, 2011, DOJ sent a letter to Congress denying that the ATF had any knowledge of the "gun walking" operation. The committee nonetheless continued its investigation, which was reinvigorated in December 2011 when DOJ withdrew the February 4 letter, conceding that it contained "inaccurate information" about ATF's actions and the depth of DOJ's knowledge of those actions, and that the operation itself was "fundamentally flawed." At this point, the committee investigation shifted to the question of how DOJ had provided the committee with inaccurate information; why it took almost 10 months to correct the mistake; and whether the agency had sought to obstruct the committee's investigation by providing misleading information. In that vein, the committee narrowed its focus to documents created after February 4 relating to DOJ's response to the committee investigation. Following a series of subpoenas and negotiations, the Attorney General ultimately refused to turn over certain documents, citing the President's determination that the information was protected by executive privilege. The House subsequently voted to hold the Attorney General in contempt of Congress for his refusal to comply with the subpoena, and simultaneously authorized the committee to file a civil lawsuit in federal court to enforce the subpoena. While DOJ announced that a criminal contempt of Congress prosecution against the Attorney General was not forthcoming, the committee did file a civil lawsuit in August 2012. On September 30, 2013 the district court issued its first opinion in the case, rejecting DOJ's motion to dismiss the civil enforcement suit on jurisdictional and justiciability grounds. The court's opinion echoed that of the District Court for the D.C. Circuit in Miers , and addressed arguments for dismissal based on separation-of-powers concerns, the court's jurisdiction to hear the case, and the plaintiff's standing to bring suit. Since that decision, the court has denied motions for summary judgment from both parties and has ordered DOJ to provide the court with a list of documents it is withholding and a description of why each document is privileged and protected from disclosure. The court has yet to reach the merits of the executive privilege question. The executive branch has developed an expansive view of executive privilege in relation to congressional investigations, taking maximum advantage of the vague and essentially undefined terrain within the judicially recognized contours of the privilege. Thus, executive branch statements have identified four areas that it believes are presumptively covered by executive privilege: foreign relations and military affairs, two separate topics that are sometimes lumped together as "state secrets"; law enforcement investigations; and confidential information that reveals the executive's "deliberative process" with respect to policymaking. Typically, the executive has asserted executive privilege based upon a combination of deliberative process and one or more of the other categories. Consequently, much of the controversy surrounding invocation of executive privilege has centered on the scope of the deliberative process category. The executive has argued that at its core this category protects confidential predecisional deliberative material from disclosure. Justifications for this exemption often draw upon the language in Nixon I that identifies a constitutional value in the President receiving candid advice from his subordinates and awareness that any expectation of subsequent disclosure might temper needed candor. The result has been a presumption by the executive that its predecisional deliberations are beyond the scope of congressional demand. "Congress will have a legitimate need to know the preliminary positions taken by Executive Branch officials during internal deliberations only in the rarest of circumstances." According to this view, the need for the executive to prevent disclosure of its deliberations is at its apex when Congress attempts to discover information about ongoing policymaking within the executive branch. In that case, the executive has argued, the deliberative process exemption serves as an important boundary marking the separation of powers. When congressional oversight "is used as a means of participating directly in an ongoing process of decisionmaking within the Executive Branch, it oversteps the bounds of the proper legislative function." The executive has also argued that because candor is the principal value served by this category, its protection should extend beyond predecisional deliberations to deliberations involving decisions already made. "Moreover, even if the decision at issue had already been made, disclosure to Congress could still deter the candor of future Executive Branch deliberations." Executives have also taken the position that the privilege covers confidential communications with respect to policymaking well beyond the confines of the White House and the President's closest advisers. Without further judicial consideration of executive privilege since the Nixon cases, the executive, through presidential signing statements, executive orders, OLC opinions, and, most recently, White House Counsel directives, has attempted to effect a practical expansion of the scope of the privilege. The key vehicle has been the notion of deliberative process. The idea of the deliberative process privilege was developed under the Freedom of Information Act (FOIA) to provide limited protection for communications and documents evidencing the predecisional considerations of agency officials. Over time, the executive branch has melded this deliberative process idea with the recognized confidentiality interest in the President's communications with close advisers, such that the privilege would extend to any policy deliberations or communications within the executive branch in which the President may have an interest. For example, the legal justifications asserted by the Obama Administration for withholding documents from Congress during a House probe into Operation Fast and Furious appear to reflect a heavy reliance on the deliberative process privilege. In a letter to the President asking him to invoke executive privilege over the subpoenaed documents, Attorney General Eric Holder noted that "Presidents have repeatedly asserted executive privilege to protect confidential Executive Branch deliberative materials from congressional subpoena." The Attorney General went on to argue that "[i]t is well established that 'the doctrine of executive privilege ... encompasses Executive Branch deliberative communications.'" The Attorney General's memorandum made no mention of a distinction between the deliberative process privilege and the presidential communications privilege, nor did the memorandum reference the D.C. Circuit cases of Espy and Judicial Watch . The executive branch has acknowledged some limits to its use of executive privilege. Thus, Presidents have stated they will not use executive privilege to block congressional inquiries into allegations of fraud, corruption, or other illegal or unethical conduct in the executive branch. The Clinton Administration announced that "[i]n circumstances involving communications relating to investigations of personal wrongdoing by government officials, it is our practice not to assert executive privilege, either in judicial proceedings or in congressional investigations and hearings." Similarly, the Reagan Administration policy was to refuse to invoke executive privilege when faced with allegations of illegal or unethical conduct: "[T]he privilege should not be invoked to conceal evidence of wrongdoing or criminality on the part of executive officers." A significant application of this policy came in the Iran/Contra investigations when President Reagan did not assert executive privilege, and even made "relevant excerpts" of his personal diaries available to congressional investigators. The executive has often tied its willingness to forgo assertions of executive privilege to the deliberative process exemption from disclosure that it recognizes, stating that it would not seek to protect materials whose disclosure "would not implicate or hinder" the executive decision-making processes. Thus, "factual, nonsensitive materials—communications from the Attorney General [or other executive branch official] which do not contain advice, recommendations, tentative legal judgments, drafts of documents, or other material reflecting deliberative or policymaking processes—do not fall within the scope of materials for which executive privilege may be claimed as a basis of nondisclosure." As indicated in the above discussion, recent appellate court rulings may cast doubt on the broad claims of privilege posited by the executive branch in the past. Taken together, Espy and Judicial Watch arguably have effected important qualifications and restraints on the nature, scope, and reach of the presidential communications privilege. As established by those cases, and until reviewed by the Supreme Court, the following elements should be considered in determining when the privilege can be invoked properly: 1. The communication must be authored or "solicited and received" by a close White House adviser or the President. The judicial test requires that an adviser be in "operational proximity" to the President. This effectively means that the scope of the presidential communications privilege can extend only to the administrative boundaries of the Executive Office of the President and the White House. It appears not to apply to communications or documents wholly produced within an executive department or agency. 2. The presidential communications privilege may be limited to communications relating to a "quintessential and non-delegable presidential power." Espy and Judicial Watch involved the appointment and removal and the pardon powers, respectively. Other core, direct presidential decision-making powers include the Commander-in-Chief power, the sole authority to receive ambassadors and other public ministers, and the power to negotiate treaties. However, neither case explicitly stated that the presidential communications privilege could only apply to communications and documents relating to "quintessential and non-delegable presidential power[s]." 3. The presidential communications privilege remains a qualified privilege that may be overcome by a showing that the information sought "likely contains important evidence" and cannot be obtained from other sources. The Espy court found an adequate showing of need by the Independent Counsel that overcame the privilege. In Judicial Watch , the court found the presidential communications privilege did not apply, and remanded to the district court to determine if the deliberative process privilege would apply to specific documents. Definitively applying the teachings of Espy and Judicial Watch to current information access disputes between Congress and the executive may be premature because these cases were decided in the context of judicial and FOIA requests for information from the executive branch. In the congressional-executive conflict context, it is clear that the Miers court unequivocally rejected the executive's claim of absolute witness immunity and adopted the committee's argument that the Supreme Court's ruling in Nixon I allows only a qualified constitutional privilege that may be overcome by a proper showing of need. Furthermore, the court recognized that subsequent Supreme Court and appellate court rulings have reiterated the qualified nature of the privilege. However, outside of the district court opinion in Miers , there is no other post-Watergate case law addressing executive privilege in the congressional-executive dispute context. Indeed, the Espy court specifically noted that its narrow holding was limited to the confines of judicial requests for information: Finally, we underscore our opinion should not be read as in any way affecting the scope of the privilege in the congressional-executive context, the arena where conflict over the privilege of confidentiality arises most frequently. The President's ability to withhold information from Congress implicates different constitutional considerations than the President's ability to withhold evidence in judicial proceedings. Our determination of how far down into the executive branch the presidential communications privilege goes is limited to the context before us, namely where information generated by close presidential advisers is sought for use in a judicial proceedings, and we take no position on how the institutional needs of Congress and the President should be balanced. In the continuing absence of a post-Nixon Supreme Court decision there is continuing uncertainty as to how executive privilege claims should be analyzed when asserted in response to congressional requests for information. While Holder may ultimately address some lingering questions regarding the application of executive privilege in the congressional oversight context, the district court has yet to reach the merits of that claim. The following is a brief summary of assertions of presidential claims of executive privilege from the Kennedy Administration through the Obama Administration. 1. Kennedy President Kennedy established the policy that he, and he alone, would invoke the privilege. Kennedy appears to have utilized the privilege twice with respect to information requests by congressional committees. In 1962, the President directed the Secretary of Defense not to supply the names of individuals who wrote or edited speeches in response to a request by a Senate subcommittee investigating military Cold War education and speech review policies. The chairman of the subcommittee acquiesced to the assertion. The President also directed his military adviser, General Maxwell Taylor, to refuse to testify before a congressional committee examining the Bay of Pigs affair. See Rozell, supra note 1, at 40-41. 2. Johnson Although he announced that he would follow the Kennedy policy of personal assertion of executive privilege, President Johnson did not follow the practice. Rozell, supra note 1, at 41-42, catalogues three instances in which executive officials refused to comply with congressional committee requests for information or testimony that involved presidential actions. These executive officials did not claim that the President directed them to assert the privilege. 3. Nixon President Nixon asserted executive privilege six times. He directed Attorney General Mitchell to withhold FBI reports from a congressional committee in 1970. In 1971, at the President's direction, Secretary of State Rogers asserted privilege and withheld information from Congress about military assistance programs. A claim of privilege was asserted at the direction of the President to prevent a White House adviser from testifying on the International Telephone and Telegraph (ITT) settlement during the Senate Judiciary Committee's consideration of the Richard Kleindienst nomination for Attorney General in 1972. Finally, President Nixon claimed executive privilege three times with respect to subpoenas for White House tapes relating to the Watergate affair: one subpoena from the Senate Select Committee; one grand jury subpoena for the same tapes issued by Special Prosecutor Archibald Cox; and one jury trial subpoena for 64 additional tapes issued by Special Prosecutor Leon Jaworski. Rozell, supra note 1, at 57-62. 4. Ford and Carter President Ford directed Secretary of State Henry Kissinger to withhold documents during a congressional committee investigation of State Department recommendations to the National Security Council to conduct covert activities in 1975. President Carter directed Energy Secretary Charles Duncan to claim executive privilege when a committee demanded documents relating to the development and implementation of a policy to impose a petroleum import fee. Rozell, supra note 1, at 77-82, 87-91. 5. Reagan President Reagan directed the assertion of executive privilege before congressional committees three times: by Secretary of the Interior James Watt with respect to an investigation of Canadian oil leases (1981-82); by EPA Administrator Anne Gorsuch Burford with respect to Superfund enforcement practices (1982-83); and by Justice William Rehnquist during his nomination proceedings for Chief Justice with respect to memos he wrote when he was Assistant Attorney General for the DOJ Office of Legal Counsel (1986). Rozell, supra note 1, at 98-105. 6. Bush, George H. W. President Bush asserted privilege only once, in 1991, when he ordered Defense Secretary Dick Cheney not to comply with a congressional subpoena for a document related to a subcommittee's investigation of cost overruns in, and cancellation of, a Navy aircraft program. Rozell, supra note 1, at 108-19. 7. Clinton President Clinton apparently discontinued the policy of issuing written directives to subordinate officials to exercise executive privilege. Thus, in some instances, it is not completely clear when a subordinate's privilege claim was orally directed by the President, even if it was quickly withdrawn. The following documented assertions may arguably be deemed formal invocations of the privilege. Four of these assertions occurred during grand jury proceedings. a. Kennedy Notes (1995) (executive privilege initially raised but never formally asserted) (Senate Whitewater investigation). S.Rept. 104-191 , 104 th Cong., 1 st Sess. (1995). b. White House Counsel Jack Quinn/Travelgate Investigations (1996) (House Government Reform). H.Rept. 104-598 , 104 th Cong., 2d Sess. (1996). c. FBI-DEA Drug Enforcement Memo (1996) (House Judiciary). d. Haiti/Political Assassinations Documents (1996) (House International Relations). e. In re Grand Jury Subpoena Duces Tecum , 112 F. 3d 910 (8 th Cir. 1997) (executive privilege claimed and then withdrawn in the district court. Appeals court rejected applicability of common interest doctrine to communications with White House Counsel's Office attorneys and private attorneys for the First Lady). f. In re Sealed Case ( Espy) , 121 F. 3d 729 (D.C. Cir. 1997) (executive privilege asserted but held overcome with respect to documents revealing false statements). g. In re Grand Jury Proceedings , 5 F. Supp. 2d 21 (D.D.C. 1998) (executive privilege claimed but held overcome because testimony of close advisers was relevant and necessary to grand jury investigation of Lewinski matter and was unavailable elsewhere). The September 9, 1998, Referral to the House of Representatives by Independent Counsel Kenneth Starr detailed the following previously undisclosed presidential claims of executive privilege (viii - xiii) before grand juries, which occurred during the Independent Counsel's investigations of the Hubbell and Lewinski matters: h. Thomas "Mack" McLarty (1997) (claimed at direction of President during Hubbell investigation, but withdrawn prior to filing of a motion to compel). i. Nancy Hernreich (claimed at direction of President, but withdrawn prior to March 20, 1998 hearing to compel). j. Sidney Blumenthal (claim rejected by district court, In re Grand Jury Proceedings , 5 F. Supp. 2d 21 (D.D.C. 1998), and dropped on appeal). k. Cheryl Mills (claimed on August 11, 1998). l. Lanny Breuer (claimed on August 4, 1998 and denied by Judge Johnson on August 11). In re Grand Jury Proceeding . Unpublished Order (Under Seal) (August 11, 1998). m. Bruce Lindsey (claimed on August 28, 1998). H.Doc. 105-310, 105 th Cong, 2d Sess. 206-09 (1998). n. FALN Clemency (claimed at direction of President by Deputy Counsel to the President Cheryl Mills on September 16, 1999, in response to subpoenas by House Committee on Government Reform). 8. Bush, George W. President Bush asserted executive privilege six times, using both written and oral directives to subordinate executive officials to claim the privilege. 1. On December 12, 2001, President Bush ordered Attorney General John Ashcroft not to comply with a congressional subpoena for documents related to a House committee's investigation of corruption in the FBI's Boston regional office. The documents were ultimately released shortly after the committee held oversight hearings. H.Rept. 108-414 , 108 th Cong., 1 st Sess. (2004). 2. Judicial Watch Inc. v. Dep't of Justice , 365 F.3d. 1108 (D.C. Cir. 2004) (rejecting the claimed applicability of the presidential communications privilege to pardon documents sought under FOIA from DOJ's Office of the Pardon Attorney). 3. Removal and Replacement of U.S. Attorneys (2007). At the direction of the President, on June 28, 2007, the White House Counsel advised the House and Senate Judiciary Committees that subpoenas issued to former White House Counsel Harriet Miers and Chief of Staff Joshua B. Bolten for documents and testimony relating to the firing of U.S. Attorneys were subject to a claim of executive privilege. Additionally, these present and former White House officials were ordered not to comply with document demands or appear at a hearing. The House passed contempt resolutions against Miers and Bolten on February 14, 2008. On February 28, the Speaker transmitted the contempt citation to the U.S. Attorney for the District of Columbia for presentation to the grand jury. The Attorney General directed the U.S. Attorney not to present the citation. On March 10, 2008, the House Judiciary Committee initiated a civil suit seeking declaratory and injunctive relief to enforce the subpoenas. See Comm. on the Judiciary, U.S. House of Representatives v. Miers, 558 F. Supp. 2d 53 (D.D.C. 2008). On July 31, 2008, the district court ruled that "The Executive's current claim of absolute immunity from compelled congressional process for senior precedential aides is without any support in the case law." Id. at 56. The court declared that Ms. Miers was legally required to testify after being issued a valid congressional subpoena and ordered Ms. Miers and Mr. Bolten to produce all subpoenaed nonprivileged documents. Additionally, while stopping short of ordering production of a full privilege log, the court did require the executive to provide more detailed descriptions of all documents withheld on the basis of executive privilege. Id. at 107. The appeals court stayed the district court order pending appeal, but the appeals court never issued a ruling on the merits because an accommodation was reached before it could take up the case. Following the expiration of the 110 th Congress and the arrival of a new Administration, the parties reached an agreement in March 2009. The executive provided some of the requested documents to the committee and Ms. Miers was permitted to testify, under oath, in a closed, but transcribed, hearing. 4. On April 9, and May 5, 2008, the House Oversight and Government Reform Committee issued three subpoenas total to the Administrator of the Environmental Protection Agency (EPA) and the Office of Information and Regulatory Affairs of the Office of Management and Budget (OIRA). The subpoenas sought documents related to EPA's promulgation of regulations serving national ambient air quality standards for ozone on March 12, 2008. Another subpoena requested communications between the EPA and OIRA concerning the agency's decision to deny a petition by California for a waiver from federal preemption to enable the state to regulate greenhouse gas emissions from motor vehicles. On June 19, 2008, the Attorney General advised the President that 25 of the documents covered by the subpoena would be properly covered by an assertion of executive privilege. On June 20, 2008, the EPA Administrator advised the chairman of the committee that he had been directed by the President to assert executive privilege with respect to the withheld documents. The committee did not pursue a contempt action. 5. Removal and Replacement of U.S. Attorneys (2008). On July 10, 2008, Karl Rove, a former White House Deputy Chief of Staff, refused to comply with a subpoena requiring his appearance before the House Judiciary Committee's Subcommittee on Commercial and Administrative Law, claiming absolute immunity on the basis of White House and DOJ opinions and directions. By a vote of 7-1, the subcommittee rejected his claims of privilege. On July 30, 2008, the full Judiciary Committee approved a report recommending that Mr. Rove be cited for contempt by the House. The full House never voted on the contempt citation. Mr. Rove was permitted to testify as part of the accommodation reached between the executive and the House at the conclusion of the Miers/Bolten dispute discussed above. 6. Special Counsel's Investigation of Revelations of CIA Agent's Identity. On July 16, 2008, the President directed the Attorney General (at the behest of the Attorney General) to assert executive privilege with respect to a House Oversight and Government Reform Committee subpoena to DOJ. The subpoena concerned DOJ's investigation by a Special Counsel of the public revelation of Valerie Plame Wilson's identity as an employee of the Central Intelligence Agency. The documents sought and withheld included FBI reports of the Special Counsel's interviews with the Vice President and senior White House staff, handwritten notes taken by the Deputy National Security Advisor during conversations with the Vice President and senior White House officials, and other documents provided by the White House during the course of the investigation. The Attorney General requested that the President formally assert the privilege after the committee scheduled a meeting to consider a resolution citing him for contempt of Congress. The chairman of the Oversight Committee delayed a scheduled committee vote on contempt to allow Members to assess the executive privilege assertion. The committee later requested a privilege log but neither DOJ nor the White House responded to that request. 9. Obama President Obama has only formally invoked executive privilege once, in relation to a congressional investigation of Operation Fast and Furious. At the direction of the President, on June 20, 2012, Deputy Attorney General James Cole informed the House Committee on Oversight and Government Reform that the President was formally asserting executive privilege over documents requested pursuant to a subpoena issued as part of the committee's investigation of Operation Fast and Furious. A letter from the Attorney General to the President, dated June 19, 2012, laid out the executive's legal argument for asserting the privilege. The Attorney General argued that the documents withheld included internal executive branch communications generated in the course of deliberative process concerning responses to congressional oversight. Furthermore, he stated that executive privilege encompasses executive branch deliberative communications and that disclosing such documents would "inhibit the candor of such Executive Branch deliberations." Letter to the President from Attorney General Eric Holder, June 19, 2012. On June 20, 2012, the committee voted to hold Attorney General Eric Holder, the subject of the subpoena as custodian of DOJ documents, in contempt of Congress. The full House voted in favor of a criminal contempt citation on June 28, 2012. The House Committee on Oversight and Government Reform filed a civil lawsuit in the U.S. District Court for the District of Columbia on August 13, 2012, seeking to enforce the subpoena and compel disclosure of the documents being withheld due to the assertion of executive privilege. The suit withstood a motion to dismiss on the basis of jurisdiction and justiciability, and is currently pending before the district court.
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Presidential claims of a right to preserve the confidentiality of information and documents in the face of legislative demands have figured prominently, though intermittently, in executive-congressional relations since at least 1792. Few such interbranch disputes over access to information have reached the courts for substantive resolution. The vast majority of these disputes are resolved through political negotiation and accommodation. In fact, it was not until the Watergate-related lawsuits in the 1970s seeking access to President Nixon's tapes that the existence of a presidential confidentiality privilege was judicially established as a necessary derivative of the President's status in our constitutional scheme of separated powers. There have been only four cases involving information access disputes between Congress and the executive, and two of these resulted in decisions on the merits. The Nixon and post-Watergate cases established the broad contours of the presidential communications privilege. Under those precedents, the privilege, which is constitutionally rooted, could be invoked by the President when asked to produce documents or other materials or information that reflect presidential decision making and deliberations that he believes should remain confidential. If the President asserts the privilege, the materials become presumptively privileged. The privilege, however, is qualified, not absolute, and can be overcome by an adequate showing of need. Finally, while reviewing courts have expressed reluctance in balancing executive privilege claims against a congressional demand for information, they have acknowledged they will do so if the political branches have tried, in good faith, but failed to reach an accommodation. Supreme Court decisions have left considerable gaps in the law of presidential privilege. Among the more significant issues left open include whether the President must have actually seen or been familiar with the disputed matter; whether the presidential privilege encompasses documents and information developed by, or in the possession of, officers and employees in the departments and agencies of the executive branch, outside of the Executive Office of the President; whether the privilege encompasses all communications with respect to which the President may be interested or is confined to presidential decision making and, if so, whether it is limited to a particular type of presidential decision making; and precisely what kind of demonstration of need must be shown to overcome the privilege and compel disclosure of the materials. The District of Columbia Circuit's 1997 ruling in In re Sealed Case (Espy), and its 2004 decision in Judicial Watch v. Department of Justice, addressed many of these questions in a manner that may alter the future legal playing field in resolving such disputes. Moreover, two recent disputes between the executive branch and Congress over the removal of U.S. Attorneys during the George W. Bush Administration and the Department of Justice's response to a congressional investigation into Operation Fast and Furious may provide further insight into the scope of executive privilege in the congressional oversight context.
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Severe thunderstorms and tornadoes affect communities across the United States every year, causing fatalities, destroying property and crops, and disrupting businesses. State and local governments are typically the first to respond to the consequences of extreme weather events, but the federal government has responsibilities for forecasting and issuing warnings to citizens and communities lying in harm's way. When severe weather catastrophes overwhelm the resources of state and local governments, the Stafford Act authorizes the President to issue major disaster or emergency declarations, resulting in the distribution of a wide range of federal aid to those affected. Also, U.S. Department of Agriculture programs, such as federal crop insurance and emergency disaster loans, can help farmers recover financially from severe weather disasters even without a presidential disaster declaration. Many observers note that although the number of lives lost each year to natural hazards in the United States has decreased, the costs of major disasters continues to rise. According to the National Science and Technology Council: "Due to changes in population demographics and more complex weather-sensitive infrastructure, Americans today are more vulnerable than ever to severe weather events caused by tornadoes, hurricanes, severe storms, heat waves, and winter weather." Whether this assertion is accurate, and whether a trend of increasing costs due to extreme thunderstorms and tornadoes exists, are matters of debate (see discussion below, for example, on "normalizing" costs of tornadoes). However, despite well-documented improvements in severe thunderstorm and tornado detection and warning systems over the past 100 years, outbreaks of these types of storms still have the capability of causing enormous damage and loss of life in the United States in the 21 st century. For example, in 2011 a series of tornado and severe weather outbreaks caused over 550 fatalities in the United States, and approximately $28 billion in total property damage. The total fatalities in 2011 were the most since modern record-keeping began in 1950, and 2011 ties with 1936 as the second-deadliest year for tornado deaths (in 1925, 794 tornado-related deaths were reported). Nearly 1,700 tornadoes were reported in 2011, including 59 "killer tornadoes," according to the Storm Prediction Center of the National Oceanic and Atmospheric Administration, making 2011 one of the top three most active tornado years since 1950. The active 2011 year was followed, however, by a year with far fewer reported tornadoes (939). In fact, 2012 and 2010 had 22 and 21 "killer tornadoes," respectively, resulting in 70 deaths in 2012 and 45 deaths in 2010. In 2013, the January through April number of reported tornadoes (114 reported, 101 reports still pending) was running well below the 1991-2010 average tornado count for that four-month period (300 tornadoes). However, on May 20, 2013, the town of Moore, Oklahoma, was struck by a large and extremely destructive tornado (ranked EF-5, the most destructive on a scale of 0-5; EF rankings, or intensity scale, for tornadoes are discussed in Appendix ). Preliminary reports indicate dozens of fatalities due to this single tornado. Although it is too early in 2013 to tell whether the May 20 tornado is an anomaly, or represents the beginning of an active and deadly tornado season, it does confirm that the bulk of damage and fatalities are caused by the largest and most powerful tornadoes (EF-4 and EF-5), even though the large majority of tornadoes that are reported each year are EF-0 through EF-3. This report discusses issues that may be of interest to Congress in three general categories: (1) forecasting and issuing warnings for severe thunderstorms and tornadoes; (2) the role of mitigation; and (3) the effect of climate change. It also describes the role of the National Weather Service in forecasting severe weather and communicating the risk to communities and individuals. The Appendix describes in more detail the risk these hazards pose to communities and individuals; where, when, how, and why they occur in the United States; and what damage they may cause. This report focuses on the risk from severe thunderstorms and tornadoes to the public and infrastructure, the federally sponsored forecast and warning systems, federally backed efforts to improve the scientific understanding of severe weather phenomena, and efforts to mitigate the risk of catastrophe. Congress has oversight and funding responsibilities for the federal agencies charged with these tasks. At issue is whether those programs are effective at reducing damage, injuries, and loss of life from severe thunderstorms and tornadoes. Also at issue is the concept of disaster resilience; namely, those precautions and strategies—such as improved building materials and structural systems—that decrease the vulnerability of communities and individuals to severe thunderstorms and tornadoes. The federal role in supporting programs of hazard mitigation, such as those included in the National Windstorm Impact Reduction Act of 2004 ( P.L. 108-360 ), has been a concern for Congress. Authorization for the Windstorm Impact Reduction Program expired at the end of FY2008, and it is not clear whether the program achieved any of the goals specified in the legislation. Legislation to reauthorize appropriations and make changes to the statute was introduced on April 26, 2013 ( H.R. 1786 ). The House has not taken action on the bill. Projections of a changing climate for the United States and the possibility of a more intense hydrologic cycle (e.g., more intense storms, rainfall, heat waves, and other phenomena) have raised questions about whether the costs of severe weather disasters will continue to rise in the future. Observers note that extreme events, more than shifts in average climate conditions, drive changes in natural and human systems. According to the U.S. Global Change Research Program: In the future, with continued global warming, heat waves and heavy downpours are very likely to further increase in frequency and intensity. Substantial areas of North America are likely to have more frequent droughts of greater severity. Hurricane wind speeds, rainfall intensity, and storm surge levels are likely to increase. The strongest cold season storms are likely to become more frequent, with stronger winds and more extreme wave heights. Another issue for Congress may be distinguishing how much of the higher costs of severe weather-related disasters may be due to changing demographics in hazard-prone areas from the effects of any increased frequency and intensity of extreme weather events due to climate change. The National Weather Service (NWS) receives the most funding of any agency or program within NOAA's budget, and the local warnings and forecasts (LW&F) program receives approximately 70% of the NWS funding each year. Table 1 shows appropriations for the LW&F program, NWS, and overall NOAA appropriations since FY2009. As Table 1 shows, spending on LW&F has increased at a slightly higher percentage than total NWS spending over the five-year period, but has increased at a lower percentage than the overall NOAA budget over the same time frame. The LW&F program averages nearly three-quarters of the NWS budget each year, indicating that short-term weather prediction and warning is a high priority for NWS and for NOAA, in accord with its statutory authority. Reports from RAND and other research organizations suggest, however, that reorienting research and development funding toward longer-term loss reduction efforts—particularly for weather-related hazards—might provide the nation with more long-lasting solutions to reducing natural disaster losses. These recommendations favor increased focus on mitigation techniques and R&D to reduce loss of life and property from severe weather hazards. Language in the most recent NWS strategic plan appears to reflect some shift in direction as recommended by RAND and others. In the draft plan, the NWS states, "We must go beyond producing accurate forecasts and timely warnings to better understanding and anticipating the likely human and economic impacts of such events." The strategic plan describes an overarching paradigm for the NWS as "impact-based decision support services," a concept that appears to take into consideration how the information provided in NWS local warnings and forecasts could be best utilized by public safety officials. In addition to the shift to "impact-based decision support services," the NWS strategic plan identifies the need for scientific and technical advancements to support such services. This could include advances in observation platforms, computing systems, and other facilities and instruments, although the draft plan focuses on "advanced information management approaches" that would be necessary to ingest and interpret all of the real-time information from instruments and systems that collect severe weather data. According to the plan, "These measures will extend the window America has to prepare for weather-dependent events that impact society." The current emphasis at the NWS on short-term local forecasting and warnings contrasts with a longer-term, anticipatory outlook that would focus on mitigation, although the two approaches are not mutually exclusive. The language of the strategic plan seems to suggest a longer-term approach in complement with the current short-term forecast and warning emphasis. Each approach could provide benefits in an overall strategy of increasing resilience to extreme weather events such as severe thunderstorms and tornadoes. The National Science and Technology Council (NSTC) noted that the nation's primary focus on disaster response and recovery is "an impractical and inefficient strategy for dealing with these ongoing threats. Instead, communities must break the cycle of destruction and recovery by enhancing their disaster resilience " (italics added). Among the six "Grand Challenges" identified in its report, the NSTC recommended that communities implement hazard mitigation strategies and technologies, such as development of advanced construction materials and structural systems that allow facilities to "remain robust in the face of all potential hazards." The report also recommended nonstructural mitigation measures, such as land use and zoning regulations that recognize the risk of natural hazards. Land use measures, such as zoning laws and building codes, are typically prerogatives of state and local governments, and thus the federal role in that aspect of hazard mitigation is limited. The federal role in developing disaster-resilient materials and structures, and evaluating their relative effectiveness in mitigating damages from severe thunderstorms and tornadoes, has been unclear. Congress attempted to clarify the federal role in mitigating damages from windstorms (including tornadoes and thunderstorms) by passing the National Windstorm Impact Reduction Act of 2004 ( P.L. 108-360 ). The legislation identified three primary mitigation components: (1) improved understanding of windstorms; (2) windstorm impact assessment; and (3) windstorm impact reduction. Authorization of appropriations under P.L. 108-360 for the National Windstorm Impact Reduction Program expired on September 30, 2008. It is not clear whether the program made progress toward its objective: achievement of major measurable reductions in the losses of life and property from windstorms. It is difficult to determine what levels of funding were allocated to the program because Congress has never enacted a specific appropriation for the National Windstorm program. In addition, the four agencies responsible for implementing the program—the National Science Foundation (NSF), the National Institute of Standards and Technology (NIST), NOAA, and the Federal Emergency Management Agency (FEMA)—have not identified a line item for the program in their annual budget justifications. On April 26, 2013, H.R. 1786 was introduced to reauthorize appropriations and make several changes to the National Windstorm Impact Reduction Program, first authorized in 2004 by P.L. 108-360 . The bill states that the purpose of the program is to achieve major measurable reductions in the losses of life and property from windstorms through a coordinated Federal effort, in cooperation with other levels of government, academia, and the private sector, aimed at improving the understanding of windstorms and their impacts and developing and encouraging the implementation of cost-effective mitigation measures to reduce those impacts. In the legislation, the Director of NIST would be responsible for planning and coordinating the program and NIST would be the lead agency in the four-agency program. The other three agencies given responsibilities for the program would be FEMA, NOAA, and NSF. In addition to acting as lead agency, NIST would carry out research and development to improve model codes, standards, design guidance, and construction and retrofit practices for buildings, other structures, and lifelines. FEMA would support the development of risk assessment tools and mitigation techniques, data collection and analysis, and dissemination information and implementation of mitigation measurements by households, businesses, and communities. NOAA would support atmospheric sciences research and data collection to help understand how windstorms behave and how they affect buildings, other structures, and lifelines. Lastly, NSF would fund engineering and atmospheric sciences research to better understand windstorms and their impact on buildings, structures, and lifelines. H.R. 1786 would authorize appropriations for the four program agencies over a three-year period through FY2016 for the following amounts: NIST—$16.5 million; NSF—$34.2 million; FEMA—$6.0 million; NOAA—$7.5 million. The total authorized amount for the program agencies from FY2014 through FY2016 would be $64.2 million. In addition, the legislation would establish an advisory committee to include representatives of academic and research institutions, industry standards development organizations, emergency management agencies, state and local government, and business communities. None of the members of the advisory committee would be employees of the federal government. Many Members of Congress have recognized increased vulnerability to tornadoes of people living in manufactured housing. In the 112 th Congress, H.R. 320 , CJ's Home Protection Act of 2009, was introduced and referred to the House Financial Services Committee. The bill would have amended § 604 of the National Manufactured Housing Construction and Safety Standards Act of 2004 (42 U.S.C. 5403) to require that all manufactured homes be equipped with a NOAA Weather Radio. NOAA Weather Radios would presumably give the residents of manufactured homes a better chance of receiving tornado warnings and allow them to take precautionary measures. In the 111 th Congress, the House passed similar legislation, H.R. 320 , but the Senate did not act on the bill. As of May 22, 2013, similar legislation has not been introduced in the House or Senate. In 2003, the 108 th Congress passed the Tornado Shelters Act ( P.L. 108-146 ), which amended the Housing and Community Development Act of 1974 (42 U.S.C. 5305(a)) to authorize communities to use Community Development Block Grant (CDBG) funds for construction of tornado-safe shelters in manufactured home parks. The law was aimed at communities of at least 20 manufactured homes that consist predominately of low- and moderate-income residents. To be eligible, the community has to be located in a state that was struck by a tornado during the fiscal year when funds were made available or during the previous three fiscal years. According to several reports that synthesize recent findings in the scientific literature, it is forecast that there are likely to be changes in the intensity, duration, frequency, and geographic extent of weather and climate extremes as the Earth continues to warm. These changes may result in continuing the upward trends that have already been observed, such as the frequency of unusually warm nights, frequency and intensity of extreme precipitation events, and the length of the frost-free season. However, the evidence is unclear as to whether the frequency and intensity of severe thunderstorms and tornadoes has increased or will increase in the future due to climate change. For example, the Intergovernmental Panel on Climate Change (IPCC) Fourth Assessment report stated that there was insufficient evidence to determine whether trends existed in small-scale phenomena such as tornadoes. A 2012 IPCC report which focused on extreme events due to climate change made a similar observation: "There is low confidence in observed trends in small spatial-scale phenomena such as tornadoes and hail because of data inhomogeneities and inadequacies in monitoring systems" (emphasis in the original). Part of the difficulty in sorting out trends in frequency and intensity of severe thunderstorms and tornadoes lies in the way they have been observed and reported. For example, the number of annual reported tornado occurrences has doubled between 1954 and 2003. Some studies indicate that the doubling reflects changes in observing and reporting. When the apparent trend produced by these changes is removed, the adjusted data show little or no trend in the number of reported tornadoes since the 1950s. Reports of severe thunderstorms without associated tornadoes increased by a factor of 20 between 1955 and 2004. However, researchers indicate that the increase is mainly in reports of marginally severe thunderstorms, and suggest that the evidence for a change in the long-term trend of severe thunderstorms is lacking. In studies that re-analyze environmental conditions that could have produced severe thunderstorms, changes in the frequency of those environmental conditions are observed. However, the record of observations may not be long enough to determine the range of natural variability. Given the uncertainty, it is not yet possible to determine if these changes are due to natural variability or changing climatic conditions from greenhouse warming. Excessive rainfall from severe thunderstorms may trigger flash floods, which are typically responsible for most flood-related deaths in the United States each year. According to researchers, one of the clearest trends over the last 30 years has been an increase in the frequency and intensity of heavy precipitation events. Despite this clear trend, the relationship between these heavy precipitation events and the frequency and intensity of severe thunderstorms is not clear, nor do scientists agree on the relationship between increased precipitation and streamflow extremes, such as flooding. As a further complication, studies of trends in streamflow using similar data have produced different results. Also, some human activities that alter the landscape, such as building dams and creating large reservoirs, may mask the influence of climatic changes on streamflow. Climate models suggest that with continued global warming due to increasing concentrations of atmospheric greenhouse gases, precipitation intensity is projected to increase. One set of research findings, for example, indicates that global precipitation increased by 7.4% per degree Celsius rise during 1987-2006 (plus or minus 2.6%). Other researchers suggest that a 20-year period is too short to infer any long-term changes, but that the relationship between warming and more precipitation likely holds true. It is unclear whether any intensification of precipitation is or will be linked in the future to more severe thunderstorms, and to more severe or more frequent flash floods. However, precipitation is, and will likely continue to be, unevenly distributed across different regions of the country. Researchers generally expect that currently wet regions of the country may get wetter, and dry regions may get drier. The National Climatic Data Center (NCDC) of NOAA bills itself as the "nation's scorekeeper" for addressing severe weather and climate events in their historical perspective. It keeps a tally of the weather and climate events that have had the greatest economic impact since 1980, and uses $1 billion of damage as a threshold to count whether events are significant or not. The NCDC adjusts its dollar values using the Consumer Price Index (CPI). It is unclear what the $1 billion threshold means in terms of its explanatory power for a given weather or climate-related disaster (for example, would a $0.9 billion or a $1.1 billion threshold indicate something significantly different than a $1.0 billion disaster?). However, it is a convenient, albeit somewhat arbitrary, number that can serve as a proxy for counting disasters responsible for damage of a certain magnitude over time. The billion dollar disaster meme has also been used by some advocacy groups as an indicator of the influence of greenhouse gas-driven climate change on increasing the destructive magnitude of weather and climate related disasters. Although the NCDC adjusts its disaster loss estimates for inflation using the CPI, others have called into question whether the CPI is sufficient to account for the many factors that contribute to changes in the costs of disaster damage over time. For example, one 2013 report examined tornado damage from 1950 to 2011 and adjusted, or "normalized," the cost estimates by including changes in inflation and wealth at the national level, and changes in population, income, and housing units at the county level. The study found that, using several different methods, tornado damages have declined since 1950, even considering the extremely damaging tornado outbreaks of 2011. However, the study also noted that the 2011 season is a reminder that maximum damage levels have the potential to increase if societal change leads to increased exposure of wealth and property. Another study concludes that there is an increasing trend in aggregate annual losses indicated in the $1 billion disaster dataset used by NCDC of about 5% per year. The study notes that distribution of damage and frequency of disasters over the 1980-2011 period is dominated by tropical cyclone damage. Trends in damage due to tropical cyclones appear to be linked, in part, to variations in insurance participation rates. The study observes that increasing trends in crop losses are complicated by a major expansion of the federally subsidized crop insurance program. The report also concludes that the net effect of uncertainties and biases in the billion dollar dataset has been an overall underestimation of the average loss due to weather and climate events of approximately 10%-15%. Are 2011 tornado outbreaks linked to changes in climate that may be the result of greenhouse gases emitted to the atmosphere from human activities? Some commentators stated that there was such a link, and that human-induced climate change affects all climatic events today, in some growing but unquantified degree: "More extreme and violent climate is a direct consequence of human-caused climate change (whether or not we can determine if these particular tornado outbreaks were caused or worsened by climate change)" (emphasis in the original). Other sources point to the difficulties in attributing the recent tornado outbreaks to climatic factors distinguishable from the other factors discussed above, such as changed instrumentation (e.g., implementation of WSR-88D Doppler radar after 1990), increases in population, and public awareness via spotter networks, all which tend to lead to increased tornado counts particularly for weak tornadoes. In a preliminary analysis of the April 2011 tornado outbreak, NOAA described ways to diagnose whether other factors, other than simply counting tornadoes, could reveal changes to large-scale time-averaged climate variables for April. The preliminary analysis attempted to discern whether large-scale conditions may have become more favorable for violent storms to occur over the lower Mississippi Valley since 1979. NOAA's preliminary analysis concluded that a discernible trend was not present over the past 30 years, and that unless new findings suggested otherwise, "… a claim of attribution (to human impacts) is thus problematic, although it does not exclude that a future change in such environmental conditions may occur as anthropogenic greenhouse gas forcing increases." Most tornado fatalities occur within housing structures, unlike fatalities from floods, which occur in vehicles. This indicates that people are more likely to seek shelter during tornadic events; however, the risk of injury or death seems to depend on what type of housing stock they choose for shelter. For example, one study indicated that manufactured houses, such as mobile homes, are particularly vulnerable to tornadoes. Mobile home deaths accounted for an average of 44% of all deaths caused by tornadoes between 1985 and 2005, and showed an increasing trend over the 20-year period. During the same time period, tornado-related deaths within permanent homes fluctuated between 20% and 30%, and deaths in vehicles decreased to 9.9% of all tornado-related deaths, on average. The study concluded that the high percentage of mobile homes in the Southeast may be the key factor explaining why most tornado-related deaths occur in lower Arkansas, Tennessee, and lower Mississippi River valleys. The Super Tuesday Tornado Outbreak of 2008 seems to support research results indicating that demographics and other socioeconomic and behavioral factors combine to make the mid-South regions particularly vulnerable to tornado fatalities. NOAA observed several factors consistent with research pointing to the importance of social and demographic factors in determining risk from tornadoes. These were: 63% of the fatalities were in manufactured houses; most fatalities occurred at night; most areas affected by the tornadoes were heavily forested; many reported that February was not a month in what they perceived as "tornado season." The NWS, at the discretion of the Secretary of Commerce, has statutory authority for weather forecasting and for issuing storm warnings (15 U.S.C. §313). The NWS provides weather, water, and climate forecasts and warnings for the United States, its territories, adjacent waters, and ocean areas. Each of the weather forecast offices in the NWS is equipped with technologies for observing, forecasting, and warning of severe thunderstorms and tornadoes. These technologies include Weather Surveillance Radar (WSR-88D, also known as NEXRAD, a network of 161 radars), Automated Surface Observing Systems (ASOS) at over 1,200 sites, access to data from two Geostationary Operational Environmental Satellites (GOES 8 and 10), and the Automated Weather Interactive Processing System (AWIPS). Severe thunderstorm and tornado forecasts are made by the Storm Prediction Center (SPC) and local weather forecast offices. Forecasters at the SPC use numerical weather prediction models to determine if atmospheric conditions, temperature, and wind flow patterns may lead to formation of severe weather. The SPC uses its suite of products to relay forecasts of organized severe weather as much as three days ahead of time, and continually refines the forecast up until the event has concluded. The severe weather forecast process typically follows the following pattern: (1) convective outlook; (2) mesoscale discussion; (3) watch; and (4) warning. The severe weather forecast process typically begins with a forecast issued one to two days in advance of where both severe and non-severe thunderstorms are expected to occur around the country. This is known as a convective outlook. Areas of possible severe thunderstorms are labeled slight risk, moderate risk, or high risk, depending upon the coverage and intensity of expected severe thunderstorms in a region. The outlooks are the first severe weather threat notifications that the local NWS offices and local emergency officials receive. As a convective outlook area becomes more defined, a next step in the forecast process is often needed to describe an evolving severe weather threat. This is known as a mesoscale discussion . Mesoscale discussions contain information that helps forecasters at local NWS offices understand the causes and prepare for the types of severe weather expected. If development of severe thunderstorms or tornadoes is imminent, or likely to occur in the next several hours, the next step is a severe storm watch. Such watches alert the public, aviators, and local NWS offices that environmental conditions have become favorable for the development of severe storms or tornadoes. Following the issuance of a severe storm watch, local networks of storm spotters are activated, and forecasters in the threat area closely monitor radar imagery and spotter reports to issue the appropriate severe thunderstorm and tornado warnings. As the severe weather threat continues to develop, the local NWS offices and the storm spotters try to detect severe thunderstorms and tornadoes using radar or other detection technology and visual evidence. When severe hail, damaging winds, or a tornado appears imminent from radar or visual evidence, local NWS offices will issue a severe thunderstorm or tornado warning as appropriate. The warning contains specific language about areas at risk, time frames, specific hazards, recommended protective behavior for those at risk, and the office issuing the warning. Several methods exist to communicate alerts and warnings to the public. The NWS maintains and operates NOAA Weather Radio (NWR). NWR is a nationwide network of radio stations broadcasting continuous weather information directly from the nearest NWS office. The NWR works with the Emergency Alert System (EAS). The EAS is an automated simultaneous retransmission system that allows NWS warnings to be disseminated over most radio and television networks, and over cable and satellite TV systems. NOAA Weather Radio broadcasts official NWS warnings, watches, forecasts, and other hazard information 24 hours a day, 7 days a week, to all 50 states and the District of Columbia, adjacent coastal waters, Puerto Rico, the U.S. Virgin Islands, and the U.S. Pacific Territories. Issuing severe weather warnings to the public has evolved into what some observers term a weather warning partnership: a roughly triangular exchange of information between the NWS, private forecasters and the news media, and local emergency managers. The objective of the weather warning partnership is to provide a consistent warning message to the public at risk. The NWS depends on weather warning partnerships with the electronic news media and local and state emergency management officials to ensure that communities are prepared for severe weather outbreaks and to further communicate the outlooks, watches, and warnings to the public. Many emergency management officials and news media monitor NWS outlooks so that they have enough lead time for activating preparedness capabilities such as storm spotters, increasing response levels, and preparing to activate the warning communication systems. The partnership is essential in guaranteeing that there is a shared understanding of the weather threats and that accurate warning information is communicated to the public at risk. Observers have noted that this shared understanding helps prevent conflicting warnings—which could lead to delays in seeking shelter—from being communicated to the public. Congress may consider several options for potentially reducing the costs from the impacts of severe thunderstorms and tornadoes: improving detection and warning systems; fostering efforts to build more resilient buildings and infrastructure; and supporting research and development to better understand why and where severe thunderstorms and tornadoes occur, as well as other measures. Whether and how climate change is influencing or could affect the frequency and intensity of thunderstorms and tornadoes is not yet evident, although some commentators ascribe a more extreme and violent climate to the influence of human-induced climate change. Thus it is not clear whether long-term efforts to mitigate greenhouse gas-induced global warming—such as by reducing emissions of carbon dioxide and other gases—could also mitigate damage to property and reduce injuries and losses of life from severe thunderstorms and tornadoes. Enhancing the scientific understanding of how and why severe thunderstorms and tornadoes form, and improving the accuracy and timeliness of forecasting and warning systems, will likely provide individuals and communities in the United States better information to help them avoid damage and injury from severe weather events. The role of the federal government in weather and climate research, thunderstorm and tornado forecasting, and issuing warnings is substantial. Spending on weather forecasts and warnings comprises the bulk of the NWS budget, which is itself the largest component of NOAA's annual budget. Several other federal agencies contribute to the weather and climate enterprise, including NSF, NASA, the U.S. Geological Survey, and others. The federal investment in weather-related response and recovery, including programs at the Department of Agriculture and FEMA, is also substantial. Many observers and stakeholders call for increased funding for improving the understanding of physical processes that produce extreme events, such as severe thunderstorms and tornadoes, and how these processes change with climate. Observers and stakeholders are broadly in agreement about the types of R&D needed, such as integrated data and observation systems, improved remote sensing capabilities, better modeling capability, and others. Even if funding increased substantially, however, it may not necessarily lead to significant decreases in damages, injuries, or deaths from severe thunderstorms and tornadoes. Shifting populations, changes in wealth density, and construction of dense infrastructure in areas prone to severe weather could offset improvements in forecasting and warning systems: ...the potential for considerable loss of life and property due to tornadoes continues to exist, especially in highly vulnerable regions of the country. Further, the increasing population and migration patterns of this population suggest that the overall vulnerability and risk to humans and their property may amplify in the future despite improvements in forecasting, detection, and warning dissemination. (References omitted.) In addition, implementing hazard mitigation strategies may include developing and enforcing land-use planning and zoning laws, which are traditionally state and local issues and not congressional concerns per se. How federal agencies disseminate the results of federally sponsored R&D, from activities such as those originally authorized in the National Windstorm Impact Reduction Program, to states and local communities, may be more squarely in the purview of Congress, and more directly addressed through oversight of the programs and annual appropriations for the participating agencies. This appendix discusses why severe thunderstorms and tornadoes are threats to some areas of the country and not others, and why they occur during some parts of the year and not others. It also describes the role of the National Weather Service (NWS) in forecasting and issuing warnings, and its relationship to private forecasters and the news media in providing clear and consistent messages to the public at risk. Thunderstorms and tornadoes affect U.S. citizens and communities every year, albeit rarely with the same level of widespread destruction as a major hurricane or flood. Although floods are one consequence of severe thunderstorms, floods that cause widespread and prolonged destruction are typically not annual events in the United States. Major floods, such as those that affected parts of the Mississippi River region in the Midwest in 2008 and in 1993, are the result of many factors and are not solely caused by heavy rains from severe thunderstorms. Severe Thunderstorms Compared to tropical storms such as hurricanes, thunderstorms are small and short-lived, but can still be dangerous. An average thunderstorm is 15 miles in diameter and lasts an average of 30 minutes. Thunderstorms occur much more frequently than large tropical storms. There are an estimated 100,000 thunderstorms in the world each year, of which 10% are severe. A severe thunderstorm is defined by the NWS as one that produces hail at least three-quarters of an inch in diameter, has winds of 58 miles per hour or higher, or produces a tornado. Severe thunderstorms may produce lightning, high winds, hail, flash floods, and tornadoes, any of which may be a hazard to people and property. Strong, straight-line winds can knock down trees and power lines, and can sometimes cause damage equal to that caused by many tornadoes. Downbursts—outward bursts of damaging winds on or near the ground—can cause wind shear and lead to aircraft accidents. Tornadoes (discussed separately below), the most destructive phenomenon associated with thunderstorms, can destroy structures and cause fatalities. Risks from Severe Thunderstorms Severe thunderstorms can produce lightning, high winds, hail, and heavy rainfall that may lead to flash flooding. All of these phenomena may pose a risk to people and property depending on their location and the storm's intensity. Lightning Lightning is commonly considered the most dangerous and most frequently encountered weather hazard. Between 1977 and 2006, an average of 62 people were killed each year by lightning in the United States. Lightning-caused fatalities are often highest each year in Florida. Lightning is also the primary cause of wildfires, which threaten natural resources, homes, businesses, and lives, particularly in the West. NOAA's National Severe Storms Laboratory estimates that lighting causes approximately $4 billion-$5 billion in damage each year, affecting buildings, communications systems, power lines, and electrical systems. High Winds Damage caused by severe straight-line winds during thunderstorms is more common than damage caused from tornadoes. During severe thunderstorms, straight-line wind speeds may reach up to 100 miles per hour (damaging winds are classified as those exceeding 50-60 mph). Estimates of the annual amount of damage caused by high winds are not provided in this report because wind damage from tropical storms, thunderstorms, and tornadoes are often reported together. Damaging winds can develop with little or no advanced warning. Microbursts—one category of damaging winds—are dangerous to aviation and can occur in an isolated rain shower or thunderstorm. Downbursts or microbursts may produce wind shear—a variation in wind speed and/or direction over a short distance—which can slow airspeed and cause an aircraft to lose altitude when a plane is taking off or landing and is near the ground. Hail Although Florida typically experiences the most thunderstorms in the United States each year, Nebraska, Colorado, and Wyoming normally experience the most hail storms. Crops are particularly vulnerable to hail damage; even relatively small hail can severely damage plants in minutes. Hail greater than three-quarters of an inch in diameter is considered severe and potentially damaging to aircraft. Hail also damages vehicles, roofs of buildings and homes, and landscaping. Damage from hail approaches $1 billion in the United States each year. Hail has been known to cause injury to humans, and occasionally has been fatal. Flash Floods Floods are a common and widespread natural hazard in the United States. As discussed in this report, flash floods can cause significant damage and fatalities, but they result from short-lived thunderstorms, and not from a prolonged weather pattern that produces higher than normal amounts of precipitation over several days or weeks. Flash floods are short in duration. They are most commonly associated with thunderstorms, severe weather, and melting snow or ice. Flash floods can occur within minutes or a few hours of excessive rainfall, such as that from a severe thunderstorm or a series of thunderstorms occurring over the same location. Because flash floods can occur suddenly and with little warning, they are the most dangerous types of floods; typically most flood-related deaths each year in the United States are caused by flash floods. It is difficult to assess the costs of actual damage from flash floods each year; cost estimates may vary widely, and the actual costs may not consistently correlate to preliminary estimates. Where and When Severe Thunderstorms Form Thunderstorms occur most frequently over the Florida peninsula and in other parts of the Southeast, although the most severe weather threat from thunderstorms extends from Texas to southern Minnesota along the Great Plains and midwestern United States. Thunderstorms are most likely to occur in the spring and summer and during the afternoon and evening. In the Great Plains, most thunderstorms occur in the afternoon and at night; and along the Gulf Coast, southeastern United States, and western states they occur most frequently in the afternoon. The greatest potential for severe weather develops in geographical regions that are subject to warm, humid air at low levels, while dry, conditionally unstable air prevails aloft. Thunderstorms form during the summer in the southern Great Plains when a southerly flow of warm, very moist air from the Gulf of Mexico meets with a dry, westerly current aloft. The thunderstorms that form in Colorado, Arizona, and New Mexico are due to orographic lifting—ascending airflow caused by the Rocky Mountains. Few thunderstorms occur along the west coast of the United States because this region is frequently influenced by cooler, maritime air masses that suppress convectional uplift over land. How and Why Thunderstorms Form A thunderstorm forms when moist, unstable air is vertically lifted in the area by unequal warming of the Earth's surface, orographic lifting due to a topographic obstruction (such as a mountain or mountain range), or the presence of a weather front. Three types of thunderstorms can produce severe weather: a squall line, a multicell storm, and a supercell storm. Squall Line A squall line is a line of storms with a continuous, well developed gust front —a boundary that separates a cold downdraft of a thunderstorm from warm, humid surface air—at the leading edge of the line. Severe weather frequently occurs near the updraft/downdraft interface at the storm's leading edge. Downburst winds are the main threat. Hail as large as golf balls along with gustnadoes— weak and short lived tornadoes—can occur. Flash flooding can occur when the squall line slows down or even becomes stationary, with thunderstorms forming parallel to the line and repeatedly moving across the same area. Multicell Storm A multicell storm consists of a group of cells moving as a single unit, with each cell in a different stage of the thunderstorm life cycle. As the multicell storm evolves, individual cells take turns at being the most dominant. New cells tend to form along the upwind (typically western or southwestern) edge of the cluster, with mature cells located at the center and dissipating cells found along the downwind (eastern or northeastern) portion of the cluster. Multicell storms come in a variety of shapes, sizes, and intensities. They are stronger than single cell thunderstorms, but less severe than supercell storms. Each cell in a multicell storm lasts about 20 minutes; however, the multicell cluster may persist for several hours. Most flash floods occur during multicell storm events. Supercell Storm A supercell storm is defined as a storm with a persistent rotating updraft in which the entire storm behaves as a single entity, rather than as a group of cells. These supercell storms are the most dangerous and rarest of the thunderstorms; they produce strong downbursts of 80 mph or more and damaging hail, and they can last for hours. Some are very prolific precipitation producers, whereas others produce very little precipitation that reaches the ground. The leading edge of the precipitation from a supercell is usually light rain. Heavier rain falls closer to the updraft with torrential rain and/or large hail immediately north and east of the main updraft. Severe weather tends to form near the main updraft, typically towards the rear of the storm. Most large and violent tornadoes come from supercell storms. Tornadoes Tornadoes—the most violent storms on Earth—can sometimes produce winds that exceed 300 mph. They are the destructive products of severe thunderstorms, and second only to flash flooding as the cause for convective storm related fatalities. Risks from Tornadoes Damages from violent tornadoes seem to be increasing, similar to the trend for other natural hazards. According to some insurance industry analysts, losses of $1 billion or more from single tornado events are becoming more frequent. Insurance industry analysts indicate that tornadoes, severe thunderstorms, and related weather events (such as hailstorms, but not hurricanes or earthquakes) have caused nearly 57%, on average, of all insured catastrophe losses in the United States in any given year since 1953. Fatalities caused by tornadoes have declined significantly since the 1930s, generally because of improved forecasting, warning systems, and increased public awareness of the tornado risk. However, some researchers suggest that the decline is unlikely to continue and may have already stopped. These findings attribute the stalled decline to increasing vulnerability due to demographic factors, rather than shortcomings in tornado forecasts and warnings. The results would suggest that there are limits to the number of potential lives saved by improvements in forecasting ability and warning systems, and that social, behavioral, and demographic factors may play an increasingly important role in tornado-related fatalities. Other stakeholders, however, emphasize the need for increased investment in observations, computing power, research, and weather modeling to improve the nation's resilience to severe weather. Since 1950, violent tornadoes were responsible for 67.5% of all tornado deaths in the United States, yet comprise only 2.1% of all tornadoes. The number of fatalities caused by less violent tornadoes is also significant, and some studies suggest that the percentage of fatalities caused by less violent tornadoes has increased since the 1970s. (See below for an explanation of how violent tornadoes and less destructive tornadoes are classified: the F-Scale and enhanced F-scale.) Where and When Tornadoes Form Tornadoes have been reported on all continents except Antarctica; however, they occur most commonly in North America and particularly in the United States. They can occur in all 50 states but they form most commonly in three regions: (1) a swath of the Midwest extending from the Texas Gulf Coastal Plain northward through eastern South Dakota (known as "Tornado Alley"); (2) an area that extends across the Gulf Coastal Plain from south Texas eastward to Florida (known as "Dixie Alley"); and (3) an area located in eastern Iowa, south-central Indiana, western Pennsylvania, and central Arkansas (a smaller "tornado alley"). See Figure A-1 . Tornadoes occur mostly during spring and summer, and usually during the late afternoon and early evening. However, they can occur on any day of the year, at any hour. The United States averages approximately 1,200 tornadoes per year— the highest average annual number in the world. (The actual number of recorded tornadoes per year varies, depending on the source of information.) How and Why Tornadoes Form A tornado is a narrow, violently rotating column of air that extends from the base of a thunderstorm to the ground. Tornadoes develop from severe thunderstorms in warm, moist, unstable air along and ahead of cold fronts. There are two types of tornadoes, those that come from a supercell thunderstorm and those that do not. Tornadoes that form from supercell thunderstorms are the most common, usually the largest, and the most dangerous. In supercell thunderstorms, a rotating updraft is essential to development of a tornado. Rotation of the updraft can be caused by wind shear, which occurs when winds at two different levels above the ground blow at different speeds or in different directions. An invisible tube of air begins to rotate horizontally, and rising air within the thunderstorm tilts the rotating air from horizontal to vertical, resulting in rotation that extends through much of the storm. Once the updraft is rotating and being fed by warm, moist air flowing in from the ground level, a tornado can form. The mechanisms that cause tornadoes to form from supercell storms are not known precisely, and it is not currently possible to predict which supercell thunderstorms will produce tornadoes and which will not. Based on observations, approximately 20% of supercell thunderstorms produce tornadoes. A non-supercell tornado forms from a vertically spinning parcel of air near the ground, about 1-10 kilometers in diameter, that is caused by wind shear from a warm, cold, or sea breeze front, or from a dryline —the interface between warm, moist air and hot, dry air. When an updraft moves over the spinning parcel of air and stretches it, a tornado can form. This type of tornado formation commonly occurs in eastern Colorado, where cool air descending from the Rocky Mountains toward the west collides with hot dry air from the Great Plains. Land-falling tropical storms and hurricanes can also generate non-supercell tornadoes. Classifying Tornadoes: The F-Scale The Fujita or F-scale was developed to provide a method for estimating the intensity of tornadoes, and was intended to relate the degree of damage to the intensity of wind. The original F-scale was used for over three decades, but its limitations prompted the development of a new scale, called the enhanced F-scale, or EF-scale. The EF-scale is intended to be a more robust and precise method of assessing tornado damage than the original F-scale. The EF-scale calibrates tornado damage using 28 different types of damage indicators, such as the type of construction (e.g., anchored versus unanchored houses, mobile homes, schools, garages, barns, skyscrapers, transmission towers, and others). Even with the improvements over the original F-scale, the EF-scale represents only estimates of wind speed, based on damage, and not measurements of actual wind speeds in tornadoes. Actual tornado wind speeds are still largely unknown. Table A-1 compares the original F-scale with the EF-scale currently used by meteorologists and wind engineers.
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Severe thunderstorms and tornadoes affect communities across the United States every year, causing fatalities, destroying property and crops, and disrupting businesses. Tornadoes are the most destructive products of severe thunderstorms, and second only to flash flooding as the cause for most thunderstorm-related fatalities. Damages from violent tornadoes seem to be increasing, similar to the trend for other natural hazards—in part due to changing population, demographics, and more weather-sensitive infrastructure—and some analysts indicate that losses of $1 billion or more from single tornado events are becoming more frequent. Policies that could reduce U.S. vulnerability to severe thunderstorms and tornadoes include improvements in the capability to accurately detect storms and to effectively warn those in harm's way. The National Weather Service (NWS) has the statutory authority to forecast weather and issue warnings. Some researchers suggest that there are limits to the effectiveness of improvements in forecasting ability and warning systems for reducing losses and saving lives from severe weather. The research suggests that, for example, social, behavioral, and demographic factors now play an increasingly important role in tornado-related fatalities. One issue for Congress is its role in mitigating damages, injuries, and fatalities from severe thunderstorms and tornadoes. The National Science and Technology Council has recommended the implementation of hazard mitigation strategies and technologies, including some—such as conducting weather-related research and development and disseminating results—that Congress has supported through annual appropriations for the National Oceanic and Atmospheric Administration, the National Science Foundation, the Federal Emergency Management Agency, the National Aeronautics and Space Administration, and other federal agencies. Other recommended strategies include land use and zoning changes, which are typically not in the purview of Congress. Congress attempted to clarify the federal role in mitigating damages from windstorms (including tornadoes and thunderstorms) by passing the National Windstorm Impact Reduction Act of 2004 (P.L. 108-360). It is not evident whether the program made progress toward its objective: achievement of major measurable reductions in the losses of life and property from windstorms. Authorization for the program expired at the end of FY2008. In the 113th Congress, legislation introduced in the House (H.R. 1786) would reauthorize the wind hazards program through FY2016. Similar legislation was introduced in the House and Senate in the 112th Congress, but no action was taken. It is not clear whether changes to climate over the past half-century have increased the frequency or intensity of thunderstorms and tornadoes, or whether climate changes were responsible for the intense and destructive tornado activity in 2011, or for the extremely destructive EF-5 tornado that struck Moore, Oklahoma, on May 20, 2013. An issue for Congress is whether future climate change linked to increases in greenhouse gas emissions will lead to more frequent and more intense thunderstorms and tornadoes, and whether efforts by Congress to mitigate long-term climate change will reduce potential future losses from thunderstorms and tornadoes.
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In the aftermath of the financial crisis of 2007-2008, the Federal Reserve (Fed) reduced the federal funds rate to a range of 0% to 0.25% by December 2008, exhausting its conventional monetary tool. With the economy still exhibiting large amounts of slack and recovery prospects weak, the Fed experimented over the next few years with unconventional policies in an attempt to revive the economy. These policies were pursued after the acute crisis phase, during which the Fed created a series of emergency liquidity facilities; a discussion of these facilities is beyond the scope of this report. The dates and nature of the policy announcements are outlined in Table 1 . Although the policies had never been used before the crisis, they had been considered for some time. In a 2004 working paper, Ben Bernanke, then-Fed governor, and co-authors found "some grounds for optimism about the likely efficacy of non-standard policies" that central banks could use for stimulating the economy when the short-term policy interest rate (the federal funds rate, in the United States) has hit the "zero lower bound" and cannot be reduced to provide further stimulus. Although the zero-bound problem had been present in Japan for some time when the paper was published, "for more than a few generations of economists, [it] seemed to be a relic of the Depression era" in the United States. The paper grouped the non-standard policies into three classes: (1) using communications policies to shape public expectations about the future course of interest rates; (2) increasing the size of the central bank's balance sheet, or "quantitative easing"; and (3) changing the composition of the central bank's balance sheet through, for example, the targeted purchases of long-term bonds as a means of reducing the long-term interest rate. In the aftermath of the crisis, the Fed under Bernanke would use all three types of policies. For communication policies, the Fed introduced "forward guidance," first announcing in December 2008 that it would likely keep the federal funds rate "exceptionally low … for some time." This eventually evolved into a specific time horizon for how long rates would be kept "exceptionally low." In its October 2012 statement, it anticipated that the federal funds rate would be exceptionally low "at least through mid-2015." In December 2012, the Fed moved away from a time horizon for exceptionally low rates, instead tying the duration of exceptionally low rates to an economic threshold, namely as long as the unemployment rate remains above 6.5% and inflation and inflation expectations remain low. For increasing the balance sheet, the Fed has undertaken three rounds of large-scale asset purchases, popularly known as "quantitative easing" (QE). By purchasing Treasury securities, agency debt securities, and agency mortgage-backed securities (MBS), the Fed has increased the size of its balance sheet from less than $0.9 trillion in 2007 to about $4 trillion at the end of 2013. For changing the composition of the balance sheet, the Fed has undertaken the "Maturity Extension Program," under which the Fed purchased $667 billion in long-term U.S. Treasury securities, and sold an equivalent amount of short-term Treasury securities. Since enactment of the mandate, Congress has largely deferred to the Fed on how to achieve the goals of maximum employment and stable prices, and therefore has had little input in the Fed's decisions to pursue unconventional policies. It maintains oversight responsibilities, however, and Congress has been interested in whether the Fed's unconventional policies have been consistent with its mandate. The remainder of this report analyzes the economic effects of these programs, the current economic context in which these policies have been adopted, policy alternatives that the Fed has not pursued to date and their potential effects, potential legislative options for restricting the Fed's pursuit of unconventional monetary policy, and issues surrounding the eventual "exit strategy" from unconventional policy. Before 2007, the Fed's balance sheet consisted overwhelmingly of Treasury securities, acquired through its normal open-market operations to target the federal funds rate. The balance sheet grew very modestly over time. Beginning in December 2007, the Fed undertook a series of unprecedented policy steps to change the size and composition of its balance sheet, a fundamental departure from traditional policy measures. The Fed's balance sheet is composed of assets, liabilities, and capital; the former is equal to the sum of the latter two. The Fed's assets consist primarily of securities it has purchased, and also include loans it has made through the discount window and, during the crisis, emergency lending facilities. The Fed's three main liabilities are Federal Reserve notes, bank reserves held at the Fed, and Treasury deposits held at the Fed; these three items are counted as liabilities because they are effectively "IOUs" from the Fed to the bearer. The sum of outstanding Federal Reserve notes and bank reserves form the "monetary base," or the portion of the money supply controlled by the Fed. When the Fed purchases assets it can finance those purchases in two ways—by increasing its liabilities or by selling other assets. In the former case, the size of the overall balance sheet increases (which has been referred to as quantitative easing when done on a large scale); in the latter case, the size of the overall balance sheet remains the same (which economists sometimes refer to as "sterilization"). Since the crisis, the Fed has pursued both options. Lending after September 2008 and the large-scale asset purchases announced in March 2009, November 2010, and September 2012 resulted in a larger balance sheet, as seen in Figure 1 . The Maturity Extension Program ("Operation Twist") and lending before September 2008 were sterilized, so the overall size of the balance sheet remained the same. When the Fed finances its asset purchases by increasing the size of the balance sheet, the primary type of liability that increases is bank reserves, as can be seen in Figure 2 . These additional reserves, in effect, finance the Fed's asset purchases and loan programs. In the case of lending facilities, reserves increase because the loan amounts are credited to the recipient's reserve account at the Fed. In the case of asset purchases, the funds to finance the purchase are credited to the seller's reserve account at the Fed, or if the seller were not a member of the Federal Reserve System, the funds would eventually lead to an increase in a member bank's reserves when the proceeds were deposited into the banking system. The rest of this section provides more detail on the Fed's announcements, followed by analysis of the issues raised by QE. Although the Fed has always lent to banks at its discount window, the amount of loans outstanding has typically been less than $1 billion throughout its history. Until 2008, it had not lent to any non-banks since the 1930s. From December 2007 to October 2008, the Fed introduced a series of emergency lending facilities for banks and non-bank financial firms and markets to restore liquidity to the financial system. Lending under these facilities is reported as assets on the Fed's balance sheet. To prevent these facilities from leading to an expansion in the size of the Fed's overall balance sheet and the money supply, the Fed sterilized (offset) the effects of the facilities on its balance sheet until September 2008 by selling a cumulative $315 billion of its Treasury securities, as seen in Figure 1 . When the financial crisis dramatically worsened in September 2008, private liquidity became scarce, causing the Fed's support to the financial system to increase significantly. Lending quickly exceeded the Fed's securities holdings, making it impractical—even if it had been desired—to continue sterilizing these loans through asset sales. Instead, the Fed allowed its balance sheet to grow as lending to the financial system increased. Between September and November 2008, the Fed's balance sheet more than doubled in size, increasing from less than $1 trillion to more than $2 trillion. Over the same period, support offered through liquidity facilities and for specific institutions increased from about $260 billion to $1.4 trillion. By the beginning of 2009, demand for loans from the Fed was falling as financial conditions normalized. Had the Fed done nothing to offset the fall in lending, the balance sheet would have shrunk by a commensurate amount, and the liquidity that it had added to the economy would have been withdrawn. The Fed judged that the economy, which remained in a recession at that point, still needed this stimulus. On March 18, 2009, the Fed announced a commitment to purchase $300 billion of Treasury securities, $200 billion of agency debt, and $1.25 trillion of agency mortgage-backed securities in 2009. In September 2009, the Fed announced that it would complete those purchases by the first quarter of 2010. In November 2009, it announced that it would purchase only $175 billion of agency debt due to the limited availability of those securities. Since then, the Fed's direct lending has continued to gradually decline, while the Fed's holdings of Treasury and agency securities have steadily increased, as seen in Figure 1 . Most emergency lending facilities were allowed to expire in February 2010; by that point, emergency lending had fallen to about $200 billion overall, and consisted mostly of "legacy" loans and securities that had not yet matured. The Fed's planned purchases of Treasury securities were completed by the fall of 2009 and planned agency purchases were completed by the spring of 2010. By this point, the recession had officially ended. The net result of the Fed's actions was to keep the overall size of the balance sheet relatively constant. Once these purchases were completed, the Fed faced a decision on what to do about its maturing assets. If the Fed did not replace securities as they matured, its balance sheet would gradually decline at a pace of about $100 billion to $200 billion per year, according to Chairman Bernanke. To prevent that, the Fed announced on August 10, 2010, that it would purchase Treasury securities to replace maturing securities (whether they be Treasury, agency, or mortgage-backed securities), keeping the overall size of the balance sheet stable. Dissatisfied with the slow pace of the economic expansion, the Fed announced on November 3, 2010, that it would further increase the size of its balance sheet by purchasing an additional $600 billion of Treasury securities at a pace of about $75 billion per month, a process which was completed by the end of June 2011. This announcement was popularly referred to as QEII. During and after QEII, the Fed announced it would continue the practice of replacing maturing securities with Treasury security purchases. Altogether, the Fed purchased securities with maturity lengths primarily between 2½ and 10 years. After the completion of QEII, the Fed took no further monetary policy actions for about six months. On September 21, 2011, dissatisfied with slow growth and continuing weakness in the labor market, the Fed announced the Maturity Extension Program, which has been popularly coined "Operation Twist" after a similar 1961 program. Under this program, the Fed initially announced that it would purchase $400 billion in long-term Treasury securities and sold an equivalent amount of short-term Treasury securities from its portfolio. The program was initially designed to end by June 2012, but nearing the termination date, the Fed extended the program to the end of 2012, which resulted in the purchase and sale of an additional $267 billion of Treasury securities. Unlike quantitative easing, the Maturity Extension Program has no effect on the size of the Fed's balance sheet, bank reserves, or the monetary base, and is constrained in size by the amount of short-term securities the Fed holds, and therefore can sell. It appears that the Fed chose this policy rather than another round of QE because most FOMC members preferred a policy that would provide some additional stimulus, but less than an equivalent amount of QE would provide. By the end of 2012, the Fed's remaining holdings of securities with a maturity of three years or less was limited, hindering its ability to use this tool again in the future. In this announcement, the Fed also indicated that it would begin replacing maturing agency debt and MBS with new MBS, rather than replacing them with Treasury securities. The Fed's holdings of MBS, which had fallen from $1,129 billion in July 2010 to $827 billion in July 2011, stabilized at that point (agency debt holdings continued to fall). On September 13, 2012, the Fed announced concern that without further policy accommodation, economic growth might not be strong enough to generate sustained improvement in labor market conditions ... (and) inflation over the medium term likely would run at or below its 2 percent objective. For those reasons, it announced that it would restart large-scale asset purchases, pledging to purchase $40 billion of agency MBS per month (popularly referred to as "QEIII"). Unlike the previous two rounds of asset purchases, the Fed specified no planned end date to its purchases, instead pledging to continue purchases until labor markets improved substantially, in a context of price stability. On December 12, 2012, the Fed announced that upon the termination of the Maturity Extension Program, it would continue to buy $45 billion of long-term Treasury securities per month, the same rate as was purchased under the Maturity Extension Program. Unlike that program, the Fed would no longer finance the purchase of those securities through the sale of short-term securities. Instead, purchases would be financed by expanding the balance sheet, meaning that these purchases can now be considered quantitative easing. Combined with the $40 billion of MBS purchases, these monthly purchases ($85 billion) were modestly larger than QEII. Because there is no announced end date to the purchases, it is unknown at present whether this round will ultimately be larger or smaller than the previous two rounds. On December 18, 2013, the Fed announced that it would begin "tapering off" (reducing) its asset purchases, and beginning in January 2014, it would only purchase $35 billion MBS and $40 billion Treasury securities per month. On January 29, 2014, it reduced its purchase rate to $30 billion of MBS and $35 billion of Treasury securities. Assuming the economy continues to recover, it is expected that net asset purchases will gradually be reduced to zero. The decision to pursue unconventional policies was first made in the context of the longest and deepest recession since the Great Depression and in the aftermath of the bursting of the housing bubble, which led to serious financial instability. The unemployment rate reached double digits for only the second time since the Great Depression. As measured by the consumer price index, the economy experienced deflation (falling prices) for much of 2009—the first time this had occurred since the 1950s. The decline in overall spending was concentrated in the interest-sensitive sectors, most notably housing. Corporations and households were reducing spending in an attempt to reduce unsustainable debt burdens following the financial crisis—a process that economists have referred to as "deleveraging." Individuals were more risk averse, seeking to store their wealth in only the safest assets, and shunning investment opportunities that would be considered attractive in normal circumstances. No matter what monetary or fiscal policies were pursued, any return to full employment in the face of these headwinds would arguably have been gradual. In the extreme case of what economists call a "liquidity trap," spending could be entirely unresponsive to monetary stimulus; this scenario is often referred to as "pushing on a string." Since mid-2009, the economy has seen growth that is steady but insufficient to restore full employment. More than three years after the recession had ended, the unemployment rate remained above the highest level it reached in the previous two recessions. The sluggish growth rate during the economic recovery is not the typical pattern following deep recessions—usually, these recoveries feature a temporary burst of above-trend growth. Inflation has remained relatively low. The Fed chose to continue pursuing unconventional policies in light of these modestly improving conditions. Since the Fed did not pursue such policies in previous recessions, in part because it did not reach the zero lower bound on short-term interest rates, it is unknown at what point the Fed would choose to terminate its unconventional policies in this economic recovery and how willing it would be to use such policies in future recessions, which might be more typical than the recent one. The Fed has stressed that large-scale asset purchases (quantitative easing) stimulate the economy by reducing long-term interest rates. Spending by households and businesses is influenced by the rates available to them, such as mortgage rates for households buying homes or corporate bond rates for larger corporations that are financing physical investment projects through bond issuance. Under QE, the Fed attempts to lower long-term Treasury and MBS yields directly through purchases that drive down their yields, in the hope that lower Treasury and MBS yields will indirectly filter through to reductions in other private long-term yields. (Lower Treasury yields do not directly stimulate economic activity—they are only stimulative if other yields fall as a result.) This could occur because Treasury securities are considered a "benchmark" against which other private securities are priced, so that other securities are automatically repriced when Treasuries are repriced (although the change is unlikely to be one-to-one). It could also occur because of a "portfolio rebalancing" effect—if the Fed pushes Treasury yields down relative to other securities, there will be a greater demand for those other securities, and investors will buy them until the yields on other securities have also fallen and relative yields have been equalized. The effect of lower MBS yields on economic activity is more straightforward. Lower MBS yields lead to lower mortgage rates, which stimulate housing demand and residential investment, all else equal. The pass-through from lower MBS yields to lower mortgage rates may not be one-to-one in practice, however. To evaluate whether QE has been successful in practice, it is not enough to observe whether yields rise or fall after the policy is implemented; economists need to use sophisticated statistical techniques to isolate the effects of QE on yields from the many other factors, such as economic growth and inflation, that also affect yields. Having said that, the fact that Treasury yields and mortgage rates have reached their lowest levels in decades (see Figure 3 ) is strong prima facie evidence that QE has had the intended (direct) effects. How much of the decline should be attributed to QE depends on how other factors are simultaneously affecting rates. It is less clear if QE has successfully fed through to reduce other private interest rates, and thereby stimulated economic activity. The spread between corporate and Treasury bonds remained larger than it was in the years before the crisis, for example, although it has narrowed since the crisis ended. A recent review of the literature found that $1 trillion in asset purchases reduced long-term interest rates by a range of 0.25 percentage points to 1.72 percentage points. Based on "announcement effects," one study found that QEI lowered interest rates on 10-year Treasury securities, corporate bonds rated BBB, and 30-year MBS by about 1 percentage point, QEII lowered rates on the same securities about 0.14 percentage points, and Operation Twist lowered 10-year Treasury securities and corporate bonds rated BBB by less than 0.1 percentage points and MBS by 0.25 percentage points. It should be noted that announcement effects measure what financial markets believe that QE will do to interest rates ex ante , and not what QE has done to interest rates ex post . Furthermore, if the main barrier to economic growth is not the level of rates but the unavailability of credit for some borrowers (sometimes referred to as a "credit crunch") or a desire by borrowers to deleverage, then the stimulative effect of reducing rates would be blunted. Finally, in evaluating the effectiveness of various rounds of QE, there could be diminishing returns, both in terms of how much additional asset purchases will lower interest rates and how much incrementally lower interest rates will stimulate spending. In other words, once interest rates are already very low, reducing them further may trigger relatively little additional spending. Although the stimulative effects of QE are open to interpretation, overall the evidence suggests that QE is not a panacea, in the sense that the economy has not returned to full employment rapidly, but has had a modestly positive effect. Whether these benefits outweigh the costs depends on their effect on inflation and credit allocation and the Fed's ability to unwind QE without economic or financial disruption when economic conditions have normalized. These issues are considered in the rest of this section. The Fed's asset purchases are financed by increasing the reserves of the banking system. Banks could theoretically use these additional reserves to expand lending or other activities, which would stimulate the economy, all else equal. In practice, the increase in reserves has not led to a large increase in lending or other bank activities; it appears that banks have primarily chosen to hold those reserves at the Fed. For example, total bank lending was 5% below its pre-crisis peak in nominal terms in the third quarter of 2012. Other factors besides the availability of reserves also affect a bank's decision to lend, including the cost of capital, expected default rates (which will be influenced by the economic environment), demand for loans by businesses and consumers, and so on. If available lending opportunities are not profitable when all of these factors are considered, then a bank will prefer to hold additional reserves at the Fed rather than lend them out. QE affects the money supply through bank reserves. The "monetary base" is defined as currency and bank reserves and can be thought of as the portion of the money supply controlled by the Fed. Overall measures of the money supply include bank deposits and other near-money substitutes. QE leads to one-to-one increases in bank reserves and, hence, the monetary base, as seen in Figure 4 . Because banks have not used the newly created bank reserves to expand lending or other activities, there has not been a commensurate increase in overall measures of the money supply, although the money supply measures M1 and M2 grew at their fastest rate since the 1980s in 2009, 2011, and 2012. Inflation expectations have not shown any lasting upward trend after each round of QE was announced. Some commentators claim that QE has backfired by undermining the Fed's credibility, thereby neutralizing any stimulative effects. If this were the case, the evidence would presumably be higher interest rates, higher inflation, or higher inflation expectations. To date, none of these have occurred. The evidence from Japan, which tried QE in 2001, suggests that QE will not inevitably lead to high inflation. If anything, the Japanese experience suggests that QE—or at least a failure to pursue QE aggressively enough—is not enough to avoid deflation (falling prices). From 1995 to 2012, Japan experienced 12 years of deflation (falling prices) and very low inflation in the other years. Although the central bank lowered overnight interest rates to low nominal levels and budget deficits were large (5.6% of GDP on average from 1993 to 2009), Japan was not able to break out of its deflationary trap. The Bank of Japan eventually tried quantitative easing in 2001, but on a smaller scale than the Fed (its balance sheet increased by about 70% overall). Further, some economists believe that Japan's deflationary trap was prolonged by sporadic attempts by the government to withdraw fiscal and monetary stimulus prematurely. QE was withdrawn in 2006 when inflation was still below 1% and economic growth was about 2%; prices and output began shrinking again following the 2008 financial crisis. Although the evidence is clear that QE has not led to a significant increase in bank lending, it is worth reiterating that the Fed never intended the efficacy of QE to be evaluated by this measure. Further, even if reserves have not been lent out to date, as long as they exist, they have the potential to be lent out in the future and increase the money supply, which is an important consideration for the "exit strategy" from QE. Economic theory predicts that QE would reduce the real exchange rate value of the dollar, all else equal. Assuming QE successfully reduces long-term interest rates, economic theory predicts that U.S. assets would be relatively less attractive to investors than foreign assets. Because foreigners must purchase dollars to purchase U.S. assets, a reduced net flow of foreign capital to the United States would reduce the demand for the dollar, thereby reducing its value. All else equal, a decline in the value of the dollar would increase U.S. exports and reduce U.S. imports, stimulating total domestic spending in the short run. The real value of the dollar declined from March 2009 to July 2011, and it has remained stable but relatively low since. Theory predicts relative differences in interest rates between countries affect exchange rates, and in practice, monetary policy in many developed countries has become more stimulative during the period of QE, potentially blunting any stimulative effects on the United States via the exchange rate (although it could still have effects through the other channels discussed above for all countries). To the extent that actions by the Fed and other developed central banks have contributed to an interest rate cycle of first lower global interest rates and, since June 2013, higher interest rates, this has contributed to first capital inflows and then capital outflows to developing countries that are potentially destabilizing. Developing countries may choose to mimic the Fed's monetary policy to keep their currencies from appreciating against the dollar, in some cases, or because their relatively small financial sectors leave them with limited ability to prevent domestic interest rates from mimicking global rates, in other cases. In either case, the developing country may wind up with a monetary policy that is inappropriate for its economic conditions. Other factors, such as changes in relative riskiness, would also affect capital flows and the value of the dollar relative to other currencies. The Fed is a self-financing entity that yields a profit each year. That profit is largely remitted to the Treasury, where it is added to general revenues, thereby reducing the budget deficit. As the Fed has increased the interest-earning assets on its balance sheet, its profits (called "net income") have increased. Net income was $79.5 billion and interest income on Treasury and agency-related securities was $90.4 billion in 2013. Before the balance sheet grew, remittances to Treasury were never higher than $34.6 billion; they increased to $47.4 billion in 2009 and have exceeded $75 billion since 2010. Additional securities purchases would be expected to increase the Fed's profits further. The Fed's profits are generated by the positive spread between its interest-earning assets (securities and loans) and its liabilities. Federal Reserve notes are interest-free liabilities, and until 2008, bank reserves were also interest-free liabilities. Congress authorized the Fed to pay interest on bank reserves in the Emergency Economic Stabilization Act of 2008 ( P.L. 110-343 ). Since the Fed began paying interest on reserves in mid-October 2008, it has set the interest rate near the federal funds rate target and has paid 0.25% on reserves since December 2008. In 2013, the Fed paid $5.2 billion in interest on reserves, reducing the Fed's net income by an equal amount. Although the cost of paying interest on reserves is relatively low when interest rates are near zero, were the federal funds rate to return to a more normal level and reserves remained large—a scenario outlined in the section on " Exit Strategy "—it could significantly reduce the Fed's remittances to Treasury. Fears that the Fed's unconventional policies would lead to losses have so far proved to be unfounded. To date, the Fed has not realized any losses on its securities or lending programs and has already received more in principal repayment and interest than it paid out on all of its programs created during the financial crisis. Although the Fed's exposure to agency debt and agency MBS remain high, these assets have no default risk as long as the federal government stands behind the GSEs. Nonetheless, the Fed faces interest rate risk (i.e., higher interest rates reduce the value of existing assets) and prepayment risk on its securities. If the Fed holds these assets to maturity, no losses should ever be realized. But losses on these assets could be realized in a scenario where interest rates rose and the Fed were forced to sell them (e.g., as part of the exit strategy). One study projected that losses would eliminate Treasury remittances for a few years, but the Fed's capital buffers would be sufficient to absorb the losses, assuming the Fed's balance sheet continues to grow and then declines and interest rates (including the interest paid by the Fed on bank reserves) rose. Were any losses to occur, it is unlikely that they would exceed the accumulation of higher remittances to Treasury that have occurred since 2009. For example, one study estimated that remittances would be a cumulative $315 billion more from 2008 to 2025 as a result of QE. In addition to the direct effects of Fed remittances on the budget deficit, reductions in Treasury yields as a result of Fed policy reduce the federal government's debt service costs. If other spending and revenue policy does not change in response, lower debt service also reduces the budget deficit. Some commentators have interpreted the Fed's decision to make large-scale purchases of Treasury securities as a signal that the Fed intends to "monetize the federal deficit," which in 2009 reached its highest share of GDP since World War II, and remained at unusually high levels through 2012. Monetizing the deficit refers to financing the budget deficit through money creation rather than by selling bonds to private investors. Hyperinflation in foreign countries has consistently resulted from governments' decisions to monetize large deficits. According to this definition, the deficit has not been monetized. Section 14 of the Federal Reserve Act legally forbids the Fed from buying newly issued securities directly from the Treasury, and all Treasury securities purchased by the Fed to date have been purchased on the secondary market, from private investors. In modern times, the Fed has always held Treasury securities to conduct normal open market operations. Nonetheless, the effect of the Fed's purchase of Treasury securities on the federal budget is similar to monetization whether the Fed buys the securities on the secondary market or directly from Treasury. When the Fed holds Treasury securities, Treasury must pay interest to the Fed, just as it would pay interest to a private investor. These interest payments, after expenses, become profits to the Fed. The Fed, in turn, remits about 95% of its profits to the Treasury, where they are added to general revenues. In essence, the Fed has made an interest-free loan to the Treasury, because almost all of the interest paid by Treasury to the Fed is subsequently sent back to Treasury. Since QE began in 2009, the Fed's net purchases of Treasury securities have been equivalent to between 0.2% and 100.3% of Treasury's net issuance each year (see Table 2 ). From 2009 to 2012, Treasury's net issuance exceeded the Fed's net purchases by hundreds of billions of dollars. Whether the Fed's net purchases were negligible or exceeded Treasury's net issuance, Treasury yields remained low by historical standards. To the extent that the Fed's purchases reduce Treasury yields, it lowers the federal government's debt service costs. Some commentators are concerned that this has masked fiscal sustainability problems that will emerge once QE ends. The Fed could increase its profits and remittances to Treasury by printing more money to purchase more Treasury bonds (or any other asset). The Fed's profits are the incidental side effect of its open market operations in pursuit of its statutory mandate (to keep prices stable and unemployment low), however. If the Fed chose instead to buy assets with a goal of increasing its profits and remittances, it would be unlikely to meet its statutory mandate. The key practical difference between experiences that have been characterized as monetizing the deficit and the Fed's actions is that under the former, the primary goal of monetary policy becomes the financing of the government's budget deficit. One common criticism of QE is that it penalizes savers. Just as net borrowers benefit when interest rates are lower because their debt service costs decline, net savers receive lower interest income on their investments. If this were the only factor determining the stimulative effects of QE, then less income to savers would be exactly offset by lower debt payments by borrowers, and QE would not have any stimulative effects. There are other factors that make QE stimulative on net despite the reduction in interest income to savers, however. A decline in interest rates tends to increase asset prices, resulting in a "wealth effect" for savers who hold those assets. Overall, net borrowers are more likely to be liquidity constrained and spend more of their income (because they are younger and have lower income, for example) than net savers on average. If so, net borrowers are likely to increase their spending more in response to lower interest rates than net savers are likely to lower their spending. Furthermore, inducing spending and discouraging saving are a goal, not an unintended side effect, of QE. The economic problem when the economy is far below full employment, as has been the case since the financial crisis, is that there is not enough spending in the economy to utilize the economy's productive capacity. In the extreme case, the economy can become caught in a "liquidity trap," where saving is too high and spending is too low to return to full employment even when interest rates are set at zero. To the extent that QE succeeds in stimulating spending (which is equivalent to reducing saving), the economy will move closer to full employment and total income will grow. If so, QE does not just redistribute the national income "pie" between borrowers and savers, it makes it larger. This fact illustrates that the effect of lower interest rates on borrowers and savers cannot be viewed solely in terms of the effects on debt service and interest income. For example, if QE succeeds in reducing the unemployment rate, then net savers who would otherwise be unemployed are likely to have higher incomes even though their interest income is lower. Conventional monetary policy attempts, to the extent possible, to have a neutral effect on the market allocation of resources. In other words, it does not benefit any particular industry or sector of the economy over others—although by the nature of monetary policy, interest-sensitive industries are inevitably more affected by monetary policy changes than other industries. One criticism of QE has been that it has had a greater effect than conventional policy on market outcomes in certain sectors, in some cases intentionally and in other cases unintentionally. QE's impact on the allocation of credit, independent of its efficacy in stimulating the overall economy, has been criticized by some economists. Through its MBS and other agency-related purchases, QE has intentionally been crafted to support the housing market. The downturn in the housing market was greater than the overall decline in economic activity, and the Fed tried to stabilize that market by pushing down mortgage rates. This strategy could be criticized on the grounds that the housing downturn was a market correction that compensated for overinvestment during the housing boom; to the extent that the Fed retarded that market correction, it delayed a more efficient allocation of resources away from housing. The alternative view was that the housing downturn was an overcorrection beyond the efficient allocation of resources, and the housing market was now stuck in a vicious cycle where foreclosures and credit constraints were pushing the market below equilibrium prices and output. If this is the case, stimulus directed at the housing market can help return the housing market from its sub-optimal state to the optimal equilibrium faster. As the housing recovery strengthens, the rationale for continued large-scale MBS purchases becomes less clear. QE has also changed certain financial markets. For example, under conventional monetary policy, there was a liquid federal funds market where banks lent and borrowed reserves privately. The combination of QE, which led to banks holding large excess reserve balances, and the Fed's new policy of paying interest on reserves could cause the federal funds market to become illiquid. The Fed has announced that it could purchase up to 70% of certain Treasury and mortgage-backed security issues as a result of QE, reducing the overall liquidity of those instruments for as long as those securities are held off private markets. (In the case of Treasury securities, this point should not be overstated—because of the growth in the federal debt, there are still more Treasury securities held by private investors today than before QE, despite the growth in the Fed's holdings.) Finally, some argue that a zero interest rate environment threatens the viability of certain financial products, such as money market mutual funds. It is uncertain whether those products and markets would be permanently compromised, or would return to normal once interest rates returned to a more typical range. Another criticism is that by creating large amounts of liquidity, QE could incentivize risk taking and lead to future asset bubbles. While it is difficult to judge the proper balance between risk-seeking and risk-aversion, some level of risk-taking is necessary for a healthy financial system. Because risk aversion grew intense following the financial crisis, reduced risk aversion could be viewed as a beneficial side effect of QE. There is not a consensus that large U.S. asset markets are experiencing bubbles by standard measures. It is difficult to be certain, however, because standard economic theory does not provide a way to identify bubbles and asset bubbles often become apparent only after they have burst. Bubbles are undesirable because, as the recent financial crisis demonstrates, they result in a misallocation of resources and can lead to excessive volatility in the broader economy. When the output gap is deep, the economy is already in the undesirable state that a bubble might cause, so worries that QE might cause bubbles are less pressing. As the economy gets closer to full employment, the potential for QE causing bubbles becomes more concerning. Until 1994, the Fed did not publicly disclose its federal funds target. Prior to then, changes to the target were inferred by market participants once the actual rate started changing. Beginning in 2003, the Fed began to announce in FOMC statements (in general terms) whether it was likely to raise, lower, or maintain its federal funds target in the future. Since 2009, the Fed has become increasingly explicit about its future plans for the federal funds target, giving markets what some economists have called "forward guidance." In March 2009, the Fed announced that exceptionally low rates would be in place for an "extended period of time." Beginning in August 2011, the Fed announced a specific time period (mid-2013) for how long it expected exceptionally low rates to remain in place. This period was pushed back a few times over the next year, most recently to "at least through mid-2015" in the October 2012 Federal Open Market Committee (FOMC) statement. Since January 2012, the Fed has publicly released FOMC members' forecasts of the "appropriate" federal funds rate target in its quarterly economic forecasts. Beginning in December 2012, the Fed replaced its target date for exceptionally low rates with an economic event—until the unemployment rate falls to 6.5%, "as long as ... inflation between one and two years ahead is projected to be no more than a half percentage point above the Committee's 2 percent longer-run goal, and longer-term inflation expectations continue to be well anchored." Some have referred to this as a threshold rule or threshold guidance. More recently, the Fed has stated that it likely will be appropriate to maintain the current target range for the federal funds rate well past the time that the unemployment rate declines below 6.5%, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal. Since September 2012, the Fed has made a similar contingent policy decision for QE, stating that the asset purchases would continue until labor markets improved substantially, in a context of price stability. Once the Fed returns to conventional monetary policy and the federal funds rate is no longer at its lower bound, it is unclear whether the Fed will continue to announce a target date or economic phenomenon (such as a target unemployment rate) for when it expects to next change the federal funds rate. To the extent that the current communication policy is motivated by a desire to further stimulate the economy at the lower bound, as discussed below, it would arguably be unnecessary to continue once the federal funds rate target is above zero. There could be at least two reasons for the Fed decision to announce the expected future path of the federal funds target. First, it can be seen as one change in a series of decisions during Bernanke's term as Chairman to make the Fed more transparent. The Fed's current philosophy is that greater transparency makes policy more effective. In this view, more transparency leads to less confusion, and if market participants have a clear understanding of the Fed's current policy goals and direction, that policy will be more effective. Second, the Fed is trying to find ways to make policy more stimulative within the constraints of the zero bound. As discussed above, economic activity is influenced by short-term and long-term interest rates. Long-term interest rates are influenced by the expected path of future short-term interest rates since a firm wishing to borrow for five years can take out a five year loan today or a one year loan each year for the next five years. Thus, if investors come to believe that short-term interest rates will be kept low in the future, it should make long-term interest rates lower today and interest-sensitive spending should be further stimulated, all else equal, even though today's short-term rates have not changed. How effective is this approach? It depends on a number of factors. First, is the Fed's announced path different from what markets expected? If financial markets already expect that the federal funds rate will remain zero until, say, the unemployment rate reaches 6.5%, then the Fed's announcement would not change expectations and would therefore not reduce long-term rates and stimulate economic activity. One reason to think these announcements could change market perceptions is that interest rates had not previously been kept low for such an extended period of time in the past few decades, so market participants might have expected that the Fed would raise rates sooner based on history. Second, is the Fed's announcement credible to market participants? If most market participants do not believe that the Fed will keep rates low for as long as the Fed has announced, then long-term rates will not decline today. Alternatively, if market participants do not believe that the Fed is committed to keeping inflation low, long-term interest rates will not fall today since investors will require a premium to protect themselves against anticipated future inflation. In that sense, an announced commitment to extended low rates could backfire if market participants believe that such a commitment makes high inflation more likely. Given the importance of credibility to effective monetary policy in general, a criticism of the Fed's new communication policies is that they could undermine credibility. This could happen if the public misunderstood the role of the central bank and its effect on the economy. Since economic conditions and projections are constantly changing for reasons beyond the Fed's control, an absolute commitment (e.g., that policy will not change until mid-2015) would no longer be appropriate if economic conditions changed after the commitment were made. For this reason, the commitment may be considered a conditional commitment (policy will not change until mid-2015 unless future projections change) rather than an absolute one. A conditional commitment is less transparent and more difficult for observers to understand, however. If it is misunderstood, credibility could be undermined and all policy decisions could become less effective. Credibility could also be undermined when the Fed repeatedly "moves the goal posts" on when exceptionally low rates will end. For example, the Fed moved back the end date for low interest rates several times as economic activity failed to pick up as quickly as it expected. Market participants might have concluded that the end date was changed so often that the current end date was meaningless and should be ignored. The end date could also be misinterpreted by market participants as meaning that the Fed believed that the economy would remain weak until that date, which could undermine consumer and business confidence. Switching from an end date to an unemployment threshold might help avoid that problem, and perhaps will require less frequent amendments to the Fed's announced policy. The downside to an unemployment threshold is that it depends on an accurate estimate of the "natural rate of unemployment," which may have changed as a result of the "Great Recession." For example, if the natural rate were now higher than the Fed believed, the 6.5% target would risk leaving stimulative policy in place too long. For critics who believe that the Fed has not been aggressive enough in counteracting the Great Recession and believe that the unconventional policies pursued to date have been relatively ineffective, the challenge is to formulate monetary policy alternatives that would be permitted under current statute (assuming legislative changes are not pursued). A number of proposals are briefly outlined in this section. Policy options that are beyond the Fed's control, such as coupling the planned monetary stimulus with additional fiscal stimulus, are beyond the scope of this report. Since 2008, the Fed has paid banks 0.25% on bank reserves held at the Fed—equal to the current upper end of the federal funds target range. Prior to that, the Fed did not have the legal authority to pay interest on reserves. Setting the interest on reserves at the upper end of the range raises the actual federal funds rate, making monetary policy less stimulative than it otherwise would be. This policy has also been criticized on the grounds that banks should not be given an incentive to hold funds at the Fed that could be lent at a time when credit is tight. If the interest rate on bank reserves were lowered to zero, banks would have more incentive to lend those funds out (or engage in other banking activities), but the additional incentive would be a marginal one. If relative rates of return were the only consideration influencing banks' willingness to lend, then there is already little disincentive offered by a 0.25% interest rate on reserves. (In practice, there are other factors at present that are likely providing a greater disincentive influencing the decision to lend.) In any case, banks could still earn close to that rate of return by lending their reserves in the federal funds market, instead of to consumers or businesses. The issue could be viewed from a different perspective, however—what economic benefit is offered by paying interest on reserves, and does it outweigh the costs? The usual reasons offered in favor of paying interest on reserves (e.g., to put a floor under the federal funds rate, to reduce volatility in the federal funds rate, to help manage the exit strategy) are not applicable at this time, and the interest rate on reserves could be raised whenever they become applicable in the future. If paying interest on reserves offers a marginal disincentive to lend and no appreciable economic benefit at this time, then there arguably appears to be little rationale for keeping it. Economist Alan Blinder, former vice-chairman of the Fed, has proposed to first reduce the interest rate on excess reserves to zero, and if that causes no problems, to then begin charging banks a small penalty interest rate for holding excess reserves. Charging a penalty rate would give banks a greater incentive to lend out reserves. However, as long as banks do not limit deposits, banks cannot directly control the inflow of new reserves they receive. Furthermore, aggregate reserves of the banking system as a whole cannot fall when a bank reduces its reserves through new lending or other activities, because those dollars then become reserves at other banks. (Lending out reserves would cause excess reserves to decline and required reserves to rise, however.) It could therefore be argued that charging a penalty rate on reserves would penalize banks for something that they did not cause and only indirectly influence. Further, it would create an incentive for banks to avoid accepting deposits, which could potentially reduce the stability of the banking system. Any reduction in the interest rate on reserves would increase the Fed's net income, which is largely remitted to the Treasury, where it becomes general revenues. Therefore, it would decrease the budget deficit. It would also decrease banks' income and profits. In a competitive market, economic theory predicts that banks would pass those costs on to customers. If the problem with QE is that it is not resulting in new economic activity, one solution would be for the Fed to lend directly, either to non-banks or to banks for longer durations. Lending to non-banks could be done only under its emergency authority (Section 13(3) of the Federal Reserve Act), which contains several statutory limitations. Those limitations include that a program must be broadly based, can only be accessed when the borrower cannot access private credit, must protect the taxpayers from losses, cannot be accessed by insolvent firms, cannot "remove assets from the balance sheet of a single and specific company," and must be approved in writing by the Treasury Secretary. One statutory limitation that might make it difficult to lend to non-financial businesses is that "policies and procedures shall be designed to ensure that any emergency lending program or facility is for the purpose of providing liquidity to the financial system ...," which might be construed as ruling out longer-term loans for the purpose of providing businesses with working capital. Some precedent exists for such an approach. The Fed made loans to banks with a maturity of up to 84 days under the Term Auction Facility from December 2007 to March 2010. In the 1930s, under an earlier version of Section 13(3) with fewer limitations and another section of the Federal Reserve Act that has since been repealed, the Fed made a relatively small number of direct loans to non-financial firms. More recently, the Fed created two programs that made credit available to non-banks without using financial firms as intermediaries—the Term Asset-Backed Securities Loan Facility (TALF) and the Commercial Paper Funding Facility (CPFF), both of which operated from 2008 to 2010. Under the CPFF, the Fed purchased the short-term paper of financial firms, non-financial firms, and pass-through entities that issue paper to finance asset-backed securitization. Under the TALF, the Fed did not lend directly to non-financial businesses; instead, it made non-recourse loans to private investors to be used for buying non-residential asset-backed securities (ABS) to make more credit available to the borrowers underlying these ABS, such as consumers, students, small businesses. Another approach is underway in Britain, where the Bank of England recently introduced a "Funding for Lending" program, under which banks can exchange loans on their books for British Treasury bills for up to four years. The Bank of England reasons that this will result in banks borrowing against those Treasury bills to increase their lending. This program will only work as intended if the dearth of lending is primarily driven by an inability of banks to access liquidity in private markets; if instead there are other barriers to lending, such as inadequate capital, then such a program by itself would be unlikely to boost bank lending. The success of this program is also contingent on the ability of banks to earn more, adjusted for risk, by borrowing against the Treasury bills to make loans than simply holding the Treasury bills. In the United States, the presence of over $1 trillion in excess bank reserves suggests that illiquidity is not the main factor currently holding back bank lending, so it is unclear whether a Funding-for-Lending style program could succeed here. Lending to banks would initially increase bank reserves, and as discussed above, there is little evidence to suggest that banks have used most of the increase in reserves to increase lending thus far. The drawback to direct lending to non-banks is that the Fed would have to make decisions on how to best allocate credit across different sectors of the economy. If it did so less efficiently than the private market equilibrium, it would cause economic distortions. Some would argue that if government credit allocation is merited, it is more appropriate for Congress and the President to carry it out through fiscal policy. In the case of TALF, a middle-man (private investors) was used to mitigate these concerns, although doing so raised other concerns about whether the middle-man was earning economic rents in excess of the risks borne in the transaction. Some economists have argued that the Fed should add more stimulus to the economy by modestly raising its inflation target and pledging to do whatever it takes to reach that target. (Currently, the Fed has set a "longer run goal for inflation" of 2%.) They argue that this would demonstrate to individuals that the Fed had a greater dedication to stimulating the economy than individuals currently believe, and a change in beliefs would in and of itself by stimulative. They also argue that it would help avoid harmful deflation (falling prices), and that the costs of modestly higher inflation have been exaggerated and the benefits have been underestimated. Proponents believe such benefits to include more flexible wages (because of the greater possibility that wages could fall in real terms while still rising in nominal terms) and the likelihood that the federal funds target will be further from the zero bound when monetary easing begins in the future, so that more easing can take place before the zero bound is reached. There are at least two potential pitfalls to this approach. First, such a proposal seems to rest on the belief that only faster growth would lead to higher inflation, but that is not necessarily the case. Higher inflation could also occur through an increase in individuals' expectations of inflation without a change in their expectations of growth. In that case, inflation would reach the higher target, but the economy would be no closer to full employment. Second, the textbook prescription for raising inflation would be for the Fed to increase the monetary base. As a result of QE, there have been extraordinary increases in the monetary base that have not led to any demonstrable increase in inflation thus far. Unless inflation rose simply because the announcement changed expectations, it is unclear what other tools supporters of a higher inflation target intend for the Fed to use to achieve higher inflation given that increasing the monetary base has not succeeded. If the Fed pledged to achieve higher inflation and then failed to achieve it, it could undermine the Fed's credibility. A common macroeconomic stabilization tool in small and developing economies is foreign exchange intervention—buying or selling foreign currency to influence the value of the exchange rate. Sometimes, such interventions are financed by expanding the central bank's balance sheet. In principle, the Fed could stimulate the economy by purchasing foreign currency via an expansion of the monetary base to drive down the value of the dollar, which would reduce the trade deficit by boosting spending on exports and import-competing goods, all else equal. Standard economic theory suggests that QE would have the same effect on exchange rates and the trade deficit regardless of whether domestic assets or foreign currency are purchased. In either case, economic theory attributes the movement in the exchange rate to changes in relative interest rates. In practice, foreign exchange intervention might have a "signaling effect" that makes it have a greater effect on the exchange rate at least temporarily, although the evidence on signaling effects is mixed. From the perspective of the world economy, the drawback to foreign exchange intervention is that the stimulus comes from an offsetting contractionary effect (referred to as "beggar thy neighbor") on other countries, given that for any bilateral exchange rate, when the exchange rate depreciates for one country, it appreciates for the other one. Since the United States has the largest economy in the world, this consideration is likely to be important. Devaluation in one country can lead to cascading rounds of compensating devaluations in other countries that ultimately leaves no country better off (sometimes referred to as "currency wars"). Congress has given the Fed broad discretion to implement monetary policies as it sees fit to meet its statutory mandate "to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." Although critics believe that QE is incompatible with the mandate to maintain stable prices, the Fed has argued that QE helps it meet its mandate. For example, in its announcement of QEII, the Fed stated To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities…. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability. Complicating any efforts to prevent the Fed from using unconventional policy tools are two factors: (1) inflation has remained low, so unconventional policy has not proven inconsistent with the Fed's mandate thus far; and (2) limiting the Fed's broad discretion could hamper its future ability to respond to unforeseen circumstances. Altering statute to prevent unconventional options while allowing normal open market operations would be challenging. The distinction between the two is an economic one, not a legal one. Both involve the purchase and sale of securities. Current law already limits the types of securities that the Fed may hold. One approach would be to narrow the statutory list of permissible securities. For example, Agency securities could be removed from the list to eliminate purchases of MBS and GSE debt. In another variation of the proposal, H.R. 1174 / S. 238 would require that permissible securities other than Treasury securities be purchased only if two-thirds of the Federal Open Market Committee found that there were "exigent and unusual circumstances," and would limit the holding of these securities to no more than five years. Narrowing this authority would not prevent the implementation of QE through purchases of Treasury securities, however. Another approach would be to put numerical thresholds in statute that would allow conventional operations but prevent unconventional operations (e.g., set a dollar limit on the Fed's securities holdings). A potential problem with this approach is it could constrain the Fed's discretion more than intended, particularly since the Fed's securities holdings gradually increase under conventional policy. This points to the underlying tension between the desire for the Fed to have broad discretion to rapidly react to unforeseen circumstances and the potential for the Fed to use that discretion in such a way that meets the disapproval of some or all Members of Congress. Analysis of more fundamental changes to the Federal Reserve's powers, such as a return to the gold standard, that would affect its ability to conduct QE are beyond the scope of this report. Although the Fed has already begun to taper off its asset purchases, a larger than normal balance sheet would remain after asset purchases have ended, potentially complicating an eventual return to conventional monetary policy. Quantitative easing has the potential to lead to high inflation if banks decided to begin using their reserve holdings to rapidly increase their lending, which would lead to a rapid increase in the money supply. In that case, the Fed would need an "exit strategy" from QE that could be implemented relatively quickly. The most straightforward method would be for the Fed to withdraw those reserves from the banking system by selling some of its assets and not replacing assets as they mature. This would reduce the size of its balance sheet on both the assets and liabilities side. It is uncertain how many assets would need to be sold, but to give an order of magnitude, the balance sheet is more than four times larger than it was before the crisis. By April 2010, the Fed's balance sheet consisted predominantly of securities that could be sold in secondary markets. These can mostly be sold relatively quickly in theory, although there could be market volatility in practice. Given the Fed's concerns about the fragility of housing markets, it is not clear how its mortgage-related holdings could be reduced quickly if the Fed became concerned about rising inflation. On June 19, 2013, Ben Bernanke stated that "a strong majority [of the FOMC] now expects that the Committee will not sell agency mortgage-backed securities during the process of normalizing monetary policy.... " Selling only Treasury securities might not reduce the balance sheet sufficiently, given the amount of Treasury securities the Fed might feel comfortable selling. The furthest that the Fed has reduced its Treasury holdings in the past was to approximately $480 billion in 2008. Another option would be to give banks incentives not to lend out reserves by raising the interest rate that the Fed pays on reserves, thereby keeping the larger monetary base from increasing the broader money supply. Since there is no domestic and very little international experience with first increasing the monetary base and then tightening policy without reversing the increase in the monetary base, this strategy can be considered untested. To better prevent these reserves from being lent out if necessary, the Fed began offering "term deposits" with a one- to six-month maturity for bank reserves in 2010. The interest rate on these term deposits is set through auction; banks would presumably be willing to bid for term deposits only if the interest rate exceeded the rate paid by the Fed on normal reserves. The Fed could also reduce liquidity by lending its assets out through "reverse repos." This would change the composition of liabilities on the Fed's balance sheet, replacing its other liabilities with reverse repos. While the Fed has experimented with this tool on a small scale, it is unlikely that reverse repos operations could be large enough to remove most of the new liquidity, however. Treasury cash balances held at the Fed could also be used to tie up excess liquidity if needed. The Treasury announced the Supplementary Financing Program on September 17, 2008, as an alternative method for the Fed to increase its assistance to the financial sector without increasing the amount of money in circulation. Under this program, the Treasury has temporarily auctioned more new securities than it needs to finance government operations and has deposited the proceeds at the Fed. (The operations do not affect inflation because the money received by the Treasury is held at the Fed and not allowed to circulate in the economy.) Since August 2011, the balance in the Supplementary Financing Program has been zero. Given that the size of this program is constrained by the debt limit, it would be insufficient to significantly reduce liquidity without a large increase in the debt limit. When the time comes, the Fed might decide to employ one or some combination of these tools to implement the exit strategy. There has been some discussion of the proper sequencing of events, and whether the use of conventional and unconventional policy tools might overlap. For example, Chairman Bernanke has stated that he anticipates that the Fed will not sell securities until policy tightening is already under way. In this scenario, raising the interest rate on reserves would presumably be crucial to the exit strategy, since the current size of the balance sheet (and accompanying level of bank reserves) is otherwise inconsistent with a higher federal funds rate. It is unclear whether there is any economic benefit to pursuing an exit strategy that maintains a large balance sheet. Any stimulative effect of a larger balance sheet on the economy would be offset by the effects of paying interest on reserves, reverse repos, the Treasury Supplementary Program, or issuing Fed bonds. The large balance sheet would have no positive effect on aggregate demand if it is offset by any of these actions that drain liquidity from the economy. If investors have rational expectations, it is not clear how this strategy could flatten the yield curve either, because the long end of the yield curve is determined primarily by expectations of future interest rates, and sterilized purchases of assets in the present should not change those expectations, all else equal. After the federal funds rate has been raised from the zero bound, it remains to be seen whether the Fed would continue using balance sheet operations or would prefer to eventually return to using only conventional monetary policy tools. To date, the public's inflationary expectations have not changed during quantitative easing. If inflationary expectations remain low, it would be expected to make an exit strategy, and monetary policy generally, more effective. On the other hand, one criticism of QE is that it could at some point undermine expectations of low and stable inflation, and the Fed's credibility on inflation. If inflationary expectations rise, larger-scale operations than would otherwise be needed could become necessary for an exit strategy. In a worst case scenario, a rise in inflationary expectations could force the Fed to pursue an exit strategy before the economy has recovered, thereby risking "stagflation" (stagnant growth with high inflation). The Fed initially undertook its unconventional policies in 2009 in response to the deepest and longest recession since the Great Depression. At the time, financial stability was still fragile, unemployment was in double digits, and inflation was very low, with fears among some economists that deflation would emerge. Since the second half of 2009, the economy has expanded at a steady but slow pace that has gradually reduced unemployment. Over the same period, inflation has continued to remain low (it was below the Fed's longer-run goal of 2% in 2013) and inflation expectations have remained relatively steady. The members of the Federal Open Market Committee project that the unemployment rate will be at or near full employment in 2015, but most do not believe it would be appropriate to raise the federal funds rate above zero before then. An individual's view on whether the Fed's unconventional policies are currently justified, or whether the Fed should be undertaking more or less stimulus than it has, depends in large part on whether one believes that the Fed should do more or less in the face of slow but steady economic expansion. Some might feel comfortable with unconventional policy during periods of economic free fall, such as late 2008, but feel uncomfortable with unconventional policy once the economy has stabilized. Although it is difficult to disentangle the effects of the Fed's policies from other factors affecting interest rates, the fact that Treasury and MBS yields are at their lowest levels in decades suggests that the Fed's unconventional policies have had the direct effects that were intended. It is less clear to what extent lower Treasury and MBS yields have fed through to lower private interest rates, a greater supply of private credit, and more interest-sensitive spending. Corporate and household deleveraging and risk aversion following the crisis has driven interest-sensitive spending down, so lower rates can only accomplish so much in the face of these headwinds. It is clear at this point that monetary policy alone is not potent enough to return the economy to full employment quickly, and there may be diminishing economic benefits from additional QE. Given that it is unlikely that the economy would return to full employment significantly sooner if the Fed purchased assets at a faster pace, some have argued for policies that are even more unconventional as a means to additional monetary stimulus. The economic benefits of such policies would need to be weighed against their costs—the economic risk that they would lead to high inflation and the political risk that they would undermine the Fed's political support and possibly its credibility. Fed Chair Janet Yellen has said that the benefits of unconventional policy should be weighed against the costs, and in her opinion the benefits to date have been substantial and the costs small. While the economic benefits of unconventional monetary policy have not been sufficient to restore full employment, the main perceived risks (higher inflation, higher inflationary expectations, or asset price bubbles) have not yet materialized several years after QE began. Thus, while some might argue that there has been limited upside from these policies, it could be argued that there has been limited downside to date. Some critics fear that unconventional policy is undermining the Fed's credibility, and this could harm the future effectiveness of monetary policy. If unconventional policy were failing because it is undermining the Fed's credibility, the evidence would be high interest rates, high inflation expectations, or both; to date, neither has occurred. At this point, the main drawback to unconventional policy is a hypothetical one: that it may complicate a smooth transition to conventional monetary policy when the economy has returned to normal, particularly because the "exit strategy" is untested.
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The "Great Recession" and the ensuing weak recovery have led the Federal Reserve (Fed) to expand its monetary policy tools. Since December 2008, overnight interest rates have been near zero; at this "zero bound," they cannot be lowered further to stimulate the economy. As a result, the Fed has taken unprecedented policy steps to try to fulfill its statutory mandate of maximum employment and price stability. Congress has oversight responsibilities for ensuring that the Fed's actions are consistent with its mandate. The Fed has made large-scale asset purchases, popularly referred to as "quantitative easing" (QE), that have increased the size of its balance sheet from $0.9 trillion in 2007 to about $4 trillion at the end of 2013. In September 2012, the Fed began a third round of monthly purchases of Treasury securities and mortgage-backed securities (MBS), referred to as "quantitative easing three" or QEIII. Unlike the previous rounds, the Fed has not announced when QEIII will end or its ultimate size. In December 2013, the Fed began "tapering off" its asset purchases, and announced in January 2014 that it would purchase $30 billion of MBS and $35 billion of Treasury securities per month. The Fed views QE as stimulating the economy primarily through lower long-term interest rates, which stimulate spending on business investment, residential investment, and consumer durables. Since QE began, Treasury yields and mortgage rates have reached their lowest levels in decades; it is less clear how much QE has affected private-borrowing rates and interest-sensitive spending. Critics fear QE's potentially inflationary effects, via growth in the monetary base. Inflation has remained low to date, but QE is unprecedented in the United States and the Fed's mooted "exit strategy" for unwinding QE is untested, so the Fed's ability to successfully maintain stable prices while unwinding QE is uncertain, as are potential unintended consequences. The Fed has also changed its communication policies since rates reached the zero bound. From 2011 to 2012, it announced a specific date for how long it anticipated that the federal funds rate would be at "exceptionally low levels," and over time incrementally extended that horizon by two years. In December 2012, it replaced the time horizon with an unemployment threshold. It now anticipates that the federal funds rate would be exceptionally low "well past the time that the unemployment rate declines below 6.5%," provided inflation remains low. The Fed argues that its new communication policies make its federal funds target more stimulative today. In this view, if financial actors are confident that short-term rates will be low for an extended period of time, then long-term rates will be driven down today, thereby stimulating interest-sensitive spending. Uncertainty about economic projections hampers the Fed's ability to stick to a preannounced policy path, and repeatedly "moving the goal posts" on when it will raise rates could undermine its credibility. If unconventional policy were failing because it has undermined the Fed's credibility, the evidence would be high interest rates, high inflation expectations, or both; to date, neither has occurred. The sluggish rate of economic recovery suggests that unconventional monetary policy alone is not powerful enough to return the economy to full employment quickly after a severe downturn and financial crisis. It also raises questions about the optimal approach to monetary policy. The economic recovery is now well established, but inflation was below the Fed's goal of 2% in 2013. The Fed officials who set interest rates project that the unemployment rate will be at or near full employment in 2015, but most do not believe it would be appropriate to raise the federal funds rate above zero before then. Although many perceived risks of unconventional policy have not been realized to date, risks may intensify as the economy nears full employment.
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In both the 110 th and the 111 th Congresses, the U.S. House of Representatives received a referral from the Judicial Conference of the United States reflecting its determination, after completion of the statutory federal judicial discipline process, that consideration of impeachment might be warranted with respect to a federal judge. On June 19, 2008, the Speaker of the House of Representatives received a referral regarding U.S. District Court Judge G. Thomas Porteous Jr. of the Eastern District of Louisiana. The House began its impeachment investigation of Judge Porteous in the 110 th Congress, but did not complete it before the end of that Congress. The matter was taken up again in the 111 th Congress. On March 11, 2010, the House impeached Judge Porteous for, among other things, accepting kickbacks, soliciting favors, falsifying bankruptcy documents, and knowingly making false statements about his past in order to obtain a federal judgeship. The Senate convicted him on all four articles of impeachment later that year. On June 10, 2009, the Speaker of the House received a referral regarding U.S. District Court Judge Samuel B. Kent of the Southern District of Texas. Judge Kent was impeached by the House of Representatives. His Senate impeachment trial was dismissed after he resigned from office and the House indicated that it did not wish to pursue the matter further. This report will discuss the present statutory structure governing complaints against federal judges, and judicial discipline where appropriate. The statutory framework stems from the Judicial Improvements Act of 2002, P.L. 107-273 , Div. C, Title I, Subtitle C, 116 Stat 1856 (Nov. 2, 2002), 28 U.S.C. §§351-364. It replaced judicial discipline procedures in the Judicial Conduct and Disability Act of 1980, as amended, codified at the former 28 U.S.C. § 372(c). The current statutory procedures are applicable to complaints against federal circuit judges, district judges, bankruptcy judges, and magistrate judges. They are not applicable to Justices of the U.S. Supreme Court. In addition, the U.S. Court of Federal Claims, the Court of International Trade, and the Court of Appeals for the Federal Circuit are each required to prescribe rules, consistent with the provisions in 28 U.S.C. §§ 351-364, establishing procedures for the filing of complaints with respect to the conduct of judges of those courts, for investigation of such complaints, and for taking appropriate action with respect to them. In investigating and taking action regarding complaints brought against their respective judges, each of these three courts has the powers granted to a judicial council in dealing with federal circuit judges, district judges, bankruptcy judges, or magistrate judges. The judicial discipline process under 28 U.S.C. §§ 351-364 is initiated by the filing of a complaint by any person, alleging that a judge has engaged in conduct "prejudicial to the effective and expeditious administration of the business of the courts, or alleging that such judge is unable to discharge all the duties of the office by reason of mental or physical disability." A written complaint containing a brief statement of the pertinent facts is filed with the clerk of the court for the circuit within which the judge sits. Alternatively, the chief judge of the circuit, in the interests of effective and expeditious administration of the business of the courts and based on information available to him or her, may identify a complaint by written order stating the reasons for the complaint. The clerk of the court receiving a written complaint promptly transmits that complaint to the chief judge of the circuit unless the complaint concerns the chief judge. In the latter circumstance, the clerk shall transmit the complaint to the circuit judge in regular service on the court who is next most senior in date of commission. That circuit judge would then carry out the responsibilities of the chief judge with respect to that complaint in all matters under this judicial discipline process. Once a complaint is filed or identified, the chief judge must review it expeditiously to determine whether appropriate corrective action has been or can be taken without the need for a formal investigation, and whether the facts stated in the complaint are either plainly untrue or incapable of establishment through investigation. The chief judge may ask the judge who is the focus of the complaint to file a written response, which is not shared with the complainant unless the judge responding authorizes its disclosure. The chief judge or his or her designee may also communicate orally or in writing with the complainant, the judge who is the focus of the complaint, or anyone else who may have pertinent information; he or she may also review any transcripts or documentary evidence. The chief judge may not make any findings of fact regarding matters reasonably in dispute. After this review, the chief judge, by written order, may dismiss the complaint if it is not in conformity with the requirements of 28 U.S.C. § 351(a), or if he or she finds that the complaint directly relates to the merits of a decision or procedural ruling or that it is frivolous—that is, lacking sufficient evidence to raise an inference that misconduct has occurred—or that it contains allegations that are incapable of being established through investigation. The chief judge may also conclude the proceeding if he or she finds that appropriate corrective action has been taken or that action on the complaint is no longer needed because of intervening events. Copies of the written order are to be transmitted by the chief judge to the complainant and to the judge involved. The complainant or the judge involved in the complaint may petition the judicial council of the circuit seeking review of the order of the chief judge. If the petition for review is denied, that decision is final and not subject to review. The judicial council may refer a petition for review to a panel of at least five members of the judicial council, two of whom must be U.S. district judges. If the chief judge does not dismiss the complaint or conclude the proceedings under 28 U.S.C. § 352(b), then he or she must promptly appoint himself or herself, along with equal numbers of circuit judges and district judges, to a special committee to investigate the facts and allegations in the complaint. The chief judge must also promptly certify the complaint and any other pertinent documents to each member of the special committee, and provide written notice of this action to the complainant and the judge involved. The committee must conduct such investigation as it finds necessary and then expeditiously file a comprehensive written report of its investigation with the judicial council of the circuit involved. In conducting its investigation, the special committee has full subpoena powers. The report of the committee must present both findings of the investigation and recommendations for necessary and appropriate action by the judicial council. Upon receipt of such a report, the judicial council of the circuit involved has several options available to it. It may conduct any additional investigation it deems necessary, and it may dismiss the complaint. If the complaint is not dismissed, the council shall take appropriate action to assure effective and expeditious administration of the business of the courts in the circuit, including ordering that, on a temporary basis for a time certain, no further cases be assigned to the judge whose conduct is the subject of a complaint; censuring or reprimanding the judge by means of private communication; and censuring and reprimanding the judge by means of public announcement. Like the special committee, the judicial council may exercise full subpoena powers in conducting its investigation. If the judge who is the subject of the complaint holds his or her office during good behavior, action taken by the judicial council may include certifying disability of the judge pursuant to procedures and standards under 28 U.S.C. § 372(b); and requesting that the judge voluntarily retire, with the provision that the length of service requirements under 28 U.S.C. § 371 shall not apply. The judicial council may not order removal from office of any judge appointed to hold office during good behavior. If the focus of the complaint is a magistrate judge, the action taken by the judicial council may include directing the chief judge of the district of the magistrate judge to take such action as the judicial council considers appropriate. Any removal of a magistrate judge by the judicial council must be in accordance with 28 U.S.C. § 631, while any removal by the judicial council of a bankruptcy judge must be in accordance with 28 U.S.C. § 152. The judicial council must provide immediate written notice of the action taken to the complainant and to the judge whose conduct is the subject of the complaint. The judicial council may also, in its discretion, refer any complaint under 28 U.S.C. § 351, along with the record of any associated proceedings and its recommendations for appropriate action, to the Judicial Conference of the United States. If the judicial council determines, based on a complaint and related investigation or on other information available to the judicial council, that a judge holding office during good behavior may have engaged in conduct which might constitute one or more grounds for impeachment under Article II, Sec. 4 of the U.S. Constitution, the judicial council must promptly certify its determination, together with any complaint and a record of any associated proceedings, to the Judicial Conference of the United States. The judicial council must also promptly certify its determination, along with any complaint and a record of any associated proceedings, to the Judicial Conference if the council determines that a judge holding office during good behavior may have engaged in conduct which, in the interest of justice, is not amenable to resolution by the judicial council. If the judicial council makes a referral to the Judicial Conference of the United States, the judicial council must, unless contrary to the interests of justice, immediately provide written notice of its action to the complainant and to the judge involved. If dissatisfied with an action of the judicial council, the complainant or the judge may petition the Judicial Conference for review of that action. The Judicial Conference, or, should the conference so choose, a standing committee appointed by the Chief Justice under 28 U.S.C. § 331 to exercise its authority under the judicial discipline process, may grant a petition filed by a complainant or a judge aggrieved by an action of the judicial council. If a petition for review is denied, that decision is final and conclusive and not subject to judicial review. Upon receipt of a referral or certification, the Judicial Conference considers any prior proceedings and engages in such further investigation as it deems appropriate. The Judicial Conference may exercise its authority under the judicial discipline provisions as a conference, or through a standing committee appointed by the Chief Justice under 28 U.S.C. § 331. In conducting any investigation under the judicial discipline process, the Judicial Conference, or a standing committee appointed by the Chief Justice for the purpose, may exercise full subpoena power under 28 U.S.C. § 356(b). After having reviewed the information before it, the Judicial Conference, by majority vote, may, if the complaint is not dismissed, take such action as is appropriate to assure the effective and expeditious administration of the business of the courts. This may include ordering that, on a temporary basis for a time certain, no further cases be assigned to the judge involved; censuring or reprimanding the judge by means of private communication; and reprimanding the judge by means of public communication. If the judge involved holds his or her office during good behavior, the options available to the Judicial Conference may include certifying disability of the judge under 28 U.S.C. § 372(b); and requesting the judge voluntarily retire, with the provision that the length of service requirements under 28 U.S.C. § 371 not apply. If the judge is a magistrate judge, the Judicial Conference may direct the chief judge of the district of the magistrate judge to take such action as the Judicial Conference deems appropriate. If the Judicial Conference concurs in the judicial council's determination that impeachable offenses may be involved, or if the Judicial Conference makes its own determination that consideration of impeachment may be warranted, the conference must certify and transmit the determination and the record of proceedings to the House of Representatives for whatever action the House considers necessary. When the Judicial Conference's determination and record of proceedings are received by the House of Representatives, the Clerk of the House must make that determination and any reasons for the determination available to the public. If a judge has been convicted of a felony under federal or state law and has exhausted all avenues of direct review of that conviction, or if the time for direct review has passed and no review has been sought, the Judicial Conference, by majority vote and without any referral or certification from the relevant judicial council under 28 U.S.C. § 354, may transmit a determination that impeachment may be warranted, together with relevant court records, to the House of Representatives for whatever action the House deems necessary. If a judge has been convicted of a federal or state felony and has exhausted direct appeals of the conviction or if the time to seek further direct review has passed and no such review has been sought, then that judge shall not hear or decide cases unless the judicial council of the circuit in the case of federal circuit judges, district judges, bankruptcy judges, or magistrate judges; or the U.S. Court of Federal Claims, the Court of International Trade, or the Court of Appeals of the Federal Circuit, respectively, in the case of a judge of one of those courts, determines otherwise. No service of such a convicted judge, once the conviction is final and the time for appeals has expired, may be included for purposes of determining years of service under 28 U.S.C. §§ 371(c), 377, or 178, or creditable service under 5 U.S.C., chapter 83, subchapter III, or chapter 84. No judge whose conduct is the subject of an investigation under 28 U.S.C. §§ 351-364 may serve on a special committee under 18 U.S.C. § 353, upon a judicial council, upon the Judicial Conference, or upon a standing committee established under 28 U.S.C. § 331, until all proceedings relating to that investigation have been completed. Nor may anyone intervene or appear as amicus curiae in any judicial discipline proceeding before a judicial council or the Judicial Conference. Except for the public disclosure, under 28 U.S.C. § 355, by the Clerk of the House of Representatives of a determination by the Judicial Conference in a given case that impeachment may be warranted and any reasons for that determination, all papers, documents, and records of proceedings related to judicial discipline proceedings under 28 U.S.C. §§ 351-364 are to be kept confidential and not disclosed to any person in any proceeding unless certain criteria are met. Disclosure is permitted to the extent that (1) the judicial council of the circuit in its discretion releases a copy of a report of a special committee under 28 U.S.C. § 353(c) to the complainant and to the judge who is the subject of the complaint; (2) the judicial council of the circuit, the Judicial Conference of the United States, or the Senate or the House by resolution, releases any such material believed necessary to an impeachment investigation or trial of a judge under article I of the Constitution; or (3) such disclosure is authorized in writing by the judge who is the subject of the complaint and by the chief judge of the circuit, the Chief Justice, or the chairman of the standing committee established under 28 U.S.C. § 331. Each written order to implement any action on a complaint under 28 U.S.C. § 354(a)(1)(C), which is issued by a judicial council, the Judicial Conference, or the standing committee established under 28 U.S.C. § 331, is to be made available to the public through the clerk's office of the court of appeals for the circuit involved. Unless contrary to the interests of justice, each order must be accompanied by written reasons supporting it. The annual reports of the Director of the Administrative Office of the United States Courts provide statistical information related to the federal courts. This information, which is available online, includes the number of complaints filed against federal judges under 28 U.S.C. §§ 351-364 and the type of disciplinary action taken. According to the 2010 Annual Report of the Director of the Administrative Office of the United States Courts , 1,448 complaints were filed in the 2010 fiscal year, down 7% from the previous year. In addition, 1,159 complaints were concluded between October 1, 2009, and September 30, 2010. However, 1,143 complaints were still pending resolution at the close of the 2010 fiscal year. As Figure 1 illustrates, the number of complaints left unresolved at the close of the fiscal year has increased every year since 2006. A single complaint can state several accusations. In the 2010 fiscal year, the allegation most commonly made against federal judges was that the federal judge in question had abused the judicial power by issuing an erroneous, delayed, or unsupported decision. As illustrated by Figure 2 , the second most common type of allegation concerned favoritism or animus toward a litigant or attorney. As shown by Figure 3 , most complaints are dismissed in full by the circuit chief judge. Complaints rarely result in the appointment of a special investigating committee and are even less likely to be referred to the Judicial Conference. No complaint was referred to the Judicial Conference in the 2010 fiscal year. The federal judicial discipline framework under 28 U.S.C. §§ 351-364 provides a mechanism for consideration of complaints against federal circuit judges, district judges, bankruptcy judges, and magistrate judges. It does not apply to U.S. Supreme Court Justices. Nor does it apply to the U.S. Court of Federal Claims, the Court of International Trade, or the Court of Appeals for the Federal Circuit, each of which is required to prescribe rules, consistent with the provisions in 28 U.S.C. §§ 351-364, establishing procedures for the filing of complaints with respect to the conduct of judges of that court, for investigation of such complaints, and for taking appropriate action with respect to them. The statutory structure under 28 U.S.C. §§ 351-364 provides a means for each complaint to be explored and for disciplinary action to be taken where warranted by the facts involved. As in the recent cases of Judge G. Thomas Porteous Jr. and Judge Samuel B. Kent, where an investigation under this judicial discipline process uncovers conduct which may rise to the level of an impeachable offense, the matter may be referred by the Judicial Conference of the United States to the Speaker of the U.S. House of Representatives for the House to consider whether to pursue impeachment of the judge involved.
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The current statutory structure with respect to complaints against federal judges and judicial discipline was enacted on November 2, 2002, as the Judicial Improvements Act of 2002, P.L. 107-273, 28 U.S.C. §§ 351-364. These provisions are applicable to federal circuit judges, district judges, bankruptcy judges, and magistrate judges. They do not apply to the Justices of the U.S. Supreme Court. The U.S. Court of Federal Claims, the Court of International Trade, and the Court of Appeals for the Federal Circuit are each directed to prescribe rules consistent with these provisions to address complaints pertaining to their own judges. The procedures under 28 U.S.C. §§ 351-364 include a complaint process, review of complaints initially by the chief judge of the circuit within which the judge in question sits, and, if appropriate, referral of the complaint to a special investigating committee, to a panel of the judicial council of the circuit involved, and, if needed, to the Judicial Conference of the United States. At any point in the process, as deemed appropriate, action may be taken on the complaint. Where a complaint alleges conduct that may rise to the level of impeachable offenses, the Judicial Conference may certify that the matter may warrant consideration of impeachment and transmit the determination and the record of proceedings to the House of Representatives for whatever action the House of Representatives considers necessary. Two such referrals were received by the House in the 111th Congress regarding Judge Samuel B. Kent of the U.S. District Court for the Southern District of Texas and Judge G. Thomas Porteous Jr. of the U.S. District Court for the Eastern District of Louisiana. Judge Kent was impeached by the House of Representatives. His Senate impeachment trial was dismissed after he resigned from office and the House indicated that it did not wish to pursue the matter further. Judge Porteous was also impeached by the House of Representatives. On December 8, 2010, the Senate, sitting as a Court of Impeachment, voted to convict Judge Porteous on all four of the articles of impeachment brought against him. A judgment of removal from office flowed automatically from his conviction. In a rare additional judgment, the Senate disqualified him from holding federal office in the future.
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The Office of Information and Regulatory Affairs (OIRA) is one of several statutory offices within the Office of Management and Budget (OMB), and can play a significant—if not determinative—role in the rulemaking process for most federal agencies. In addition to its many other responsibilities, OIRA currently reviews the substance of between 500 and 700 significant proposed and final rules each year before agencies publish them in the Federal Register , and can clear the rules with or without change, return them to the agencies for reconsideration, or encourage the agencies to withdraw the rules. Between 70 and 100 of the rules that OIRA reviews each year are each considered "economically significant" or "major" (e.g., have a $100 million impact on the economy). The office was created by Congress and has a number of specific statutory responsibilities, but it also helps ensure that agencies' rules reflect the President's policies and priorities. OIRA's role in the federal rulemaking process has been highly controversial in all five of the presidential administrations in which it has been in existence, but some of the criticisms directed at the office have varied over time. In some administrations, OIRA has been accused of controlling the agenda of the rulemaking agencies too much, directing them to change substantive provisions in draft rules or even stopping proposed regulatory actions that it believes are poorly crafted or unnecessary. At other times, though, OIRA has been accused of not exerting enough authority over the agencies' rules. Other, more persistent criticisms have focused on the lack of transparency of OIRA's regulatory reviews to the public and the sometimes unseen influence that regulated entities and other nongovernmental organizations can have on agencies' rules through those reviews. This report describes how OIRA reviews covered agencies' draft rules, OIRA's effects on the rules, and changes in OIRA's procedures and policies in recent years. Much of that discussion is drawn from a September 2003 report on OIRA by the General Accounting Office (GAO, now the Government Accountability Office). First, though, this report will provide a brief history of presidential regulatory review and describe how OIRA's review process was established. Finally, the report describes several potential legislative issues regarding OIRA's regulatory review authority. OIRA was created within OMB by Section 3503 of the Paperwork Reduction Act (PRA) of 1980 (44 U.S.C. Chapter 35). The PRA provided that OIRA would be headed by an administrator, and designated the OIRA administrator as the "principal advisor to the Director on Federal information policy." The act also said that the Director of OMB "shall delegate to the (OIRA) Administrator the authority to administer all functions under this chapter." Specific areas of responsibility in the PRA that were assigned to the Director (and later delegated to OIRA) included information policy, information collection request clearance and paperwork control, statistical policy and coordination, records management, privacy, and automatic data processing and telecommunications. With regard to paperwork reduction, the act generally prohibited agencies from conducting or sponsoring a collection of information until they had submitted their proposed information collection requests to OIRA and the office had approved those requests. The PRA's requirements cover rules issued by virtually all agencies, including Cabinet departments, independent agencies, and independent regulatory agencies and commissions. Although the PRA gave OIRA substantive responsibilities in many areas, the bulk of the office's day-to-day activities under the act were initially focused on reviewing and approving agencies' proposed information collection requests. OIRA had 77 staff members when the PRA took effect in 1981, of which about half were involved in reviewing agencies' information collection requests. That year, OIRA took nearly 5,000 paperwork review actions—approving new and revised collections, extending existing collections, and reinstating expired collections. The office's paperwork clearance workload since then has generally been between 4,000 and 6,000 actions each year, although the number of OIRA staff overall and those reviewing proposed collections has declined substantially. Many federal regulations have an information collection component, but the PRA did not authorize OIRA to review or comment on the non-paperwork elements of those regulations, or on regulations without an information collection component. In 1980, President Reagan was elected on a platform critical of government's role in society in general and of federal regulations in particular. Shortly after taking office, he established a "Presidential Task Force on Regulatory Relief," headed by Vice President George H. W. Bush and composed of Cabinet officers (although the bulk of the task force's work was reportedly performed by OMB staff). The task force's responsibilities included (1) monitoring the establishment of OMB's responsibility to coordinate and review new rules, (2) the development of legislative changes to regulatory statutes, and (3) the revision of existing regulations. In relation to this last responsibility, the task force ultimately identified a total of 119 rules for alteration or cancellation by the issuing agencies, nearly half of which had been issued by the Department of Transportation or the Environmental Protection Agency. Although the task force said that implementation of the changes it recommended would save more than $150 billion over the next 10 years, critics charged that this estimate ignored the benefits associated with the rules on what they referred to as the administration's regulatory "hit list." The task force's legislative efforts were less successful, failing to get Congress to enact revisions to clean air and water laws or to enact broad regulatory reform legislation that would have limited agencies' rulemaking powers. In February 1981—less than one month after taking office—President Reagan issued Executive Order 12291 on "Federal Regulation," which greatly increased both the scope and importance of OIRA's responsibilities. Specifically, the executive order generally required covered agencies (Cabinet departments and independent agencies, but not independent regulatory agencies) to: refrain from taking regulatory action "unless the potential benefits to society for the regulation outweigh the potential costs to society," select regulatory objectives to maximize net benefits to society, and select the regulatory alternative that involves the least net cost to society; prepare a "regulatory impact analysis" for each "major" rule, which was defined as any regulation likely to result in (among other things) an annual effect on the economy of $100 million. Those analyses were required to contain a description of the potential benefits and costs of the rule, a description of alternative approaches that could achieve the regulatory goal at lower cost (and why they weren't selected), and a determination of the net benefits of the rule. The issuing agency was to make the initial determination of whether a rule was "major," but the executive order gave OMB the authority to require a rule to be considered major; and send a copy of each draft proposed and final rule to OMB before publication in the Federal Register . The order authorized OMB to review "any preliminary or final regulatory impact analysis, notice of proposed rulemaking, or final rule based on the requirements of this Order." Non-major rules were required to be submitted to OMB at least 10 days before publication, but major rules had to be submitted as much as 60 days in advance. Executive Order 12291 authorized the director of OMB to review any draft proposed or final rule or regulatory impact analysis "based on the requirements of this Order." The executive order indicated that the review should be completed within 60 days, but allowed the director to extend that period whenever necessary. It also authorized the director to exempt classes of regulations from any or all of the order's requirements, and generally required agencies to "refrain" from publishing any final rules until they had responded to OMB's comments. The executive order made OMB's authority to review agencies' draft rules subject to the overall direction of the presidential task force on regulatory relief. Although the executive order did not specifically mention OIRA, shortly after its issuance the Reagan Administration decided to integrate OMB's regulatory review responsibilities under the executive order with the responsibilities given to OMB (and ultimately to OIRA) by the PRA. As a result, OIRA's responsibilities for substantive review of rules under the executive order were added to the office's substantial responsibilities under the PRA. In 1981, OIRA reviewed the substance of nearly 2,800 rules under Executive Order 12291—in addition to the nearly 5,000 paperwork review actions it took that year. In 1985, President Reagan extended OIRA's influence over rulemaking even further by issuing Executive Order 12498, which required Cabinet department and independent agencies (but not independent regulatory agencies) to submit a "regulatory program" to OMB for review each year that covered all of their significant regulatory actions underway or planned. Previously, Executive Order 12291 required each of those agencies to publish semiannual "regulatory agendas" of proposed regulations that the agency "has issued or expects to issue," and any existing rule that was under review. These agendas were required to contain a schedule for completing action on any major rule for which the agency had published a notice of proposed rulemaking. The new executive order went further, saying that, except in "unusual circumstances," OMB could return any rule submitted for review under Executive Order 12291 to the issuing agency for "reconsideration" if it was not in the agency's regulatory program for that year, or was "materially different" from what was described in the program. In other words, OIRA could return a draft rule to an issuing agency if the office did not have advance notice of the rule's submission, even if the rule was otherwise consistent with the requirements in Executive Order 12291. The regulatory agenda and program requirements in these executive orders also permitted OIRA to become aware of forthcoming agency actions well in advance of the submission of a draft proposed rule, thereby permitting the office to stop or alter an objectionable rule before the rulemaking process developed momentum. Although Reagan Administration officials compared this planning process to the process used to develop the President's budget, critics noted that the budget process has a final step that the regulatory process lacks—review and approval by Congress. The establishment of this regulatory review function within OIRA was a significant development both in the office's history and in the overall movement to reform the federal regulatory process. In another sense, though, Executive Orders 12291 and 12498 represented the continuation of presidential review of rules, not the start of such reviews. Some form of centralized review of agencies' regulations within the Executive Office of the President has been part of the rulemaking process since the early 1970's. For example: In 1971, President Nixon established a "Quality of Life Review" program in which executive departments and independent agencies submitted all "significant" draft proposed and final rules pertaining to "environmental quality, consumer protection, and occupational and public health and safety" to OMB, which then circulated them to other agencies for comment. In their submissions, agencies were to provide a summary of their proposals, including their principal objectives, the alternatives that they considered, and a comparison of the expected benefits and cost of those alternatives. Agencies were also required to submit a schedule showing estimated dates of proposed and final significant rules. In 1974, President Ford issued Executive Order 11821, which required agencies to prepare an "inflation impact statement" for each "major" proposed rule. The statement was a certification that the inflationary impact of the rule had been evaluated in accordance with criteria and procedures developed by OMB. The executive order directed OMB to develop criteria for the identification of major rules that may have a significant impact on inflation, but specified that the office must consider costs, effects on productivity, effects on competition, and effects on supplies of important products and services. Before a major rule was published in the Federal Register , the issuing agency was required to submit the associated impact statement to the Council on Wage and Price Stability (CWPS). CWPS would then either provide comments directly to the agency or participate in the regular rulemaking comment process. In 1978, President Carter issued Executive Order 12044, which (among other things) required agencies to publish semiannual agendas of any significant rules under development or review, and to prepare a regulatory analysis for at least all rules with a $100 million impact on the economy. The analysis was to contain a succinct statement of the problem, a description of the alternative approaches considered, and the "economic consequences" of those alternatives. OMB was instructed to "assure the effective implementation of this Order," but was not given specific review responsibilities. President Carter also established (1) a "Regulatory Analysis Review Group" (RARG) to review the analyses prepared for certain major rules and to submit comments during the comment period, and (2) a "Regulatory Council" to coordinate agencies' actions to avoid conflicting requirements and duplication of effort. In several ways, though, the analytical and review requirements in Executive Order 12291 were significantly different from these previous efforts. For example, the requirement in the new executive order that agencies choose the least costly approach to a particular regulatory objective went further than the requirement in President Carter's Executive Order 12044, which simply required agencies to analyze and consider alternative regulatory approaches. Also, whereas the regulatory oversight functions were divided among many offices (OMB, CWPS, RARG, and the regulatory council) during the Carter Administration, Executive Order 12291 consolidated these functions within OIRA. Another major difference was the amount of influence that OIRA had compared to its predecessors. Under previous executive orders, CWPS and RARG had primarily an advisory role. In contrast, under Executive Order 12291, OIRA could overrule agency determinations regarding whether the rule was "major" (and therefore required a regulatory impact analysis), and could delay the regulation until the agency had adequately responded to its concerns (e.g., if it believed the agency had not considered all reasonable alternatives, that its analysis was not sound, or that it was contrary to administration policy). OIRA's significant influence on rulemaking was underscored by its organizational position within OMB—the agency that reviews and approves the rulemaking agencies' budget requests. Finally, and perhaps most importantly, the nature and transparency of the review process was significantly different under Executive Order 12291. Under the Carter Administration's approach, RARG and CWPS prepared and filed comments on agencies' regulatory proposals during the formal public comment period, after they were published in the Federal Register . In the case of RARG filings, a draft of the comments was circulated to all RARG members, and the comments and any dissents were placed on the public record at the close of the comment period. In contrast, OIRA's reviews occurred before the rules were published for comment, and Executive Order 12291 did not require that OIRA's comments on the draft rule be disclosed. This pre-publication review process made OIRA's regulatory reviews under Executive Order 12291 qualitatively different than its predecessors. The expansion of OIRA's authority in the rulemaking process via Executive Orders 12291 and 12498 was highly controversial. Although some believed that the authority did not go far enough (e.g., did not cover independent regulatory agencies), most of the concerns were that the expansion had gone too far. For example, a number of the concerns raised by Members of Congress, public interest groups, and others focused on whether OIRA's role violated the constitutional separation of powers and the effect that OIRA's review had on public participation and the timeliness of agencies' rules. Some believed that OIRA's new authority displaced the discretionary authority of agency decision makers in violation of congressional delegations of rulemaking authority, and that the President exceeded his authority in issuing the executive orders. Others indicated that OIRA did not have the technical expertise needed to instruct agencies about the content of their rules. Still other concerns focused on OIRA's ability to carry out its many responsibilities. In 1983, GAO concluded that the expansion of OIRA's responsibilities under Executive Order 12291 had adversely affected the office's ability to carry out its PRA responsibilities, and recommended that Congress consider amending the act to prohibit OIRA from carrying out other responsibilities like regulatory review. Many of the early concerns about OIRA focused on the lack of transparency of the regulatory reviews, and specifically questioned whether OIRA had become a clandestine conduit for outside influence in the rulemaking process. Critics pointed out that in the first few months after the executive order was issued, OIRA met with representatives from dozens of businesses and associations seeking regulatory relief and returned dozens of rules to the agencies for reconsideration. In response to these concerns, the OMB Director issued a memorandum in June 1981 stating that any factual material provided to OIRA regarding proposed rules should also be sent to the relevant rulemaking agency. The memorandum did not, however, apply to information provided to OIRA orally, and did not require that OIRA's meetings with outside parties be disclosed to the public. OIRA's role in the rulemaking process remained controversial for the next several years. In 1983, Congress was so dissatisfied with OIRA's performance in the areas of regulatory and paperwork review that it permitted the office's appropriation authority to expire (although the office's statutory authority under the PRA was not affected and it continued to receive an appropriation via OMB). In 1985, five House committee chairmen filed a friend-of-the-court brief in a lawsuit brought against the Department of Labor regarding the department's decision (reportedly at the behest of OMB) not to pursue a proposed standard concerning exposure to ethylene oxide, a sterilizing chemical widely used in hospitals and suspected of causing cancer. The chairmen claimed that OMB's actions represented a usurpation of congressional authority. Congress reauthorized OIRA in 1986, but only after making the administrator subject to Senate confirmation. By 1986, Congress began considering legislation to restrict OIRA's regulatory review role and to block OIRA's budget request. In an attempt to head off that legislation, in June 1986 the OIRA administrator issued a memorandum for the heads of departments and agencies subject to Executive Order 12291 describing new OIRA procedures to improve the transparency of the review process. For example, the memorandum said that only the administrator or the deputy administrator could communicate with outside parties regarding rules submitted for review, and that OIRA would make available to the public all written materials received from outside parties. OIRA also said that it would, upon written request after a rule had been published, make available all written correspondence between OIRA and the agency head regarding the draft submitted for review. In 1987 the National Academy of Public Administration published a report on presidential management of agency rulemaking that summarized the criticisms of the OIRA review process as well as the positions of its proponents. The report also described a number of issues in regulatory review and offered recommendations for improvement. For example, the report recommended that "regulatory management be accepted as an essential element of presidential management." It also recommended that regulatory agencies "log, summarize, and include in the rulemaking record all communications from outside parties, OMB, or other executive or legislative branch officials concerning the merits of proposed regulations." In 1988, the Administrative Conference of the United States also examined the issue of presidential review of agency rulemaking and concluded that the reviews could improve coordination and resolve conflicts among agencies. The Administrative Conference also said, though, that presidential review "does not displace responsibilities placed in the agency by law nor authorize the use of factors not otherwise permitted by law." The Conference recommended public disclosure of proposed and final agency rules submitted to OIRA under the executive order, communications from OMB relating to the substance of rules, and communications with outside parties, and also recommended that the reviews be completed in a "timely fashion." President George H. W. Bush continued the implementation of Executive Orders 12291 and 12498 during his administration, but external events significantly affected OIRA's operation and, more generally, the federal rulemaking process. In 1989, President Bush's nominee to head OIRA was not confirmed. Later, in response to published accounts that the burden of regulation was once again increasing, President Bush established the President's "Council on Competitiveness" (also known as the Competitiveness Council) to review regulations issued by agencies. Chaired by Vice President Quayle, the council oversaw and was supported by OIRA, and reviewed particular rules that it believed would have a significant impact on the economy or particular industries. According to OIRA representatives, the council signified continued White House-level interest in the regulatory arena, and also represented a continuation of the type of role played by the Presidential Task Force on Regulatory Relief during the Reagan Administration. Many of the Competitiveness Council's actions were highly controversial, with critics assailing both the effects of those actions (e.g., rolling back environmental or other requirements) and the secrecy in which the council acted. The council attempted to maintain strict secrecy regarding both its deliberations and those in the private sector with whom it communicated or consulted. Critics decried what they believed to be "backdoor rulemaking" by the Competitiveness Council, but the council continued its operations until the end of the Bush Administration in 1993. Meanwhile, OIRA continued its operations under Executive Order 12291, reviewing between 2,100 and 2,500 rules each year from 1989 through 1992. In September 1993, President Clinton issued Executive Order 12866 on "Regulatory Planning and Review," which revoked Executive Orders 12291 and 12498 and abolished the Council on Competitiveness. Although different from its predecessors in many respects, Executive Order 12866 (which is still in effect) continued the general framework of presidential review of rulemaking. For example, it requires covered agencies (again, Cabinet departments and independent agencies but not independent regulatory agencies) to submit their proposed and final rules to OMB before publishing them in the Federal Register . The order also requires agencies to prepare cost-benefit analyses for their "economically significant" rules (essentially the same as "major" rules under Executive Order 12291). As discussed in detail below, however, Executive Order 12866 established a somewhat new regulatory philosophy and a new set of rulemaking principles, limited OIRA's reviews to certain types of rules, and established transparency requirements that included but went beyond those that had been put in place by the administrator's June 1986 memorandum. Section 2(b) of the order assigns responsibility for review of agency rulemaking to OMB, and specifically names OIRA as "the repository of expertise concerning regulatory issues." The order also named the Vice President as principal advisor to the President on regulatory policy, planning, and review. In its statement of regulatory philosophy, Executive Order 12866 says, among other things, that agencies should assess all costs and benefits of available regulatory alternatives, including both quantitative and qualitative measures. It also provides that agencies should select regulatory approaches that maximize net benefits (unless a statute requires another approach). Where permissible and applicable, the order states that agencies should adhere to a set of principles when developing rules, including (1) consideration of the degree and nature of risk posed when setting regulatory priorities, (2) adoption of regulations only upon a "reasoned determination that the benefits of the intended regulation justify its costs," and (3) tailoring regulations to impose the least burden on society needed to achieve the regulatory objectives. Some of the stated objectives of the order are "to reaffirm the primacy of Federal agencies in the regulatory decision-making process; to restore the integrity and legitimacy of regulatory review and oversight; and to make the process more accessible and open to the public." According to OIRA representatives, the "primacy" of the agencies provision signaled a significant change in regulatory philosophy, vesting greater control of the rulemaking process with regulatory agencies and taking away authority from OIRA. Also, the requirement that the benefits of a regulation "justify" its costs was a noticeably lower threshold than the requirement in Executive Order 12291 that the benefits "outweigh" the costs. Section 6 of Executive Order 12866 established agency and OIRA responsibilities in the centralized review of regulations. In contrast to the broad scope of review under Executive Order 12291, the new order limited OIRA reviews to actions identified by the rulemaking agency or OIRA as "significant" regulatory actions, which are defined in section 2(f) of the order as the following: "Any regulatory action that is likely to result in a rule that may (1) have an annual effect on the economy of $100 million or more or adversely affect in a material way the economy, a sector of the economy, productivity, competition, jobs, the environment, public health or safety, or State, local, or tribal governments or communities; (2) create a serious inconsistency or otherwise interfere with an action taken or planned by another agency; (3) materially alter the budgetary impact of entitlements, grants, user fees, or loan programs or the rights and obligations of recipients thereof; or (4) raise novel legal or policy issues arising out of legal mandates, the President's priorities, or the principles set forth in the Executive order." As Figure 1 shows, by focusing OIRA's reviews on significant rules, the number of draft proposed and final rules that OIRA examined fell from between 2,000 and 3,000 per year under the Executive Order 12291 to between 500 and about 700 rules per year under Executive Order 12866. Executive Order 12866 also differs from its predecessors in other respects. For example, the order generally requires that OIRA complete its review of proposed and final rules within 90 calendar days, and requires both the agencies and OIRA to disclose certain information about how the regulatory reviews were conducted. Specifically, agencies are required to identify for the public (1) the substantive changes made to rules between the draft submitted to OIRA for review and the action subsequently announced and (2) changes made at the suggestion or recommendation of OIRA. OIRA is required to provide agencies with a copy of all written communications between OIRA personnel and parties outside of the executive branch, and a list of the dates and names of individuals involved in substantive oral communications. The order also instructs OIRA to maintain a public log of all regulatory actions under review and of all of the above-mentioned documents provided to the agencies. As Figure 2 shows, OIRA reviews agencies' draft rules at both the proposed and final stages of rulemaking. In each phase, the review process starts when the rulemaking agency formally submits a regulatory review package to OIRA consisting of the rule, any supporting materials, and a transmittal form. The OIRA docket librarian then logs the receipt of the review package and forwards it to the appropriate desk officer. In some cases, agencies withdraw their rules from OIRA during the review period and the rules may or may not be subsequently resubmitted. At the end of the review period, OIRA either returns the draft rule to the agency "for reconsideration" or OIRA concludes that the rule is consistent with the executive order. OIRA codes the rule in its database as "consistent with change" if there had been any changes to the rule, regardless of the source or extent of the change. OIRA codes rules in its database as "consistent with no change" only if they are exactly the same at the end of the review period as the original submission. If the draft rule is a proposed rule and is judged by OIRA to be consistent with the executive order, the agency may then publish a notice of proposed rulemaking in the Federal Register , obtain comments during the specified comment period, review the comments received, and make any changes to the rule that it believes are necessary to respond to those comments. (Executive Order 12866 says that this comment period should, in most cases, be at least 60 days for significant rules reviewed by OIRA.) If the draft is a final rule, the agency may publish the rule after OIRA concludes its review and the rule will generally take effect either at that point or at some later date specified by the agency. In most of the years since Executive Order 12866 was issued, more than 90% of the rules that OIRA reviewed were coded in the database as either "consistent with change" or "consistent without change." (See Table 1 .) Only a small percentage of rules were withdrawn, and even fewer were returned to the agencies. The proportion of rules coded as "changed" has varied somewhat over time, but the last several years of the Clinton Administration (1997 through 2000) were only somewhat lower than during most of the George W. Bush Administration (2002 through 2008). The data indicate that there were a relatively large number of rules that were withdrawn and returned in 2001 compared to other years. The withdrawn rules reflect actions taken at the start of the George W. Bush Administration pursuant to a memorandum issued by Assistant to the President and Chief of Staff Andrew H. Card, which generally directed Cabinet departments and independent agencies to (1) not send proposed or final rules to the Office of the Federal Register, (2) withdraw from the Office rules that had not yet been published in the Federal Register , and (3) postpone for 60 days the effective date of rules that had been published but had not yet taken effect. (A somewhat similar effort was made at the start of the Obama Administration, reflected in the 10.4% of rules coded as withdrawn in 2009.) Also, as discussed in greater detail later in this report, OIRA returned a number of rules to the agencies for reconsideration shortly after a new administrator was appointed in 2001. The type of review that OIRA conducts under Executive Order 12866 sometimes depends on the type of draft rule submitted. For example, if the draft rule contains a collection of information covered by the PRA, the desk officer would also review it for compliance with that act. If the draft rule is "economically significant" (e.g., has an annual impact on the economy of at least $100 million), the executive order requires agencies to prepare an economic analysis describing, among other things, the alternatives that the agency considered and the costs and benefits of those alternatives. For those economically significant rules, OIRA desk officers are to review the economic analyses using the office's guidance on how to prepare regulatory analyses under the executive order. An attachment to a September 20, 2001, memorandum to the President's Management Council described the general principles and procedures that OIRA reportedly uses in the implementation of Executive Order 12866. For example, the attachment indicated that the office would, where appropriate, (1) include an evaluation of whether the agency has conducted an adequate risk assessment, (2) give "a measure of deference" to regulatory impact analyses and other supporting technical documents that have been peer reviewed in accordance with specified procedures, (3) ensure that regulatory clearance packages satisfy the requirements in other executive orders (e.g., include the certifications required by Executive Order 13132 on "Federalism" and Executive Order 13175 on "Consultation and Coordination with Indian and Tribal Governments"), (4) consult with the Small Business Administration (SBA) and the SBA Chief Counsel for Advocacy, and (5) ensure that agencies evaluate the possible impact of the draft rule on the programs of other federal agencies. There is usually some type of communication during the review process (often via e-mail or telephone) between the OIRA desk officer and the rulemaking agency regarding specific issues in the draft rule. Briefings and meetings are sometimes held between OIRA and the agency during the review process, with OIRA branch chiefs, the deputy administrator, or the administrator involved in some of these meetings. According to OIRA representatives, the desk officers always consult with the resource management officers on the budget side of OMB as part of their reviews, and reviews of draft rules are not completed until those resource management officers sign off. If the draft rule is economically significant, the desk officer would also consult with a government economist to help review the required economic analysis. For other rules the desk officer might consult with other OIRA staff on issues involving statistics and surveys, information technology and systems, or privacy issues. In certain cases, OIRA may circulate a draft rule to other parts of the Executive Office of the President (e.g., the Office of Science and Technology Policy or the Council on Environmental Quality) or other agencies (e.g. the Departments of Energy, the Interior, or Transportation for certain Environmental Protection Agency rules). Executive Order 12866 requires OIRA to complete its regulatory reviews within certain time frames—(1) within 10 working days of submission for any preliminary actions prior to a notice of proposed rulemaking (e.g., a notice of inquiry or an advance notice of proposed rulemaking) or (2) within 90 calendar days of submission for all other regulatory actions (or 45 days if OIRA had previously reviewed the material). In some instances, however, agency officials said OIRA will ask the rulemaking agency to withdraw the rule and resubmit it, restarting the review period. The executive order does not permit OIRA to "approve" or "disapprove" a draft rule; it is up to the agency to decide whether to proceed with publication of a rule after it had been returned, or to accept OIRA's suggested changes. OIRA representatives said it is often an iterative process in which the agencies and OIRA negotiate issues and clarify terms. Nevertheless, agencies very rarely publish rules that OIRA returns or ignore substantive OIRA "suggestions." In some instances, agency officials will formally or informally appeal OIRA determinations to the White House. Figure 2 also shows that, for some rules, there is an additional phase of "informal review" before the rule is officially submitted to OIRA. In its December 2001 report on the costs and benefits of federal regulations, OIRA stated that the office's original review process "was designed as an end-of-the-pipeline check against poorly conceived regulations." OIRA also said, however, that by the time an agency formally submits a rule to OIRA for review there may be "strong institutional momentum" behind the proposal and, as a result, the agency may be reluctant to address certain issues that OIRA analysts might raise. Therefore, OIRA indicated "there is value in promoting a role for OIRA's analytic perspective earlier in the process, before the agency becomes too entrenched." OIRA went on to state the following: "A common yet informal practice is for agencies to share preliminary drafts of rules and/or analyses with OIRA desk officers prior to formal decision making at the agency. This practice is useful for agencies since they have the opportunity to educate OIRA desk officers in a more patient way, before the formal 90-day review clock at OMB begins to tick. The practice is also useful for OIRA analysts because they have the opportunity to flag serious problems early enough to facilitate correction before the agency's position is irreversible." OIRA cannot informally review each of the hundreds of significant proposed and final rules that are submitted to the office each year. Informal reviews are most common when there is a statutory or legal deadline for a rule or when the rule is extremely large and requires discussion with not only OMB but also other federal agencies. The Environmental Protection Agency (EPA) and the Departments of Agriculture, Health and Human Services, and Transportation often issue those types of rules, and therefore are more likely to have their rules reviewed informally before formal submission. OIRA has informally reviewed agencies' draft rules since its review function was established in 1981, but informal reviews reportedly became more common when Executive Order 12866 was adopted in 1993 and OIRA's reviews were focused on "significant" rules. There have been some indications, though, that OIRA has increased its use of informal reviews even further in recent years. For example, in its March 2002 draft report to Congress on the costs and benefits of federal regulation, OIRA said "agencies are beginning to invite OIRA staff into earlier phases of regulatory development in order to prevent returns late in the rulemaking process. It is at these early stages where OIRA's analytic approach can most improve on the quality of regulatory analyses and the substance of rules." Separately, in 2002, the OIRA administrator said "an increasing number of agencies are becoming more receptive to early discussions with OMB, at least on highly significant rulemakings." The administrator also indicated that agencies' "receptivity" to informal reviews may be enhanced by the possibility of a returned rule. For example, in early 2002 he said that OIRA was trying "to create an incentive for agencies to come to us when they know they have something that in the final analysis is going to be something we're going to be looking at carefully. And I think that agencies that wait until the last minute and then come to us—well, in a sense, they're rolling the dice." Although a great deal has been written about OIRA's reviews of agencies' draft rules, few studies have systematically tried to determine the extent to which those reviews result in substantive changes to the rules. One such study (using data prior to the advent of Executive Order 12988) concluded that OIRA's reviews resulted in the rejection of some regulations that would have been economically inefficient, but did not appear to have improved the cost-effectiveness (e.g., costs-per-life saved) of many of the rules. Other studies have used OIRA's database showing the number of rules that were coded as "consistent with change" and "consistent without change" in an attempt to determine the significance of OIRA's effects on agencies' rules and whether those effects have changed over time. As mentioned previously, however, the "consistent with change" code includes changes made at the initiation of the agencies as well as changes suggested by OIRA. Also, the code does not differentiate between minor editorial changes and changes that radically alter the effect of the rule. "Returns" and "withdrawals" in OIRA's database also need careful interpretation. A return may be for purely administrative reasons, not for substantive OIRA objections. Conversely, a withdrawal of a rule by an agency may have been initiated by OIRA. In order to use these data effectively, researchers should examine the associated documentation in the agencies' and OIRA's rulemaking dockets. GAO published such an analysis in September 2003, supplementing information from OMB's database with information in the dockets and interviews with agency officials. GAO reported that from July 1, 2001, through June 30, 2002, OIRA completed 642 reviews of agencies' draft proposed and final rules. Of these, About 33% (214) were coded in the database as "consistent with no change," indicating that OIRA considered the rules consistent with the executive order as submitted. About 50% (322) were coded as "consistent with change," indicating that the rules had changed after being submitted to OIRA, and that OIRA subsequently concluded that the rule was consistent with the executive order's requirements. About 8% (50) were coded as "withdrawn" by the agency. About 3% (21) were coded as "returned" to the agency by OIRA. About 5% (35) had some other disposition (e.g., "sent improperly," "emergency," or "statutory or judicial deadline"). In order to make its review manageable, GAO focused on 85 of those rules that were coded as changed, withdrawn, or returned and that were submitted to OIRA by nine selected health, safety, or environmental agencies or offices: the Animal and Plant Health Inspection Service within the Department of Agriculture; the Food and Drug Administration within the Department of Health and Human Services; the Occupational Health and Safety Administration within the Department of Labor; the Federal Aviation Administration (FAA), the Federal Motor Carrier Safety Administration, and the National Highway Traffic Safety Administration (NHTSA) with the Department of Transportation (DOT); and the offices of air and radiation, water, and solid waste and emergency response within EPA. Seventy-one of the 85 rules had been coded "consistent with change," nine were coded as "returned," and five were coded as "withdrawn." GAO's analysis of the underlying documents indicated that OIRA had a significant effect on at least 25 of the 85 draft rules. Specifically: Of the 71 "changed" rules, GAO concluded that OIRA had suggested significant changes to 17 of them—changes that affected the scope, impact, or estimated costs or benefits of the rules as originally submitted. In general, the focus of OIRA's suggested changes appeared to be on reducing regulatory burden (and, in some cases, the expected benefits as well). Fourteen of the 17 significantly changed rules were from EPA's office of air and radiation or its office of water. For example, at OIRA's recommendation, EPA removed manganese from a list of hazardous wastes, deleted certain types of engines from coverage of a rule setting emissions standards, and delayed the compliance dates for two other types of emissions. Of the remaining 54 "changed" rules, the most significant changes made at OIRA's suggestion involved adding explanatory language to the preambles of the rules and asking for comment on particular provisions. In 20 of the 54 rules, OIRA suggested only minor editorial changes (e.g., correcting spelling errors or citations) or made no suggestions at all. Of the nine rules that had been returned to the agencies by OIRA, two were returned because they had been improperly submitted, not because of substantive defect. OIRA returned the remaining seven rules because of concerns about the agencies' regulatory analyses or a perceived lack of coordination between rulemaking agencies. For example, OIRA returned one EPA rule because the agency did not provide a quantitative analysis of costs and benefits, and returned a NHTSA rule because OIRA did not believe that the agency had demonstrated that it had selected the best available alternative. Five of the seven rules returned for substantive reasons had been submitted by the FAA. Of the five rules that were withdrawn, GAO determined that only one had been withdrawn at OIRA's suggestion. The other four rules were withdrawn solely at the agencies' initiative or as a result of a mutual decision by the agencies and OIRA. If anything, GAO's analysis understates the influence that OIRA has on agencies' rules because its findings were often limited to the documentation that was available. If OIRA suggested a change to a rule before it was formally submitted to OIRA (e.g., during informal review), GAO's analysis would not reflect those changes. In fact, the rule might not have even been in the universe of rules that GAO examined (i.e., those coded as changed, returned, or withdrawn during OIRA's formal review). Other forms of OIRA influence may be even more indirect and harder to document. For example, some agencies have indicated that they do not even propose certain regulatory provisions because they believe that OIRA would find them objectionable. GAO also reported that regulated entities directly contacted OIRA either before or during its review process regarding 11 of the 25 rules that OIRA significantly affected. Eight of those 11 cases involved EPA rules, and the nature of the contacts ranged from meetings with OIRA representatives to letters sent to OIRA. In 7 of the 11 cases, GAO concluded that what OIRA ultimately recommended to the rulemaking agencies was similar to what these regulated parties recommended to OIRA—in some cases, using similar language to that used by the regulated entities. For example, during OIRA's review of an EPA rule on identification and listing of hazardous waste, industry representatives met with and sent letters to OIRA opposing the listing of manganese as a hazardous waste constituent. (The industry representatives had made essentially the same argument to EPA during the public comment phase, but EPA did not agree.) The main focus of OIRA's comments to EPA at the conclusion of its review was that final action on listing manganese as a hazardous contaminant should be deferred. Notwithstanding the congruence between the comments of the regulated entities and OIRA's comments, GAO said it was impossible to determine the extent to which this or other suggestions made by the regulated entities might have influenced OIRA's actions, if at all. In April 2009, GAO again reported that OIRA's reviews often resulted in changes to draft rules. Of 12 rules that GAO examined in detail, 10 were changed at OIRA's suggestion. Some of the changes resulted in alteration of regulatory text. GAO said that the agencies used a variety of methods to document OIRA's reviews, and that there was inconsistent interpretation of which changes were "substantive" enough to require documentation and "uneven attribution" of the sources of the changes made to the agencies' rules. The formal process by which OIRA reviews agencies' draft rules has changed little since Executive Order 12866 was issued in 1993. There have, however, been several subtle yet notable changes in OIRA policies and practices in recent years—particularly after Dr. John D. Graham became OIRA administrator in July 2001. In October 2002, Administrator Graham said "the changes we are making at OMB in pursuit of smarter regulation are not headline grabbers: No far-reaching legislative initiatives, no rhetoric-laden executive orders, and no campaigns of regulatory relief. Yet we are making some changes that we believe will have a long-lasting impact on the regulatory state." As noted previously, during the Reagan Administration, OIRA was often criticized for acting as a regulatory gatekeeper, actively overseeing and recommending changes to agencies' rules. During the Clinton Administration, however, the opposite concerns were expressed. A number of observers criticized OIRA for not overseeing the actions of the rulemaking agencies more aggressively. In September 1996, the then-administrator of OIRA testified that "we have consciously changed the way we relate to the agencies," and described OIRA's relationship with the rulemaking agencies as "collegial" and "constructive." She also said she agreed with an article that said OIRA functioned during that period "more as a counselor during the review process than as an enforcer of the executive order." OIRA during the George W. Bush Administration returned to the role it had during the Reagan Administration, even describing itself in an annual report as the "gatekeeper for new rulemakings." Then-OIRA Administrator Graham said one of the office's functions is "to protect people from poorly designed rules," and said OIRA review is a way to "combat the tunnel vision that plagues the thinking of single-mission regulators." He also compared OIRA's review of agencies' rules to OMB's role in reviewing agencies' budget requests. This return to the gatekeeper perspective of OIRA's role had implications for an array of OIRA's functions, and underlays many of the other changes described below. As noted previously in Table 1 , during the Clinton Administration, OIRA only rarely returned rules to the agencies for reconsideration. Specifically, according to OIRA's database, of the more than 4,000 rules that OIRA reviewed from 1994 through 2000, OIRA returned only seven rules to the agencies—three in 1995 and four in 1997. OIRA administrators during that period said they viewed the use of return letters as evidence of the failure of the collaborative review process, since OIRA and the agencies were part of the same presidential Administration. In contrast, OIRA Administrator Graham referred to return letters as the office's "ultimate weapon," and viewed them as a way to make clear that the office is serious about the review process. In the first eight months after he took office in July 2001, OIRA returned 21 draft rules to the agencies for reconsideration. DOT had the most rules returned during 2001 and 2002 (eight), followed by the Social Security Administration (five) and the Department of Veterans Affairs (four). The letters commonly indicated that OIRA returned the rules because of concerns about the agencies' analyses (e.g., whether the agencies had considered all reasonable alternatives or had selected the alternative that would yield the greatest net benefits). Subsequently, however, the pace of OIRA's return letters slowed. Although the average number of rules that OIRA reviewed each month stayed about the same, in the period from March 2002 until January 2008, OIRA returned a total of seven draft rules to the agencies—a dramatic decline from the 21 returns during Administrator Graham's first eight months in office. OIRA officials attributed the decline in return letters to the improved quality of agencies' regulatory submissions after the initial flurry of returns. OIRA has traditionally been a reactive force in the rulemaking process, commenting on draft proposed and final rules that are generated by the agencies. Although OIRA occasionally suggested regulatory topics to the agencies during previous administrations, the practice was relatively uncommon and the discussions were not made public. In contrast, OIRA Administrator Graham was more publicly proactive, sending several agencies "prompt letters" (and posting them on the OIRA website) suggesting that they develop regulations in a particular area or encouraging the agencies' ongoing efforts. For example, one such letter encouraged NHTSA to give greater priority to modifying its frontal occupant protection standard, and another letter suggested that OSHA make the promotion of automatic external heart defibrillators a higher priority. Other prompt letters recommended that the agencies better focus certain research or programs. Between September 2001 and December 2003, OIRA sent a total of 13 prompt letters to regulatory agencies, and several of the agencies took action in response to the letters. Since then, however, the number of prompt letters diminished substantially. Only two prompt letters were issued in 2004, none in 2005, one in 2006, and none in 2007. Although OIRA has always encouraged agencies to provide well-developed economic analyses for their draft rules, Administrator Graham expressed greater interest in this issue than his predecessors. Also, according to agency officials, there has been a perceptible "stepping up the bar" in the amount of support required for their rules, with OIRA reportedly more often looking for regulatory benefits to be quantified and a cost-benefit analysis for every regulatory option that the agency considered, not just the option selected. In September 2003, OIRA published revised guidelines for economic analysis under the executive order—updating "best practices" guidance issued in January 1996. The new guidelines were generally similar to the earlier guidance, but differed in several key areas—e.g., encouraging agencies to (1) perform both cost-effectiveness and cost-benefit analyses in support of their major rules, (2) use multiple discount rates when the benefits and costs of rules are expected to occur in different time periods, and (3) use a formal probability analysis of benefits and costs when a rule is expected to have more than a $1 billion impact on the economy (unless the effects of the rule are clear). Although OIRA has said that regulations based on economic analysis are more likely to be better than those that are not, it has also signaled that these analyses are sometimes difficult or impossible for certain types of rules. In November 2005, OIRA Administrator Graham said "[h]omeland security regulations account for about half of our major-rule costs in 2004 but we do not yet have a feasible way to fully quantify benefits." He also said that cost-benefit analysis may not be appropriate for homeland security rules, and that a more practical "soft" test was being used for them. Some have questioned why assessments of homeland security rules should be treated differently than health, safety, and environmental rules. As noted previously, many of the longstanding concerns about OIRA's role in the rulemaking process have centered on the perceived lack of transparency of its reviews. Executive Order 12866 attempted to address some of those concerns, requiring (among other things) that agencies disclose after the publication of a rule the changes made to the rule during OIRA's review and the changes made at the suggestion or recommendation of OIRA. The executive order requires OIRA to maintain a publicly available log disclosing the status of all regulatory actions under review and the names and dates of those involved in substantive oral communications (e.g., meetings, telephone calls) between OIRA staff and parties outside of the executive branch. These requirements notwithstanding, concerns about the lack of transparency continued. For example, even after issuance of the executive order, OIRA disclosed contacts with outside parties only if they occurred during the office's formal review period, not if they occurred during its informal reviews. In October 2001, the OIRA administrator published a memorandum to OIRA staff on the office's website that extended the executive order's disclosure requirements in several areas. For example, the memorandum said that OIRA would disclose substantive meetings and other contacts with outside parties about a rule under review even if OIRA was only informally reviewing the rule. OIRA also said it would disclose substantive telephone calls with outside parties that were initiated by the administrator, not just calls initiated by outside parties. OIRA has also posted on its website lists of regulations currently under review, reviews concluded in the previous 30 days, and its contacts with outside parties. Although these changes have improved the transparency of OIRA's reviews, as discussed later in this report, the effects of OIRA's reviews (particularly informal reviews) are not always apparent. When OIRA was created in FY1981, the office had a "full-time equivalent" (FTE) ceiling of 90 staff members. By 1997, OIRA's FTE allocation had declined to 47—a nearly 50% reduction. Although Executive Order 12866 (issued in late 1993) permitted OIRA to focus its resources on "significant" rules, this decline in OIRA staffing also occurred during a period in which regulatory agencies' staffing and budgetary levels were increasing and OIRA was given a number of new statutory responsibilities. Specifically, as discussed later in this report, OIRA was expected to perform various duties under the Unfunded Mandates Reform Act of 1995, the Small Business Regulatory Enforcement Fairness Act of 1996, and the Regulatory Right-to-Know Act of 2001. Starting in 2001, OIRA's staffing authorization began to increase; by 2002, it stood at 55 FTEs. Between 2001 and 2003, OIRA hired five new staff members in such fields as epidemiology, risk assessment, engineering, and health economics. OIRA indicated that these new hires reflected the increasing importance of science-based regulation in federal agencies, and would enable OIRA to ask penetrating technical questions about agency proposals. Since 2003, OIRA staffing has been relatively stable. On January 18, 2007, President George W. Bush issued Executive Order 13422, making the most significant amendments to Executive Order 12866 since it was published in 1993. The changes made by this new executive order were controversial, characterized by some as a "power grab" by the White House that undermined public protections and lessened congressional authority, and by others as "a paragon of common sense and good government." The most important changes made to Executive Order 12866 by Executive Order 13422 fell into five general categories: (1) a requirement that agencies identify in writing the specific market failure or problem that warrants a new regulation, (2) a requirement that each agency head designate a presidential appointee within the agency as a "regulatory policy officer" who can control upcoming rulemaking activity in that agency, (3) a requirement that agencies provide their best estimates of the cumulative regulatory costs and benefits of rules they expect to publish in the coming year, (4) an expansion of OIRA review to include significant guidance documents, and (5) a provision permitting agencies to consider whether to use more formal rulemaking procedures in certain cases. A separate CRS report discusses each of these changes, noting areas that are unclear and the potential implications of the changes; provides background information on presidential review of rules; discusses three congressional hearings on the executive order in 2007; and notes congressional efforts to block the implementation of the order. It concludes by pointing out that the significance of the changes made to the review process by Executive Order 13422 may become clear only through their implementation. The changes made by this executive order represented a clear expansion of presidential authority over rulemaking agencies. In that regard, Executive Order 13422 can be viewed as part of a broader statement of presidential authority presented throughout the Bush Administration. On January 30, 2009, President Barack Obama issued Executive Order 13497, which revoked both Executive Order 13422 and Executive Order 13258 (which had been issued in February 2002, and amended Executive Order 12866 to reassign all roles originally assigned to the Vice President to the President's chief of staff). On March 4, 2009, however, the Director of OMB issued a memorandum to federal agencies instructing them to continue sending significant guidance documents to OIRA for review. On January 30, 2009, President Barack Obama issued a memorandum to the heads of executive departments and agencies instructing the Director of OMB, in consultation with representatives of regulatory agencies, to "produce within 100 days (i.e., by May 10, 2009) a set of recommendations for a new Executive Order on Federal regulatory review." The memorandum said that the recommendations should, among other things: offer suggestions for the relationship between OIRA and the agencies; provide guidance on disclosure and transparency; encourage public participation in agency regulatory processes; offer suggestions on the role of cost-benefit analysis; address the role of distributional considerations, fairness, and concern for the interests of future generations; identify methods of ensuring that regulatory review does not produce undue delay; clarify the role of the behavioral sciences in formulating regulatory policy; and identify the best tools for achieving public goals through the regulatory process. On February 26, 2009, the Director of OMB published a notice in the Federal Register requesting comments from the public on how to improve the regulatory review process. The Director noted that although executive orders are not subject to notice and comment procedures, and public comments are not normally invited before their issuance, OMB was doing so in this case because there had been an "unusually high level of public interest," and because of the "evident importance and fundamental nature of the relevant issues." The initial deadline for comments was March 16, 2009, but the comment period was extended until March 31, 2009, because of "requests from a number of interested members of the public." In response to its request, OMB received 183 comments from the public, including Members of Congress, representatives of public interest and private sector interest groups, academicians, and individuals. The comments and suggestions varied widely, with some advocating a reduced role for OIRA, and others pushing for OIRA to assume a stronger role. Some of the comments proposed a stronger role for cost-benefit analysis, while others suggested that the analysis be used only when required by statute. On January 18, 2011, President Obama issued Executive Order 13563 on "Improving Regulation and Regulatory Review." In many respects, the new executive order simply restates many of the principles enunciated in Executive Order 12866, or in related documents. In fact, Section 1(b) of the new order specifically states that "This order is supplemental to and reaffirms the principles, structures, and definitions governing contemporary regulatory review that were established in Executive Order 12866 of September 30, 1993." Perhaps most notably, Section 6 of Executive Order 13563 requires covered federal agencies (most agencies, excluding independent regulatory agencies) to submit to OIRA within 120 days "a preliminary plan, consistent with law and its resources and regulatory priorities, under which the agency will periodically review its existing significant regulations to determine whether any such regulations should be modified, streamlined, expanded, or repealed so as to make the agency's regulatory program more effective or less burdensome in achieving the regulatory objectives." Although Section 5 of Executive Order 12866 had previously required agencies to develop a plan for retrospective reviews, this new requirement appears to require the development of a new plan. On February 2, 2011, OIRA administrator Cass R. Sunstein issued a memorandum to federal agencies elaborating certain aspects of Executive Order 13563. In particular, the memorandum described what agencies' plans for retrospective reviews should address (e.g., public participation, prioritization, and costs and benefits), and encouraged independent regulatory agencies to "give consideration" to the executive order's provisions, particularly the provisions relating to retrospective analysis. However, neither this memorandum nor Executive Order 13563 changed OIRA's regulatory review responsibilities. In addition to its regulatory review responsibilities under Executive Order 12866 and its multiple responsibilities under the Paperwork Reduction Act (paperwork review, information resources management, statistical policy and coordination, records management, privacy and security, and information technology), Congress has assigned OIRA a number of other specific functions related to the rulemaking and regulatory process. For example: The Unfunded Mandates Reform Act of 1995 (2 U.S.C. 1532-1538) generally requires agencies to prepare written statements describing the effects of their rules that are subject to the act's requirements. The act requires the director of OMB to collect those written statements and provide them to the Congressional Budget Office, to establish pilot programs to test innovative regulatory approaches, and to prepare an annual report on the implementation of the act. The OMB director has delegated these responsibilities to OIRA. The Small Business Regulatory Enforcement Fairness Act of 1996 (SBREFA) (5 U.S.C. 601 note) required EPA and OSHA to convene "advocacy review panels" before publishing proposed rules expected to have a significant economic impact on a substantial number of small entities. The act specifically requires the review panel to include full-time employees from OIRA as well as other agencies. SBREFA also contains provisions commonly referred to as the "Congressional Review Act," which (among other things) requires agencies to delay the effective date of "major" rules, and requires GAO to submit a report on those rules within 15 days of their issuance. SBREFA defines a major rule as one that the OIRA administrator concludes has resulted or is likely to result in (among other things) a $100 million annual effect on the economy. Section 515 of the Treasury and General Government Appropriations Act for Fiscal Year 2001 (44 U.S.C. 3504 (d)(1) and 3516), generally known as the "Data Quality Act" or the "Information Quality Act," directed OMB to take several actions (all of which were delegated to OIRA). Specifically, the act required OMB to issue governmentwide guidelines that "provide policy and procedural guidance to Federal agencies for ensuring and maximizing the quality, objectivity, utility, and integrity of information (including statistical information) disseminated by Federal agencies." OMB published those guidelines in final form on February 22, 2002. The act also required agencies to develop their own guidelines (which were reviewed by OMB), and to report to OMB on the number and nature of complaints received and how such complaints were handled by the agency. Section 624 of the Treasury and General Government Appropriations Act, 2001, (31 U.S.C. 1105 note), sometimes known as the "Regulatory Right-to-Know Act," requires OMB to prepare and submit with the budget an annual "accounting statement and associated report" containing an estimate of the costs and benefits (including quantifiable and nonquantifiable effects) of federal rules and paperwork, to the extent feasible, (1) in the aggregate, (2) by agency and agency program, and (3) by major rule. The accounting statement is also required to contain an analysis of impacts of federal regulation on state, local, and tribal governments, small businesses, wages, and economic growth. Similar one-year requirements were in previous appropriations acts. The same legislation requires OMB to include "recommendations for reform" in its cost-benefit reports. Rather than rely on its own expertise, OIRA decided to solicit suggestions from the public. For example, in March 2002, OIRA asked the public for recommendations to eliminate or modify existing rules as well as to expand or extend existing programs. In response, OIRA received more than 300 suggestions, which OIRA turned over to the appropriate agencies for prioritization. In February 2004, OIRA asked the public for suggested reforms of rules affecting the manufacturing sector. OIRA said it was focusing on manufacturing because of the relatively large impact that regulations have on that sector. The Small Business Paperwork Relief Act of 2002 ( P.L. 107-198 ) requires OMB to annually publish, in the Federal Register and on the Internet, a list of compliance assistance resources available to small businesses. The act also requires OMB to convene and chair a task force to study the feasibility of streamlining paperwork requirements on small businesses. The task force was required to file an initial report by the end of June 2003, and is required to file a second report by the end of June 2004. The E-Government Act of 2002 ( P.L. 107-347 ) requires the OIRA administrator to work with the administrator of the Office of Electronic Government to establish the strategic direction of the governmentwide e-government program and to oversee its implementation. OIRA has been particularly active in the Administration's e-rulemaking initiative. In the Treasury and General Government Appropriations Act, 2002 ( P.L. 107-67 ), Congress stated that about $6.3 million of OMB's $70.7 million appropriation was for OIRA, but stipulated that nearly $1.6 million of that amount should not be obligated until OMB "submits a report to the Committees on Appropriations that provides an assessment of the total costs and benefits of implementing Executive Order No. 13166." The conference report for OMB's appropriation for FY2004 (to accompany H.R. 2673 ) directed OIRA to submit a report to the House and Senate Committees on Appropriations by June 1, 2004, on "whether agencies have been properly responsive to public requests for correction of information pursuant to the (Data Quality Act)." Congress also sometimes limits OIRA's actions through riders on OMB's appropriation. For example, since 1983, language has been included in OMB's appropriation stating that none of the funds appropriated to OMB could be used for the purpose of reviewing any agricultural marketing orders issued by the Department of Agriculture. Marketing orders, which cover dozens of commodities from lemons to milk, basically keep prices up by regulating supplies, and had been targeted for elimination or amendment by President Reagan's task force on regulatory relief in the early 1980s. In response, Members of Congress have inserted this restriction in each subsequent appropriation bill, asserting that the Department of Agriculture, not OMB, has statutory authority in this area. In other cases, OIRA has taken on additional responsibilities, sometimes basing its actions on previous statutory or executive order authorities. For example: In December 2004, OIRA published a final bulletin establishing government-wide guidance aimed at enhancing the practice of peer review of government science documents. The bulletin applied to all "influential scientific information" and "highly influential scientific assessments." The final version of the bulletin gave agencies significantly greater discretion to decide when information required peer review than the September 2003 proposed bulletin, but OIRA retained significant authority in certain areas (e.g., when information is "highly influential" and requires more stringent peer review). In November 2005, OMB published a proposed bulletin "Good Guidance Practices," saying that it was concerned that agency guidance documents "may not receive the benefit of careful consideration accorded under the procedures for regulatory development and review. OMB did not cite any specific statutes or executive orders as authorizing the issuance of the bulletin, but did indicate that it was "responsible both for promoting good management practices and for overseeing and coordinating the Administration's regulatory policy." The bulletin would require agencies to develop written procedures for the approval of significant guidance documents, and to publish "economically significant" documents in the Federal Register and invite comments. In January 2006, OIRA published a proposed bulletin on agency risk assessment practices for public comment and peer review by the National Academy of Sciences (NAS). However, in January 2007, an NAS committee reported that the proposed bulletin was "fundamentally flawed" and should be withdrawn. In September 2007, OMB withdrew the proposed bulletin and instead issued a memorandum reiterating and reinforcing principles for risk assessment that were originally written in 1995, indicating that agencies should comply with the principles. For 30 years, OIRA has played a central role in the federal rulemaking process. Although some argued early in OIRA's history that the office's regulatory review role was unconstitutional, few observers continue to hold that view. No court has directly addressed the constitutionality of the OIRA regulatory review process, but in 1981 (the year that OIRA was created) the D.C. Circuit said the following: The court recognizes the basic need of the President and his White House staff to monitor the consistency of agency regulations with Administration policy. He and his advisors surely must be briefed fully and frequently about rules in the making, and their contributions to policymaking considered. The executive power under our Constitution, after all, is not shared—it rests exclusively with the President. OIRA is located within the Executive Office of the President and is the President's direct representative in the governmentwide rulemaking process. As Executive Order 12866 states, OIRA is the "repository of expertise on regulatory issues" within the Executive Branch, and is uniquely positioned both within OMB (with its budgetary influence) and within the federal rulemaking process (reviewing and commenting on rules just before they are published in the Federal Register ) to enable it to exert maximum influence. Variations in how OIRA operates—as a gatekeeper or a counselor—are largely a function of the wishes of the President that the office serves. For example, in a June 2001 article in Harvard Law Review , Elena Kagan posited that, while it is generally acknowledged that President Reagan used OIRA's review function as a tool to control the policy and political agenda in an anti-regulatory manner, President Clinton did much the same thing to accomplish pro-regulatory objectives. She said he did so by exercising directive authority and asserting personal ownership over a range of agency actions, thereby making them "presidential" in nature. She also characterized this emergence of enhanced methods of presidential control over the regulatory state—what she termed the "presidentialization of administration"—as "the most important development in the last two decades in administrative process." Other observers, however, view OIRA (like other executive branch agencies) as having more of a shared allegiance between the President and the Congress. They point out that OIRA was created by Congress, and has been given a number of statutory responsibilities through the PRA and other laws. Nevertheless, even supporters of a strong legislative perspective recognize that OIRA is part of the Executive Office of the President, and that Congress gave OIRA its responsibilities because of its strategic position within that office. With both statutory and executive order responsibilities, OIRA embodies a broader tension between Congress and the President for control of administrative agencies. Although major differences of opinion exist among observers of the federal rulemaking process regarding the appropriateness of OIRA's regulatory review role, the broad reach and influence of the office's is undebatable. Rulemaking agencies formally challenge OIRA's returns and "suggestions" for change only rarely, and sometimes refrain from even submitting draft rules for review if they believe they will be opposed by OIRA. Regulated entities also recognize OIRA's influence, and seem to view the office as a "court of second resort" if they are unable to influence regulatory agencies to their position directly. Congress also recognizes the importance that OIRA plays in the rulemaking process, and sometimes holds hearings examining OIRA's implementation of its responsibilities pursuant to various statutes and executive orders. Proposals for changes to OIRA's authority and responsibilities have focused on such issues as (1) providing a statutory underpinning for regulatory reviews, (2) increasing or decreasing the office's funding and staffing, (3) including independent agencies' rules under the office's regulatory review function, and (4) improving the transparency of OIRA's regulatory review processes. As noted previously, Congress has enacted legislation expanding OIRA's statutory responsibilities, and has considered (but not enacted) legislation that would provide a statutory basis for OIRA's regulatory review function. For example, in the 106 th Congress, section 632 of S. 746 (the "Regulatory Improvement Act of 1999") would have required the President (via OMB and OIRA) to "establish a process for the review and coordination of Federal agency regulatory actions." The proposed legislation also would have placed in statute many of the transparency requirements in Executive Order 12866. Congress has also considered legislation that would affect OIRA as part of broader OMB changes. For example, during the 107 th Congress, proposed legislation was introduced ( H.R. 616 ) that would have established an Office of Management within the Executive Office of the President and redesignated OMB as the Office of the Federal Budget. As part of that process, OIRA and other offices within OMB would have been abolished and their functions and authorities transferred to the new Office of Management. Neither of these bills was enacted. OIRA does not have a specific line item in the budget, so its funding is part of OMB's appropriation. Similarly, OIRA's staffing levels are allocated from OMB's totals. Although OIRA staffing increased somewhat during the Bush Administration, OIRA has still fewer staff than it had when its regulatory review function was first established in 1981. Currently, about 30 to 40 OIRA desk officers and branch chiefs review about 3,000 agency information collection requests each year and between 500 and 700 significant rules each year. At various times in its history, certain Members of Congress have attempted to reduce funding for OIRA in order to signal congressional displeasure with the office's actions. Other observers, however, believe that OIRA's funding should be increased, not reduced, arguing that a relatively small amount of additional resources for OIRA could yield substantial benefits. At other times, proposed legislation has been introduced designating how OIRA staff should be used. For example, in the 108 th Congress, a provision in H.R. 2432 as originally introduced would have required the OMB Director to "assign, at a minimum, the equivalent of at least 2 full time staffers to review the Federal information collection burden on the public imposed by the Internal Revenue Service." The Internal Revenue Service accounts for more than 80% of the estimated paperwork burden, but OIRA indicated that it devoted less than one FTE to reviewing the agency's paperwork requests (because much of the burden is mandated by statute). The Bush Administration objected to this specific direction of OIRA staff, so the sponsors of the bill agreed to delete this requirement before it was approved by the House of Representatives in May 2004. Although several of the statutes that OIRA helps to administer include rules issued by independent regulatory agencies (e.g., the PRA, the Regulatory Flexibility Act, the Congressional Review Act, and the Data Quality Act), the executive orders that have established regulatory review within OIRA have explicitly excluded rules issued by those agencies. Some observers have suggested that this limitation be lifted, arguing that independent regulatory agencies issue regulations that have a significant impact on the economy (about $230 billion per year according to OIRA) but their rules often contain little quantitative information on regulatory costs and benefits. Those opposed to this expansion in OIRA's duties point out that independent regulatory agencies were established to be relatively independent of the President, and inclusion of their rules under OIRA's would be counter to this purpose. In response, proponents argue that independent regulatory agencies' rules are already reviewed for purposes such as paperwork clearance and ensuring that data quality requirements are met, so examining the substance of the rules is just an extension of those reviews. One consistent area of concern to some observers has been the lack of transparency of the OIRA review process to the public. Notwithstanding recent improvements, they argue that it is difficult for the public to know with any degree of certainty what changes OIRA has suggested to agencies' draft rules, what contacts OIRA has made with regulated entities and other outside parties regarding those rules, or whether documents were exchanged between OIRA and the agencies. In its September 2003 report, GAO said that the documentation that agencies are required to provide showing the changes made at OIRA's suggestion or recommendation were not always available and, when done, were not always clear or consistent. GAO also said that the transparency requirements incumbent on OIRA were not always clear, and recommended several improvements. For example: Although OIRA indicated that it can have its greatest impact on agencies' rules during informal reviews before review packages are formally submitted, OIRA indicated that agencies only had to disclose the changes made at OIRA's suggestion during formal review (some of which were as short as one day). GAO recommended that OIRA define this requirement in the executive order to include informal reviews, just as it did with regard to the requirements involving the office's communications with outside parties. As noted previously, the "consistent with change" code in OIRA's database does not differentiate between OIRA- or agency-initiated changes, or changes that were major or minor in nature. GAO recommended that the database be changed to more clearly indicate which rules were substantively changed at OIRA's suggestion. GAO also recommended refinements to the executive order's requirements applicable to OIRA (e.g., more clearly indicating on its website the regulatory actions being discussed at meetings with outside parties and the affiliations of the participants) and the requirements applicable to the agencies (e.g., defining the types of "substantive" changes that agencies should disclose). In commenting on GAO's report, the administrator of OIRA said that the office planned to review its implementation of the executive order's transparency requirements and would work to improve the clarity of its meeting log. The administrator did not, however, believe that changes made during informal OIRA reviews should be disclosed—even though he said that OIRA can have its greatest influence during informal reviews. Disclosure of these informal review changes could be required through an administrative directive issued by the OIRA administrator or, alternatively, through legislation. In April 2009, GAO again examined the changes made during OIRA's reviews, and concluded that OIRA had implemented only one of the eight recommendations in its 2003 report. GAO recommended that OIRA (1) define in guidance what types of changes made as a result of those reviews are substantive and need to be publicly identified, (2) instruct agencies to clearly identify those changes made at OIRA's suggestion or recommendation, (3) direct agencies to clearly state in their final rules whether substantive changes were made to their rules as a result of OIRA's reviews, and (4) standardize how agencies label documentation of these changes in their rulemaking dockets. OMB said that these recommendations had merit and warranted further consideration. In the 112 th Congress, H.R. 214 would, if enacted, establish a "Congressional Office of Regulatory Analysis." Among other things, the office would be required to "provide to the Committee on Oversight and Government Reform of the House of Representatives and the Committee on Homeland Security and Governmental Affairs of the Senate, information that will assist the committee in the discharge of all matters within its jurisdiction, including information with respect to its jurisdiction over authorization and oversight of the Office of Information and Regulatory Affairs of the Office of Management and Budget."
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The Paperwork Reduction Act of 1980 created the Office of Information and Regulatory Affairs (OIRA) within the Office of Management and Budget (OMB). Executive Order 12291, issued by President Reagan in 1981, gave OIRA the responsibility to review the substance of agencies' regulatory actions before publication in the Federal Register. The office's regulatory review role was initially highly controversial, and it has been criticized at different times as being both too active and too passive regarding agencies' rules. Although OIRA has a number of specific statutory responsibilities (e.g., paperwork review and regulatory accounting), as a component of OMB it is part of the Executive Office of the President, and helps ensure that covered agencies' rules reflect the President's policies and priorities. OIRA's current regulatory review responsibilities are detailed in Executive Order 12866, which was issued by President Clinton in 1993. The office reviews significant draft rules from agencies (other than independent regulatory agencies) at both the proposed and final rulemaking stages, and also informally reviews certain rules before they are formally submitted. For rules that are "economically significant" (most commonly defined as those having a $100 million impact on the economy), OIRA also reviews the economic analyses. Since 1994, OIRA has reviewed between 500 and 700 significant proposed and final rules each year, and can clear the rules with or without changes, return the rules to the agencies for reconsideration, or encourage the agencies to withdraw them. The executive order also requires OIRA or the rulemaking agencies to disclose certain elements of the review process to the public, including the changes made at OIRA's recommendation. A September 2003 report by the General Accounting Office indicated that OIRA had a significant effect on more than a third of the 85 rules in the study, but OIRA's most common effect was to suggest changes to explanatory language in the preambles to the rules. At the start of the George W. Bush Administration, OIRA made a number of changes to its review process, including increased use of return letters, added emphasis on economic analysis to support the rules, and improvements in the transparency of the office's review process. Overall, in contrast to the "counselor" role it played during the Clinton Administration, OIRA appeared to have returned to the "gatekeeper" role that it had during its first 12 years of existence. An April 2009 report by GAO again noted changes made to rules at OIRA's suggestion. Possible legislative issues involving OIRA include codification of the office's review function and principles, increasing or decreasing the office's funding and staffing, adding review of rules from independent regulatory agencies, and improvements in the transparency of OIRA's review process. In January 2009, President Obama requested recommendations from the Director of OMB for possible changes to Executive Order 12866. In January 2011, President Obama issued Executive Order 13563, which reaffirmed many of the principles in Executive Order 12866, but did not change OIRA's responsibilities. This report will be updated if there are changes in OIRA's regulatory review responsibilities. For information, see CRS Report RL33862, Changes to the OMB Regulatory Review Process by Executive Order 13422, by [author name scrubbed]; CRS Report RL32240, The Federal Rulemaking Process: An Overview, by [author name scrubbed]; and CRS Report RL32356, Federal Regulatory Reform: An Overview, by [author name scrubbed].
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In July 2005, President Bush announced his intention to conclude a peaceful nuclear cooperation agreement with India. India, which is not a party to the Nuclear Nonproliferation Treaty (NPT), is considered under U.S. law to be a non-nuclear weapon state, yet has tested nuclear weapons and has an ongoing nuclear weapons program. For these reasons, the President would need to make certain waivers and determinations pursuant to the Atomic Energy Act (AEA) before nuclear cooperation with a state such as India could proceed. The Administration proposed legislation (introduced as H.R. 4974 / S. 2429 ) in March 2006 that, in addition to providing waivers of relevant provisions of the AEA (Sections 123 a. (2), 128, and 129), would have allowed a nuclear cooperation agreement with India to enter into force without a vote from Congress, as though it conformed to AEA requirements. On July 26, 2006, the House passed H.R. 5682 by a vote of 359 to 68. On November 16, 2006, the Senate passed H.R. 5682 by a vote of 85 to12, substituting the text of S. 3709 as an engrossed amendment; the Senate insisted on its amendment, necessitating a conference to resolve differences between the bills. On December 7, conferees filed a conference report, and on December 8, the House approved the conference report by a vote of 330 to 59; the Senate approved the conference report by unanimous consent in the early hours of December 9. On December 18, President Bush signed the bill into law, P.L. 109-401 . His signing statement is discussed in more detail below. The House International Relations Committee met on June 27, 2006 to consider H.R. 5682 , "United States and India Nuclear Cooperation Promotion Act of 2006," introduced on June 26 by Representative Hyde. The Committee voted to adopt 6 of 12 amendments (one was withdrawn): Representative Royce offered an amendment to ensure that nothing in the act shall be interpreted as permitting any civil nuclear cooperation with India that would in any way assist, encourage, or induce India to manufacture or otherwise acquire nuclear weapons (Section 4 (d) (1)); Representative Sherman offered an amendment to strengthen one of the determinations the President must make to implement the waivers pertaining to the Nuclear Suppliers Group (NSG), stipulating that the required NSG decision would not permit nuclear commerce with any other non-nuclear weapon state that does not have full-scope International Atomic Energy Act (IAEA) safeguards (Section 4 (b) (7)). Representative Schiff offered an amendment with three components: to add a provision to U.S. policy with respect to South Asia (Section 3 (b)(7)) encouraging India not to increase its production of fissile material at military facilities pending a multilateral moratorium on production of such material for nuclear weapons; to add a reporting requirement for the Presidential submission to implement the waivers (Section 4 (c) (2) (I)) on steps taken to ensure the U.S. transfers will not be replicated by India or used in its military facilities and that U.S. nuclear fuel supply does not facilitate military production of high-enriched uranium or plutonium; and to add a reporting requirement for an annual report on the same (Section 4 (o) (2) (C)). Representative Crowley offered an amendment to add a requirement (Section 4 (o)(3)) for an annual report on new Indian nuclear facilities. Representative Berkley offered two amendments related to India's spent fuel disposal: an annual report describing the disposal of spent nuclear fuel from India's civil nuclear program (Section 4 (o) (4), and a statement of policy that any spent civilian nuclear fuel in India that might be stored in the United States is considered by Congress under existing procedures of the Atomic Energy Act (Section 3 (b) (7)). An amendment by Ms. Berkley to prohibit any Indian spent fuel from being stored in the United States was rejected by a vote of 15-19. The Committee also voted down four other amendments, including two by Representative Berman designed to place limits on U.S. cooperation until India halts production of fissile material for nuclear weapons. The first Berman amendment, rejected by a vote of 13-32, sought to condition the President's use of waiver authority (by adding a new determination by the President in Section 4 (b) of the bill) on India's adherence to a unilateral or multilateral moratorium or a multilateral treaty prohibiting the production of fissile material for nuclear weapons. The second amendment, rejected by a vote of 12-31, sought to restrict transfers of U.S. nuclear material under a cooperation agreement until such time that India halted fissile material production for weapons, either by adhering to a unilateral or multilateral moratorium, or a multilateral treaty. The Committee also rejected by a vote of 10-32 an amendment by Representative Sherman to condition the President's use of waiver authority on an additional determination, under Section 4 (b) of H.R. 5682 , that India's nuclear weapons program was not using more domestic uranium than it had before July 2005. The amendment would have attached an annual certification that required termination of nuclear cooperation if the certification could not be made. Finally, the Committee rejected, by a vote of 4-37, an amendment by Representative Lee that would have required India to join the Nuclear Nonproliferation Treaty (NPT) before the President could exercise his waiver authority. The Committee on Rules held a hearing on July 25 th to consider amendments to H.R. 5682 and procedures for handling the bill on the floor. H. Res 947 waived all points of order against the bill, specified the allowed amendments and limited floor debate to one hour. The following six amendments were allowed to be offered on the floor: Representatives Hyde (IL)/Lantos (CA): Manager's amendment, containing technical and conforming changes to the text, as well as one substantive change: removing an amendment proposed by Representative Sherman and adopted during the full committee markup relating to subsection 4(b)(7). Representative Stearns (FL): Reinforces the intent of Congress that the nuclear cooperation into which the governments of the United States and India would enter is for peaceful, productive purposes, not military. Representatives Jackson-Lee (TX)/Burton (IN): Sense of Congress declaring the importance of the South Asia region and urging the continuation of the United States' policy of engagement, collaboration, and exchanges with and between India and Pakistan. Representative Sherman (CA): Requires that, before any nuclear cooperation with India can go forward, and every year thereafter, the President must certify that during the preceding year India has not increased the level of domestic uranium it sends through its weapons program. Baseline for the determination under the amendment is the 365 day period preceding the July 18, 2005, Bush-Singh declaration on nuclear cooperation. Representative Berman (CA): Restricts exports of uranium and other types of nuclear reactor fuel (defined as "source material" and 'special nuclear material' in the Atomic Energy Act of 1954) to India until the President determines that India has halted the production of fissile material (i.e., plutonium and highly enriched uranium) for use in nuclear weapons. Representative Fortenberry (NE): Provides Congress with the ability to assess, to the extent possible, whether annual levels of India's nuclear fissile production may imply a possible violation of Article I of the Nuclear Nonproliferation Treaty. Three amendments were not allowed for consideration on the floor. These were an amendment by Representative Woolsey that would have prohibited the export of any nuclear-related item to India until the President has implemented and observed all NPT obligations and commitments of the United States and has revised United States' policies relating to nuclear weapons accordingly; an amendment by Representative Barbara Lee that would have required India to place all electricity-producing reactors under safeguards, undertake a binding obligation not to transfer any nuclear-weapon-related information or technology (per Article I of the NPT) and take concrete steps toward disarmament; and an amendment by Representatives Markey and Upton that would have prohibited nuclear cooperation with India from commencing until the President has determined that the United States has secured India's full and active support in preventing Iran from acquiring weapons of mass destruction. The House first considered H. Res 947, which, after several objections to limits on time and the exclusion of certain amendments by Representative Markey and others, passed by a vote of 311 to 112. Of the six amendments considered, three passed by voice vote (the Managers' amendment, Representatives Jackson-Lee/Burton's amendment, and Representative Fortenberry's amendment); Representative Stearn's amendment was recorded as 414-0, and the amendments offered by Representatives Sherman and Berman were defeated (the votes, respectively, were 155 to 268, and 184 to 241). Representative Markey made a motion to recommit the legislation back to the House International Relations Committee with instructions to include language that would require that nuclear cooperation with India could only commence after the president has determined that the United States has secured India's full support in preventing Iran from acquiring weapons of mass destruction. That motion to recommit was defeated in a vote of 192 to 235. The House passed H.R. 5682 , "Henry J. Hyde United States and India Nuclear Cooperation Promotion Act of 2006," as amended, by 359 to 68 on July 26, 2006. On June 29, 2006, the Senate Foreign Relations Committee considered original legislation, S. 3709 , to create an exception for India from relevant provisions of the Atomic Energy Act (See S.Rept. 109-288 ). The Committee voted to adopt 2 of 3 amendments: Senator Chafee offered an amendment making it U.S. policy to ensure that exports of nuclear fuel to India did not encourage India to increase its production of fissile material (Section 103 (9)); Senator Obama offered an amendment to ensure that the United States did not encourage other states to continue nuclear exports to India, if the United States exports to India terminated under U.S. law (Section 102 (6)). The Committee rejected an amendment by Senator Feingold requiring an additional presidential determination in Section 105 of the bill by a vote of 5-13. The Feingold amendment would have conditioned the President's use of waiver authority on a determination that U.S. civil nuclear assistance to India would in no way assist, encourage, or induce India to manufacture nuclear weapons or nuclear devices. The amendment was identical in text to the Schiff amendment to H.R. 5682 , but sought instead to require a determination rather than a report. An initial attempt to bring S. 3709 to the Senate floor in September failed to gain unanimous consent agreement. Among several issues, two apparently delayed the bill—language in Title II pertaining to implementing legislation for the U.S. Additional Protocol, and potential concern about whether the United States would accept U.S.-origin spent fuel back from Indian reactors. In the first case, concerns appeared to be mostly resolved by incorporating language into a manager's amendment, with the exception of two issues raised by Senator Ensign in two amendments he introduced on the floor on November 16 th that did not pass. These are described in more detail below. In the second case, the concern about disposition of Indian spent fuel was dropped prior to the bill's reaching the floor. On November 15, 2006, the Senate agreed by unanimous consent to consider S. 3709 , at a time to be determined by the Majority Leader, in consultation with the Democratic Leader. The unanimous consent agreement specified that a managers' amendment would serve as the original text for the purpose of further amendment; and that the only other amendments to be considered would include the following: Senators Ensign (considered in closed session), Reed, Levin, Obama, Dorgan (two amendments), Feingold, Boxer, Feinstein, Harkin, Bingaman (up to seven amendments), Kennedy, and Dodd. Of these, Senators Reed, Levin, Kennedy, and Dodd did not introduce amendments, and Senator Bingaman introduced three, rather than seven. All but Senator Feingold's amendment were considered to be relevant second-degree amendments and related to the subject matter of the bill. Further, the unanimous consent agreement provided that once the bill was read a third time, the Senate would begin consideration of H.R. 5682 , the House-passed companion, striking all text after the enacting clause and inserting the amended text of S. 3709 in its place. Senator Lugar introduced the bill and offered a section-by-section analysis. The following amendments, in brief, were passed either by unanimous consent or voice vote without debate: Senator Lugar introduced a manager's amendment, which contained new language in Title II related to the Additional Protocol ( S.Amdt. 5168 ; unanimous consent); Senator Obama introduced an amendment containing a statement of U.S. policy (which became Section 114) that any nuclear power reactor fuel reserve provided to the Government of India for use in safeguarded civilian nuclear facilities should be commensurate with reasonable reactor operating requirements ( S.Amdt. 5169 ; voice vote); Senator Harkin introduced an amendment requiring the President to determine, before executing his waiver authority, that India was supporting U.S. and international efforts to dissuade, sanction, and contain Iran's nuclear program ( S.Amdt. 5173 ; unanimous consent); Senator Bingaman introduced an amendment to add a reporting requirement to Section 108 (b) on the amount of uranium mined in India during the previous year; the amount of such uranium that has likely been used or allocated for the production of nuclear explosive devices; and the rate of production in India of fissile material for nuclear explosive devices and of nuclear explosive devices as well as an analysis as to whether imported uranium has affected the rate of production in India of nuclear explosive devices ( S.Amdt. 5179 ; unanimous consent); Senator Bingaman introduced an amendment to add a new Section in Title I (which became Section 115) requiring the Secretary of Energy to create a Cooperative Threat Reduction Program with India ( S.Amdt. 5180 ; unanimous consent). Senator Lugar's amendment, S.Amdt. 5168 contained minor changes in Title I of S. 3709 as reported out of Committee. One potentially significant change was the deletion of a Sense of Congress on licensing policy in Section 106. In Title II, however, which contains the implementing legislation for the U.S. Additional Protocol, significant provisions were added. These included Section 202 on findings, Section 251 (3), and Sections 254, 261, 262 and 271-275. In his opening statement, Senator Lugar reported that "a compromise was reached between the Administration, the Senate Foreign Relations Committee, and those Senators who expressed concern about the IAEA Additional Protocol implementing legislation." These additional provisions appear to make explicit existing U.S. rights to exclude inspectors and certain kinds of inspection activities under the Additional Protocol. Several of the modifications address the use of environmental sampling, both for specific locations and for detecting anomalies in a wide-area mode. Other amendments were introduced, debated, and defeated. These included the following: Senator Bingaman introduced an amendment requiring a Presidential determination that the United States and India are taking specific steps to conclude a multilateral treaty on the cessation of fissile material for weapons before U.S. nuclear equipment or technology could be exported under the future agreement for cooperation and that no nuclear materials may be exported to India unless the President has determined that India has stopped producing fissile materials for weapons ( S.Amdt. 5174 ; Vote 26-74); Senator Dorgan introduced an amendment to add a declaration of U.S. policy to continue to support implementation of United Nations Security Council Resolution 1172 ( S.Amdt. 5178 ; Vote 27-71); Senator Ensign introduced an amendment to Title II of the bill related to the Additional Protocol that would have required any inspection equipment, materials and resources to have been purchased, owned, inspected, and controlled by the United States ( S.Amdt. 5181 ; Vote 27-71); Senator Dorgan introduced an amendment that would have required the President to determine, before executing his waiver authority, that India has committed to putting all electricity-producing nuclear reactors under safeguards, has undertaken an obligation not to proliferate nuclear weapons technology, has joined a legally-binding nuclear test moratorium; is verifiably reducing its nuclear weapons stockpile, and has undertaken an obligation to agree to ultimate disarmament ( S.Amdt. 5182 ; voice vote); Senator Feingold introduced an amendment that would have required the President to determine, before executing his waiver authority, that the scope and content of the cooperation agreement would not allow India to use U.S. technology, equipment or material in unsafe guarded facilities, would not result in India replicating U.S. technology nuclear fuel and would not facilitate the increased production by India of fissile material in unsafeguarded nuclear facilities ( S.Amdt. 5183 ; Vote 25-71); Senator Boxer introduced an amendment that would have required the President to determine, before he could execute his waiver authority, that India had halted military-to-military contacts with Iran ( S.Amdt. 5187 ; Vote 38-59). Most of these amendments were characterized by Senators Lugar and Biden as "killer amendments." Senator Bingaman described his amendment as implementing a proposal by former Senator Nunn. Senator Dorgan's amendment supporting U.S. implementation of U.N. Security Council 1172 sought to reaffirm U.S. support for the steps endorsed by the U.N. Security Council following the 1998 Indian and Pakistani nuclear tests, including limits on those nuclear programs such as a ban on deployments, and fissile material production for weapons, as well as a commitment on all states' parts not to sell nuclear technology to India and Pakistan. Senator Dorgan's other amendment, S.Amdt. 5182 , was similar to Representative Barbara Lee's amendment to the House bill that was rejected by the House Rules Committee. That amendment attempted to commit India to undertake the same obligations as other nuclear weapon states under the NPT. Senator Feingold's amendment was similar to the one he introduced in Committee that was rejected. Although modified to address objections voiced in the mark-up, the amendment was described by Senator Lugar on the floor as requiring a certification that would have been "impossible to make." Senator Ensign's amendment was debated in closed session, apparently because of the potential need to discuss classified information relating to the protection of national security information during IAEA inspections under an Additional Protocol in the United States. On December 7, 2006, conferees on H.R. 5682 filed Conference Report H.Rept. 109-721 . The bill essentially combines many of the provisions of both the House and Senate versions. Specific differences are highlighted in Table 1 , below. Of note, the Senate provisions to ban enrichment, reprocessing, and heavy water production cooperation with India (now Section 104. (d) (4)) and create an end-use monitoring program (now Section 104.(d) (5)) prevailed in the conference bill, as did Title II, which includes the implementing legislation of the U.S. Additional Protocol. The so-called Harkin amendment, which added a determination that India was fully and actively supporting U.S. and international efforts to contain, dissuade, and sanction Iran for its nuclear weapons program, did not remain as a determination, but became two reporting requirements: first, as a one-time report when the Section 123 agreement is submitted to Congress (now Section 104.(c)(2)(H)) and as an annual reporting requirement (now Section 104.(g)(2)(E)). On December 18, 2006, President Bush signed the "Henry J. Hyde United States-India Peaceful Atomic Energy Cooperation Act of 2006" into law ( P.L. 109-401 ). President Bush noted that the act "will strengthen the strategic relationship between the United States and India." In particular, President Bush stated that the executive branch would construe two sections of the bill as "advisory" only: policy statements in Section 103 and the restriction contained in Section 104 (d) (2) on transferring items to India that would not meet NSG guidelines. On the first, the President cited the Constitution's "commitment to the presidency of the authority to conduct the Nation's foreign affairs;" on the second, the President raised the question of whether the provision "unconstitutionally delegated legislative power to an international body." In other words, the President was questioning whether Congress were ceding authority to approve U.S. exports to the Nuclear Suppliers Group. However, U.S. officials, including Secretary of State Rice, have formally told Congress multiple times that the United States government would abide by NSG guidelines. The President's signing statement also noted that the executive branch would construe "provisions of the Act that mandate, regulate, or prohibit submission of information to the Congress, an international organization, or the public, such as sections 104, 109, 261, 271, 272, 273, 274, and 275, in a manner consistent with the President's constitutional authority to protect and control information that could impair foreign relations, national security, the deliberative processes of the Executive, or the performance of the Executive's constitutional duties." This could suggest that the executive branch might limit the scope of reporting required by Congress in those sections. CRS Report RL33016, U.S. Nuclear Cooperation with India: Issues for Congress , by [author name scrubbed]. CRS Report RL33292, India ' s Nuclear Separation Plan: Issues and Views , by [author name scrubbed]. CRS Report RL33072, U.S.-India Bilateral Agreements and " Global Partnership " , by [author name scrubbed]. CRS Report RS22474, Banning Fissile Material Production for Nuclear Weapons: Prospects for a Treaty (FMCT) , by [author name scrubbed].
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In March 2006, the Bush Administration proposed legislation to create an exception for India from certain provisions of the Atomic Energy Act to facilitate a future nuclear cooperation agreement. After hearings in April and May, the House International Relations Committee and the Senate Foreign Relations Committee considered bills in late June 2006 to provide an exception for India to certain provisions of the Atomic Energy Act related to a peaceful nuclear cooperation agreement. On July 26, 2006, the House passed its version of the legislation, H.R. 5682, by a vote of 359 to 68. On November 16, 2006, the Senate incorporated the text of S. 3709, as amended, into H.R. 5682 and passed that bill by a vote of 85 to 12. The Senate insisted on its amendment, and a conference committee produced a conference report on December 7, 2006. The House agreed to the conference report (H.Rept. 109-721) on December 8 in a 330-59 vote; the Senate agreed by unanimous consent to the conference report on December 9. The President signed the bill into law (P.L. 109-401) on December 18, 2006. The Senate and House versions of the India bill contained similar provisions, with four differences. The Senate version contained an additional requirement for the President to execute his waiver authority, an amendment introduced by Senator Harkin and adopted by unanimous consent that the President determine that India is "fully and actively participating in U.S. and international efforts to dissuade, sanction and contain Iran for its nuclear program." This provision was watered down into a reporting requirement in the conference report. The Senate version also had two unique sections related to the cooperation agreement, Sections 106 and 107, both of which appear in the conference report. Section 106 (now Section 104 (d) (4)) prohibits exports of equipment, material or technology related for uranium enrichment, spent fuel reprocessing or heavy water production unless conducted in a multinational facility participating in a project approved by the International Atomic Energy Agency (IAEA) or in a facility participating in a bilateral or multilateral project to develop a proliferation-resistant fuel cycle. Section 107 (now Section 104 (d) (5)) would establish a program to monitor that U.S. technology is being used appropriately by Indian recipients. Finally, the Senate version also contained the implementing legislation for the U.S. Additional Protocol in Title II, which was retained in the conference bill. Minor differences in reporting requirements and statements of policy are compared in Table I of this report. This report provides a thematic side-by-side comparison of the provisions of the conference report with H.R. 5682 as passed by the House and by the Senate, and compares them with the Administration's initially proposed legislation, H.R. 4974/S. 2429, and the conference report. The report concludes with a list of CRS resources that provide further discussion and more detailed analysis of the issues addressed by the legislation summarized in the table. This report will not be updated.
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Prompted in part by proposals to close the detention facility or transfer detainees to the United States, the continued detention of alleged enemy combatants at the U.S. Naval Station in Guantanamo Bay, Cuba, was the subject of considerable interest during the 111 th Congress. Seven enacted measures contain provisions that directly restrict the transfer or release of Guantanamo detainees, particularly into the United States. Many of the restrictions applied only to funds appropriated during the 2010 fiscal year. However, Congress temporarily extended conditions imposed by FY2010 appropriations measures through March 4, 2011. Additionally, the Ike Skelton National Defense Authorization Act for FY2011 (2011 NDAA, P.L. 111-383 ), which was signed into law on January 7, 2011, contains blanket restrictions on the use of military funds either to transfer or release Guantanamo detainees into the United States, or assist in the transfer or release of such persons into the country. The act also imposes restrictions on the transfer of detainees to the custody of certain foreign countries, in an effort to minimize the likelihood that transferred detainees return to hostilities. This report surveys provisions restricting transfer, together with other provisions enacted in the 111 th Congress relating to Guantanamo detainees. For more detailed explorations of the legal issues related to the potential closure of the detention facility or the transfer, release, and treatment of detainees, see CRS Report R40139, Closing the Guantanamo Detention Center: Legal Issues , by [author name scrubbed] et al. In 2001, Congress authorized the President's use of "all necessary and appropriate force" against those responsible for the 9/11 terrorist attacks. Pursuant to that authority, the United States has captured suspected Al Qaeda and Taliban members and detained them at several locations, including Guantanamo. Most of the 779 persons detained at Guantanamo at some point during post-9/11 military operations have been transferred to a foreign government for continued detention or release. As of January 11, 2010, 173 detainees continue to be held at the facility. A number of issues concerning the remaining detainees are unsettled. In some instances, the United States has encountered difficulties repatriating or resettling Guantanamo detainees who are no longer believed to be enemy belligerents, either because it has been unable to find a country willing to accept them, or because of concerns that a detainee would face torture if transferred to a particular country. Other issues have arisen concerning whether to try certain detainees for criminal offenses in either military or civilian courts, or whether some detainees may lawfully be held for the duration of the conflict with Al Qaeda and the Taliban so as to prevent their return to hostilities. Since its inception, the policy of detaining suspected belligerents at Guantanamo has been the subject of controversy. Shortly after taking office, President Barack Obama issued three executive orders affecting U.S. policy towards Guantanamo detainees. Most notably, Executive Order 13492 called for the Guantanamo detention facility to be closed as soon as practicable, and no later than January 22, 2010. It also ordered an immediate review of each detainee's status by a special task force and temporarily halted all proceedings before military commissions. Although the order's deadline for the closure of the Guantanamo detention facility was not met, the Obama Administration has stated that it remains committed to closing the facility as expeditiously as possible. Military commission proceedings for some Guantanamo detainees charged with war crimes have also resumed. Two additional executive orders addressed overall wartime detention policy. One limited the methods for interrogating persons in U.S. custody (as part of any armed conflict) to those listed in the Army Field Manual on Human Intelligence Collector Operations, although it provides an exception for interrogations by the Federal Bureau of Investigation (FBI), stating that the FBI may "continu[e] to use authorized, non-coercive techniques of interrogation that are designed to elicit voluntary statements and do not involve the use of force, threats, or promises." Another executive order established the Special Task Force on Detainee Disposition, tasked with "identif[ying] lawful options" for the disposition of Guantanamo detainees and others captured by the United States. Because executive orders can be revoked or modified by subsequent presidential directives, legislation would be necessary to make the President's policies permanent. Likewise, Congress may reverse or adjust the approach of the executive orders by statute in any area in which it has the authority to act. Key issues implicated by the potential closure of the Guantanamo detention facility include the transfer or release of detainees and procedures for prosecuting them or assessing their enemy belligerency status. Some members of Congress have noted that issues related to the disposition of the remaining detainees complicate any legislative actions to fund, mandate, or prohibit closure of the detention facility. For example, when introducing a bill proposing a timeline for closure of the facility, Senator Dianne Feinstein noted that "the hard part about closing Guantanamo is not deciding to go do it; it is figuring out what to do with the remaining detainees." Thus, much of the legislative activity related to Guantanamo has focused on the transfer, release, and treatment of detainees. Proposed transfers to the United States have garnered particular attention. In November 2009, the U.S. Department of Justice announced that five Guantanamo detainees would be transferred to New York for prosecution for criminal offenses related to the 9/11 terrorist attacks (one Guantanamo detainee had already been transferred to the United States in June 2009 to face criminal charges related to the bombing of the U.S. embassies in Tanzania and Kenya ). In December 2009, the President issued a memorandum directing the acquisition of the Thomson Correctional Center, a maximum-security facility in Illinois, so that designated Guantanamo detainees could be transferred there for continued detention. The implementation of these proposals was reportedly placed on hold, with alternative approaches being developed. Provisions relating to Guantanamo detainees were enacted as part of nine laws in the 111 th Congress. Seven of these measures limit the use of funds to transfer or release Guantanamo detainees in the United States: the 2009 Supplemental Appropriations Act ( P.L. 111-32 ); the Department of Homeland Security Appropriations Act, 2010 ( P.L. 111-83 ); the 2010 National Defense Authorization Act ( P.L. 111-84 ); the Department of the Interior, Environment, and Related Agencies Appropriations Act, 2010 ( P.L. 111-88 ); the Consolidated Appropriations Act, 2010 ( P.L. 111-117 ); the Department of Defense Appropriations Act, 2010 ( P.L. 111-118 ); and the 2011 NDAA ( P.L. 111-383 ). The majority of these enactments contain restrictions on the use of appropriated funds to transfer or release Guantanamo detainees into the United States; the most stringent restriction being found in the 2011 NDAA, which includes a blanket prohibition on the use of authorized funds to transfer or release Guantanamo detainees into the country for any purpose. Two other measures enacted in the 111 th Congress, the Supplemental Appropriations Act, 2010 ( P.L. 111-212 ), and the Intelligence Authorization Act for FY2010 ( P.L. 111-259 ), do not contain provisions directly affecting Guantanamo detainees, but do require the Executive to supply certain information to Congress or the public that pertains to such persons. Congress did not enact any FY2011 regular appropriations acts by the end of the 2010 fiscal year, Instead, Congress passed a series of continuing resolutions to temporarily extend funding for federal agencies. On December 22, 2010, President Obama signed the Continuing Appropriations Act, 2011 ( P.L. 111-322 ) into law. The act generally extends funding for federal agencies at the FY2010 enacted spending levels through March 4, 2011, under the authority and conditions provided for under FY2010 appropriations acts. Accordingly, restrictions imposed by FY2010 appropriations measures on the use of funds for the transfer and release of Guantanamo detainees remain in place. Seven measures enacted in the 111 th Congress prohibit or place conditions on the use of federal funds to release or transfer Guantanamo detainees into the United States. Such measures may be prompted by perceived security risks that some argue could arise if suspected terrorists were brought to the United States. The enactments also provide reporting requirements that must be satisfied before a detainee may be transferred or released to a foreign country. Pursuant to the fourth Continuing Appropriations Act, 2011 ( P.L. 111-322 ), conditions imposed on the transfer or release of Guantanamo detainees under FY2010 appropriations measures remain in effect through March 4, 2011. Although several FY2010 appropriations measures restricted appropriated funds from being used to transfer or release Guantanamo detainees into the United States, they permitted transfers for purposes of criminal prosecution or detention during legal proceedings, contingent upon certain reporting requirements being fulfilled. However, the 2011 NDAA ( P.L. 111-383 ) which was signed into law on January 7, 2011, imposes more significant restrictions on detainee transfers than previous enactments. Specifically, the act provides that: None of the funds authorized to be appropriated by this Act for fiscal year 2011 may be used to transfer, release, or assist in the transfer or release to or within the United States, its territories, or possessions of Khalid Sheikh Mohammed or any other detainee who (1) is not a United States citizen or a member of the Armed Forces of the United States; and (2) is or was held on or after January 20, 2009, at United States Naval Station, Guantanamo Bay, Cuba, by the Department of Defense. In addition to establishing an absolute bar on the use of authorized Department of Defense (DOD) funds to transfer or release detainees into the United States, this provision also bars funds from being used to assist in the transfer or release of such persons. The prohibition on the use of funds to assist in the transfer or release of detainees appears to prevent the DOD from participating in any effort by another entity to transfer or release detainees into the United States. Because Guantanamo detainees are presently in military custody, the 2011 NDAA appears to effectively bar the transfer of any Guantanamo detainee into the country, despite language in previously enacted measures that permitted other federal agencies to use appropriated funds to transfer detainees into the country for criminal prosecution. Some have suggested that because the defense authorization act only restricts the use of military funding to transfer Guantanamo detainees, it would not prevent another federal agency (e.g., the Department of Justice) from using its own appropriated funds to effectuate the transfer of Guantanamo detainees into the United States, subject to the limitations contained in relevant appropriations enactments. On the other hand, examination of the legislative record supports the view that Congress believed that the defense authorization act would effectively prevent the transfer of any Guantanamo detainee into the United States. When presenting the bill for consideration on the House floor, House Chairman of the Armed Services Committee Ike Skelton characterized the measure as: the most thorough and comprehensive set of restrictions ever placed on the transfer and release of detainees. It is substantially stronger than current law, and voting against this bill will have the effect of making it easier to bring detainees into the United States…. Statements made by other members of the House and Senate during consideration of the act also appear to reflect a belief that the measure would effectively preclude any transfer of Guantanamo detainees into the United States. When signing the 2011 NDAA into law, President Obama issued a statement expressing his opposition to those provisions that limit executive discretion to transfer detainees into the United States or to the custody of certain foreign governments or entities. In the statement, President Obama expressed concern that the provision limiting detainee transfers into the United States "represents a dangerous and unprecedented challenge to critical executive branch authority to determine when and where to prosecute Guantanamo detainees…." He further stated that the provision limiting executive discretion to transfer detainees to the custody of foreign entities would "interfere with the authority of the executive branch to make important and consequential foreign policy and national security determinations" regarding the transfer of persons captured in an armed conflict. While highly critical of these provisions' effect on executive discretion, President Obama's signing statement did not allege that they represented an unconstitutional infringement upon executive authority, or claim that the executive branch was not legally bound to comply with the provisions' requirements. President Obama did, however, state that his "Administration will work with the Congress to seek repeal of these restrictions, will seek to mitigate their effects, and will oppose any attempt to extend or expand them in the future." Seven enacted measures bar the use of funds to release Guantanamo detainees into the United States. The 2009 Supplemental Act banned the use of funds appropriated under that or previous acts to release any Guantanamo detainee into the continental United States, Hawaii, or Alaska. Four other appropriations measures similarly prohibit the use of federal funds—particularly those appropriated during the 2010 fiscal year—to release a Guantanamo detainee into the United States or specified territories. The 2010 National Defense Authorization Act prohibited DOD from using funds that were authorized to be appropriated under the act or otherwise made available to the department to release a Guantanamo detainee into the United States or its territories or possessions during the period beginning October 1, 2009, and ending December 31, 2010. The 2011 NDAA prohibits authorized FY2011 appropriations from being used to release a Guantanamo detainee, or assist in the release of such a person, into the United States or its territories or possessions. Seven measures enacted in the 111 th Congress place restrictions on the transfer of Guantanamo detainees into the United States. The 2011 NDAA, however, bars authorized appropriations to the DOD from being used to transfer, or assist in the transfer, of any Guantanamo detainee into the United States, including for purposes of criminal prosecution. Earlier measures enacted by the 111 th Congress permitted the use of funds to enable the transfer of detainees only for purposes of prosecution or detention during legal proceedings, but required the President to fulfill a reporting requirement 45 days prior to effecting the transfer. Legislative enactments in the 111 th Congress that permitted the transfer of Guantanamo detainees into the United States for limited purposes contained nearly identical 45-day reporting requirements, but there are a few differences in the requirements of the respective enactments. The 2009 Supplemental Appropriations Act, the first measure to be enacted, required the President to submit a classified report to Congress concerning the proposed transfer of an individual to the United States that would, at minimum, contain (1) "findings of an analysis regarding any risk to the national security of the United States that is posed by the transfer"; (2) "costs associated with transferring the individual"; (3) "[t]he legal rationale and associated court demands for transfer"; (4) "[a] plan for mitigation of any risk" posed by the transferee to the national security of the United States; and (5) "[a] copy of a notification to the Governor of the State to which the individual will be transferred ... with a certification by the Attorney General of the United States in classified form at least 14 days prior to such transfer (together with supporting documentation and justification) that the individual poses little or no security risk to the United States." The reporting requirements relating to detainee transfers that are contained in the 2010 National Defense Authorization Act are slightly different, and arguably contemplate a greater degree of participation by state government officials in federal decisions to transfer detainees to a particular location. Specifically, the act requires the President, 45 days prior to the transfer of a detainee to the United States, to provide congressional defense committees a classified report which contains (1) "an assessment of the risk that the [detainee] poses to the national security of the United States, its territories, or possessions"; (2) a proposal for the disposition of each detainee; (3) a plan to mitigate any identified national security risks; (4) the proposed transfer location; (5) information regarding costs associated with the transfer; (6) a "summary" of a "consultation" required to take place with the local jurisdiction's chief executive; and (7) "a certification by the Attorney General that under the plan the individual poses little or no security risk to the United States, its territories, or possessions." The sixth component of the classified report refers to a separate requirement in the 2010 National Defense Authorization Act that the President "consult with the chief executive" of the jurisdiction that is the proposed location of transfer. It appears to contemplate a somewhat greater degree of involvement by state governors in detainee transfer decisions than the 2009 Supplemental Appropriations Act, which only required a certification that a governor had been "notified" regarding a transfer. In all of the other measures containing reporting requirements with respect to the transfer of detainees into the United States, the components of the 45-day reports are identical and include some information required by the 2009 Supplemental and the FY2010 Defense Authorization Acts. The components include (1) "[a] determination of the risk that the individual might instigate an act of terrorism within the continental United States, Alaska, Hawaii, the District of Columbia, or the United States territories if the individual were so transferred"; (2) "[a]determination of the risk that the individual might advocate, coerce, or incite violent extremism, ideologically motivated criminal activity, or acts of terrorism, among inmate populations at incarceration facilities ..."; (3) "costs associated with transferring the individual in question"; (4) "[t]he legal rationale and associated court demands for transfer"; (5) "[a] plan for mitigation of any risks described [in the first, second, or seventh components]"; (6) "[a] copy of a notification to the Governor of the State to which the individual will be transferred ... with a certification by the Attorney General of the United States in classified form at least 14 days prior to such transfer (together with supporting documentation and justification) that the individual poses little or no security risk to the United States"; and (7) "an assessment of any risk to the national security of the United States or its citizens, including members of the Armed Services of the United States, that is posed by such transfer and the actions taken to mitigate such risk." The geographic applications of restrictions imposed by the seven enactments also differ. The 2009 Supplemental Act appears to have only restricted transfers into the United States. In contrast, the 2010 and 2011 NDAAs' restrictions included all U.S. "territories or possessions." Each of the other relevant enactments explicitly applies to the United States and all of its territories, namely Guam, American Samoa, the U.S. Virgin Islands, the Commonwealth of Puerto Rico, and the Commonwealth of the Northern Mariana Islands. However, they do not appear to apply to other U.S. possessions. Six of the measures enacted during the 111 th Congress make the use of funds to effectuate the transfer or release of a Guantanamo detainee to a foreign state contingent upon certain reporting requirements being met. The FY2010 Homeland Security Appropriations, Interior Appropriations, Consolidated Appropriations, and Defense Appropriations acts each contain provisions that restrict the use of appropriated funds to transfer or release a Guantanamo detainee to another country or any "freely associated state." The restrictions apply unless the President, 15 days prior to a proposed transfer or release, submits the following information in classified form: (1) the name of the detainee and the country or freely associated state to which he will be transferred; (2) an assessment of the risk to national security or U.S. citizens posed by the transfer or release; and (3) the terms of any agreement with the country or freely associated state that has agreed to accept the detainee. The 2009 Supplemental Appropriations Act contains a provision that is similar except that it does not specify its application to freely associated states. The 2011 NDAA contains more significant restrictions on the transfer of detainees to foreign countries than prior enactments. The act provides that, except in cases when a detainee transfer is done to effectuate an order by a U.S. court or tribunal, a detainee may only be transferred to the custody or control of a foreign government or the recognized leadership of a foreign entity if, at least 30 days prior to the proposed transfer, the Secretary of Defense certifies to Congress that the foreign government or entity: (1) is not a designated state sponsor of terrorism or terrorist organization; (2) maintains effective control over each detention facility where a transferred detainee may be housed; (3) is not facing a threat likely to substantially affect its ability to control a transferred detainee; (4) has agreed to take effective steps to ensure that the transferred person does not pose a future threat to the United States, its citizens, or its allies; (5) has agreed to take such steps as the Secretary deems necessary to prevent the detainee from engaging in terrorism; and (6) has agreed to share relevant information with the United States related to the transferred detainee that may affect the security of the United States, its citizens, or its allies. The act also contains a one-year prohibition on the transfer of any detainee to the custody or control of a foreign government or entity if there is a confirmed case that a former Guantanamo detainee who was transferred to that government or entity subsequently engaged in terrorist activity. However, this prohibition is subject to waiver by the Secretary of Defense if he fulfills the certification process described in the preceding paragraph and also determines that the transfer is in the security interests of the United States. The prohibition also does not apply in cases where a transfer is done to effectuate an order by a U.S. court or tribunal. In addition to establishing reporting requirements relating to the transfer and release of Guantanamo detainees, several measures enacted in the 111 th Congress establish more general reporting requirements relating to the Guantanamo detention facility or the facility's detainee population. Several of the enacted laws establish general reporting requirements which direct the Executive to report on the status of Guantanamo detainees. Section 319 of the Supplemental Appropriations Act, 2009 ( P.L. 111-32 ), required the President to submit reports on the Guantanamo "prisoner population" to specified members of Congress within 60 days of the legislation's enactment and every 90 days thereafter. The reports were required to provide the following information with respect to each detainee: (1) the detainee's name and country of origin; (2) a "summary of the evidence, intelligence, and information used to justify" his detention; and (3) a "current accounting of all the measures taken to transfer" him to his home or another country. In addition, the reports must state the "number of individuals released or transferred from detention ... who are confirmed or suspected of returning to terrorist activities after release or transfer" and provide "an assessment of any efforts by al Qaeda to recruit detainees released from detention." The initial report (which was to be completed within 60 days of the legislation's enactment) was required to address several additional matters, including (1) a "description of the process that was previously used for screening the detainees" who have been released and are confirmed or suspected of returning to terrorist activities; (2) "[a]n assessment of the adequacy of that screening process for reducing the risk that detainees previously released or transferred ... would return to terrorist activities after [their] release or transfer"; and (3) "[a]n assessment of lessons learned from previous releases and transfers of individuals who returned to terrorist activities for reducing the risk that detainees released or transferred ... will return to terrorist activities after their release or transfer." In addition, five enactments establish reporting requirements that must be satisfied before the Executive may cease operations at the Guantanamo detention center. Specifically, they require the President, before "the termination of detention operations" at the detention facility, to submit a classified report to Congress that "describ[es] the disposition or legal status of each individual detained at the facility as of the date of [the relevant act's] enactment." They do not specify the level of detail that the report must include with respect to each detainee, nor do they appear to require any particular length of time between the submission of the report and closure of the facility. The Supplemental Appropriations Act, 2010 ( P.L. 111-212 ), requires the Director of National Intelligence, not later than 45 days after the enactment of the bill, to fully inform the congressional intelligence committees regarding disposition decisions and threat assessments for Guantanamo detainees that were reached by the Guantanamo Review Task Force established by Executive Order 13492. The Director of National Intelligence is further required to submit information to the congressional intelligence committees in the future regarding any new threat assessments made by the intelligence community regarding a particular Guantanamo detainee, along with access to the intelligence forming the basis for that assessment. The 2011 NDAA directs the Secretary of Defense, not later than April 1, 2011, to provide a report to congressional defense committees concerning the feasibility of using any proposed facility in the United States or its territories or possessions to house transferred Guantanamo detainees who remain in DOD custody or control. The report is required to include information regarding the rationale for the selection of a proposed facility; the merits of using the proposed facility to house detainees instead of the Guantanamo detention facility; any potential risks that might be incurred by the community surrounding the proposed detention site; the personnel and modifications necessary for the housing of detainees at the proposed facility; and legal issues that could be raised as a result of detaining an individual at the facility rather than at Guantanamo. The restrictions imposed on the transfer and release of Guantanamo detainees that were adopted in the 111 th Congress vary in scope and applicable time frames. Restrictions in the Supplemental Appropriations Act, 2009, applied only to funds appropriated by that or any prior act; although a later measure temporarily extended their application through October 31, 2009, they do not appear to apply to later appropriated funds. The restriction in the 2010 Defense Authorization Act, applied through December 31, 2010, but only to the use of funds appropriated to the Department of Defense. In contrast, restrictions contained in the 2010 Homeland Security, Interior Department, Consolidated Appropriations, and Defense Appropriations Acts appeared to apply to all federal funds, but only during the 2010 fiscal year (October 1, 2009-September 30, 2010). Congress did not appropriate funds for FY2011 before the 2010 fiscal year ended. However, Congress enacted continuing resolutions generally extending funding for federal agencies at the FY2010 enacted spending levels through March 4, 2011, under the authority and conditions provided for under those FY2010 appropriations acts. Accordingly, the funding restrictions on the transfer and release of Guantanamo detainees contained in FY2010 measures for various federal agencies appear to remain in effect until March. For funds appropriated during FY2010, several of the reporting requirements probably apply concurrently. It is likely that the acts will be interpreted so as to avoid a conclusion that a later-enacted provision implicitly repeals an earlier provision. Thus, to the extent that differing reporting requirements apply to the same committee, they would presumably be read as having a cumulative effect. In other words, it is likely that the Executive will submit one or more reports to the committee(s) of jurisdiction which fulfill all applicable requirements. The restrictions established by the 2011 NDAA relating to the transfer or release of detainees into the United States apply for the entirety of the 2011 fiscal year (i.e., through September 30, 2011), while the limitations imposed on the transfer of detainees to the custody of a foreign government (and related certification requirements) apply for one calendar year following the legislation's date of enactment, January 7, 2011. Provisions of enacted measures other than those restricting detainees' transfer or release may also have significant implications for persons held at Guantanamo. First, Title XVIII of the 2010 National Defense Authorization Act ( P.L. 111-84 ), the Military Commissions Act of 2009, establishes new procedures governing military commissions, which may be used to try detainees for violations of the laws of war and specified offenses. Examples of changes enacted in the measure include a prohibition on the use of evidence elicited by cruel, inhuman, or degrading treatment, without regard to when the statement was made; shifting the burden of proof concerning the admissibility of hearsay evidence to the proponent of such evidence; an extension of the obligation to disclose exculpatory information to include evidence of mitigating circumstances; and a detailed set of procedures regarding the use of classified evidence. Although proposals had been introduced earlier in the 111 th Congress that would have abolished military commissions altogether, Congress has instead opted to pass legislation which preserves the military commission system while amending the statutory framework. Section 1040 of the 2010 National Defense Authorization Act restricts foreign enemy belligerents captured and held outside the United States from being read the warnings required in the domestic criminal law enforcement context by the Supreme Court decision in Miranda v. Arizona . Applying Miranda , courts generally do not admit defendants' statements at trial unless law enforcement officers first advise them, with the warnings typically beginning with "you have the right to remain silent," of their Fifth Amendment right against self-incrimination. Section 1040 provides that no member of the Armed Forces and no official or employee of the Department of Defense or a component of the intelligence community (other than the Department of Justice) may read to a foreign national who is captured or detained outside the United States as an enemy belligerent and is in the custody or under the effective control of the Department of Defense or otherwise under detention in a Department of Defense facility the statement required by Miranda v. Arizona … or otherwise inform such an individual of any rights that the individual may or may not have to counsel or to remain silent consistent with Miranda v. Arizona . Thus, it applies to all foreign nationals captured or detained abroad as enemy belligerents rather than just foreign nationals detained at Guantanamo. This provision is expressly made inapplicable to the Department of Justice, meaning that agents of the DOJ could potentially read Miranda warnings to persons in military custody. One instance where the DOJ might opt to read Miranda warnings to an enemy belligerent in military custody would be when it intends to bring criminal charges against a detainee in federal civilian court. Finally, section 1080 of the 2010 National Defense Authorization Act requires, among other things, that the Department of Defense "ensure that each strategic intelligence interrogation of any person who is in the custody or under the effective control of the Department of Defense or under detention in a Department of Defense facility is videotaped or otherwise electronically recorded." The FY2010 Homeland Security Appropriations Act includes two additional provisions affecting the treatment of Guantanamo detainees. Section 553, which appears to apply beyond the end of the 2010 fiscal year, requires that former detainees be included on the "No Fly List," "unless the President certifies in writing to Congress that the detainee poses no threat to the United States, its citizens, or its allies." A second provision prohibits the use of funds appropriated under that act to "provide any immigration benefit" to any former Guantanamo detainee, including a visa, admission into the United States, parole into the United States, or classification as a refugee or applicant for asylum. This prohibition is similar to other proposals introduced during the 111 th Congress; however, the other proposals would apply permanently, whereas the prohibition in the Homeland Security Appropriations Act appears to apply only to funds appropriated by that act. The Consolidated Appropriations Act, 2010 contains a similar restriction on using the funds it appropriates to provide a Guantanamo detainee with an immigration benefit. The Intelligence Authorization Act for FY2010 ( P.L. 111-259 ), which was enacted in October 2010, required the Director of National Intelligence to make publicly available, within 60 days of the law's enactment, an unclassified summary of intelligence relating to recidivism rates of current or former Guantanamo detainees, as well as an assessment of the likelihood that such detainees may engage in terrorism or communicate with terrorist organizations. This report was released on December 7, 2010. The 2011 NDAA contains a provision barring funds it authorizes to be appropriated to the DOD from being used to renovate or construct a facility in the United States or its territories or possession so that an individual can be transferred from Guantanamo to that facility for continued detention by the DOD. Numerous legislative proposals introduced during the 111 th Congress addressed the disposition or treatment of Guantanamo detainees. Early in the Congress, several proposals were introduced that would have required the closure of the Guantanamo detention facility within a specified period. However, more recent legislative proposals, including enacted legislation discussed earlier in this report, sought to restrict the transfer or release of Guantanamo detainees into the United States, significantly impacting efforts by the Obama Administration to close the facility. Other proposals introduced during the 111 th Congress raised issues not addressed in the enacted or pending authorization and appropriations measures. It is possible that the proposals, though not enacted into law, might inform legislation in the 112 th Congress. A few proposals would have extended the timeline for restrictions on the transfer or release of Guantanamo detainees, or make such restrictions more stringent. The version of the Continuing Appropriations Act, 2011 ( H.R. 3082 ), which was initially passed by the House on December 8, 2010, would have barred any funds either by it or any prior act from being used in FY2011 to transfer a person detained at Guantanamo (other than a U.S. citizen or member of the U.S. Armed Forces), or assist in the transfer or release of a detainee into the country. The version of the continuing resolution which was ultimately enacted did not include this limitation, but instead had the practical effect of extending limitations imposed by FY2010 appropriations measures on the transfer or release of Guantanamo detainees through March 4, 2011. However, similar restrictions as those contained in the version of the continuing appropriations resolution that initially passed the House were subsequently contained in the 2011 NDAA (though the defense authorization act's restrictions apply only to military funding, and not to funds appropriated to other federal agencies). H.R. 5136 , the National Defense Authorization Act for FY2011, which was passed by the House in May 2010, contained almost identical restrictions on the transfer or release of Guantanamo detainees as those contained in H.R. 6523 , the version of the 2011 NDAA which was ultimately enacted into law. H.R. 5136 also contained a similar limitation on the use of authorized funds to modify facilities to house transferred Guantanamo detainees as that contained in the version of the defense authorization act that became law. S. 3454 , a version of the FY2011 NDAA introduced in the Senate and reported out of committee, would have extended the restrictions on detainee transfers established by the FY2010 National Defense Authorization Act until December 31, 2011. S. 3454 also would have placed a one-year restriction on the use of Department of Defense funds to transfer Guantanamo detainees to five specified countries "where al Qaeda has an active presence," namely, Afghanistan, Pakistan, Saudi Arabia, Somalia, and Yemen. However, in September 2010, a motion to proceed on consideration of the bill by the Senate failed. On December 9, 2010, cloture on a motion to consider S. 3454 was not invoked. The version of the 2011 NDAA ultimately enacted into law did not contain the limitations found in S. 3454 . The House-passed Military Construction and Veterans Affairs and Related Agencies Appropriations Act, 2011 ( H.R. 5822 ) would not have directly restricted the transfer or release of Guantanamo detainees into the United States, but it would have barred the funds it appropriated or made available to the Department of Defense from being used to renovate or construct a facility within the continental United States to house Guantanamo detainees. The version of the continuing resolution for FY2011 that was initially passed by the House would have similarly barred the Department of Justice from using any funds for similar purposes, but this restriction was not ultimately enacted into law. In addition to provisions restricting the transfer or release of detainees, some legislative proposals included provisions requiring the submission of reports to Congress, or the release of information to the public, on specified topics affecting detainees. The first version of the FY2011 defense authorization bill that passed the House ( H.R. 5136 ) contained a reporting requirement relating to detainees' legal representation. It would have required the Department of Defense's Inspector General to "conduct an investigation of the conduct and practices" of attorneys who represented non-citizen Guantanamo detainees in habeas corpus or military commission proceedings. The Inspector General would have been required to submit a report of the findings to the House and Senate Armed Services Committees within 90 days of the bill's enactment. This provision was not contained in the version of the 2011 defense authorization bill that was ultimately enacted into law ( P.L. 111-383 ). Several bills introduced in the 111 th Congress addressed the interrogation or treatment of persons detained at the Guantanamo detention facility or elsewhere. The House-passed version of H.R. 5136 would have prohibited the use of funds appropriated under the act or otherwise made available to the DOD from being used in violation of § 1040 of the 2010 National Defense Authorization Act, which generally prohibited Armed Forces members or DOD officials from reading Miranda warnings to foreign nationals captured or detained outside the United States as enemy belligerents. Two bills introduced early in the 111 th Congress, S. 147 and H.R. 374 , proposed that interrogations of all persons in custody of U.S. intelligence agencies be conducted in accordance with the U.S. Army Field Manual. Such legislation would have foreclosed the possibility, left open in President Obama's executive order on interrogation, that techniques other than those in the Army Field Manual could eventually be deemed appropriate for use by agencies outside the military. A few bills would have restricted detainees' access to public benefits or medical facilities. H.R. 2338 would make those detained at Guantanamo as of the bill's enactment and subsequently transferred to the United States "permanently ineligible" for specified federal, state, or local benefits. Another bill, H.R. 1042 , prohibited the provision of medical treatment to Guantanamo detainees in any facility where members of the Armed Forces also receive treatment or in any facility operated by the Department of Veteran's Affairs. To the extent that H.R. 1042 would have resulted in withholding medical care, it is possible that it would have raised legal concerns regarding U.S. compliance with treaty obligations. Several other bills addressed broad issues related to judicial authority to review habeas corpus petitions or to executive authority to detain enemy belligerents or prosecute detainees. Some bills would have restricted the Department of Justice's use of federal funds to conduct prosecutions of Guantanamo detainees or others with possible ties to the 9/11 terrorist attacks. For example, S. 2795 and H.R. 4542 would have prohibited the use of such funds by the Department of Justice to prosecute Guantanamo detainees in criminal courts in the United States or its territories or possessions. Although the bills did not define the term "criminal court," it is likely that it would have extended to prosecutions in both Article III courts and in any military commissions that may be established in the United States. This funding restriction would not appear to have precluded the Department of Defense from prosecuting detainees before military tribunals. Companion bills, S. 2977 and H.R. 4556 , might have applied to individuals other than Guantanamo detainees. They would have prohibited the Department of Justice's use of federal funds to commence or continue the prosecution in an Article III court of any individual who: is suspected of "planning, authorizing, organizing, committing, or aiding the attacks on the United States and its citizens that occurred on September 11, 2001"; is not a citizen of the United States; and is subject to proceedings before a military commission. An alternative proposal, H.R. 4588 , would have affirmatively required that Guantanamo detainees be tried only in military commissions. Several proposals would have reaffirmed or extended executive authority to detain persons associated with U.S. operations against Al Qaeda, the Taliban, and other entities. S. 3707 , the Terrorist Detention Review Reform Act, would have "reaffirm[ed]" the President's authority "to detain unprivileged enemy belligerents in connection with the continuing armed conflict with al Qaeda, the Taliban, and associated forces, regardless of the place of capture, until the termination of hostilities." The bill would have also established jurisdiction, venue, and procedures for habeas corpus challenges raised by persons detained as "unprivileged enemy belligerents" at Guantanamo or other locations who are subject to the habeas jurisdiction of the federal courts. Similar authorities would have been provided by Enemy Combatant Detention Review Act of 2009 ( H.R. 630 ). Another bill, the Protecting America's Communities Act ( S. 1071 ), contained a similar provision concerning the President's authority to detain persons in the conflict with Al Qaeda and the Taliban. These provisions would have perhaps broadened the President's authority to preventively detain enemy belligerents as part of post-9/11 military operations. In Hamdi v. Rumsfeld , the Supreme Court held that the 2001 Authorization to Use Military Force authorized the President to preventively detain enemy combatants captured during hostilities in Afghanistan but did not address whether such authority extends to captures made in other locations. The aforementioned bills appear to have expressly authorized the detention of persons captured away from the Afghan zone of combat. The Terrorist Detainees Procedures Act of 2009, H.R. 1315 , would likewise have granted exclusive jurisdiction over habeas challenges to the U.S. District Court in the District of Columbia and stay pending habeas cases. However, in contrast to H.R. 630 , it would have stayed habeas proceedings not to facilitate trials before military commissions but to await the outcome of status review hearings held by panels of military judges. In addition, the time period in which judges would render decisions in the status review process would have been sharply limited—to 120 days from the legislation's enactment for all detainees, unless a military judge extended that date for good cause. Finally, several House resolutions would have possibly facilitated greater congressional oversight. Namely, H.Res. 920 , H.Res. 922 , and H.Res. 923 required or requested the transmittal to the House of Representatives of relevant documents or information in the possession of the Attorney General, Secretary of Homeland Security, and the President, respectively, relating to Guantanamo detainees. In each case, the request or direction included a 14-day timeline for transmittal. Soon after taking office, President Obama issued an executive order to effectuate the closure of the Guantanamo detention facility within a year. The announced deadline for closing the facility has not been met, arguably in part because of a series of congressional enactments limiting executive discretion to transfer or release detainees into the United States. Congress has passed numerous measures which suggest strong opposition to the possibility that a detainee might be released into the United States, even if he is found not to have been an enemy belligerent. Until recently, Congress had been less resistant to the possibility of transferring detainees into the United States for criminal prosecution, provided that the Executive first provides Congress with a risk assessment and other information relating to the proposed transfer. However, at the end of the 111 th Congress, legislative activity involved measures to bar the transfer of detainees to the United States for any purpose, including criminal prosecution. These restrictions were ultimately enacted into law pursuant to the 2011 NDAA. By prohibiting military funds from being used to transfer or release detainees into the United States, or assist in the transfer or release of detainees into the country, the act seems to ensure that the Guantanamo detention facility remains open and at least through the 2011 fiscal year, and perhaps for the foreseeable future. Moreover, the measure appears to make military tribunals the only viable forum by which Guantanamo detainees could be tried for criminal offenses, as no civilian court operates within Guantanamo. Other changes effected by legislation enacted in the 111 th Congress, such as the establishment of new military commission procedures, may also significantly impact the treatment and disposition of Guantanamo detainees. These and other proposals in the 111 th Congress are likely to inform future legislative debates regarding the treatment and rights of detainees at Guantanamo and elsewhere.
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The detention of alleged enemy belligerents at the U.S. Naval Station in Guantanamo Bay, Cuba, together with proposals to transfer some such individuals to the United States for prosecution or continued detention, has been a subject of considerable interest for Congress. Several authorization and appropriations measures enacted during the 111th Congress addressed the disposition and treatment of Guantanamo detainees. This report analyzes legislation enacted in the 111th Congress concerning persons held at the Guantanamo detention facility. Nine laws that were enacted during the 111th Congress contained provisions directly relating to Guantanamo detainees: the 2009 Supplemental Appropriations Act (P.L. 111-32); the Department of Homeland Security Appropriations Act, 2010 (P.L. 111-83); the 2010 National Defense Authorization Act (P.L. 111-84); the Department of the Interior, Environment, and Related Agencies Appropriations Act, 2010 (P.L. 111-88); the Consolidated Appropriations Act, 2010 (P.L. 111-117); the Department of Defense Appropriations Act, 2010 (P.L. 111-118); the Supplemental Appropriations Act, 2010 (P.L. 111-212); the Intelligence Authorization Act for FY2010 (P.L. 111-259); and the Ike Skelton National Defense Authorization Act for FY2011 (2011 NDAA, P.L. 111-383). Many of these measures imposed conditions on the use of appropriated funds to transfer or release Guantanamo detainees into the United States. The fourth Continuing Appropriations Act, 2011 (P.L. 111-322), has effectively extended the restrictions imposed by FY2010 appropriations enactments through March 4, 2011. Several appropriations measures enacted in the 111th Congress restricted appropriated funds from being used to transfer or release Guantanamo detainees into the United States; they permitted transfers for purposes of criminal prosecution or detention during legal proceedings, contingent upon certain reporting requirements being fulfilled. However, the 2011 NDAA (P.L. 111-383), which was signed into law on January 7, 2011, prohibits any funds it authorizes to be appropriated to the Department of Defense (DOD) from being used to transfer Guantanamo detainees into the United States for any purpose, and also bars such funds from being used to assist in the transfer of such persons. Because Guantanamo detainees are presently in military custody, the act could be interpreted as effectively barring the transfer of any Guantanamo detainee into the United States, despite language in authorizing appropriations measures for other federal agencies that permits the use of funds to transfer detainees into the country for criminal prosecution. In addition to these restrictions, the 2011 NDAA bars authorized funds from being used to construct facilities in the United States to house transferred Guantanamo detainees, and also imposes restrictions on the transfer of detainees to certain foreign countries in order to deter the return of transferred detainees to hostilities. Upon signing the act into law, President Obama issued a statement describing his opposition to the legislation's restrictions on the transfer of Guantanamo detainees, and claimed that his Administration will work with Congress to seek to repeal or mitigate the effect of these restrictions. He did not allege that these provisions are an unconstitutional infringement on executive discretion, or state that the provisions would not be enforced. Legislation enacted in the 111th Congress also addressed issues related to the treatment and disposition of Guantanamo detainees. For example, Title XVIII of the FY2010 National Defense Authorization Act establishes new procedures for military commissions. Section 552 of the FY2010 Department of Homeland Security Act requires that former Guantanamo detainees be included on the "No Fly List" in most circumstances and restricts their access to immigration benefits.
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President Barack Obama did not submit a detailed appropriations request during the first weeks of his administration. Instead, he forwarded the outline of a budget request, stating In the little more than a month my Administration has had in office, we have not had the time to fully execute all the budget reforms that are needed, and to which I am fully committed. Those will come in the months ahead, and next year's budget process will look much different. Detailed information on the FY2010 Department of Defense (DOD) request was released on May 7, 2009. Representative Chet Edwards (TX/17), chair of the House Committee on Appropriations Subcommittee on Military Construction, Veterans Affairs, and Related Agencies, reported an original measure, H.R. 3082 ( H.Rept. 111-188 ), to the House on June 26, 2009. The bill was placed on the Union Calendar (Calendar No. 101). The House Committee on Rules reported H.Res. 622 , for consideration of H.R. 3082 , on July 9, allowing one hour of general debate. The rule was passed on July 10, and the bill was brought to the floor for consideration ( Congressional Record pp. H7976-H7983). Following floor debate ( CR pp. H7983-H7991), the measure passed on the Yeas and Nays: 415-3 (Roll No. 529). Senator Tim Johnson (South Dakota), chair of the Senate Committee on Appropriations Subcommittee on Military Construction, Veterans Affairs, and Related Agencies, introduced an original measure, S. 1407 ( S.Rept. 111-40 ), to the Senate on July 7, 2009, where it was placed on the Senate Legislative Calendar under General Orders (Calendar No. 100). H.R. 3082 was received in the Senate on July 13, 2009, where it was placed on the Senate Legislative Calendar under General Orders (Calendar No. 16). The bill was laid before the Senate on November 5, 2009 ( CR pp. S11187-S11191). The Senate debated the bill on November 6 ( CR pp. S11239-S11245), November 9 ( CR pp. S11265-S11273, and S11283-S11284), November 10 ( CR pp. S11313-S11334), November 16 ( CR pp. S11362-S11378), and November 17 ( CR pp. S11403-S11411), passing it on November 17 by Yea-Nay vote: 100-0 (Record Vote No. 348). On December 8, 2009, H.R. 3082 , along with appropriations bills for Transportation-HUD, Commerce-Justice-Science, Financial Services, Labor-HHS, and State-Foreign Operations, was included in the conference report for H.R. 3288 , the 2010 Transportation-HUD appropriations bill retitled as the Consolidated Appropriations Act, 2010. H.R. 3082 became Div. E of that report, H.Rept. 111-366 . The House adopted the conference report on December 10 by the Yeas and Nays, 221-202-1 (Roll No. 949). The Senate began consideration of the H.R. 3082 conference report the same day, along with an accompanying cloture motion. Floor action continued through December 13, including a point of order invoking Rule XXVIII (the rule was waived by Yea-Nay vote: 60-36, Record Vote No. 372), the invocation of cloture (Yea-Nay vote: 60-34, Record Vote No. 373), and final agreement to the conference report by Yea-Nay vote: 57-35 (Record Vote No. 374). The passed bill was presented to the President on December 15, 2009, who it signed into law the next day as P.L. 111-117 . The conference report accompanying the enacted bill specifies that The language and allocations set forth in H.Rept. 111-188 and S.Rept. 111-40 should be complied with unless specifically addressed to the contrary in the conference agreement and this explanatory statement. Report language included by the House, which is not changed by the report of the Senate or this explanatory statement, and Senate report language, which is not changed by this explanatory statement is approved by the Committees on Appropriations of both Houses of Congress. This explanatory statement, while repeating some report language for emphasis, does not intend to negate the language referred to above unless expressly provided herein. In cases where the House or the Senate have directed the submission of a report, said report is to be submitted to both Houses of Congress. Detailed, appropriations account-level data on the appropriations bills, including enacted amounts for prior years, are displayed in Table 4 (Department of Veterans Affairs), Table 6 (Related Agencies), and Table A -1 (Military Construction and Family Housing). Representative Ike Skelton (MO/04) introduced H.R. 2647 , the National Defense Authorization Act for 2010, on June 2, 2009, when it was referred to the House Committee on Armed Services (HASC). The committee reported the bill ( H.Rept. 111-166 ) on June 16. The House began consideration on June 24 and passed it on June 25, 2009. The bill was received in the Senate on July 6 and placed on the Legislative Calendar (No. 96). The Senate's version of the bill, S. 1390 , was introduced to that chamber by the chair of the Senate Committee on Armed Services (SASC), Senator Carl Levin (MI), as an original measure on July 2, 2009. The Senate began consideration of the bill on July 14. Senator Harry Reid (NV), the Majority Leader, introduced a cloture motion on July 22 and passed it, as amended, on July 23, 2009, by Yea-Nay vote (87-7, Record Vote No. 242). On July 23, the Senate took up consideration of H.R. 2647 , struck all after its Enabling Clause, and substituted the debate-amended language of S. 1390 . The Senate then passed the amended H.R. 2647 by Unanimous Consent, insisted on its amendment, and requested a conference. The House took up the amended bill on October 6, 2009, when Representative Skelton moved that the chamber disagree to the amendment and agree to a conference. The motion carried by voice vote. Representative J. Randy Forbes moved that the conferees be instructed on a provision regarding the Matthew Shephard Hate Crimes Prevention Act. After one hour of debate, the motion failed by the Yeas and Nays, 178-234 (Roll No. 754). Conferees filed the conference report ( H.Rept. 111-288 ) in the House on October 7. Representative Skelton brought up the report for floor consideration on October 8. After one hour of debate, Representative Buck McKeon moved that report be recommitted with instructions to the conference committee. The motion was defeated by the Yeas and Nays (208-216, Roll No. 769). The House agreed to the conference report by a recorded vote of 281-146 (Roll No. 770). The Senate took up the conference report on October 20. A cloture motion was filed the same day. Cloture on the conference report was invoked by the Senate on October 22 by a Yea-Nay vote of 64-35 (Record Vote No. 326). The chamber agreed to the conference report by Yea-Nay vote (68-29) on the same day (Record Vote No. 327). Congress cleared the bill for the White House on October 22, 2009. It was presented to the President on October 26 and signed by him on October 28, becoming P.L. 111-84 . Table 1 and Table 2 track the progress of the appropriations and authorization acts, respectively. Military C onstruction accounts provide funds for new construction, construction improvements, planning and design, and host nation support of active and reserve military forces and DOD agencies. The North Atlantic Treaty Organization Security Investment Program (NSIP) is the U.S. contribution to defray the costs of construction (airfields, fuel pipelines, military headquarters, etc.) needed to support major NATO commands. Family housing accounts fund new construction, construction improvements, federal government costs for family housing privatization, maintenance and repair, furnishings, management, services, utilities, and other expenses incurred in providing suitable accommodation for military personnel and their families where needed. The DOD Housing Improvement Fund is the vehicle by which funds, both directly appropriated and transferred from other accounts, support military housing privatization. The Homeowners Assistance Fund aids federal personnel stationed at or near an installation scheduled for closure or realignment who are unable to sell their homes by allowing the Secretary of Defense to subsidize the sale or to purchase homes outright. The Chemical Demilitarization Construction, Defense-Wide , account provides for the design and construction of disposal facilities required for the destruction of chemical weapons stockpiles. The Base Realignment and Closure Account 1990 funds the remaining environmental remediation requirements (including the disposal of unexploded ordnance) arising from the first four base realignment and closure (BRAC) rounds (1988, 1991, 1993, and 1995). The Base Realignment and Closure Account 2005 provides funding for the military construction, relocation, and environmental requirements of the implementation of both the 2005 BRAC round and the DOD Integrated Global Presence and Basing Strategy/Global Defense Posture Realignment (military construction only). Funding of the various accounts included under Title I (Department of Defense) is listed in Appendix A to this report. Congressional committees with jurisdiction over military construction appropriations and appropriation authorizations require the Secretary of Defense to justify in detail the construction projects requested for the upcoming fiscal year. In addition, in order to anticipate upcoming construction requirements, Congress requires the Secretary to regularly project its future budget plans and to review its national defense strategy. These exercises are referred to as the Future Years Defense Plan (FYDP) and the Quadrennial Defense Review (QDR). Section 221 of Title 10 of the United States Code (10 U.S.C. 221) requires the Secretary of Defense to submit a Future Years Defense Plan in conjunction with the President's annual appropriations request. A FYDP projects the Secretary's anticipated appropriations requirements, including military construction-related accounts, over the next five or six years and is used by the defense committees to exercise oversight by tracking changes in DOD plans. Rather than submit a complete appropriations request for FY2010 only five weeks after taking office, President Barack Obama published a budget overview, A New Era of Responsibility: Renewing America's Promise , on February 26, 2009. Detailed information on the FY2010 DOD request was released on May 7. In the accompanying documentation, Secretary of Defense Robert Gates did not project the Department's requirements into the future, citing the ongoing Quadrennial Defense Review (QDR, see next section) and the uncertainty of its potential impact on future military construction. All four congressional defense committees noted the Secretary's failure to provide this information. The HAC declared its expectation for the Department "to promptly inform the Committee when decisions on future plans are finalized." Their Senate counterparts (SAC) noted that the "Department's decision to not provide [FYDP] data with the fiscal year 2010 budget has … complicated the Committee's efforts to ascertain the scope and timetable of large-scale initiatives." The House Committee on Armed Services (HASC) observed, "The inability of the Department to produce this critical document for consideration in this Act leads to a degradation of the quality of the military construction program. The committee encourages the Department to submit these documents … in concert with other budget documents, for consideration in the annual budget request." Finally, the SASC, in its discussion of the anticipated move of more than 7,000 Marines from the Japanese Prefecture of Okinawa to the U.S. Territory of Guam, also noted that the budget submission did not include a FYDP and pointed out that a "FYDP would go a long way toward illustrating to the committee that the total U.S. investment required for the [relocation] initiative can be supported in future budget requests." Since the dissolution of the Soviet Union, Congress has required DOD to periodically reassess its strategic objectives and potential military threats to national defense. The Department is currently undertaking its fourth such exercise, the 2010 QDR. As stated above, the Secretary of Defense deferred submission of detailed budget documentation this year, explaining that his planning could not proceed while a QDR was ongoing. Section 1002 of the enacted National Defense Authorization Act for FY2010 ( H.R. 2647 , P.L. 111-84 ) amended 10 U.S.C. 118 by adding a new subsection (h), clarifying that the development of the QDR should not interfere with or delay delivery of budget materials and congressional reporting requirements tied to Section 1105(a) of Title 31, United States Code, the requirement for timely budget submission. The QDR may affect a number of decisions that will impact future military construction programs. Three important initiatives whose future have become clouded awaiting the review's findings are Army modularization, the redeployment of forces from Germany to the United States, and the stationing of new troops as the Army's end strength grows. On April 6, 2009, the Secretary of Defense announced that he would cap the number of Army Modular Brigade Combat Teams (BCTs) at 45, three below the 48 BCTs envisioned in his December 2007 Grow the Army plan. The three installations where new brigades will not be created include Fort Carson, CO, Fort Stewart, GA, and Fort Bliss, TX. The SAC observed that $2.10 billion had been appropriated in 2009 for the military construction and family housing intended to support these three BCTs. The SASC noted that the decision not to activate the three BCTs would logically reduce the requirement for new military construction at the three sites. The redeployment of existing BCTs from German garrisons to installations in the United States and of 7 th Army Headquarters to a new Command and Battle Facility at Wiesbaden, Germany, have been delayed until completion of the QDR and a reevaluation of overseas deployment requirements. In the detailed documentation submitted by DOD to accompany the President's full FY2010 appropriations request, DOD estimated that its one-time implementation costs for BRAC 2005 will total $34.8 billion. These cost estimates have changed over time as the military departments and DOD have developed plans to carry out the various required BRAC actions. In requesting military construction funds for FY2007, the first submission after the list of BRAC recommendations was created, DOD estimated the total one-time implementation cost to implement the 2005 BRAC round (the realignment and closure of a number of military installations on United States territory) and to redeploy approximately 70,000 troops and their families from overseas garrisons to bases within the United States at $17.9 billion. Between the submission of the FY2007 request in February 2006 and the FY2008 request the next year, DOD estimates had matured considerably, causing the estimate of one-time implementation cost to rise to more than $30.7 billion. The same estimate made by DOD in February 2008 for the FY2009 appropriations request rose again, to $32.0 billion. The FY2010 estimate for one-time implementation costs over the FY2006-2011 period reached $34.2 billion. The Obama Administration requested $7.48 billion for FY2010 for the implementation of the 2005 BRAC round. The House and Senate separately supported the request, and the appropriations conferees agreed to appropriate $7.46 billion, ascribing the difference to cost reductions due to the realignment of funding for a hospital replacement project at Fort Bliss, Texas. Figure 1 displays the progression of DOD cost estimates. The House version of the National Defense Authorization Act ( H.R. 2647 ) contained language (Section 2711) that would have amended the Defense Base Closure and Realignment (BRAC) Act of 1990, redefining the role of the Economic Development Conveyance (EDC) and restricting the ability of the Secretary of Defense to negotiate the fair market value of surplus property being transferred to local redevelopment authorities. The provision would have loosened the definition of the EDC and tied the value of the property to post hoc market conditions, rather than ad hoc valuation by the Secretary. It would also have required the Secretary to convey the property for no consideration (no-cost) under certain conditions. Section 2705 of the Senate amendment expressed a sense of the Senate that the Department of Defense should comprehensively assess the needs of communities while assisting them to deal with the effects of base closures or growth. The enacted version of the bill ( P.L. 111-84 ) amended Section 2905 of the BRAC Act to replace the previous requirement for the Secretary to seek fair market value in real property EDC with authority granting him discretion to account for local economic conditions and the cost of needed additional local infrastructure (transportation, utilities, schools, etc.) when assessing the amount of consideration to be requested for all BRAC-surplused property. The enacted language also grants the Secretary the authority to accept a range of considerations in lieu of cash value, including a share of the revenues generated from subsequent sale or lease of the property. One of the BRAC Commission recommendations establishes a joint pilot training school for the new F-35 Thunderbolt II (Joint Strike Fighter, JSF) at Eglin Air Force Base (AFB) adjacent to Valparaiso, FL. In their FY2010 request, the Air Force and Navy jointly requested six construction projects related to the new training squadron. Both the House Appropriations and Armed Services Committees recommended to DOD that the entire cost of these projects be fully funded through the Air Force account, with the Armed Services Committee noting that unitary management would "ensure that a complete and usable facility can be constructed." The FY2010 budget includes the first request for funds to relocate approximately 8,000 Marines and an estimated 10,000 members of their families from installations in the Prefecture of Okinawa to the U.S. Territory of Guam. Relocation funding is to be shared between the governments of Japan and the United States. Associated with the Guam relocation is the construction of a replacement facility on Okinawa for the Marine aviation facility at Futenma and a redeployment of units to Camp Schwab, Okinawa. In its Statement of Administration Policy (SAP) on H.R. 2647 (the House-passed version of the National Defense Authorization Act for FY2010), the Office of Management and Budget (OMB) objected to a provision (Section 2836) that would prevent the Secretary of Defense from accepting a Japanese-built Futenma Replacement Facility (FRF) until he certifies that it meets Naval Aviation Safety standards. OMB stated that the planned FRF configuration has already been formally agreed between the governments of the United States and Japan. More than $10.2 billion in joint construction funding for the relocation, which includes new operations-related structures and housing and infrastructure and utility upgrades on Guam, has yet to be coordinated between Japan and the United States, and the recent election of a new government in Japan may have slowed the conclusion of these negotiations. Nevertheless, the relocation is expected to be complete by 2014. Several provisions in the House-passed version of H.R. 2647 related to construction supporting the relocation. Among them, Section 2833 would have required construction workers to be paid not less than the lowest wage rates for comparable work performed in Hawaii, rather than the prevailing local wage rate set by the Secretary of Labor. In his written response to advance policy questions submitted to the SASC pursuant to his July 9, 2009, hearing on his nomination to become Commander, U.S. Pacific Command, Admiral Robert F. Willard, USN, stated According to Department of Labor data, Hawaii construction wage rates are approximately 300% higher than those on Guam. The $10.27B estimated cost for construction to relocate the Marines to Guam was based on historical wages experienced on Guam. In accordance with international agreement, the amount of funding that Japan will provide is fixed. Therefore, any additional cost will require more U.S funding. The Joint Guam Program Office estimates application of Hawaii Davis-Bacon wage rates with fringes to Guam could increase the labor cost for the realignment by $4.7B. Section 2833 would also have limited the number of construction work hours each month performed by persons holding H2B visas to no more 30% of the total. The SASC noted that an Environmental Impact Statement, required before construction can begin on Guam, is underway. For several years, the committee has been vocal in requesting a DOD master plan that would detail the extent of military construction and associated infrastructure upgrades that the relocation would require. To date, no such comprehensive plan has been submitted, and the initiation of a QDR and deferral of a FYDP appears to indicate that a Guam Master Plan will be further delayed. The committee recommended that some construction projects requested for Guam be deferred pending the submission of a master plan and FYDP and reduced the requested Navy construction authorization by $211.0 million. In its SAP on S. 1390 , OMB objected, stating that the government of Japan had appropriated $366.0 million for its current fiscal year as part of a $6.0 billion commitment to help develop Guam. The enacted version of the bill ( P.L. 111-84 ) requires that local wage rates apply to military construction contracts associated with the realignment of military installations and relocation of personnel to Guam and requires the Secretary of Labor to issue an annual wage rate determination until 90% of the funds for the project are expended. It also imposes no limitation on the number of visa holders who may work on construction projects, but requires that the needed visas be issued subsequent to the issuance of a temporary labor certification by the Governor of Guam. The bill also conditions acceptance of the Futenma Replacement Facility on a report by the Secretary of Defense to the congressional defense committees that it and its associated operating procedures are consistent with naval aviation safety requirements, but does not deny the Secretary the authority to exercise his existing waiver authorities. The FY2010 appropriations request includes $1.41 billion in overseas contingency construction for projects at various locations in Afghanistan. In previous years, construction projects in an active military area of operations would have been requested in one or more requests for emergency supplemental appropriations. This marks the first year that all such construction is included in the regular annual appropriation request. The U.S. Air Force operates a facility at Seeb International Airport (also known as Muscat International Airport), Oman, a joint civil-Royal Omani Air Force site, that includes prepositioned war reserve materiel. The Omani government has requested that U.S. military activity at the airport be relocated to a new site, Al Musannah, so that commercial development may proceed at Seeb International. DOD subsequently requested funding for construction at the Al Musannah site. The SASC recommended that funding requested in FY2010 ($69.0 million for airlift ramp and fuel facilities and $47.0 million for a war reserve materiel compound) be denied, noting the lack of a base master plan to guide construction, the incomplete state of the needed long-term agreement with the Omani government for its use, and the absence of contributions from the Omanis to its construction and operation. The committee calculated that the future cost to complete construction and bring the new installation into operation would likely reach $350 million, observing that a FYDP would assist in confirming the magnitude of the necessary future investment. The final version of the authorization act ( H.R. 2647 , P.L. 111-84 ) did not authorize the appropriation of the funds requested for construction. The conferees recommended that DOD confirm the existence of an updated host nation agreement before resubmitting the project in a future Presidential budget request. The SASC noted in its report on S. 1390 that then-President George W. Bush released an Integrated Global Posture and Basing Strategy (IGPBS) in 2004. Later renamed the Global Defense Posture Realignment Strategy (GDPRS), it formed the basis for plans to redeploy as many as 70,000 military personnel and their families from garrisons overseas to installations within the United States over the subsequent decade. Section 2704 of S. 1390 would have required the Secretary of Defense to submit an annual report on the status of overseas base closures and realignments that result from the implementation of changes in DOD's basing strategy. Because the QDR was created to be a comprehensive examination of national defense strategy, infrastructure, and other elements of defense policy, Section 2704 would also have amended its governing law, 10 U.S.C. 118, to require an additional report from the Secretary on the impact each QDR would have on the global posture of U.S. military forces. The enrolled version of the National Defense Authorization Act ( H.R. 2647 , P.L. 111-84 ) retained that provision as an amendment to Title 10, inserting a new Section 2687a, "Overseas Base Closures and Realignments and Basing Master Plans." The final bill also included in Section 1063 a requirement that the Secretary of Defense submit, concurrent with delivery of the 2009 QDR, a report on the plan for basing forces outside of the United States. In particular, the report is to address how such a plan would support international and bilateral security agreements, describe the current security environment in each geographic combatant command's Area of Responsibility, and assess the impact of any permanent change in unit basing would have on those agreements and on the status of overseas base closure and realignment actions already underway. The report is to also include the Secretary's recommendations, if any, for additional overseas base closures or realignments. The statute requires the Secretary to notify Congress at least 30 days before the permanent relocation of a unit stationed outside of the United States. Construction at Camp Lemonier, a former French Foreign Legion facility in Djibouti that is now the location of Combined Joint Task Force–Horn of Africa (CJTF-HOA), has been supported by emergency supplemental appropriations for expeditionary operations. Nevertheless, CJTF-HOA has recently been described by the Africa Command (AFRICOM) staff as an "enduring forward operating site," implying that it has assumed a more permanent status. New construction projects requested for the Camp in 2010 have been included in the regular appropriation. In its report on S. 1407 , the SAC observed that AFRICOM headquarters is located in Stuttgart, Germany. With Camp Lemonier, still an expeditionary outpost, its sole installation within the AFRICOM area of responsibility, the committee was unwilling to support any enduring construction prior to the release of the 2010 QDR. The SAC instructed DOD to submit a strategic infrastructure plan for AFRICOM not later than April 30, 2010. The SASC expressed concern in its report on S. 1390 that the future mission of CJTF-HOA, its relationship with other U.S. governmental organizations in the region, and the ability of AFRICOM to sustain the task force's current level of operations remain unclear and directed the Secretary of Defense to submit an explanatory report. This language was not included in the final authorization act's conference report. The Department of the Army has reported that housing for an anticipated 65,000 new troops at its various initial training facilities will not be brought up to its current habitability standards before 2015. The House recommended $450 million in additional funding to accelerate trainee troop barracks modernization. The conference agreement reduced this to $350 million. The Military Housing Privatization Initiative (MHPI), initiated more than a decade ago by then-Secretary of Defense William J. Cohen, has thus far resulted in the transfer of responsibility, and cost, to private enterprise for the construction, maintenance, and operation of military family housing at approximately 100 military installations across the nation. This privatization has reduced the amount of appropriated funds needed for the construction and operation of military family housing. Therefore, the total military family housing appropriation request for FY2010, $1.96 billion, comprises only 62% of the FY2009 enacted level of funding. Major construction projects often require several years to complete. In their planning and execution, military departments and defense agencies have developed the practice of requesting authorization and appropriations in discrete phases, each of which is considered to be independent of another. A "military construction project" is defined in statute to include "all … work … necessary to produce a complete and usable facility or a complete and usable improvement to an existing facility." Thus, each construction phase must result in a facility that can be placed in service. All four military construction committees have expressed their willingness to authorize these large and complex construction projects in their entirety and appropriate funding incrementally (i.e., in annual portions). As assessed by the SASC, when used on some large-scale projects, the use of phased construction "can lead to inefficient designs, complex construction difficulties …, repeated contractor mobilizations, and inefficient ordering of construction materials. This phasing strategy often leads to higher overall costs … and longer construction times…." The HASC supported full authorization for a number of major projects, but authorized the appropriation of only part of the total amount. The HASC calculated this reduction based on its assessment of the relevant military department's ability to execute an annual increment of the needed construction. In its Statements of Administration Policy on H.R. 2647 and S. 1390 , the House and Senate versions of the National Defense Authorization Act for FY2010, and H.R. 3082 , the House-passed version of the military construction appropriations bill, OMB objected to incremental funding, stressing its desire to continue the use of so-called "full funding." The HAC stated, "that while projects should be fully funded or separated into standalone phases where practicable, incremental funding should remain an option when it makes fiscal and programmatic sense." The Senate committee observed, "it continues to be the practice of the Committee to provided incremental funding for certain large projects, despite administration policy to the contrary, to enable the services to more efficiently allocate military construction dollars…." The explanatory statement accompanying the final version of the bill contained the following language: The conferees continue to believe that military construction projects should be fully funded or separated into stand-alone phases when practical. In some cases, however, incremental funding makes fiscal and programmatic sense. The conference agreement then identified six construction projects that the bill would fund incrementally. The final version of the National Defense Authorization Act for FY2010 ( H.R. 2647 , P.L. 111-84 ) authorized full funding and incremental appropriations for hospital replacement projects on Guam and at Ft. Bliss, TX. Navy and Marine crews of fixed-wing aircraft are required to periodically practice shipboard landing techniques under daylight and nighttime conditions at specially equipped airfields before deploying to their assigned aircraft carriers. In order to mimic conditions at sea as closely as possible, the Department of the Navy maintains a number of these Outlying Landing Fields (OLF) at sites selected in part for their proximity to major Naval and Marine Corps Air Stations and at sufficient distance from encroaching city and suburban sprawl to eliminate distracting lights. OLF Fentress, an auxiliary airstrip located eight miles southwest of Naval Air Station (NAS) Oceana in Virginia Beach, VA, has served this purpose for several decades. Residential encroachment prompted the Department of the Navy to remove the training function to a new site available to F/A-18 squadrons based at both NAS Oceana and Marine Corps Air Station (MCAS) Cherry Point, NC. The initial effort focused on a rural inland location midway between Plymouth, VA, and Pantego, NC, approximately 85 miles from the NAS and 57 miles from the MCAS, but the new airfield was resisted by local governments, culminating in Congress repealing the Navy's authorization to acquire the land. The Department is now examining alternative OLF locations. In its report on S. 1390 , the SASC directed the Secretary of the Navy to consult with the State of North Carolina and the Commonwealth of Virginia, local governments and other interested parties prior to issuing a final environmental impact statement and record of decision on its choice of location of a new field and to report on this to the defense committees. The HASC also addressed Navy OLFs, but went farther by incorporating several specific measures into their recommended statutory language. Section 2818 of the House-drafted version of H.R. 2647 would prevent the Secretary of the Navy from establishing an OLF at a location where the Secretary finds the local political jurisdiction formally opposed. Section 2819 would prohibit the establishment of an OLF at either Sand Banks or Hale's Lake, NC, two more recently studied sites. The enacted version of H.R. 2647 contained neither of these provisions. During the 1980s, the Department of the Army acquired approximately 250,000 acres near Ft. Carson, CO, for use as a troop maneuvering area. Half of the land was purchased via open sale, with the remainder bought through the use of condemnation proceedings. When the Department announced that the number of soldiers stationed at Ft. Carson would increase substantially, it initiated an effort to add an additional 450,000 acres to the PCMTA. Local land owners expressed concern that public condemnation might again be invoked to acquire the new land. An amendment to the bill appropriating military construction funds for FY2008 ( P.L. 110-161 ) forbade the use of such funds for Piñon Canyon expansion. Identical language appeared in the military construction appropriations act for FY2009. This restriction is continued in Section 127 of the Administrative Provisions in Title I of the enacted appropriations bill. Federal agency operations are normally funded through the enactment of one of the 13 annual appropriations bills requested by the President and passed by Congress. Absent an annual appropriation, agency operations are funded under one or more continuing resolutions. Statute forbids the initiation of new programs using continuing resolution funding. DOD requested statutory relief from this restriction for new military construction projects. The HAC did not include such a provision in its version of the appropriations act ( H.R. 3082 ). A number of military installations will gain a significant number of military and civilian personnel during the next several years due to force shifts associated with base realignments, military end strength increases, and the redeployment of military units from overseas to domestic garrisons. Most school-age children of military personnel attend public schools operated by local school agencies. Federal property is exempt from the local taxation that normally supports school systems, and an important federal support for school attendance takes the form of Impact Aid Program payments to local school districts. Nevertheless, impact aid is retroactive, depending on an annual census of military family school children. This has presented a challenge for jurisdictions to prepare for a large influx of students as military units move to nearby installations. The HAC directed DOD to report on options available to proactively assist local agencies with school construction and renovation and on conditions that could trigger the need for new DOD school construction. The Obama Administration in September announced a significant restructuring of the existing plan for the defense of Europe against potential missile attack from Iran. The Bush Administration had planned and budgeted for the installation of two fixed missile defense sites, one in Poland and another in the Czech Republic. The revamped plan called instead for a less robust configuration based on the Navy's ballistic missile defense version of its Aegis weapon control system and SM-3 missile interceptor. During floor debate of the military construction appropriations bill, Senator Daniel Inouye introduced an amendment that would rescind those funds set aside for construction required for the now-abandoned missile defense plan and add $68.5 million for a new Aegis Ashore Test Facility needed to support the new plan. The Senate accepted the amendment and the subsequent conference agreement retained both the rescission and appropriation. The Obama Administration requested $46.0 million for the development of a Cooperative Security Location (CSL) at Palanquero Air Base, Columbia, for the conduct of various operations, including counter narcotics and air mobility missions, throughout South America. The project includes construction of operations and billeting facilities, a taxiway and parking apron, aircraft refueling infrastructure, and improvements to utility services and communications support. Although CSLs are by definition not host to a permanent U.S. military contingent and are intended to be maintained by host nation or contractor personnel, the appropriations conferees provided $43.0 million for the project and specified that "this funding is not intended to establish a U.S. military presence in Colombia ... in accordance with the Defense Cooperation Agreement of October 30, 2009." The Department of Veterans Affairs (VA) administers directly, or in conjunction with other federal agencies, programs that provide benefits and other services to veterans and their spouses, dependents and beneficiaries. The VA has three primary organizations to provide these benefits: the Veterans Benefits Administration (VBA), the Veterans Health Administration (VHA), and the National Cemetery Administration (NCA). Benefits available to veterans include service-connected disability compensation; a pension for low-income veterans who are elderly or have a nonservice-connected disability; vocational rehabilitation for disabled veterans; medical care; life insurance; home loan guarantees; burial benefits; and educational and training benefits to help in the transition of active servicemembers to civilian life. As shown in Table 3 , VA appropriations for benefits and services has increased from $58.10 billion in FY2003 to $95.95 billion in FY2009. The FY2010 budget submitted by the Administration in May 2009 called for funding the VA at a level of $108.9 billion for FY2010 (see Table 4 ). This would have been an increase of $12.9 billion, or 13.5%, over the FY2009 appropriation (including the economic stimulus funding provided by the American Recovery and Reinvestment Act [ARRA, P.L. 111-5 ]). The largest increases in funding for the VA between FY2009 and FY2010 in the Administration request, H.R. 3082 , S. 1407 , and P.L. 111-117 were for compensation and pension benefits, and readjustment benefits, where the largest component was for education benefits. As shown in Table 4 , H.R. 3082 would have provided $108.86 billion in FY2010 funding for the VA, and $48.18 billion in advance FY2011 funding for VA medical care. While H.R. 3082 provided total funding for the VA equal to the Administration request, H.R. 3082 would have provided lower funding for general operating expenses and greater funding for minor construction and the National Cemetery Administration than in the Administration request. S. 1407 would have provided, as shown in Table 4 , $109.06 billion in FY2010 funding for the VA, and $48.18 billion in advance FY2011 funding for VA medical care. S. 1407 would have provided higher funding for medical facilities and grants for state extended care facilities than in the Administration request. As shown in Table 4 , P.L. 111-117 provided increases in funding, above the Administration request, for compensation and pensions, and readjustment benefits (including education benefits). Consolidated Appropriations Act ( P.L. 111-117 ) provides a total of approximately $45.1 billion for the Veterans Health Administration (VHA) of the Department of Veterans Affairs (VA). This is a 7.4% increase over the FY2009 enacted amount and the same as the Administration's budget request for VHA. This amount includes funding for the medical services ($34.7 billion), medical support and compliance ($4.9 billion), medical facilities ($4.9 billion) and medical and prosthetic research ($581 million) accounts. The Consolidated Appropriations Act ( P.L. 111-117 ) also provides approximately $48.2 billion in advance appropriations for the medical services, medical support and compliance, and medical facilities accounts to be available in FY2011. As shown in Table 5 , there is an almost equal split between mandatory and discretionary funding for the VA. In the FY2009 appropriation, mandatory funding was only slightly less than discretionary funding. The Administration request, H.R. 3082 , S. 1407 , and P.L. 111-117 for FY2010 provide discretionary funding that is slightly less than mandatory funding. For FY2011, all of the advance funding provided by H.R. 3082 , S. 1407 , and P.L. 111-117 is discretionary funding. The American Battle Monuments Commission (ABMC) is responsible for the maintenance and construction of U.S. monuments and memorials commemorating the achievements in battle of U.S. armed forces since the nation's entry into World War I; the erection of monuments and markers by U.S. citizens and organizations in foreign countries; and the design, construction, and maintenance of permanent cemeteries and memorials in foreign countries. The Commission maintains 24 cemeteries and 25 memorials in either foreign countries or on U.S. soil. The U.S. Court of Appeals for Veterans Claims was established by the Veterans' Administration Adjudication Procedure and Judicial Review Act of 1988 ( P.L. 100-687 ). The Court is an independent judicial tribunal with exclusive jurisdiction to review decisions of the Board of Veterans' Appeals. It has the authority to decide all relevant questions of law; interpret constitutional, statutory, and regulatory provisions; and determine the meaning or applicability of the terms of an action by the VA. It is authorized to compel action by the VA. It is authorized to hold unconstitutional or otherwise unlawful and set aside decisions, findings, conclusions, rules and regulations issued or adopted by the VA or the Board of Veterans' Appeals. The Court currently occupies leased facilities near Judiciary Square in the District of Columbia and is searching for a permanent location as the current lease expires in September 2010. The Secretary of the Army is responsible for the administration, operation and maintenance of Arlington National Cemetery and the Soldiers' and Airmen's Home National Cemetery. In addition to its principal function as a national cemetery, Arlington is the site of approximately 3,100 non-funeral ceremonies each year and has approximately 4,000,000 visitors annually. The Armed Forces Retirement Home Trust Fund provides funds to operate and maintain the Armed Forces Retirement Home in Washington, DC (also known as the United States Soldiers' and Airmen's Home) and the Armed Forces Retirement Home in Gulfport, Mississippi (originally located in Philadelphia, PA, and known as the United States Naval Home). These two facilities provide long-term housing and medical care for approximately 1,600 needy veterans. The Gulfport campus, encompassing a 19-story living accommodation and medical facility tower, was severely damaged by Hurricane Katrina at the end of August, 2005, and is not currently in use. Residents of the facility were transferred to the Washington, DC, location immediately after the storm. A Memorandum of Understanding (MOU) was signed between the AFRH and the General Services Administration (GSA) for the rebuilding of the Gulfport facility, with a targeted completion date in 2010. The appropriation for the AFRH facilities is from the Armed Forces Retirement Home Trust Fund. The trust fund is maintained through gifts, bequests, and a $0.50 per month assessment on the pay of active duty enlisted military personnel and warrant officers. Table 6 shows the FY2009 enacted appropriations, the FY2010 request, and the funding provided for FY2010 for each of the related agencies. President George W. Bush submitted his FY2009 appropriations request to Congress on February 4, 2008. The House Committee on Appropriations (HAC) Subcommittee on Military Construction, Veterans Affairs, and Related Agencies marked its bill on June 12, 2008, and the full committee markup took place on June 24. Representative Chet Edwards, the subcommittee chair, introduced the bill ( H.R. 6599 , H.Rept. 110-775 ) on July 24. After extensive debate and the raising of two points of order on the floor, the House passed H.R. 6599 on August 1, 2008. The Senate Committee on Appropriations (SAC) Subcommittee on Military Construction, Veterans Affairs, and Related Agencies polled out its version of the appropriations bill, and the full committee reported it out without amendment by a unanimous vote on July 17, 2008. Senator Tim Johnson, subcommittee chair, introduced the measure ( S. 3301 , S.Rept. 110-428 ) on July 22, 2008. In the course of legislative business, several analysts suggested that this and other appropriations bills might not be adopted until the convening of the 111 th Congress. The text of the military construction appropriations bill was incorporated into Division E of an amendment to H.R. 2638 , the Department of Homeland Security Appropriations Act, 2008, a bill subsequently retitled the Consolidated Security, Disaster Assistance, and Continuing Appropriations Act, 2009. Passed by both chambers in late September, the President signed the bill into law ( P.L. 110-329 ) on September 30, 2008. Representative David R. Obey, chair of the HAC, introduced the American Recovery and Reinvestment Act of 2009 ( H.R. 1 ), or ARRA, to the 111 th Congress on January 26, 2009. Title X of the bill added funding to several military construction and veterans affairs appropriations accounts. After debate and amendment, H.R. 1 was passed by the House on January 27. The Senate subsequently substituted its own version of the bill, S. 336 , and after floor debate and amendment, passed H.R. 1 on February 10, 2009. The conference committee filed its report ( H.Rept. 111-16 ) on February 12, and President Barack Obama signed the bill into law ( P.L. 111-5 ) on February 16, 2009. The ARRA added $4.28 billion to already-enacted military construction, family housing, and veterans affairs appropriations, increasing DOD accounts by $2.88 billion and Department of Veterans Affairs accounts by $1.40 billion. A detailed discussion of ARRA provisions related to military construction appropriations may be found in CRS Report RL34558, Military Construction, Veterans Affairs, and Related Agencies: FY2009 Appropriations , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. Representative Obey introduced a supplemental appropriations bill ( H.R. 2346 ) on May 12, 2009, that consolidated funds, with some adjustments, that the Administration had requested in four supplemental appropriations proposals, including an April 9 request for $83.4 billion in supplemental funding for defense, international affairs, domestic fire fighting, and other purposes; an April 30 request for $1.5 billion for influenza preparedness and response; and a May 12 request for $5 billion to support International Monetary Fund (IMF) borrowing authority. The House passed the bill on May 14. The Senate passed its version of the bill on May 21. On June 2, the Administration submitted an additional request for $2.0 billion more for influenza response, for expanded authority to transfer funds from other appropriations for influenza measures, and for $200 million in additional humanitarian assistance to Pakistan. The conference committee filed its report ( H.Rept. 111-151 ) on June 12, 2009. After agreement by both chambers, the President signed the bill into law ( P.L. 111-32 ) on June 24. The Act added $2.11 billion to military construction accounts, including $1.23 billion for Army, $239.0 million for Navy and Marine Corps, and $281.0 million for Air Force construction, $263.3 million for the Base Realignment and Closure 2005, and $100.0 million for the NATO Security Investment Program accounts. Appendix A. DOD Military Construction Accounts Appendix B. Additional Resources Budget CRS Report RL30002, A Defense Budget Primer , by [author name scrubbed] and [author name scrubbed] (pdf). CRS Report 98-720, Manual on the Federal Budget Process , by [author name scrubbed] and Allen Schick (pdf). Veterans Affairs CRS Report RL33991, Disability Evaluation of Military Servicemembers , by [author name scrubbed] and [author name scrubbed]. CRS Report RS22483, Health Care for Dependents and Survivors of Veterans , by [author name scrubbed]. CRS Report RS20533, VA-Home Loan Guaranty Program: An Overview , by [author name scrubbed]. CRS Report RL33704, Veterans Affairs: The Appeal Process for Veterans' Claims , by [author name scrubbed]. CRS Report RL33113, Veterans Affairs: Basic Eligibility for Disability Benefit Programs , by [author name scrubbed]. CRS Report RL33323, Veterans Affairs: Benefits for Service-Connected Disabilities , by [author name scrubbed]. CRS Report RL34370, Veterans Affairs: Health Care and Benefits for Veterans Exposed to Agent Orange , by [author name scrubbed] and [author name scrubbed]. CRS Report RS22897, Veterans Affairs: Historical Budget Authority, Fiscal Years 1940 Through 2008 , by [author name scrubbed]. CRS Report RS22561, Veterans Affairs: The U.S. Court of Appeals for Veterans Claims—Judicial Review of VA Decision Making , by [author name scrubbed]. CRS Report RS22666, Veterans Benefits: Federal Employment Assistance , by [author name scrubbed]. CRS Report RL33985, Veterans' Benefits: Issues in the 110 th Congress , coordinated by [author name scrubbed]. CRS Report RL33992, Veterans Benefits: Merchant Seamen , by [author name scrubbed] and [author name scrubbed]. CRS Report RS22902, Veterans Benefits: An Overview , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL34626, Veterans' Benefits: Benefits Available for Disabled Veterans , by [author name scrubbed] and [author name scrubbed]. CRS Report RS22804, Veterans' Benefits: Pension Benefit Programs , by [author name scrubbed] and [author name scrubbed]. CRS Report RL34627, Veterans' Benefits: The Vocational Rehabilitation and Employment Program , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33993, Veterans' Health Care Issues , by [author name scrubbed]. CRS Report RL34598, Veterans Medical Care: FY2009 Appropriations , by [author name scrubbed]. Selected Websites House Committee on Appropriations http://appropriations.house.gov/ Senate Committee on Appropriations http://appropriations.senate.gov/ House Committee on Armed Services http://www.house.gov/hasc/ Senate Committee on Armed Services http://armed-services.senate.gov/ House Committee on Veterans Affairs http://veterans.house.gov/ Senate Committee on Veterans Affairs http://veterans.senate.gov/ CRS Appropriations Products Guide http://www.crs.gov/Pages/appover.aspx Congressional Budget Office http://www.cbo.gov/ Defense Base Closure and Realignment Commission (BRAC Commission) http://www.brac.gov Government Accountability Office http://www.gao.gov/
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The Military Construction, Veterans Affairs, and Related Agencies appropriations bill provides funding for the planning, design, construction, alteration, and improvement of facilities used by active and reserve military components worldwide. It capitalizes military family housing and the U.S. share of the NATO Security Investment Program, and finances the implementation of installation closures and realignments. It underwrites veterans benefit and health care programs administered by the Department of Veterans Affairs, provides for the creation and maintenance of U.S. cemeteries and battlefield monuments within the United States and abroad, and supports the U.S. Court of Appeals for Veterans Claims and Armed Forces Retirement Homes. The bill also funds construction supporting Overseas Military Operations, a function previously carried out through emergency supplemental appropriations, and advance appropriations for veterans medical services. Rather than submit a complete appropriations request for FY2010 only five weeks after taking office, President Barack Obama published a budget overview, A New Era of Responsibility: Renewing America's Promise, on February 26, 2009. The President submitted his regular FY2010 appropriations request to Congress on May 7, 2009, including $133.5 billion for programs covered in the regular Military Construction, Veterans Affairs, and Related Agencies appropriations bill: $24.4 billion for Title I (military construction and family housing); $108.9 billion for Title II (veterans affairs); and $275.7 million for Title III (related agencies). Compared with funding appropriated for FY2009, this represented decreases for Title I of $3.7 billion (13.4%), and increases for Title II of $12.9 billion (13.5%) and for Title III of $69.0 million (33.3%). The overall increase in appropriations between that requested for FY2010 and enacted for FY2009 was $9.2 billion (7.4%). The enacted bill (P.L. 111-117) appropriated $23.3 billion for Title I, $157.8 billion for Title II, $280.7 million for Title III, and $1.2 billion for Title IV (Overseas Contingency Operations construction included in Title I of the President's request). Military construction is experiencing an overall decrease in spending as the annual appropriation required to implement the 2005 Defense Base Closure and Realignment round begins to drop off. Also, appropriations dedicated to the construction and operation of military family housing are decreasing as its privatization program expands. In the area of veterans' non-medical benefits, mandatory spending is increasing as claims for disability compensation, pension, and readjustment benefits increase due to a combination of several factors including the aging of the veterans' population and the current conflicts in Iraq and Afghanistan. As a result, the average number of days for completing a pension or compensation claim in FY2008 was 179 days. To reduce the pending claims workload and improve processing time, funds have been provided in previous appropriation bills for hiring and training additional claims processing staff. The House version of the Military Construction, Veterans Affairs, and Related Agencies Act for 2010 (H.R. 3082) was passed by the House on July 10, 2009, and sent to the Senate. The Senate passed an amended version of the bill on November 17, 2009. H.R. 3082 was subsequently incorporated as Div. E of the Consolidated Appropriations Act, 2010 (H.R. 3288).
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International child custody disputes figure to increase in frequency as the global society becomes more integrated and mobile. What is more, a child custody dispute between two parents can become a diplomatic imbroglio between two countries. In Abbott v. Abbott the U.S. Supreme Court will address an issue that has divided the Circuit Courts of Appeals: Whether a ne exeat right is a "right of custody" for purposes of the Hague Convention? If so, parents with a ne exeat right can demand the return of their child "wrongfully" taken from the family's home country. In September 2008, the Fifth Circuit ruled that a ne exeat right is not a "right of custody" and therefore the removal of a child in violation of ne exeat order is not "wrongful." The Supreme Court is now confronted with a four-to-one circuit split: the Second, Ninth, Fourth, and now Fifth Circuits have ruled that a ne exeat right is not a "right of custody," while the Eleventh Circuit has reached the opposite conclusion. The Hague Convention on the Civil Aspects of International Child Abduction ("Hague Convention") protects children from wrongful removal across international borders and provides procedures to aid in their safe return. While the Convention has been the principal mechanism for enforcing the return of abducted children to the United States, it is not without limitations. First, its procedures are inapplicable and/or unenforceable in nonsignatory nations. Second, it does not act as an extradition treaty, nor does it purport to adjudicate the merits of a custody dispute. It is merely a civil remedy designed to preserve the status quo by facilitating the return of an abducted child to the country of his or her "habitual residence" and allowing the judicial authorities in that country to adjudicate the merits of a custody dispute. As such, the proceeding is brought in the country to which the child was abducted or in which the child is retained. Although domestic relations involve issues typically governed by state law, the federal statute implementing the Hague Convention explicitly confers jurisdiction on the federal courts. Procedures and remedies available under the Convention differ depending on the parental rights infringed. Under Article 3 of the Hague Convention, the removal of a child is "wrongful" when "it is in breach of rights of custody attributed to a person, an institution or any other body, either jointly or alone, under the law of the State in which the child was habitually resident immediately before the removal or retention;" and "at the time of removal or retention those rights were actually exercised, either jointly or alone, or would have been so exercised but for the removal or retention." Thus, there are two elements to a claim that the child's removal was "wrongful" under Article 3: (1) the removal was in breach of "rights of custody"; and (2) those rights were "actually exercised" at the time of the removal, or would have been but for the removal. Article 5 in turn defines "rights of custody," and distinguishes those rights from "rights of access": (a) "rights of custody" shall include rights relating to the care of the person of the child and, in particular, the right to determine the child's place of residence; (b) "rights of access" shall include the right to take a child for a limited period of time to a place other than the child's habitual residence. Critically, the treaty provides for the return of the child only if a parent's custody rights have been violated. Parents deprived of their rights of access have the less robust remedy provided for in Article 21 of "mak[ing] arrangements" with the Department of State to secure effective exercise of their rights. Thus, at the heart of Abbott is the father's claim that a ne exeat right is a right of custody under the Hague Convention, and that this right was violated by the child's removal from Chile without his consent. The Abbott family—Timothy Abbott, Jacquelyn Abbot, and their son—had resided in La Serena, Chile, since 2002. The parents separated in March 2003, and during the successive several months the Chilean courts issued several orders regarding the parents' custody rights. The first order granted Mr. Abbott visitation rights. The second order, at the center of the Abbott case, was a ne exeat or "no exit" order, entered by the court at the request of the mother, providing that neither parent could remove the child from Chile without the consent of the other parent. Finally, a third order denied the father's request for custody rights, and granted all custodial rights to the mother. In August 2005, without notice, in the midst of disputes over visitation and other issues, the mother removed the child to Texas without the father's consent in contravention of the Chilean court's ne exeat order, as well as Chilean statutory law that by default confers ne exeat rights on non-custodial parents. As the District Court for the Western District of Texas recognized, Mr. Abbott's visitation rights conferred by Chilean court order amount to rights of access: he is permitted to take the child from the child's habitual home for a limited period. But, relying on the language and structure of Article 5, the court concluded that Mr. Abbott does not have rights of custody. Therefore, the removal of his child from Chile was not "wrongful" under the Hague Convention. The court began by stating that ne exeat rights are not encompassed by Article 5's definition of "rights of custody." That is, ne exeat rights do not accord Mr. Abbott any rights "relating to the care of [the child's] person." The court further concluded that the right to "determine" the child's place of residence refers to a right to decide the child's specific place of residence, rather than merely a right to veto prospective places of residence. Finally, the court cited the Ninth Circuit's argument that a ne exeat right is not embraced by the plain meaning of "custody," and added that a ne exeat right does not give Mr. Abbott a say on any "child-rearing issue" besides the child's geographic location. The court also emphasized the structure of Article 5. The court found a "clear intent" to both distinguish between custody rights and access rights, and to provide greater protection for parents with custody rights. Therefore, the court concluded that ordering the return of Mr. and Mrs. Abbott's child to Chile would be "inappropriate." The Fifth Circuit affirmed the district court's decision on September 16, 2008. Its opinion was essentially a description of the circuit split and a summary of the district court's reasoning. Not until the penultimate paragraph did the court conclude that it found persuasive the Second Circuit's reasoning that the Hague Convention distinguished between rights of custody and rights of access. In Croll, a father sued their child's mother seeking an order pursuant to the Hague Convention that the child was removed from Hong Kong in violation of a court order and be returned to Hong Kong. The District Court for the Southern District of New York ordered return of the child. Mrs. Croll appealed. The Second Circuit held in Croll v. Croll that ne exeat rights are not "rights of custody" for purposes of the Hague Convention. In conducting what is the most extensive analysis of the five circuit courts to address the issue, the Croll majority relied on the text of the Hague Convention, its drafting history, and practical considerations to reach its conclusion. The bulk of the Croll court's analysis was textual. Citing multiple dictionaries, the court concluded that custody of a child "entails the primary duty and ability to choose and give sustenance, shelter, clothing, moral and spiritual guidance, medical attention, education, etc., or the (revocable) selection of other people or institutions to give these things." The court left to implication the obvious conclusion that flows from this definition of "custody": the father's ne exeat rights do not permit him to take a "primary" role in any facet of his son's upbringing, and so he does not have rights of "custody" as that word is ordinarily understood. The majority further noted that Articles 3 and 5 refer to the plural "rights." Under the Hague Convention, the removal of a child is wrongful when "it is in breach of rights of custody," and moreover, "'rights of custody' shall include rights relating to the care of the person of the child." This language, the majority argued, refers to a "bundle" of rights exercised by someone holding custody, which means that a person who holds only a single right—such as a veto right over removal of the child from his home country—cannot hold custody. Turning to the second clause of Article 5(a) ("'rights of custody' shall include rights relating to the care of the person of the child and, in particular, the right to determine the child's place of residence "), the court observed that the function of that language is to offer a prominent example of a "right of custody." Because "custody" entails the primary care and control of a child, the argument continued, the "determine" clause must refer to a right to choose a specific place of residence within a country if it is to be a useful example of a right of custody. Decisional rights relating to the child's care and upbringing entail more specific choices than the determination of which country a child resides in, such as whether the child lives in a city, a suburb, or countryside, or whether the child attends boarding school or military school. Therefore, if "the right to determine the place of the child's residence" is an apt example of a right of custody, "place of residence" must refer to a specific place within a country. The final point the court made about the "determine" clause of Article 5(a) was that the word "determine" denotes a power to choose a certain outcome, not merely a right to veto a certain outcome. Again, the court established this meaning by referencing two dictionaries. Concluding its textual analysis, the court found support in paragraph (b) of Article 3, which provides that a removal in breach of custody rights is wrongful only if "at the time of removal or retention those rights were actually exercised, either jointly or alone, or would have been so exercised but for the removal or retention." Of course, the complainant-parent in Croll was not exercising his ne exeat rights at the time of his child's removal, and the court maintained that it was "circular" to say he would have exercised those rights but for the removal. The majority buttressed the meaning it gave to ne exeat rights by arguing that an alternative meaning would render the Hague Convention "unworkable." The court offered a hypothetical to illustrate. If the court ordered the return of the child to the home country, Mrs. Croll would be under no legal obligation to return with the child. Further, Mr. Croll has only ne exeat rights, and is not charged with the duties of the child's primary care and custody. Thus, if the court ordered the return of the child based solely on a breach of ne exeat rights, the child would not necessarily be returned to a person or institution with a legal obligation to care for the child's person. This result was unfathomable, the court asserted. Finally, the majority examined extratextual material. The most convincing of these was a piece of scholarship, authored by the chair of the international organization that drafted the Hague Convention, asserting that a ne exeat right was not a right of custody. As the dissent recognized, the other materials cited by the majority stood "for the unremarkable proposition" that the Convention meant to distinguish between custody rights and access rights. This distinction is not helpful in answering the question of which right Mr. Abbott has. But establishing an intention to make such a distinction supported the majority's jurisprudential argument that ordering the return of a child even though the complainant had no custody rights would be an unwarranted judicial "substitution" of access rights for custody rights. Then-Court of Appeals Judge Sonia Sotomayor dissented in Croll . Unwilling to be constrained by the majority's "parochial" definition of "custody," Judge Sotomayor determined that the phrase "rights of custody" embraced a ne exeat right by drawing heavily on the object and purpose of the Hague Convention. That purpose, gleaned from the treaty drafting materials, was to thwart a forum-shopping parent's aim to flout the custody law of the child's home country. In other words, the Hague Convention is meant to ensure that custody disputes are resolved in the home country rather than a foreign country with potentially laxer custody law and enforcement. Her dissent thus concluded that this purpose would be served by returning a child in cases where a physical custody right is violated as well as cases where a ne exeat right is violated, because both rights are expressions of the home country's "custody law." Continuing with its purposive analysis, the dissent faulted the majority's treatment of Article 5(a)'s "determine" clause for ignoring the international character of the Hague Convention. That clause must refer to the broader decision as to whether the child will live in England or the United States, for example, because that is precisely the type of decision the Hague Convention is meant to protect. Judge Sotomayor responded to the majority's argument that interpreting a ne exeat right as a custody right would render the Hague Convention "unworkable." She noted that the majority's argument mistakenly assumed that a custody order is the sole source of a parent's duties to care for the child. Instead, parental duties may arise from "many sources," such as the internal law of the home country. Moreover, Judge Sotomayor was skeptical of the majority's fear that a father would travel across the world to get his child back, and then "simply permit his child to stand abandoned in the airport upon her return." Judge Sotomayor also addressed the decisions of sister-signatories that have taken up the issue. While acknowledging that there is not a perfect consensus in favor of her interpretation, most foreign courts have interpreted a ne exeat right as a right of custody (including "some biggies," as Justice Scalia put it during Abbott 's oral argument, such as the House of Lords ). The Furnes court dealt with the same interpretative issue taken up by Croll , but came to the contrary conclusion that a ne exeat right is a right of custody. Akin to Judge Sotomayor's reasoning in Croll , the Furnes majority interpreted "place of residence" in light of the Hague Convention's purpose. Because the object of the treaty is to deter and remedy international abduction, "the right to determine the child's place of residence" must include a right to decide the country the child lives in. But the Furnes court argued that in any event a ne exeat right confers a right to determine the child's place of residence in the narrower sense as well. The court argued that a veto right encompasses an effective right to determine a specific place of residence because a parent could grant consent to the child's international relocation on the condition that the child reside in a particular city, or even a particular house. The court cemented its analysis by seizing on Article 5(a)'s use of "relating." Even assuming a ne exeat right is not a right to "determine" the child's place of residence, the majority observed, it is at least a right relating to the care of the child's person, as well as a right relating to the determination of the child's place of residence. The briefs filed in the Supreme Court largely mirrored the thrusts and parries of the majority and dissenting opinions in Croll and Furnes . Mrs. Abbott argued that the "ordinary meaning" of "custody" entails the primary ability to give physical care to the child, and therefore did not encompass a ne exeat right. She further argued that a ne exeat right was not a right to "determine the place of residence," because that phrase refers to a child's "specific living quarters." Mr. Abbott recited the purposive argument employed in the Croll dissent and the Furnes majority. The Hague Convention was concerned with the removal of children from their home country, that argument goes, and so "place of residence" must have an international meaning rather than an in tra national one. Mr. Abbott also argued that in any case the holder of a ne exeat right has the right to determine the "place of residence" in the narrower sense. Borrowing the logic of the Furnes court, Mr. Abbott noted that the parent could grant consent to the child's international relocation on the condition that the child reside in a particular place within the new country. Finally, Mr. Abbott argued that by withholding consent and requiring the child to stay in one country the parent exercises control over important decisions about upbringing such as which language the child will speak and the political climate in which the child is raised. This, Mr. Abbott asserted, shows that a ne exeat right was a right of "custody" even under the meaning that Mrs. Abbott gives that word. In addition to rearticulating the arguments of lower courts, Mrs. Abbott made a novel argument regarding the historical and theoretical underpinnings of ne exeat rights. Mrs. Abbott urged the court to conceptualize a ne exeat right as a power of the state—not a parent—that is meant to preserve the state's ability to enforce the law. This, she maintained, was consistent with the history of the ne exeat writ. Further, the United States has codified this conception of ne exeat in statute ("The district courts of the United States ... shall have such jurisdiction to make and issue in civil actions, writs ... of ne exeat republica ... as may be necessary or appropriate for the enforcement of the internal revenue laws"). Thus, Mrs. Abbott concluded, a violation of a ne exeat order or statute frustrates the state's jurisdiction rather than a right of a private person. The parties also disputed the weight of authority from signatory courts. Assessing the position of the international community on this treaty issue depends largely on which foreign decisions one counts as relevant. Thus, Mrs. Abbott emphasized that only seven courts of last resort have spoken to the issue, and those courts came to conflicting conclusions. In contrast, Mr. Abbott cited at least nine foreign courts that have rendered opinions in accord with his interpretation. He also explained away much of the asserted dissonance among foreign courts by noting that the conclusions favoring Mrs. Abbott in two opinions by the Supreme Court of Canada were merely dicta. He further noted that although a French trial court held that ne exeat does not amount to a custody right, a French appellate court in a separate case held to the contrary. The Supreme Court's decision will address the question of whether the Hague Convention requires the return of a child to the home country if the child was removed to the United States in violation of a ne exeat order or statute. However, various other issues regarding the treaty will remain unresolved. For example, the Hague Convention will still be susceptible to conflicting applications around the world to the extent interpretations by foreign courts depart from the one handed down in Abbott . Further, if the Supreme Court holds that ne exeat rights are not rights of custody, a Chilean court may respond by amending the Abbotts' custody order to clarify that ne exeat rights are in fact rights of custody under Chilean law. Other signatory countries may likewise amend their law to provide that they are custody rights. Also, while the ne exeat -physical custody arrangement at issue in Abbott is a common one, it is not the only one implemented by courts in child custody disputes. Abbott will not address which side of the access-custody line these other arrangements fall on. Finally, a practical issue remains: the political problem of noncompliance by some signatories.
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International child custody disputes figure to increase in frequency as the global society becomes more integrated and mobile. A child custody dispute between two parents can become a diplomatic imbroglio between two countries. Thus in 2000, Members of Congress and Vice President Al Gore backed legislation to grant Cuban refugee Elian Gonzalez permanent residency status, even after President Fidel Castro demanded the boy's return. More recently, in the 111th Congress, both houses passed resolutions (S.Res. 37 and H.R. 125) calling on the Brazilian government to return Sean Goldman, the son of New Jersey resident David Goldman, to the United States. In the case of the Goldman family, the father's legal argument for return was based on the Hague Convention on the Civil Aspects of International Child Abduction ("Hague Convention"). This treaty was entered into force in the United States in 1988, and has since been the principal mechanism for enforcing parental rights in international custody disputes. However, judicial interpretation of certain Hague Convention provisions has been inconsistent among federal Circuit Courts of Appeals. The lives of one British-American family—the Abbotts—and the lives of families similarly situated may be affected by how the United States Supreme Court resolves this circuit split in Abbott v. Abbott. In this case, the Court will determine whether a ne exeat, or "no exit" order granting one parent the right to veto another parent's decision to remove their child from his or her home country is a "right of custody" under the Hague Convention. Such a determination is necessary to determine the Convention's applicability, as it only provides for a child's return to the country which issued the ne exeat order if the removal was "wrongful" and in breach of "rights of custody." This report discusses the circuit split on the treaty interpretation issue, the arguments made before the Supreme Court in Abbott, and the significance of the case.
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R ecent reports regarding an uptick in the number of alien minors apprehended at the U.S. border without a parent or legal guardian have prompted renewed questions regarding so-called unaccompanied alien children (UACs). Many of these questions were previously raised in FY2013-FY2014, when a significant number of UACs were apprehended along the southern U.S. border. Although the number of UAC apprehensions dropped in FY2015, the beginning of FY2016 has seen an increase in the number of UACs apprehended along the southern border in comparison to the same time period in the prior year. Some of these questions pertain to the numbers of children involved, their reasons for coming to the United States, and current and potential responses of the federal government and other entities to their arrival. Other questions concern the interpretation and interplay of various federal statutes and regulations, administrative and judicial decisions, and settlement agreements pertaining to alien minors. This report addresses the latter questions, providing general and relatively brief answers to 15 frequently asked questions regarding UACs. In particular, this report begins with questions and answers that give basic definitions and background information pertaining to UACs, including how federal law defines unaccompanied alien child and the difference between being a UAC and having Special Immigrant Juvenile (SIJ) status. It then turns to questions and answers pertaining to custody, control, and enforcement of immigration laws as to UACs, such as federal agencies' responsibilities in maintaining custody of UACs, and UACs' eligibility for relief from removal. It concludes with questions and answers regarding UACs' rights, privileges, and benefits while in the United States, including whether UACs have a right to counsel at the government's expense in removal proceedings and whether UACs are eligible for inclusion in the Obama Administration's Deferred Action for Childhood Arrivals (DACA) initiative. Other CRS reports address the pre-FY2015 surge in the number of UACs encountered at the U.S. border with Mexico, as well as how UACs who are apprehended by immigration officials are processed and treated. These include CRS Report R43599, Unaccompanied Alien Children: An Overview , by [author name scrubbed] and [author name scrubbed]; CRS Report R43628, Unaccompanied Alien Children: Potential Factors Contributing to Recent Immigration , coordinated by [author name scrubbed]; CRS Report R43734, Unaccompanied Alien Children: Demographics in Brief , by [author name scrubbed] and [author name scrubbed]; CRS Insight IN10107, Unaccompanied Alien Children: A Processing Flow Chart , by [author name scrubbed]; and CRS Report R43664, Asylum Policies for Unaccompanied Children Compared with Expedited Removal Policies for Unauthorized Adults: In Brief , by [author name scrubbed]. Yet other CRS reports discuss the circumstances in foreign countries that some see as contributing to UACs' unauthorized migration to the United States. These include CRS Report R43702, Unaccompanied Children from Central America: Foreign Policy Considerations , coordinated by [author name scrubbed]; CRS Report R41731, Central America Regional Security Initiative: Background and Policy Issues for Congress , by [author name scrubbed] and [author name scrubbed]; CRS Report RL34112, Gangs in Central America , by [author name scrubbed]; CRS Report R43616, El Salvador: Background and U.S. Relations , by [author name scrubbed]; CRS Report R42580, Guatemala: Political, Security, and Socio-Economic Conditions and U.S. Relations , by [author name scrubbed]; and CRS Report RL34027, Honduras: Background and U.S. Relations , by [author name scrubbed]. Pursuant to Section 462 of the Homeland Security Act of 2002, as amended, an unaccompanied alien child , is defined as a person who: is under the age of 18; lacks lawful immigration status; and either (1) has no parent or legal guardian in the United States or (2) has no parent or legal guardian in the country who is available to provide care and physical custody of the child. Accordingly, not every minor without lawful immigration status is a UAC. Notably, if a child and parent without lawful immigration status are apprehended by immigration authorities and detained together while awaiting removal, the child is not considered a UAC. Moreover, the fact that a child is initially a UAC does not necessarily mean that he/she will remain within the scope of this definition thereafter (e.g., the child is reunited with a parent, or turns 18). In practice, however, federal officials seem to have historically based their determinations as to whether a child is unaccompanied upon the child's circumstances at and in the hours immediately following the child's apprehension. If a child is not apprehended with a parent or guardian, or cannot be reunited with a parent or guardian within a matter of hours, the child is generally treated as a UAC for purposes of the transfer from Department of Homeland Security (DHS) custody to Department of Health and Human Services (HHS) custody, as discussed below, regardless of whether the child has a parent or parents in the United States with whom he/she could eventually be reunited. On account of policy considerations, DHS sometimes opts not to review or reconsider its initial UAC determination. Moreover, once a UAC designation has been made by DHS, HHS's ability to independently reconsider that determination may be statutorily constrained to the extent it requires a reassessment of the child's immigration status. Legislation introduced in the 113 th and 114 th Congresses would mandate a somewhat different approach, expressly providing for children to cease being treated as UACs as soon as a "parent, legal guardian, sibling over 18 years of age, aunt, uncle, grandparent, or cousin over 18 years of age of the alien is found in the United States and is available to provide care and physical custody." Some—but not necessarily all—UACs may be eligible for Special Immigrant Juvenile (SIJ) status. As previously noted (see " What is an unaccompanied alien child? "), the term unaccompanied alien child is broadly defined to include aliens under the age of 18 who have no parent or legal guardian in the United States, or whose parent or legal guardian is unavailable to provide care and physical custody. Eligibility for SIJ status under Section 101(a)(27)(J) of the Immigration and Nationality Act (INA) and its implementing regulations is also limited to aliens who are young (under 21 years of age) and essentially lack the care or custody of their parents or legal guardians. However, eligibility for SIJ status is further restricted to aliens (1) who have been declared dependent on a U.S. juvenile court, or whom such a court has legally committed to, or placed under the custody of, a state agency or department or other state- or court-appointed individual or entity, and (2) whose reunification with "1 or both ... parents is not viable due to abuse, neglect, abandonment, or a similar basis found under State law." In addition, administrative or judicial proceedings must have determined that it would not be "in the alien's best interest" to be returned to his or her previous country of nationality or last habitual residence, and the Secretary of Homeland Security must consent to the granting of SIJ status. DHS regulations contain some additional restrictions upon eligibility (e.g., that the alien's dependency on the court arises because "family reunification is no longer a viable option" due to abuse, neglect, abandonment, or "a similar basis found under State law"). However, these regulations have not been amended since Section 101(a)(27)(J) of the INA was amended in 2008, and it is unclear whether they are to be seen as legally binding upon the agency at present. SIJ status, in itself, gives aliens a legal basis to remain in the United States and adjust their status to that of lawful permanent resident aliens (LPRs), which, in turn, would eventually enable them to apply for U.S. citizenship. Specifically, Section 245 of the INA provides that aliens granted SIJ status are deemed to have been paroled—a term discussed in greater detail below at " Why aren't UACs encountered at ports of entry turned away as inadmissible? "—into the United States and may apply for LPR status. Being classified as a UAC, in contrast, does not, in itself, furnish any legal basis to remain in the United States or to adjust to LPR status. However, an individual UAC could potentially be eligible for certain forms of relief from removal, depending upon his or her particular circumstances. See " Are children without immigration status eligible for relief from removal? " and " Can UACs obtain asylum due to gang violence in their home countries? ." The Flores settlement agreement (also known as the Flores agreement or Flores settlement) is a 1997 agreement resolving a long-running challenge to certain practices of the then-Immigration and Naturalization Service (INS) as to the detention of UACs. The Flores litigation began in 1984, when INS's Western Regional Office adopted a policy that generally barred the release of detained minors to anyone other than a parent or lawful guardian except in "unusual and extraordinary cases." This policy was challenged in a class action lawsuit brought on behalf of detained unaccompanied minors. Following several lower court decisions, the litigation reached the Supreme Court, which rejected a facial challenge to the constitutionality of this policy in its 1993 decision in Flores v. Reno . In so doing, a majority of the Court expressly rejected the argument that UACs who have no available parent or guardian have a "fundamental right" to be placed in the custody of a willing and able private custodian, instead of government custody. However, notwithstanding the Court's decision, the Flores litigation continued, in part, over the conditions in which UACs were detained, and the parties ultimately concluded that settlement was "in their best interests and best serves the interests of justice." The Flores agreement articulates a number of broad principles and policies applicable to the detention of alien minors, some of which are also reflected in subsequent legislation or regulations. See " Which federal agencies have primary responsibility for maintaining custody of alien children without immigration status? " and " May children without immigration status be released from DHS or HHS custody? ." Among other things, the agreement establishes that alien minors in federal custody will be treated with "dignity, respect and special concern for their particular vulnerability as minors." It also establishes procedures for the temporary placement of alien minors following their arrest, which include "expeditiously process[ing]" the minor, providing the minor with a notice of rights, and generally segregating UACs from unrelated adults. In addition, it sets forth a "general policy" favoring the release of UACs "without unnecessary delay" to their parents, legal guardians, adult relatives, certain other adults or entities designated by the parent or guardian, licensed programs willing to accept legal custody, or under certain conditions, another entity or adult individual, in this order of preference. What the Flores agreement may require as to any specific alien is less clear, in part, because the agreement incorporates a number of exceptions to its requirements. For example, the agreement specifically contemplates that the "general policy favoring release" would not preclude the continued detention of individual minors in order to secure their timely appearance before immigration authorities or the immigration court, or to ensure the safety of the minor or other persons. In addition, courts have imposed certain limitations upon the agreement's enforceability. In particular, the agreement has been found to be enforceable only through actions seeking compliance with its terms, not through actions seeking monetary damages for alleged violations of its terms. In particular, at least one court has expressly rejected the argument that the Flores agreement "create[s] a due process entitlement (a protected property or liberty interest) because the terms and conditions of the agreement currently serve as interim federal regulations, and the language of the agreement is mandatory with regard to the services and protections to be provided to unaccompanied minors." Also, where legislation enacted subsequent to the Flores agreement provides for alternate treatment of UACs, that legislation could be seen to govern instead of the agreement, particularly in cases where the legislation provides for aliens to be treated more favorably than under the agreement. The Flores agreement was entered into in 1997, and was initially set to terminate (except for the requirement that minors generally be housed in licensed facilities) at the earlier of (1) five years after its final approval by the court, or (2) three years after the court determines that federal officials are in substantial compliance with the agreement. However, a 2001 stipulation and order extended its term until "45 days after the federal government promulgates final regulations implementing the Agreement." No such regulations have been promulgated to date. UACs encountered at ports of entry are generally inadmissible under Section 212(a)(7) of the INA. This section generally bars the admission to the United States of any immigrant [who] at the time of application for admission ... is not in possession of a valid unexpired immigrant visa, reentry permit, border crossing identification card, or other valid entry document required by this Act, and a valid unexpired passport, or other suitable travel document, or document of identity and nationality if such document is required under the regulations issued by the [Secretary of Homeland Security]. However, admission is not the same as entry for purposes of the INA. Admission is defined as the "lawful entry into the United States after inspection and authorization by an immigration officer." Entry , in contrast, is generally seen to encompass any "coming of an alien into the United States," and may be permitted, pursuant to other provisions of federal law, in circumstances where admission is not legally permissible. In the case of UACs, Section 235 of the William Wilberforce Trafficking Victims Protection Reauthorization Act (TVPRA) of 2008, as amended, could be said to implicitly authorize UACs to enter the United States. Section 235 distinguishes between UACs from "contiguous countries"—namely, Canada and Mexico—and UACs from other countries. UACs from contiguous countries found at a land border or port of entry who are determined to be inadmissible (e.g., for lack of proper documentation) may be permitted to withdraw their application for admission and be returned to their home country, subject to certain conditions. UACs from other countries, in contrast, are not subject to such treatment, but are instead required to be transferred to the custody of the Secretary of Health and Human Services within 72 hours of being determined to be UACs, as discussed below (see " Which federal agencies have primary responsibility for maintaining custody of alien children without immigration status? "). Other provisions of law could also be construed to permit UACs to enter the United States. Key among these provisions is Section 212(d)(5)(A) of the INA, which permits the Secretary of Homeland Security to parole —or permit the physical entry of aliens into the United States without being admitted—on a "case-by-case basis for urgent humanitarian reasons or significant public benefit." Among other things, parole under Section 212(d)(5)(A) is used to permit aliens seeking asylum to enter the United States. See " Can UACs obtain asylum due to gang violence in their home countries? ." The primary federal agencies responsible for maintaining custody over alien children without immigration status are DHS and HHS. Many UACs encountered by DHS in the course of its immigration enforcement activities are required to be transferred to HHS custody. However, not all UACs encountered by DHS are required to be transferred to HHS. Notably, HHS does not play a role in detaining certain arriving UACs from contiguous countries (i.e., Canada and Mexico) who have agreed to be voluntarily repatriated to their home countries. Moreover, DHS maintains responsibility over accompanied alien children who are detained pending removal. DHS is the primary agency responsible for enforcing the nation's immigration laws, including by apprehending aliens who attempt to enter the United States without legal authorization, and detecting aliens within the country whose unauthorized presence or commission of a status violation makes them removable. In particular, alien children traveling across a land border or a port of entry may be encountered by immigration enforcement officers within DHS —primarily those within U.S. Customs and Border Protection (CBP). If such children are suspected of attempting to enter or have entered the United States without legal authorization, they may be taken into custody and thereafter removed or otherwise repatriated in accordance with applicable federal immigration statutes and regulations. Section 462 of the Homeland Security Act of 2002 generally transferred responsibility for the care of UACs (but not accompanied alien children) from immigration enforcement authorities to HHS's Office of Refugee Resettlement (ORR). Once such children are transferred to its custody, ORR is responsible for "coordinating and implementing the care and placement" of the children, including by placing UACs in state-licensed care facilities and foster care. However, the transfer of a UAC from DHS custody to ORR does not preclude DHS from removing the alien from the United States. If a UAC in ORR custody is ultimately ordered removed, DHS may briefly take physical custody of the UAC in order to effectuate his or her removal. Not every UAC encountered by DHS is required to be transferred to the custody of HHS's ORR. If a UAC from Canada or Mexico is apprehended at a land border or a U.S. port of entry and deemed inadmissible under federal immigration laws, the UAC may be offered the opportunity to be voluntarily returned to his or her home country in lieu of being placed in immigration removal proceedings (a process distinct from "voluntary departure," discussed infra, " May children without immigration status be placed in removal proceedings? "). If the UAC agrees to repatriation, he/she may generally remain in DHS custody for the brief period until being repatriated. By statute, a determination must be made within 48 hours that an alien child is eligible for voluntary return on account of being a UAC from Canada or Mexico. If a determination cannot be made within this period, or the child does not meet the criteria for repatriation, DHS must immediately transfer the child to ORR custody. More generally, other than in exceptional circumstances, any child in the custody of DHS or another federal agency must be transferred to the custody of ORR within 72 hours of the agency having made the determination that he/she is a UAC. Children without immigration status may be placed in removal proceedings. However, federal law requires that UACs (but not other alien children identified for removal) be placed in specific types of proceedings if federal immigration authorities seek to remove them from the United States. Moreover, as discussed earlier (" Which federal agencies have primary responsibility for maintaining custody of alien children without immigration status? "), arriving UACs from Canada and Mexico may be voluntarily returned to their home countries in lieu of being placed in removal proceedings, if certain criteria are met. Federal statute establishes specific requirements concerning the removal of UACs (but not accompanied children). Many aliens arriving in the United States who are deemed inadmissible by an immigration officer may be immediately ordered removed, through a streamlined process known as expedited removal, which entails a determination of inadmissibility by immigration officials, rather than an immigration judge. However, arriving UACs are exempted from this process. In general, if DHS seeks to remove a UAC from the United States, regardless of whether the UAC is arriving or encountered in the United States, it must place the child in removal proceedings before an immigration judge (sometimes referred to as formal removal proceedings). UACs placed in formal removal proceedings are also required to be provided access to counsel, to the extent practicable and consistent with statutory restrictions on the provision of counsel at the government's expense in immigration proceedings. A UAC is also eligible for voluntary departure under Section 240B of the INA in lieu of undergoing removal proceedings, at no cost to the child. Special rules govern the handling of arriving UACs from Canada and Mexico. In general, arriving aliens are considered "applicants for admission" into the United States for immigration purposes. As previously discussed (see " Which federal agencies have primary responsibility for maintaining custody of alien children without immigration status? "), arriving UACs who are nationals or habitual residents of Canada and Mexico may be voluntarily returned to their home countries in lieu of being placed in removal proceedings, if they consent to the withdrawal of their application for admission. "Voluntary return" following a withdrawal of an application of admission is a distinct alternative to "voluntary departure" under Section 240B of the INA. The availability of voluntary return to an arriving UAC from Canada or Mexico is contingent upon immigration authorities determining that the child (1) was not a victim of a "severe form of trafficking" or at risk of being trafficked if repatriated; (2) "does not have a fear of returning to the child's country of nationality or of last habitual residence owing to a credible fear of persecution"; and (3) is able to make an independent decision to agree to repatriation in lieu of being placed in removal proceedings. Arriving UACs from Canada or Mexico who do not satisfy these criteria, or who do not agree to withdraw their application for admission, may be treated in the same manner as other UACs, including being placed in formal removal proceedings before an immigration judge. In certain instances, aliens whose entry or continued presence in the United States is otherwise not permitted under federal immigration law may be eligible for relief from removal. If such relief is granted, an otherwise removable alien may be permitted to remain in the United States and, depending upon the form of relief granted, adjust to LPR status. There is no statute or treaty-based form of relief available for alien children based solely upon their juvenile status. However, some children without immigration status may obtain relief from removal depending upon their individual circumstances, including whether they are victims of trafficking, would face persecution on a protected ground if returned to their home country, or are subject to abuse or abandonment by their parents. The most relevant forms of relief from removal are discussed below. Asylum . Any alien—regardless of age —may be eligible for asylum if the alien is unable or unwilling to return to his/her home country due to a well-founded fear of persecution on account of race, religion, nationality, political opinion, or membership in a particular social group. An alien granted asylum may be eligible to work in the United States and adjust to LPR status. In general, an alien can either apply for asylum "affirmatively" with U.S. Citizenship and Immigration Services (USCIS) within DHS or "defensively" in the context of removal proceedings before an immigration judge. However, Section 208 of the INA mandates that asylum officers within USCIS have initial jurisdiction over any asylum claim made by a UAC even if the UAC is in removal proceedings. In addition, other provisions of federal law make it easier for UACs to be granted asylum on account of persecution. For further discussion, see also " Can UACs obtain asylum due to gang violence in their home countries? ." SIJ Status . As previously noted (see " What is the difference between being a UAC and having Special Immigrant Juvenile (SIJ) status? "), some alien children without lawful status may be eligible for SIJ status, and, on the basis of this status, become LPRs. Eligibility for SIJ status is limited to juveniles who, among other things, (1) have been declared by a state court to be a dependent on the court, or have been legally placed by the court with a state or an appointed private entity; (2) are unable to reunite with one or more parents on account of abuse, abandonment, or neglect; and (3) have been determined not to have his/her best interest served by being returned to his/her native country or country of last habitual residence. The availability of an immigrant visa for aliens who obtain SIJ status is subject to the numerical cap on the allocation of immigrant visas for "special immigrants" (a category that includes several types of aliens in addition to those with SIJ status). Nonimmigrant Visa for Victims of Trafficking and Other Crimes . Alien children without immigration status could also be eligible for nonimmigrant visas allowing them to temporarily remain in the country (and potentially adjust to LPR status) if they are the victims of trafficking or certain other crimes. The INA provides that an alien may be granted a nonimmigrant visa (commonly referred to as a "T visa") if he or she is a victim of a severe form of trafficking, and satisfies at least one other specified requirement, such as being under the age of 18. A T visa generally allows an alien to live in the United States for up to four years (subject to extension in limited cases), and the alien may apply for adjustment to LPR status after three years. Up to 5,000 T visas may be issued per year. A separate nonimmigrant visa (commonly referred to as a "U visa") is available for aliens who (1) have suffered substantial physical or mental abuse on account of being victims of specified criminal activities; (2) possess information regarding the criminal activity; and (3) have been or are likely to be helpful in a law enforcement investigation or prosecution of such activity. A U visa may remain valid for up to four years (subject to extension in limited circumstances), and the visa-holder may apply for adjustment to LPR status after three years. Up to 10,000 U visas may be issued per year. DHS and HHS maintain custody over children without immigration status for different purposes. In the case of DHS, the primary purpose is to secure the child's presence at removal proceedings and during the execution of a final order of removal. The purpose of HHS obtaining custody over UACs is generally not focused upon immigration enforcement, but instead to provide UACs with temporary shelter care and protect them from trafficking and other forms of exploitation. As a general matter, individual aliens placed in removal proceedings by DHS are potentially subject to detention, but may also be released on bond or parole—which here refers to release from custody, not entry into the United States—unless they fall under a category subject to mandatory detention. DHS regulations and the Flores settlement agreement provide criteria for when juveniles in removal proceedings may be released from custody. The Flores settlement agreement establishes a "general policy" favoring the release of children from detention. However, both the agreement and DHS regulations recognize that release is not required when DHS determines that the juvenile's continued detention is necessary to ensure his/her safety or the safety of others, or is required to secure the juvenile's presence at immigration removal proceedings. DHS regulations provide that a juvenile may be released, in order of preference, to (1) a parent, legal guardian, or other adult relative (brother, sister, aunt, uncle, or grandparent) who is not presently in DHS detention; (2) another adult individual or entity who is designated by a parent or guardian in DHS custody and who agrees to care for the juvenile and ensure his/her presence at removal proceedings; or (3), in unusual and compelling circumstances, another adult individual or entity designated by DHS who agrees to care for the child and ensure his/her presence at removal proceedings. Additionally, in cases where a juvenile is detained by DHS along with a parent, legal guardian, or adult family member, DHS may on a case-by-case basis opt to release the juvenile and accompanying adult from detention simultaneously. As noted earlier (see " Which federal agencies have primary responsibility for maintaining custody of alien children without immigration status? "), federal statute designates HHS's ORR with responsibility for the care and custody of UACs, other than certain arriving UACs from Canada and Mexico who have been immediately and voluntarily returned to their home countries. When functions formerly handled by immigration authorities concerning UACs were transferred to HHS via the Homeland Security Act of 2002, HHS also became subject to the terms of the Flores settlement agreement. Section 235 of the TVPRA provided further guidance concerning HHS standards for the care and control of UACs within the agency's custody. Following the transfer of a UAC to the custody of HHS's ORR, the UAC is generally released shortly thereafter to the physical custody of an ORR-contracted care facility. The type of facility (e.g., shelter care, secure care, or foster care) may depend upon the particular needs of the UAC, the UAC's age, and whether the UAC poses a flight risk or a danger to himself/herself or others. UACs remain in the legal custody of the federal government even though they may be temporarily placed in the physical custody of a licensed care provider. UACs could potentially remain in such facilities pending culmination of removal proceedings against them (at which point they may be removed from the United States); until they turn 18 (at which point they may be turned over to DHS custody, provided that DHS has initiated removal proceedings against them); or until such times as ORR finds a parent, legal guardian, or other entity who may take custody of the UAC, in accordance with the terms of the Flores settlement agreement. The Secretary of HHS must consent to the jurisdiction of a juvenile court before the court may declare a child in HHS custody to be a dependent of the court or before the court may legally commit or place the juvenile in the custody of a state agency or a court-appointed person or entity. As previously noted, such action by a state court is necessary before a juvenile can be granted SIJ status. As the term suggests, the "best interest of the child" standard prioritizes an affected child's interests in the context of adjudication or other decisionmaking processes. The standard is typically employed by courts or administrative bodies considering issues implicating a child's welfare, including child custody and placement decisions. There is no uniform consensus as to the particular factors that should be considered (or the weight given to each of these factors) when applying the "best interest of the child standard," and application of the standard can vary depending upon the context. The "best interest of the child" standard generally does not provide legal guidance as to whether or not a child is subject to removal. A 2007 guidance document issued by the DOJ's Executive Office of Immigration Review (EOIR) concerning immigration court cases involving UACs notes the following: Issues of law—questions of admissibility, eligibility for relief, etc.—are governed by the Immigration and Nationality Act and the regulations. The concept of "best interest of the child" does not negate the statute or the regulatory delegation of the Attorney General's authority, and cannot provide a basis for providing relief not sanctioned by law. The "best interest of the child" standard may, however, inform the conduct of immigration removal proceedings, even if the standard is not relevant to a determination of whether the child is removable. A child's interests are also relevant to other determinations by immigration authorities, including when or whether to release a child without immigration status from detention during the course of removal proceedings (though consideration of this interest is not dispositive, and it may be overcome by competing government interests, including ensuring the child's presence at removal hearings). As noted above (see " What is the difference between being a UAC and having Special Immigrant Juvenile (SIJ) status? "), in determining an alien child's eligibility for SIJ status, immigration authorities must consider whether it would be in the child's best interest not to be repatriated to his/her home country. However, other criteria must also be satisfied for a child to be deemed eligible for SIJ status. On the other hand, the "best interest of the child" standard is statutorily required to be considered by ORR in certain decisions involving UACs placed in its custody. In 2008, Congress mandated that UACs placed in ORR custody "be promptly placed in the least restrictive setting that is in the best interest of the child." Some UACs could potentially be found to be eligible for asylum as a result of gang-related violence in their home countries, although the existence of such violence is not, in itself, a basis for asylum. Rather, eligibility for asylum is determined on a case-by-case basis, with the individual alien applying for asylum having the burden of establishing that he/she is unable or unwilling to return to his/her home country because of persecution, or a well-founded fear of persecution, on account of race, religion, nationality, political opinion, or membership in a particular social group. Persecution is not defined by either the INA or its implementing regulations, but has been construed to mean "the infliction of suffering or harm upon those who differ (in race, religion or political opinion) in a way regarded as offensive.... [It is] an extreme concept that does not include every sort of treatment our society regards as offensive." Generalized violence or lawlessness may be distinguished from persecution, as may be harms that are not seen as arising from the actions of the government or entities that the government cannot or will not control. Any persecution must also be "on account of" a protected ground (i.e., race, religion, etc.), a phrase which has been taken to mean that the protected ground serves as "at least one central reason for the persecution." Those seeking asylum based on gang-related violence have often asserted persecution on account of membership in a particular social group or, less commonly, political opinion (i.e., an actual or imputed political opinion that they are opposed to the gangs). The relevant social group has been defined in various ways—including (1) those who oppose (or are taking "concrete" or "active" steps to oppose) the gangs' activities; (2) those who resist attempts to recruit them to the gang; (3) former gang members who have renounced their membership; (3) witnesses who have testified against the gangs; and (4) families that have been affected by gang violence —and with various degrees of success. In a number of cases, administrative and judicial tribunals have declined to recognize the proposed social group because it is amorphous, and the individuals making up the group would not be perceived as a group by the society in question. However, such determinations generally reflect the tribunals' view of the evidence that the alien offered regarding social perceptions in his/her home society, not per se rules as to what constitutes a particular social group. In other cases, individual aliens' claims regarding their treatment at the hands of their alleged persecutors are not seen as credible, for example, because of inconsistencies in their stories. Some aliens may also be statutorily barred from receiving asylum under the INA, although such bars seem unlikely to affect UACs who are not former gang members. UACs are treated the same as other aliens in terms of applications for asylum, with two notable exceptions, previously noted (see " Are children without immigration status eligible for relief from removal? "). First, all applications for asylum involving UACs must be heard by USCIS, regardless of whether the application involves an alien currently in removal proceedings. Claims involving aliens in proceedings—widely known as "defensive applications"—are otherwise heard exclusively by immigration judges, with only claims by aliens not in removal proceedings (i.e., "affirmative applications") being heard by USCIS. However, Section 208 of the INA and its implementing regulations require that both defensive and affirmative applications by UACs be heard by USCIS. Second, an alien's minority status could constitute an "extraordinary circumstance" that would permit an application for asylum to be filed more than one year after the alien's arrival in the United States. Claims filed more than one year after arrival are otherwise barred absent the existence of "changed circumstances that materially affect the applicant's eligibility for asylum." The primary difference between refugees and asylees is the alien's location at the time he/she applies for such status. Eligibility for both refugee status and asylum depends upon the alien qualifying as a refugee, as that term is defined by Section 101(a)(42) of the INA: The term "refugee" means (A) any person who is outside any country of such person's nationality or, in the case of a person having no nationality, is outside any country in which such person last habitually resided, and who is unable or unwilling to return to, and is unable or unwilling to avail himself or herself of the protection of, that country because of persecution or a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion, or (B) in such special circumstances as the President after appropriate consultation ... may specify, any person who is within the country of such person's nationality or, in the case of a person having no nationality, within the country in which such person is habitually residing, and who is persecuted or who has a well-founded fear of persecution on account of race, religion, nationality, membership in a particular social group, or political opinion. However, refugee status may only be granted to aliens who apply for such status while they are outside the United States, while asylum may only be granted to aliens who apply for such status at the U.S. border or inside the United States. As a practical matter, considering children or other persons from Central American countries for refugee status—as opposed to asylum—as some have proposed would thus mean that these individuals would not need to travel through Mexico (and potentially other countries) to the United States. (Indeed, in fall 2014, the Obama Administration implemented a program which provides for unmarried children under 21 years of age residing in El Salvador, Guatemala, or Honduras whose parents are "legally present in the United States" to be considered for refugee status, or parole into the United States.) Legally, though, individuals would have to meet the same requirements discussed previously (see " Can UACs obtain asylum due to gang violence in their home countries? ") in terms of showing that they have suffered past persecution, or have a well-founded fear of future persecution on account of a statutorily protected ground (i.e., race, religion). Fear of generalized violence or lawlessness would not necessarily suffice. There are, however, a couple of other notable distinctions between refugee status and asylum. One is that refugees are subject to the broader criminal grounds of inadmissibility (although with waivers available for many grounds for humanitarian, family unity, and public interest purposes), while asylees are ineligible for asylum after entry if they have been convicted of an aggravated felony. Another is that applicants for refugee status must be sponsored by a "responsible person or organization," who guarantees the applicant's transportation from his or her present abode to his or her place of resettlement in the United States. There is also generally a limit on the maximum number of refugees admitted to the United States each year, and applicants who are accepted are typically placed on "waiting lists," from which "refugees or groups of refugees may be selected ... in a manner that will best support the policies and interests of the United States." Neither sponsorship nor placement on a waiting list occurs with asylees. It is also worth noting that aliens seeking asylum may appeal the denial of their application, while "[t]here is no appeal" from a denial of an application for refugee status (although an alien could potentially apply for refugee status again). Derivative status may be generally granted to the spouses and minor children of those granted both refugee status and asylum. Parents are not eligible for such derivative status. Both refugees and asylees may also become LPRs after one year. Two separate provisions of federal law address UACs' access to legal counsel. One provision—Section 235 of the TVPRA, as amended—generally requires the Secretary of HHS to "ensure" that UACs in HHS or DHS custody "have counsel to represent them in legal proceedings or matters and protect them from mistreatment, exploitation, and trafficking." The other provision—Section 462 of the Homeland Security Act, as amended—requires the Director of the ORR at HHS to develop a plan to "ensure that qualified and independent legal counsel is timely appointed to represent the interests of each child." However, because both provisions describe such access as being "consistent with" Section 292 of the INA and other provisions of federal law, they have not been construed as requiring the appointment of counsel at the government's expense since these provisions require that any such counsel be "at no expense to the Government." In several cases, UACs and their advocates have challenged Section 292 and the government's corresponding failure to provide counsel to UACs in removal proceedings, including on the grounds that it violates the Due Process Clause of the U.S. Constitution. These challenges sometimes note that children in other types of civil proceedings have been found to have a categorical right to counsel at the government's expense, regardless of their individual circumstances. They often also note that the consequences of potential removal for aliens are comparable to the consequences of these other proceedings. Courts have, to date, rejected these arguments, declining to recognize a categorical right to counsel at the government's expense for UACs or other aliens. However, at least four federal courts of appeal have opined that the Due Process Clause could potentially require the appointment of counsel on a case-by-case basis for individual aliens who are incapable of representing themselves due to "age, ignorance, or mental capacity." Section 504 of the Rehabilitation Act has also been construed in such a way that it could result in the appointment of counsel at the government's expense for unrepresented immigration detainees with "serious mental disorders or conditions that may render them mentally incompetent to represent themselves in immigration proceedings." Certain UACs could potentially be encompassed by the protections of Section 504. The federal government's 2014 announcement that it would award $2 million in grants to enroll "about 100 lawyers and paralegals" to represent children in immigration proceedings prompted questions about whether the government is barred, under Section 292 of the INA, from using appropriated funds to provide counsel to UACs in removal proceedings. As previously noted (see " Do UACs have a right to counsel at the government's expense in removal proceedings? "), Section 292 generally governs aliens' right to counsel, and provides that, In any removal proceedings before an immigration judge and in any appeal proceedings before the Attorney General from any such removal proceedings, the person concerned shall have the privilege of being represented (at no expense to the Government) by such counsel ... as he shall choose. Some have previously suggested that this provision, by itself or in conjunction with 5 U.S.C. §3106—which generally bars agencies from "employ[ing] an attorney or counsel for the conduct of litigation in which the United States ... is a party"—precludes the government from providing or otherwise paying for aliens' counsel in removal proceedings. Those making this argument seemingly construe the language about aliens' "privilege" to have counsel at their own expense to mean that the government may not pay for counsel for them. However, this interpretation does not appear to have been adopted by any court, and other interpretations could be advanced. In particular, an argument could be made that these provisions only restrict aliens' ability to claim an entitlement to counsel at the government's expense, and do not preclude the government from paying for aliens' counsel pursuant to other provisions of law or at its discretion. Along with the vast majority of countries, the United States is a party to the Vienna Convention on Consular Relations (VCCR), a multilateral agreement codifying consular practices originally governed by customary practice and bilateral agreements. Pursuant to Article 36 of the VCCR, when a national of a State party (i.e., country) is arrested or otherwise detained in another State party, appropriate authorities within the arresting State must inform the person arrested "without delay" of the ability to have his/her consulate notified. The VCCR does not require the arresting State to notify the appropriate consular officials in every instance; rather, it requires the arresting State to notify the foreign national in its custody that he/she has the option of having his/her consulate notified. A foreign consular officer also is provided the right to communicate and be provided access to a detained national, including the ability to visit the national in the detention facility and arrange legal representation. DHS regulations require that "[e]very detained alien shall be notified that he or she may communicate with the consular or diplomatic officers of the country of his or her nationality in the United States." The United States also has bilateral agreements with a number of countries that require consular notification in the event that one of the parties arrests a national of the other party. Most UACs encountered by CBP along the U.S.-Mexico border are from countries (including Mexico) that are parties to the VCCR but do not have separate agreements requiring mandatory consular notification. The VCCR identifies consular functions as including "safeguarding ... the interests of minors and other persons lacking full capacity who are nationals of the sending State, particularly where any guardianship or trusteeship is required with respect to such persons." Some have argued that, consistent with the VCCR's recognition of this function, consular officers should be notified whenever a UAC or other alien child is taken into custody by immigration authorities, but current DHS regulations provide for mandatory consular notification only when a bilateral agreement expressly requires it. The United States may also enter into both legally binding and nonlegal arrangements with foreign countries concerning the repatriation of their nationals. In recent years, DHS and local ICE or CBP field offices have entered nonlegal arrangements concerning the repatriation of Mexican nationals, including UACs. These arrangements typically call for notification of Mexican consular officials and other Mexican authorities when a UAC is to be repatriated, and provide for repatriation to occur during daylight hours. In addition to consular notification requirements relating to the detention of a foreign national, the VCCR also provides that appropriate authorities within the host country notify the appropriate consular post "without delay of any case where the appointment of a guardian or trustee appears to be in the interests of a minor or other person lacking full capacity who is a national of the sending State." UACs who entered the United States in FY2014 are generally not eligible for deferred action—a type of temporary relief from removal, the receipt of which can result in aliens receiving work authorization and certain federal financial assistance—under the Deferred Action for Childhood Arrivals (DACA) initiative. (As of the date of this report, the DACA initiative is still being implemented, although the Obama Administration has been enjoined from implementing a proposed expansion of DACA, as well as from establishing a DACA-like program for certain unlawfully present aliens who are the parents of U.S. citizens or LPRs.) Pursuant to the DHS guidelines regarding DACA, eligibility is limited to aliens who have resided in the United States since June 15, 2007, and who were physically present in the United States on June 15, 2012. Such residence must have been "continuous," which is generally construed to mean that any absences from the United States are "brief, causal, and innocent." Thus, even if individual UACs happened to be re-entering the United States after a prior period of presence, the requirement as to continuous residence could present issues. Immigration officials may, however, still grant deferred action to aliens outside of DACA if they have prioritized other aliens for removal, or if humanitarian factors weigh in favor of allowing individual aliens to remain in the United States.
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The beginning of FY2016 has seen an uptick in the number of alien minors apprehended at the U.S. border without a parent or legal guardian in comparison to the same time period in the prior year. This increase has prompted renewed questions regarding so-called unaccompanied alien children (UACs), many of which were previously raised in FY2013-FY2014, when a significant number of UACs were apprehended along the southern U.S. border. Some of these questions pertain to the numbers of children involved, their reasons for coming to the United States, and current and potential responses of the federal government and other entities to their arrival. Other questions concern the interpretation and interplay of various federal statutes and regulations, administrative and judicial decisions, and settlement agreements pertaining to alien minors. This report addresses the latter questions, providing general and relatively brief answers to 15 frequently asked questions regarding UACs. In particular, some of the questions and answers in this report provide basic definitions and background information relevant to discussions of UACs, such as the legal definition of unaccompanied alien child; the difference between being a UAC and having Special Immigrant Juvenile (SIJ) status; the terms and enforcement of the Flores settlement agreement; and why UACs encountered at a port of entry—as some recent arrivals have been—are not turned away on the grounds that they are inadmissible. Other questions and answers explore which federal agencies have primary responsibility for maintaining custody of alien children without immigration status; removal proceedings against such children; the release of alien minors from federal custody; the "best interest of the child" standard; and whether UACs could obtain asylum due to gang violence in their home countries. Yet other questions and answers address whether UACs have a right to counsel at the government's expense; their ability under the Vienna Convention on Consular Relations to have consular officials of their home country notified of their detention; and whether UACs are eligible for inclusion in the Obama Administration's Deferred Action for Childhood Arrivals (DACA) initiative. Other CRS reports address the pre-FY2015 surge in the number of UACs encountered at the U.S. border with Mexico, as well as how UACs who are apprehended by immigration officials are processed and treated. These include CRS Report R43599, Unaccompanied Alien Children: An Overview, by [author name scrubbed] and [author name scrubbed]; CRS Report R43628, Unaccompanied Alien Children: Potential Factors Contributing to Recent Immigration, coordinated by [author name scrubbed]; CRS Report R43734, Unaccompanied Alien Children: Demographics in Brief, by [author name scrubbed] and [author name scrubbed]; CRS Insight IN10107, Unaccompanied Alien Children: A Processing Flow Chart, by [author name scrubbed]; and CRS Report R43664, Asylum Policies for Unaccompanied Children Compared with Expedited Removal Policies for Unauthorized Adults: In Brief, by [author name scrubbed]. Yet other CRS reports discuss the circumstances in foreign countries that some see as contributing to UACs' unauthorized migration to the United States. These include CRS Report R43702, Unaccompanied Children from Central America: Foreign Policy Considerations, coordinated by [author name scrubbed]; CRS Report R41731, Central America Regional Security Initiative: Background and Policy Issues for Congress, by [author name scrubbed] and [author name scrubbed]; CRS Report RL34112, Gangs in Central America, by [author name scrubbed]; CRS Report R43616, El Salvador: Background and U.S. Relations, by [author name scrubbed]; CRS Report R42580, Guatemala: Political, Security, and Socio-Economic Conditions and U.S. Relations, by [author name scrubbed]; and CRS Report RL34027, Honduras: Background and U.S. Relations, by [author name scrubbed].
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The recent financial crisis and deep economic recession have led to criticisms of the Federal Reserve's (Fed's) handling of both. Critics have blamed the Fed for pursuing policies that allowed the housing bubble to inflate, for lax regulation of financial firms and mortgage markets that led to excessive speculation, for "bailing out" financial firms during the crisis, for failing to prevent the recession's unusual length and depth, and for engaging in "quantitative easing" that critics believe will result in high inflation. Although alternative explanations have also been offered for each of these criticisms, they have led some Members of Congress to question whether legislative remedies are needed to avoid similar problems in the future. In particular, some Members of Congress have argued that the Fed's statutory mandate should be modified. The Fed's statutory mandate for monetary policy was set in the "Federal Reserve Reform Act of 1977." It currently reads: The Board of Governors of the Federal Reserve System and the Federal Open Market Committee shall maintain long run growth of the monetary and credit aggregates commensurate with the economy's long run potential to increase production, so as to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates. Although this mandate includes three goals, it is often referred to by economists as a "dual mandate" of maximum employment and stable prices. Some economists have argued that Congress should strike the goals of maximum employment and moderate long-term interest rates from the current mandate, leaving price stability as the only mandated goal. Often the proposal for a single mandate is paired with a more specific proposal that the Fed should adopt an inflation target. Under an inflation target, monetary policy would aim to achieve a predefined numerical target or range for some measure of inflation (the change in the general price level). For at least the past two decades, bills have been introduced in Congress to switch the Federal Reserve to a single mandate of price stability. In the 113 th Congress, H.R. 215 , the Federal Reserve Single Mandate Act, would strike maximum employment from the mandate and replace "stable prices" with "long-term price stability, a low rate of inflation" (it would maintain stable prices and moderate long-term interest rates). It would require the Fed to establish an inflation target to promote price stability. Also in the 113 th Congress, there was companion legislation introduced in the House, H.R. 1174 , the Sound Dollar Act, and the Senate, S. 238 , the Federal Reserve Modernization Act. Title I of H.R. 1174 / S. 238 would strike the current mandate and replace it with a single mandate of long-term price stability. It would require the Fed to establish metrics (e.g., an inflation target) to evaluate whether the mandate was being achieved, and those metrics would have to take into account price indices of goods and services, asset prices, exchange rates, and the price of gold. The Fed would be required to publicly disclose the metrics and report to Congress when the metrics were altered. The bill would also replace current semi-annual "Humphrey-Hawkins" reporting requirements to Congress, which call for "a discussion of the conduct of monetary policy and economic developments and prospects for the future, taking into account past and prospective developments in employment, unemployment, production, investment, real income, productivity, exchange rates, international trade and payments, and prices," with reporting requirements on "whether the goal of long-term price stability is being met and, if such goal is not being met, an explanation of why the goal is not being met and the steps that the Board and the Federal Open Market Committee will take to ensure that the goal will be met in the future…," as well as a description of the instruments used and strategy employed to achieve price stability, and the effect of monetary policy on the exchange rate value of the dollar. The H.R. 1174 / S. 238 also has other titles unrelated to the Fed's mandate. Were a single mandate to be adopted in the United States, it would follow an international trend that has seen many foreign central banks, including those of New Zealand, Canada, Australia, and the United Kingdom, adopt price stability mandates, inflation targets, or both in recent decades. In January 2012, the Fed voluntarily announced a "longer-run goal for inflation" of 2%, as measured by the annual change in the price index for personal consumption expenditures. This report analyzes the economic arguments for and against shifting to a single mandate. It then analyzes possible effects of a mandate change on Fed policymaking in the context of recent criticisms related to the Fed's performance. It also discusses the advantages and disadvantages of different options for implementing an inflation target. The statutory mandate sets the ultimate goals of monetary policy, and can be altered only through legislative action. The instruments, methods, and strategies that the Fed employs to reach those goals are not laid out in law. Inflation targeting can be thought of as a strategic approach—to focus policy on achieving a numerical target for inflation—to achieving mandated goals. Because it is a part of a strategy for achieving statutory goals, it could be codified through legislation or voluntarily adopted internally by the Fed. Traditionally, proponents of a single mandate have also favored inflation targeting. There is logic to the idea that if the Fed's sole focus of policy is going to be achieving price stability, then there should be a numerical target to help ensure that this goal is achieved and facilitate evaluation of the Fed's performance in relation to the mandate. Legislation could include both, but need not. One might favor a single mandate of price stability, but oppose a legislated inflation target on the grounds that the Fed should have maximum independence and flexibility to pursue that mandate. Or Congress might legislate a single mandate, and the Fed could then choose whether to voluntarily adopt an inflation target to help meet the single mandate. Although many proponents of inflation targeting also favor a single mandate, an inflation target could also be adopted without changing the current mandate. Fed Chairman Ben Bernanke was a well-known advocate of inflation targeting before his time at the Fed, but has repeatedly defended the dual mandate in its current form while at the Fed. He has suggested that an inflation target would be complementary to the dual mandate. In 2005, he testified: One possible step toward greater transparency would be for the FOMC to state explicitly the numerical inflation rate or range of inflation rates it considers to be consistent with the goal of long- term price stability, a practice currently employed by many of the world's central banks. I have supported this idea in my academic writings and in speeches as a board member. Providing quantitative guidance about the meaning of "long-term price stability" could have several advantages, including further reducing public uncertainty about monetary policy and anchoring long-term inflation expectations even more effectively. I view the explicit statement of a long-run inflation objective as fully consistent with the Federal Reserve's current policy approach, including its appropriate emphasis on the role of judgment and flexibility in policymaking. Most important, this step would in no way reduce the importance of maximum employment as a policy goal. Indeed, a key justification for this action is its potential to contribute to stronger and more stable employment growth by further stabilizing inflation and inflation expectations. It is debatable whether an inflation target is compatible with the equal weighting of maximum employment and price stability in the dual mandate—arguably, it communicates to the public a greater focus on inflation, intentionally or not. Given the Fed's broad discretion over policy implementation, however, the Fed would not need to seek new authority or wait for a mandate change to adopt an inflation target if it desired. An example of the Fed's scope to act within its current mandate is discussed in the next section. In January 2012, the Fed released a "Statement of Longer Run Goals and Policy Strategy," in which it set a numerical inflation goal: The inflation rate over the longer run is primarily determined by monetary policy, and hence the Committee has the ability to specify a longer-run goal for inflation. The Committee judges that inflation at the rate of 2 percent, as measured by the annual change in the price index for personal consumption expenditures, is most consistent over the longer run with the Federal Reserve's statutory mandate. In this statement, the Fed explained why it believed it would not be appropriate to set a parallel numerical employment goal: The maximum level of employment is largely determined by nonmonetary factors that affect the structure and dynamics of the labor market. These factors may change over time and may not be directly measurable. Consequently, it would not be appropriate to specify a fixed goal for employment… The Fed also reaffirmed its adherence to the dual mandate and the equal weighting of the two goals in this statement: The FOMC is firmly committed to fulfilling its statutory mandate from the Congress of promoting maximum employment, stable prices, and moderate long-term interest rates. The Committee seeks to explain its monetary policy decisions to the public as clearly as possible…under circumstances in which the Committee judges that the objectives are not complementary, it follows a balanced approach in promoting them.… It is fair to ask whether this announcement amounts to the introduction of an inflation target within the context of the dual mandate. The Fed has not officially used the term inflation target in this announcement or subsequently. That raises the question: what qualifies as an inflation targeting regime? Is the adoption of an explicit inflation goal a necessary and sufficient condition to qualify as an inflation targeting regime? The institutional elements of inflation targeting regimes vary from country to country, and different economists would define inflation targeting differently. Economist Edwin Truman identified what he believed to be the four key elements of an inflation targeting regime, which are shown in the left-hand column of Table 1 . For the fourth element, Truman identifies inflation reports, inflation forecasts, testimony before parliament, or letters when the target has been breached as examples of mechanisms to determine whether the target has been or will be met. He finds that most countries with inflation targets have some combination of these four elements, but the only element that all share in common is a numerical inflation target. The right-hand column of Table 1 shows current Fed policy for each of Truman's four mechanisms. The Fed's longer-run goals meet only the second—arguably, the most essential—criterion in full. For the fourth criterion, the only specific mechanism to determine whether the target has been met is an inflation forecast. The Fed regularly testifies before Congress, but not specifically on its inflation goal. Proponents claim that a series of related benefits would stem from a single mandate of price stability. These claims have been criticized on two grounds—that purported benefits would actually result in worse policy and economic outcomes than the status quo, or that the Fed, in practice, has already delivered the same benefits under the current dual mandate. In fact, some economists have referred to the Fed as an "implicit inflation targeter" because of the latter argument. This section considers each of those arguments in turn. For clarity of discussion, this report will treat a single mandate and inflation targeting as complementary when evaluating the merits and drawbacks of the proposal unless otherwise noted. In other words, an inflation target would increase the benefits and drawbacks of changing the mandate. It should be noted, however, that more of the literature has focused on the effects of inflation targeting than on a single mandate, so certain authors may not necessarily have intended their arguments to be applied to both. A long-standing critique of macroeconomic policymakers is that they inappropriately choose the short-term political benefits of low unemployment over the long-term costs of higher inflation. Election-minded policymakers allegedly have a bias toward overly stimulative policy in an effort to "rev up" the economy beyond its sustainable limits that ultimately results in undesirably high inflation beyond their political horizons. While the dual mandate already calls for stable prices, its inclusion of maximum employment could potentially allow policymakers to justify this bias. Proponents of a single mandate claim that it would reduce the scope for policymakers to indulge in that bias, and would therefore result in lower and more stable inflation over time. Two questions can be answered with empirical evidence to help evaluate the legitimacy of this argument. First, has the Fed consistently delivered price stability under a dual mandate? Second, have other countries with single mandates or inflation targets delivered low and stable inflation more consistently than the Fed? Although inflation was high in the 1970s and parts of the 1980s, it has been consistently low and stable, as measured by the consumer price index (CPI), over the past two decades. The increase in the overall CPI has been below 4% for the year in each year since 1991. In 2009, the CPI experienced slight deflation, meaning overall prices fell. In this case, inflation was lower than desired. In other words, the one time in recent years the Fed failed to achieve price stability, it was the opposite of the problem predicted by the economic theory that policymakers will be biased toward high inflation. Since 2012, inflation has run below the Fed's long-term goal of 2%. In its policymaking, the Fed has preferred to focus on core inflation, which omits food and energy prices. Using the Fed's preferred measure, the core CPI has been above 1% and below 3% each year since 1995 and has not shown any tendency to rise at the end of the past two business cycles. In other words, the Fed has been highly successful at achieving price stability by its preferred measure since 1995, and almost as successful by a broader measure of inflation. Some economists believe that the Fed has pursued policies since the financial crisis that are incompatible with price stability, but those unconventional policies have not, to date, resulted in any tangible increase in inflation. The Fed, for its part, has argued that those policies are necessary for price stability, in order to avoid price deflation. Further, the Fed's inflation record is not significantly different from that of major inflation targeters. For example, from 2000 to 2010, average inflation in the United States was within one percentage point of the average for major inflation targeters, with inflation in Australia and New Zealand slightly higher than the United States, and inflation in the Euro Area, United Kingdom, and Canada slightly lower. Some commentators argue that the European Central Bank has adopted a more cautious approach to monetary stimulus than the Fed because of its commitment to price stability, but the United Kingdom, for example, has pursued many of the same unconventional policies as the Fed, including quantitative easing. There has been some dispute among economists as to whether overall inflation or a core measure is a more appropriate benchmark for evaluating the Fed's performance. But in the context of changing the mandate, two points can be made. First, the Fed's record on price stability by its preferred measure since 1995 could not have been improved upon under an alternate mandate or an inflation target. Second, its record is not quite as good by other measures. For example, headline has been higher than core on average in recent years. But if one believes that the Fed is defining price stability incorrectly (e.g., it should use overall inflation instead of core inflation, or it should include house prices in its inflation measure), one would have to explicitly add the preferred definition to a mandate change or inflation target. Otherwise, the Fed would have discretion to define price stability in terms of whatever measure it prefers. The Fed's record on inflation may be good, contrary to the predicted policy bias, because the Fed's independence may already be sufficient to allow it to effectively ignore short-term benefits of higher inflation. If so, a mandate change is not necessary for the Fed to resist the temptation to pursue policies with short-term benefits and long-term costs. A central tenet of mainstream economic theory is that money is neutral in the long run, meaning that changes in monetary policy do not have permanent effects on the level of employment. In the long run, it is primarily labor market policy that influences the "natural rate" of unemployment, and the Fed has no control over labor market policy. (The mandate's call for "maximum employment" is typically interpreted to mean keeping unemployment near its natural rate, as opposed to, say, reducing unemployment to zero.) Proponents of a mandate change argue that the Fed's mandate should not include a variable that the Fed cannot control in the long run. Further, some economists have argued that the best way for the Fed to contribute to economic efficiency in the long run is by keeping prices stable. Price stability reduces errors made by economic agents because of mistaken forecasts about future price movements, and reduces "shoe leather" costs caused by the expense and effort of individuals to protect themselves against inflation. While a belief that monetary policy has no long-term effect on employment may be fairly uncontroversial, it is also uncontroversial to assert that monetary policy has a significant effect on the business cycle, which is the main driver of total employment and unemployment in the short run. It can take several years for the economy to return to full employment after a downturn, and the economy rarely remains at full employment for long. In economist Olivier Blanchard's view, "while money is eventually neutral…monetary policy can affect the real interest rate for a decade and perhaps more…[and] output or unemployment, for a roughly equal time…" Thus, as a practical matter, the effect of monetary policy on employment is always a relevant policy concern. Foreign central banks with single mandates have still adjusted monetary policy in response to changes in employment, in practice. Some would also question the mainstream premise that monetary policy has no long-term effect on employment. A central tenet to the natural rate of unemployment concept is that the natural rate is unaffected by the business cycle. There is an alternative theory, called "hysteresis," that prolonged periods of high unemployment raise the natural rate of unemployment. This could occur, for example, because a worker's skills are eroded by episodes of long-term unemployment, making the individual less employable when the economy recovers. If the hysteresis argument is correct, monetary policy could influence employment in the long run. For example, an aggressively stimulative monetary policy could prevent hysteresis by limiting long-term unemployment following a deep recession. Such a policy might be more aggressive than what would be called for solely on the basis of maintaining price stability. Policymakers would have to decide where to draw the line in the tradeoff between combating hysteresis and maintaining price stability, but this can be contrasted with the neutrality of money argument that there is no long-term tradeoff. One criticism of the dual mandate is that the Fed has multiple goals, but only one instrument (open market operations) to pursue those goals. When goals conflict, the mandate offers no guidance as to which goal takes precedence. Most of the time, employment and inflation move together. During economic downturns, employment and inflation both decline; during booms, they both rise. In those cases, the policy prescription is likely to be the same—expansionary in a boom and contractionary in a downturn—under a single or dual mandate. For example, the Fed is currently concerned that employment and inflation are too low—in these circumstances, both a single or dual mandate would call for expansionary policy. Further, movements in employment are seen as leading indicators of future movements in inflation. If that is the case, monetary policy would respond to movements in employment even if policymakers were only concerned with price stability. It follows that, in normal circumstances, policy reactions to changes in employment would be similar under a single or dual mandate. There are cases when employment and inflation do not move together, however. For example, "supply shocks," such as a sharp increase in the price of oil, would temporarily reduce economic activity while temporarily increasing inflation. The most famous case is the "stagflation" of the 1970s, when the recessions beginning in 1973 and 1979 both involved rising inflation and falling employment. High inflation persisted throughout the 1970s and was not wrung out of the system until a second, deeper recession occurred beginning in 1981. If stagflation occurred, tighter or easier monetary policy would be consistent with the dual mandate, whereas the single mandate would call for neutral or tighter policy (if the supply shock caused all prices to begin rising more rapidly). For many economists who have supported a single mandate, the poor performance of the 1970s is the main argument in favor of changing the mandate (although the dual mandate was not adopted until 1977). The argument against easing policy during stagflation would be that, if one accepts the premise that monetary policy has no long-term effects on employment, the efficiency gains of price stability outweigh the short-term costs of temporarily higher unemployment. While that may be the case, to some policymakers, the long-term benefits of lower inflation would not outweigh the short-term costs of high unemployment. Some economists have argued that, now that low inflationary expectations have been well anchored, the short-term costs necessary to maintain price stability in these scenarios will be higher, making a dual mandate desirable. Proponents of a single mandate argue that it would improve monetary policy by reducing the Fed's policymaking discretion. The result of a broad mandate, they argue, is that the Fed does not have to offer any systematic rationale for its policy decisions, and can therefore pursue any policy direction it desires without effective accountability. Sometimes monetary policy is criticized for excessive "fine tuning," meaning the adjustment of policy to every small economic development, which some economists believe is in itself destabilizing. It is argued that a more hands-off approach would reduce the volatility in economic growth and prices. Discretion, they argue, also reduces transparency, meaning, in this context, the ability of market participants to predict and comprehend the rationale of monetary policy changes. A better understanding of monetary policy makes it more effective, it is argued, by improving the accuracy and ability of the private sector's economic planning. An inflation target, for example, might make it clearer to market participants what the Fed's plans were and what goals it was trying to accomplish. Proponents do not claim that the Fed would lose all discretion under a single mandate, but have sometimes described inflation targeting as "constrained discretion." Other economists argue that maximum discretion is necessary and desirable because short-term economic performance is dominated by unforeseen shocks, and it is these shocks, rather than policy mistakes, that are the root cause of economic volatility. Were policymakers not free to rapidly respond to those shocks, they believe, downturns would be deeper and more frequent. Since these shocks affect recorded inflation with a long lag, if policymakers felt compelled under a single mandate or inflation target to wait until prices had changed to respond, then the response could be undesirably late. For example, inflation (as measured by the CPI) in 2008 rose 3.8%, which was its highest rate since 1991. If the Fed had felt compelled to focus policy solely on the inflation rate, it might have felt constrained in its response to the financial crisis that occurred that year. Flexibility allowed the Fed to introduce multiple innovative and unconventional policies to respond to problems in financial markets as they arose during the crisis. An alternative perspective is that a single mandate alone would do little to curb the Fed's discretion because its discretion flows mainly from other sources, primarily the Fed's high degree of independence from Congress and Congress's long-standing custom of not involving itself in the Fed's day-to-day policymaking decisions. There is no outside arbiter tasked with evaluating whether the Fed's decisions are consistent with its mandate now, and that would still be the case if the mandate were changed in isolation. In this light, the Fed's discretionary powers would not be significantly affected by a change in the mandate, but could be affected by other provisions that accompany a mandate change in legislation. For example, an inflation target could reduce the Fed's discretion by reducing the scope for policy options that would cause inflation to miss its target, although the extent that a target would reduce discretion depends greatly on the design of the target, as discussed below. But even the breaching of an inflation target would not trigger any automatic change in policy, as they have operated in other countries. An argument could also be made that a single mandate would not greatly alter the Fed's transparency, in the sense of the term as used in this section, because the Fed is already highly transparent. It releases quarterly economic forecasts, and since January 2012, it has released Federal Open Market Committee (FOMC) members' forecasts of the "appropriate" federal funds rate target. Minutes of FOMC meetings are released with a lag. Typically, changes in interest rates and other policy decisions are well predicted and expected by market participants before they occur. Transparency flows primarily from the Fed's communication style—major policy changes are typically hinted at and debated in speeches, interviews, or articles by Fed officials before they are announced. Because current transparency practices are largely voluntary, they may be unaffected by a mandate change. A criticism of the current mandate has been that the multiple statutory goals are so broad and wide-ranging that they can be used to justify virtually any policy decision. Critics say that this makes effective Congressional oversight difficult, and makes the Fed unaccountable for policy mistakes. Oversight and accountability would improve under a single mandate, according to proponents, because it would make it easier to evaluate the Fed's performance, particularly if the single mandate included an inflation target. Congress has considerable scope to alter the degree of Fed accountability outside of the mandate, however. For example, it controls the number of hearings and Government Accountability Office audits on Federal Reserve issues, as well as the number of reports that it requires the Fed to produce for it. Accountability may be hampered mainly by two other factors that a single mandate does not address. First, the functioning of the economy is complex, and Congress may lack the specialization to independently assess the Fed's performance. For example, the Fed does not typically refer to its dual mandate to justify bad economic outcomes—it blames them on factors outside its control. Since the Fed's influence on the economy is limited, it is certainly the case that many of the negative shocks that influence the economy (such as an energy price shock or the Eurozone crisis) could not be prevented by the Fed. But for effective accountability under a single or dual mandate, Congress must be able to effectively determine whether bad economic outcomes (such as missing an inflation target) are caused by the Fed or beyond the Fed's control. Second, there are many institutional factors that make the Fed less accountable than a typical executive branch agency. There are no statutory or institutional consequences for missing the mandated goals; nor is there any formal process for identifying when the goals have been missed. The Fed's officials do not answer to the President. Fed governors are appointed to long, overlapping terms and can only be removed for cause. The Fed is self-funded and is not subject to the appropriation process or any other form of regular congressional budgetary review. By statute, the Government Accountability Office cannot perform monetary policy evaluations of the Fed. There are statutory barriers to its interaction with the executive branch—for example, it cannot purchase federal debt directly from the Treasury. While all of these factors make the Fed less accountable, they also make the Fed more independent from Congress. Many economists have argued that this independence is desirable because it is responsible for the Fed's overall record of good policymaking. Another argument made in favor of a single mandate is that it will enhance the Fed's credibility, and monetary policy is more effective under credible central banks. In a well-known paper, economist Kenneth Rogoff argued that if a central bank has a reputation of being tough on inflation, then when the central bank eases policy, it will be more effective than if the central bank lacked credibility. There does not appear to be compelling evidence at this time that the Fed suffers from a lack of credibility with market participants. Inflation expectations are low despite the fact that the Fed is currently pursuing quantitative easing, an unconventional policy that, under normal circumstances, would be inconsistent with price stability. Long-term interest rates are at low levels by historical standards. Foreigners continue to be willing to hold U.S. assets. Thus, the Fed may gain little additional credibility from a switch to a single mandate. Since the financial crisis began, the Fed has been subject to significant criticism on a number of different fronts. Some would argue that its shortcomings of the past few years are a sign that legislative action is needed to improve its performance. This section analyzes whether a switch to a single mandate might have altered the criticized policy decisions. The Fed has been criticized for not preventing the last recession from becoming the longest and deepest recession since the Great Depression. In this sense, the Fed failed to fulfill its dual mandate, although economists are divided about how much factors beyond the Fed's control are to blame. What is difficult to dispute is that beginning in August 2007—months before the recession officially began—the Fed undertook a series of aggressive steps to stimulate the economy and provide liquidity to the financial sector. These steps were innovative and unconventional, and included reducing short-term interest rates to nearly zero, creating a series of unprecedented lending facilities, and conducting "quantitative easing" (large-scale purchases of securities, including mortgage-backed securities). While there has been criticism of the long-term implications of some of these policy steps, it is difficult to argue that the Fed was too passive in responding to the recession. For critics of unconventional policy, constraint would have been desirable from a long-term perspective, but in the short run, a less aggressive policy would have resulted in less monetary stimulus, and probably a deeper and longer recession. Further, it is not clear how the Fed would have acted differently under a single mandate or an inflation target. The Fed's unconventional policy initiatives were not required to be justified in terms of its mandate. Many of these initiatives were undertaken under the Fed's lender of last resort duties and emergency lending powers, which are separate from its mandate. Perhaps the Fed would have felt constrained to act less aggressively during the crisis if inflation had been above its target, although the Fed might have justified its actions by arguing that the crisis made deflation a greater threat than inflation. A separate criticism is that the underlying cause of the recession was the growth and subsequent bursting of the housing bubble, which led to crippling losses in the financial sector that eventually led to panic. Some critics have argued that the Fed should have prevented the housing bubble from inflating in the first place; if it had done so, then the bursting of the bubble would not have been so damaging to the financial system and economy. These critics argue that the Fed left stimulative monetary policy in place for too long after the 2001 recession, and the resulting low mortgage rates helped inflate the bubble. For example, the federal funds target was 2% or less until December 2004, three years after the recession had ended. Chairman Bernanke has argued that Even if monetary policy was not a principal cause of the housing bubble, some have argued that the Fed could have stopped the bubble at an earlier stage by more-aggressive interest rate increases. For several reasons, this was not a practical policy option. First, in 2003 or so, when the policy rate was at its lowest level, there was little agreement about whether the increase in housing prices was a bubble or not (or, a popular hypothesis, that there was a bubble but that it was restricted to certain parts of the country). Second, and more important, monetary policy is a blunt tool; raising the general level of interest rates to manage a single asset price would undoubtedly have had large side effects on other assets and sectors of the economy. In this case, to significantly affect monthly payments and other measures of housing affordability, the FOMC likely would have had to increase interest rates quite sharply, at a time when the recovery was viewed as "jobless" and deflation was perceived as a threat. For the purposes of this report, it is not necessary to settle the debate about whether the Fed should be blamed for the housing bubble. Rather, the relevant question is whether a single mandate or inflation target would have led the Fed to tighten policy sooner to avoid a bubble. Quotes from Chairman Bernanke suggest that this is unlikely. Chairman Bernanke has stated that, even in hindsight, "…monetary policy from 2002 to 2006 appears to have been reasonably consistent with the Federal Reserve's mandated goals of maximum sustainable employment and price stability…" He has also said, before the financial crisis, that …to the extent that a stock-market boom causes, or simply forecasts, sharply higher spending on consumer goods and new capital, it may indicate incipient inflationary pressures. Policy tightening might therefore be called for—but to contain the incipient inflation not to arrest the stock-market boom per se. Neither the dot-com bubble nor the housing bubble was manifested in high overall price inflation, so a single mandate is unlikely to have made the Fed more responsive to those bubbles than the dual mandate. (House prices are not included in any of the common measures of price inflation, which measure the change in the prices of goods and services, not assets. Therefore, the rapid increase in house prices in the 2000s had no direct effect on inflation.) Asset bubbles are likely to continue to be a policy concern in the future. If policymakers believe the Fed should be more responsive to future asset bubbles, they could instead expand the mandate to require that the Fed prevent asset bubbles or, more generally, ensure financial stability. H.R. 1174 / S. 238 requires the Fed to consider asset prices in its inflation target. Some economists have criticized the Fed's decision to pursue "quantitative easing" (QE—i.e., expansion in the Fed's balance sheet through large-scale asset purchases) on the grounds that it will lead to high inflation. In normal conditions, extended quantitative easing would eventually be inconsistent with price stability, but the Fed believes that because of problems in the economy and financial markets, quantitative easing is needed for a timely economic recovery and to reduce the threat of deflation. The Fed also believes that quantitative easing will support mortgage markets and assist a recovery in the housing market. The link between QE and price stability is more direct (QE expands the monetary base) than the link between the other recent criticisms of the Fed. Nevertheless, as long as the Fed is given discretion to pursue policies that it believes are consistent with price stability, it seems doubtful that a single mandate would have prevented the Fed from pursuing price stability. This can be demonstrated by examining the following FOMC statement announcing the first round of large-scale asset purchases: In light of increasing economic slack here and abroad, the Committee expects that inflation will remain subdued. Moreover, the Committee sees some risk that inflation could persist for a time below rates that best foster economic growth and price stability in the longer term. In these circumstances, the Federal Reserve will employ all available tools to promote economic recovery and to preserve price stability…. To provide greater support to mortgage lending and housing markets, the Committee decided today to increase the size of the Federal Reserve's balance sheet further by purchasing up to an additional $750 billion of agency mortgage-backed securities, bringing its total purchases of these securities to up to $1.25 trillion this year, and to increase its purchases of agency debt this year by up to $100 billion to a total of up to $200 billion. Moreover, to help improve conditions in private credit markets, the Committee decided to purchase up to $300 billion of longer-term Treasury securities over the next six months. Similarly, the November 2010 FOMC announcement of another round of asset purchases, popularly coined "quantitative easing 2," reads, To promote a stronger pace of economic recovery and to help ensure that inflation, over time, is at levels consistent with its mandate, the Committee decided today to expand its holdings of securities…. the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about $75 billion per month. The Committee will regularly review the pace of its securities purchases and the overall size of the asset-purchase program in light of incoming information and will adjust the program as needed to best foster maximum employment and price stability. In both of these announcements, the Fed justified its decisions in terms of the need to avoid deflation to achieve price stability under the dual mandate. Switching to a single mandate would presumably not change the Fed's belief that QE is necessary to maintain price stability. In addition to a single mandate, H.R. 1174 / S. 238 allows for the purchase or sale of securities issued by government agencies only under unusual and exigent circumstances, by the two-thirds vote of the Fed's governors and regional bank presidents. (It does not restrict the Fed's ability to purchase Treasury securities.) As measured by the consumer price index, overall (referred to as "headline") inflation has been lower on average since 1992 than it had been since the mid-1960s. Although the Fed's record in this regard is very good, a case could nevertheless be made that the Fed should focus more on headline inflation and less on core inflation, particularly since headline inflation has outpaced core inflation in 11 of the past 14 years. One criticism that could be leveled at the Fed is that headline inflation rose above 3% before the last two recessions, and the Fed was too slow to respond at the expense of price stability and economic stability, perhaps because there were important signals that the economy was overheating that the Fed may have neglected because of its focus on core inflation, which stayed below 3% before the two previous recessions. The rationale for focusing on core inflation is that it is more representative of underlying inflationary pressures because it leaves out two highly volatile components, food and energy. A focus on increases in inflation caused by transitory movements in volatile components of the CPI could result in "false positives," leading to changes in interest rates when underlying inflationary pressures have not really changed. Headline inflation has generally outpaced core in recent years because commodity prices have tended to rise more rapidly than other prices, but it does not follow that this trend will necessarily continue in the future. If it is believed that the Fed's focus on core inflation has led to poor policymaking, switching to a single mandate alone would arguably do little to solve the problem. As long as the Fed retained discretion to define price stability, it could continue to define price stability in terms of the performance of core inflation, or any other measure it favored. If an inflation target were adopted, any potential policy shift on this issue would depend on whether headline or core inflation were targeted. The Fed's January 2012 longer-run inflation goal defined price stability in terms of headline inflation. It is not clear if this is a shift in policy emphasis away from core, or if it is because the statement dealt only with long-run goals, where there would not be expected to be differences between core and headline inflation rates. In 2008, the Fed intervened financially to prevent two large financial firms, Bear Stearns and American International Group (AIG), from failing on the grounds that they were "too big to fail." In other words, the Fed believed their failure would have undermined the stability of the financial system as a whole. Many critics have argued that these interventions increase risk in the financial system in the long run by increasing "moral hazard," meaning that anticipated rescue from bad outcomes leads to greater risk taking. The Fed also provided liquidity through a series of newly created, broadly based lending facilities to non-bank financial firms, such as primary dealers. Some critics argue that the Fed should not have provided assistance to firms that it did not regulate for safety and soundness, since the Fed cannot mitigate moral hazard at firms it does not regulate. Until 2010, the Fed regulated only bank holding companies, financial holding companies, domestic branches of foreign banks, and state-chartered member banks. For both the assistance to AIG and Bear Stearns and the broadly-based facilities, the Fed provided assistance primarily through its emergency lending authority, found in Section 13(3) of the Federal Reserve Act. That authority was amended by The Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ), which attempted to prohibit future "bail outs" of failing firms, while allowing the Fed to set up broadly-based emergency liquidity facilities. Some critics felt that the Fed's emergency lending authority should be repealed or further restricted, but a change in the Fed's monetary policy mandate would not affect this authority. Some economists believe a root cause of the financial crisis was excessive risk-taking by financial firms. When risks were realized, these both contributed to the general panic and left those firms unable to survive the panic without government assistance. Some—but not all—of the firms that relied on Federal Reserve lending emergency facilities during the crisis were bank holding companies that were regulated by the Fed for safety and soundness. If the Fed had required these firms to take steps such as hold more capital or greater liquidity, the firms may have fared better in the crisis. The Fed is also accused of having failed to anticipate the problems that led to and exacerbated the crisis until it was too late. The Fed also had regulatory responsibility for consumer products, such as mortgages, before the crisis. Critics argue that the housing bubble could have been avoided had the Fed used its consumer protection powers to prevent people from taking out unsuitable mortgages. A number of non-traditional mortgage products have proven in hindsight to have high default rates, and many of these products allowed borrowers to borrow more than they would have been eligible to with traditional products. It is argued that house prices could not have risen so quickly without the growth in non-traditional products. Chairman Bernanke has admitted that the Fed and other regulators should have done more to protect consumers against unsuitable mortgages. He said The Federal Reserve and other agencies did make efforts to address poor mortgage underwriting practices…. However, these efforts came too late or were insufficient to stop the decline in underwriting standards and effectively constrain the housing bubble. The Fed's failure to prevent the crisis was not unique—domestic firms regulated by other regulators, foreign firms regulated by foreign regulators, and domestic firms that were not regulated for safety and soundness all experienced liquidity or solvency problems during the crisis. Few policymakers, investors, or academics accurately anticipated the problems that would arise from 2007 on. The Fed's regulatory powers are not mentioned in its statutory mandate, and would not be affected by a change to a single monetary policy mandate. Its authority to regulate financial institutions for safety and soundness are found in Section 21 of the Federal Reserve Act and other parts of the U.S. Code. Its consumer protection responsibilities were not part of the original Federal Reserve Act, and were enumerated in a series of later acts. As a result of the Dodd-Frank Wall Street Reform and Consumer Protection Act ( P.L. 111-203 ), the Fed's general consumer protection responsibilities have been reassigned to a new Consumer Financial Protection Bureau, housed in the Fed. If Congress decided to legislate an inflation target, or the Fed decided to adopt one voluntarily, there are a number of institutional details to consider surrounding its scope and composition. Arguably, these issues would have important ramifications for economic and policy outcomes, as well as the scope of the Fed's discretion. As discussed above, Congress could require an inflation target in statute, or leave it to the Fed to decide whether or not to adopt one. In addition, if Congress decided to require a target by statute, it could choose to set some of the parameters of that target in law or leave it to the Fed to set the parameters. Those parameters, discussed in the following sections, include the level of inflation to target, the price index to use for the target, whether to base the target on actual outcomes or forecasted outcomes, whether to target a point estimate or a band, and whether there should be penalties for missing the target. Any parameter that was set in law would be more difficult to change than if it were set by the Fed, for better or for worse. The consequence of setting the target and its attributes in law is that it would eliminate some of the Fed's discretion and accountability. As discussed above, for some policymakers, this would be a benefit as they believe that the discretion increases the risk of bad economic outcomes. For others, it would be a drawback, because some flexibility is desirable to deal with unexpected economic developments and contingencies. The first question regarding an inflation target is what rate of inflation is consistent with price stability? Taken literally, price stability might be understood to be an inflation rate of 0%, but this would be quite a departure from post-World War II history, when inflation has never remained below 1% for more than a few months at a time. A 0% inflation rate would minimize the "menu costs" associated with inflation which refers to the costs firms have to incur to respond to nominal price changes, such as a restaurant that must reprint menus. But since inflation will sometimes miss its target because of unexpected shocks, a zero percent target makes it more likely that the economy would sometimes experience deflation. Furthermore, getting to zero inflation, when households and investors have long-standing expectations that inflation will be positive, could require a short-term slowdown in the economy. An alternative definition offered by Alan Greenspan is that "price stability is best thought of as an environment in which inflation is so low and stable over time that it does not materially enter into the decisions of households and firms." By this definition, the FOMC's long-run goal of 2% inflation might be considered price stability. Since measures of inflation such as the CPI are believed to overstate the "true" inflation rate, a low but positive rate of measured inflation may be equivalent to true price stability. An alternative view is that a little inflation, say 4%, can "grease the wheels" of the labor market. This view is based on the claim that workers are less willing in the short run to accept a nominal wage cut than the equivalent real wage cut if it contains a nominal wage increase. For example, workers would be less willing to accept a 2% wage cut when inflation is zero than a 2% wage increase when inflation is 4%, even though the two options are equivalent in terms of purchasing power. In other words, workers suffer from "money illusion"—a proposition that many economists reject. If this is true, then the labor market would clear faster, meaning real wages would fall faster when unemployment was high, and the economy would return to full employment faster with a little inflation. A higher average rate of inflation would also reduce the likelihood of swings into price deflation during recessions and give conventional monetary policy more room to stimulate before it hits the "zero bound" on interest rates. This would have to be balanced against the higher costs, such as menu costs, associated with moderately higher inflation. It might also be tricky to transition to a new higher inflation rate without destabilizing the inflation expectations of the public. Some economists have argued that a price index value (the level of prices) should be targeted instead of the inflation rate (change in prices). They argue that this would lead to less uncertainty about the future path of prices, which would aid businesses with their planning, for example. On the other hand, targeting the price level could arguably be destabilizing since policy would have to compensate after unexpected "price shocks." For example, if prices exceeded the targeted level by 2% in the first year, prices would have to fall by 2% relative to the baseline in future years to return to the targeted path of prices. It is not clear that the short-term cost of creating higher inflation or deflation to return to the planned price level path is worth the benefits. By contrast, if inflation were targeted and exceeded the target, "bygones would be bygones" in future years. In practice, countries that have adopted inflation targets typically target inflation, not the price level. Separate from the question of what numerical value should be targeted is the question of what data source should be used for the target. This question, which is important for accountability reasons, raises a number of issues. First, there are several official measures of inflation. The Bureau of Labor Statistics issues multiple measures of inflation, and the Bureau of Economic Analysis (BEA) issues several more. Should the inflation target be based on the change in the prices of all goods in the economy, the change in the price of consumer goods, changes in asset prices, or the change in wages? Usually inflation is understood to be changes in the price of goods and services, but it could be measured in terms of the change in any prices. The best known measure of inflation is arguably the headline CPI, but a drawback of the CPI is that it is thought to overstate inflation because of some methodological problems. Familiarity may be a benefit at first, but wane in importance once the targeted measure becomes well known. The GDP deflator issued by BEA is the broadest measure of inflation. On the other hand, the measures issued by BEA (including the PCE index selected by the Fed for its longer-run inflation goal) are only released quarterly and are subject to data revisions—two characteristics that some consider less desirable for an inflation target. Further, should the target be based on one single measure or should it consider several different measures (which could potentially send contradictory messages at any given time)? Because the Fed can only direct monetary policy at one issue at a time, there is a tradeoff between maximizing accountability and transparency, in the former case, and the benefits of a more holistic approach to decision making, in the latter case. For example, before the last two recessions, the prices of goods and services did not indicate an overheating economy, but asset prices may have. While potentially offering more specificity than the current mandate, including multiple measures or concepts in the inflation target could preserve many of the drawbacks that single-mandate proponents perceive in the dual mandate. Assuming the selected measure of inflation is based on the price of goods and services, a further issue is whether volatile elements of the price index should be omitted from the target. In other words, should core or headline inflation be targeted? If core is targeted, how many items should be omitted? Traditionally, core inflation is measured by omitting food and energy prices, but economists have also devised other measures of core inflation that they believe to have more desirable qualities. The benefit of using core inflation as a target is that removing volatile components of the inflation rate would make it less likely that the Fed would miss its target at any given time. It would also make it less likely that policy would be altered in response to transitory price changes. The drawback, as discussed above, is that targeting core inflation can lead to suboptimal performance if headline outpaces core for extended periods of time. The Fed defined its longer-run inflation goal in terms of headline inflation, although FOMC members often refer to core inflation when describing the inflation situation to Congress and the public. An alternative approach to addressing price volatility would be to target overall inflation, but allow exceptions for unusual circumstances, such as an energy price spike. But too many exceptions could result in a level of discretion, accountability, and transparency that, in practice, was indistinguishable from current policy. A final issue is whether recent (actual) inflation or future (forecasted) inflation should be targeted. Because monetary policy affects inflation only indirectly in the short run, and unexpected shocks often throw inflation off its expected path, the drawback to targeting actual inflation is that actual inflation will inevitably miss its target frequently. The other drawback to targeting actual inflation is that monetary policy affects inflation with lags. Inflation may be above the target in the period that has just occurred but be projected to fall below the target in the near future. If the Fed were responding to actual inflation, it may feel compelled to raise rates in this example, even though projections call for lower rates for the period that current monetary policy changes would influence. This hypothetical case is likely to be important in reality since inflation tends to peak right before the onset of a recession. The drawback to targeting future inflation is that it would reduce transparency and accountability, particularly if the Fed were responsible for forecasting the inflation it was also targeting. There could be little consequence for actual inflation missing its target chronically, as long as the Fed produced forecasts that showed that it would meet the target in the future. It would be more difficult to apply any penalties (discussed below) to a regime based on targeting future inflation since the Fed would control the performance metric. Accountability might revolve less around why actual outcomes differed from desired outcomes and more around whether the Fed's forecasting was accurate, which could be difficult for Congress to evaluate. Another choice in the design of an inflation target is whether the target should be a point estimate, such as 2%, or a range, such as between 1% and 3%. For its long-run inflation goal, the Fed chose a point estimate. If a range were chosen, policymakers would also need to decide whether the midpoint of the range was most desirable, or if hitting any part of the range is equally acceptable. Because monetary policy only indirectly influences inflation in the short run, and inflation is influenced by unexpected shocks, actual inflation is unlikely to often hit a point estimate exactly. This distinction is less important if it is implicitly understood that small deviations from the point estimate are acceptable. A range would make the tolerance of small deviations explicit, and make misses due to unexpected events less frequent. On the other hand, if unexpected shocks are large, then to make the range wide enough to never miss the target due to unexpected shocks could render the target meaningless. If actual inflation were targeted, a range would be more transparent, since deviations are unavoidable and the amount of tolerable deviation would be explicit. If future inflation were targeted, a point estimate might be more appropriate since the goal of policy is to achieve some specific future goal, even though forecast error means the goal will rarely ever be hit precisely. If one goal of an inflation target is to increase the Fed's accountability to Congress, then a natural question is whether accountability should be buttressed by tangible consequences for bad results. Otherwise, admonitions for missing the target might be ignored. The difficulty with creating penalties is that the Fed's high degree of independence means that many potential penalties could either be toothless or draconian. For example, if a federal agency performed poorly, Congress could reduce (or add restrictions to) its budget in the following fiscal year. That option is not currently available for the Fed because it is self-financed and has budgetary independence. One proposed penalty is that a missed target would trigger an automatic report to Congress or a Congressional hearing that would require the Fed to explain why the target was missed and how the situation would be remedied. Another proposed penalty is that the Chairman or Board could be removed if the target were persistently missed or missed by a wide margin. This would be a significant change from current policy, under which governors (including the Chairman) can be removed only for cause, which is a higher standard than "at will" dismissal. One argument against explicit penalties is that the Fed could be unfairly punished for events beyond its control, such as an oil price spike. The likelihood of this occurring would depend on the flexibility built into the target and the penalty. A single mandate or inflation target may constrain the Fed's ability to pursue policies that result in high inflation, but in practice Fed policies over the past two decades have not resulted in high inflation. By conventional standards, the Fed's record on price stability in the past two decades is very good—headline inflation has been below 4% since 1991 and core inflation has been below 3% since 1995—but not perfect. Since the recent financial crisis, however, the problem has generally been modestly lower-than-desired inflation. The Fed's performance is also not significantly different from major inflation targeting countries. Nevertheless, past performance does not guarantee similar results in the future. Some argue that introducing an inflation target is a way to "lock in" good policies. In isolation, a change to a single mandate of price stability is unlikely to lead to a modification in monetary policy decisions since it would leave intact the Fed's independence and discretion to set policy as it sees fit. The dual mandate is only one of many institutional factors that contribute to the Fed's discretion and independence. Neither statute nor tradition formally lay out any consequences of missing the mandated goals; this makes accountability more difficult, but a switch to a single mandate in isolation would not alter that arrangement. An inflation target could potentially have more of an impact on the Fed's discretion, but the extent that its discretion would be constrained would depend on the characteristics of the inflation targeting regime, such as what consequences there would be if the target were missed, and whether the inflation target was selected and designed by the Fed or by Congress. The benefits of constraining discretion are debatable—discretion can lead to good or bad decisions. For example, inflation (as measured by the CPI) in 2008 rose 3.8%, which was its highest rate since 1991. If the Fed had felt compelled to focus policy solely on the inflation rate, it might have felt constrained in its response to the financial crisis that occurred that year. Has the Fed already introduced an inflation targeting regime? Based on Truman's inflation targeting framework, the Fed's January 2012 announcement of a longer-run inflation goal of 2% meets the criterion of a numerical target in full and partly meets the other criteria. The announcement could be seen as reducing the importance—to supporters and opponents—of proposed statutory changes to the mandate or statutory implementation of an inflation targeting regime. Alternatively, such statutory changes could be seen as reinforcing the Fed's inflation goal, marking a continuation of current policy. As practiced abroad, countries with a single mandate or inflation target have not ignored changes in unemployment when setting monetary policy, in part because they may help predict future changes in inflation. While this demonstrates that policymaking under one or both can be more flexible in practice than opponents sometimes portray, it also begs the question of whether dropping maximum employment from the mandate is necessary or desirable. Arguments in favor of an inflation target and single mandate include improved accountability of monetary policymakers and increased transparency of monetary policy to financial markets. Both are thought to result in better outcomes for the economy. To the extent that an inflation target were interpreted flexibly by the Fed, these benefits would be diminished. On the other hand, flexibility could improve outcomes if policymakers cannot devise a regime that accounts for all unforeseen contingencies ahead of time. Some of the desire for legislative change comes from discontent with the Fed's recent performance. But would those shortcomings be affected by a mandate change? Many of the criticisms of the Fed's performance—its "bailouts" of "too big to fail" firms, lax supervision of the financial system in the run up to the crisis, and passivity during the housing boom's run up of unsuitable mortgage debt—are unrelated to its monetary policy mandate, and involve authority derived from other parts of the Federal Reserve Act. Monetary policy's failure to prevent, and possibly exacerbate, the housing bubble, could argue in support of a mandate change. But because the housing bubble did not lead to high inflation, a single mandate would not obviously modify the Fed's behavior in the face of future asset bubbles. A mandate change to require the Fed to explicitly address bubbles or financial stability might be a more direct means to this end. Criticism that the Fed should have done more to prevent the depth and length of the recession implicitly speaks to the "maximum employment" part of the dual mandate, and so it does not follow that a single mandate of price stability would result in more aggressive countercyclical policy. A criticism could be made that the Fed's focus on core inflation has not proven to be the optimal measure for obtaining price stability. But this criticism does not make the case that the Fed has neglected price stability, or that the Fed would be more focused on price stability under a single mandate. Unless Congress is involved in defining price stability (through the type of inflation to be targeted, for example), discretion would still remain with the Fed on what measure to focus on. A similar argument applies to criticisms that the Fed's program of quantitative easing is inconsistent with a price stability mandate—the Fed believes that quantitative easing is necessary to maintain price stability (to avoid deflation), and as long as the Fed has discretion to set its policies, a single mandate would not prevent quantitative easing.
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The Federal Reserve's (Fed's) current statutory mandate calls for it to "promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates." Some economists have argued that this mandate should be replaced with a single mandate of price stability. Often the proposal for a single mandate is paired with a more specific proposal that the Fed should adopt an inflation target. Under an inflation target, the goal of monetary policy would be to achieve an explicit, numerical target or range for some measure of price inflation. Inflation targets could be required by Congress or voluntarily adopted by the Fed as a way to pursue price stability, or a single mandate could be adopted without an inflation target. Alternatively, an inflation target could be adopted under the current mandate. In January 2012, the Fed voluntarily introduced a "longer-run goal for inflation" of 2%, which some might consider an inflation target. In the 113th Congress, H.R. 1174/S. 238 and S. 215 would strike the goal of maximum employment from the mandate, leaving a single goal of price stability, and require the Fed to adopt an inflation target. Were a single mandate to be adopted in the United States, it would follow an international trend that has seen many foreign central banks adopt single mandates or inflation targets in recent decades. Arguments made in favor of a price stability mandate are that it would better ensure that inflation was low and stable; increase the predictability of monetary policy for financial markets; narrow the potential to pursue monetary policies with short-term political benefits but long-term costs; remove statutory goals that the Fed has no control over in the long run; limit policy discretion; and increase transparency, oversight, accountability, and credibility. Defenders of the current mandate argue that the Fed has already delivered low and stable inflation for the past two decades, unemployment is a valid statutory goal since it is influenced by monetary policy in the short run, and discretion is desirable to respond to unforeseen economic shocks. A case could also be made that changing the mandate alone would not significantly alter policymaking, because Fed discretion, transparency, oversight, and credibility are mostly influenced by other factors, such as the Fed's political independence. Discontent with the Fed's performance in recent years has led to calls for legislative change. It is not clear that a single mandate would have altered its decision making, however. Criticizing the Fed for the depth and length of the recession arguably leads to the prescription that monetary policy should have been more stimulative, which points to greater weight on the employment part of the dual mandate. Whether or not the Fed allowed the housing bubble to inflate, it is not clear that a single mandate would have changed matters because the housing bubble did not result in indisputably higher inflation. Some economists believe that the Fed's recent policy of "quantitative easing" (large-scale asset purchases) will result in high inflation. Inflation has not increased to date, but even if these economists are correct, the Fed has discretion to pursue policies it believes are consistent with its mandate. It has argued that quantitative easing was necessary to maintain price stability by avoiding price deflation, and it could still make this argument under a single mandate. Since the recent financial crisis, the problem has generally been modestly lower-than-desired inflation. This report discusses a number of implementation issues surrounding an inflation target. These include what rate of inflation to target, what inflation measure to use, whether to set a point target or range, and what penalties to impose if a target is missed.
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On May 14, 2011, Dominique Strauss-Kahn, the Managing Director of the International Monetary Fund (IMF), was arrested at John F. Kennedy Airport and charged with the attempted rape, criminal sexual assault, and unlawful imprisonment of a maid at the New York City Sofitel hotel. Indicted by a grand jury on several counts, he was granted bail, but will be confined to a New York apartment under 24-hour armed guard until his trial. Mr. Strauss-Kahn was in New York on personal business, en route to Brussels to participate in a meeting of the Eurozone finance ministers when he was apprehended by police. On May 18, 2011, he resigned as IMF Managing Director. The number two official at the IMF, First Deputy Managing Director John Lipsky, is serving as Acting Managing Director until a new Managing Director is elected. IMF and State Department reviews suggest that Mr. Strauss-Kahn is not entitled to either status-based or conduct-based immunity. Under the IMF Charter, IMF employees are granted a limited form of diplomatic immunity for actions related to activities performed in the course of their IMF work. However, "[t]he [managing director's] immunities are limited and are not applicable to this case," according to IMF officials, since, according to such officials, he was in New York on personal business. While Mr. Strauss-Kahn is arguably entitled to immunity by virtue of his status as the executive head of an international organization under the United Nations Convention on the Privileges and Immunities of the Specialized Agencies, the United States is not party to that Treaty. Accordingly, in the view of the State Department, Mr. Strauss-Kahn is unlikely to qualify for immunity under U.S. law. The relevant U.S. law entitles international organizations to claim immunity for their officers and employees only for "acts performed by them in their official capacity and falling within their functions as such representatives, officers, or employees." "Our understanding is that immunity in this particular case, and, with IMF officials ... would only involve their official capacity and carrying out their duties in an official role," said State Department spokesman Marc Toner. Mr. Strauss-Kahn's arrest comes at an challenging time for the IMF, which he had led since 2007. Under his leadership, the IMF reasserted its role as the premier international organization for international economic corporation. In the wake of the financial crisis, Mr. Strauss-Kahn persuaded countries to substantially increase their funding to the IMF enabling the Fund to sharply increase its financial support to troubled economies and its capacity to monitor global economic risks. He also brokered agreement between developing and advanced economies on wide range of issues including reform of IMF quotas that will increase the voting share of emerging economies; revamping the IMF's lending tool-kit to introduce greater flexibility and create new facilities for low-income countries; and placed the IMF at the center of G-20 efforts to increase multilateral surveillance by looking at the external implications of the domestic economic policies of several systemically important countries. The IMF is heavily involved in the current economic crisis in Europe. At the meeting that Mr. Strauss-Kahn was on his way to attending, European finance ministers approved a $111 billion IMF/EU assistance package for Portugal and considered additional economic support for Greece, which continues to struggle a year after receiving its own $145 billion support package. The IMF was represented at the meetings by Ms. Nemat Shafik, the IMF Deputy Managing Director overseeing the Fund's work in various European countries. The arrest and resignation will likely have little impact on the Fund's current lending and monitoring activities, but the arrest has put the selection of Fund leadership back into the spotlight. Controversy focuses on whether a transatlantic "gentlemen's agreement" reserving the IMF leadership for a European and the World Bank leadership for a U.S. citizen is justified in the current global economy. Proposals for a more open, transparent, and merit-based leadership selection process have been made consistently in the past, and at times have been incorporated in communiqués of various leaders summits, but have yet to change the outcome at either of the institutions. This report provides information on the IMF management selection process and discusses some of the related debate. The United States is the largest shareholder of the IMF and congressional interest in the Fund's activities has increased in recent years. Most recently, congressional attention focused on increased IMF lending since the onset of the global economic crisis in 2008 and amidst growing concern about the sustainability of fiscal deficits in several Eurozone economies. Following Mr. Strauss-Kahn's arrest, Senator John Kerry, chairman of the Senate Foreign Relations Committee, which has legislative oversight of the IMF, said that the circumstances surrounding the alleged assault of a hotel maid were "very troubling if not damning." A few Members called for his resignation and expressed interest in holding hearings on the IMF and its recent activities. There is no formal congressional involvement in the selection of Fund management. U.S. participation in the IMF is authorized by the Bretton Woods Agreement Act of 1945. The Act delegates to the President ultimate authority under U.S. law to direct U.S. policy and instruct the U.S. representatives at the IMF. The President, in turn, has generally delegated authority to the Secretary of the Treasury. With the advice and consent of the Senate, the President names individuals to represent the United States on the Executive Board of the IMF. The Executive Board has authority over operations and policy and must approve any loan or policy decision. The U.S. Executive Director is supported primarily by Treasury Department staff. Unique among the founding members, the Bretton Woods Agreement Act requires specific congressional authorization for certain decisions, such as changing the U.S. quota in the Fund or to amend the Articles of Agreement. However, neither the approval of individual loans nor the selection of the Managing Director requires congressional approval. Selecting the leadership at the two major international financial institutions (IFIs) – the IMF and the World Bank – is guided by a 60-year old tradition that the World Bank president is an American and that the IMF Managing Director is a European. The informal agreement, not written into the IMF Articles of Agreement (the official charter of the organization), reflects the political and economic balance of power at the end of World War II. At the time, the United States believed that the World Bank should be headed by an American since the United States was the only capital surplus nation, and World Bank lending would be dependent on American financial markets. The U.S. Secretary of the Treasury at the time, Fred Vinson, believed that if an American representative headed the World Bank, the IMF must be headed by a non-American. A Deputy Managing Director position in the IMF was established in 1949, and an American citizen, nominated by the U.S. Department of the Treasury, has always filled the position. In 1994, the IMF Board of Executive Directors increased the number of deputy directors from one to three in order to increase the regional diversity of the top management team. The additional positions are currently filled by Naoyuki Shinohara , a former senior official in the Japanese Finance Ministry and Nemat Shafik, a national of Egypt, the United Kingdom, and the United States, who has held various positions at the World Bank and the U.K. Department for International Development. The IMF Articles provide for a three-tiered governance structure with a Board of Governors, an Executive Board, and a Managing Director ( Figure 1 ). The Board of Governors is the highest policy making authority of the IMF. All countries are represented on the Board of Governors, usually at the Finance Minister or Central Bank governor level. IMF governors usually meet annually at the fall annual IMF meetings. Day-to-day authority over operational policy, lending, and other matters is vested in the Board of Executive Directors, a 24 member body that meets three or more times a week to oversee and supervise the activities of the IMF. The five largest shareholders are entitled to appoint their own Executive Director. The remaining members are elected (for two-year terms) by groups of countries, generally on the basis of geographical or historical affinity. A few countries, Saudi Arabia, China and Russia, have enough votes to elect their own Executive Directors. In reforms approved by the Governors in December 2010, the IMF Articles of Agreement will eventually be amended so that the Executive Board will consist solely of elected Executive Directors, doing away with the practice of some member countries appointing their representatives. The IMF Executive Board selects the Managing Director of the IMF, who serves as its chairman and chief executive officer. The Managing Director manages the ongoing operations of the Fund (under the policy direction of the Executive Board), supervises about 2,500 staff members, and oversees the preparation of policy papers, loan proposals, and other documents which go before the Executive Board for its approval. Most of the material before the Executive Board is prepared by IMF management or staff. However, some documents and recommendations are prepared by executive directors themselves or by the governments they represent. An Independent Evaluation Office (IEO), which reports directly to the Board of Directors, conducts objective and independent evaluations of Fund operations and policies. Recent reports include studies of the Fund's performance prior to the onset of financial crisis in 2008, IMF involvement in trade issues, and an analysis of the IMF's advice on exchange rate policy. The Managing Director is elected for a five-year renewable term of office. The Executive Board also approves the selection of the Managing Director's principal assistants, the First Deputy Managing Director and the two other Deputy Managing Directors. The formal guidelines for choosing the IMF Managing Director are laid out in the IMF's Articles of Agreements and By-laws. Article XII, Section 4, states that "[t]he Executive Board shall select a Managing Director who shall not be a Governor or an Executive Director. " This decision may be reached by a 50% majority of the IMF's Executive Board. Section 14(c) of the Fund's By-laws provides that "[t]he contract of the Managing Director shall be for a term of five years and may be renewed for the same term or a shorter term at the discretion of the Executive Board, provided that no person shall be appointed to the post of Managing Director after he has reached his sixty-fifth birthday and that no Managing Director shall hold such post beyond his seventieth birthday." The selection process is also constrained by informal guidelines among the Executive Board. Rather than formal voting, the decision on selecting an Managing Director has been made historically by consensus. If there is more than one candidate under consideration, potential candidates are weeded out by the Executive Board through informal straw polls. Within the Executive Board there is a very strong institutional aversion to voting. Executive Board Rule C-10 states that "the Chairman [Managing Director] shall ordinarily ascertain the sense of the meeting in lieu of a formal vote." Table 1 summarizes the selection process employed for the past seven Managing Directors, including Dominique Strauss-Kahn. The selection of a European has never been in doubt, but the United States and the broader membership had greater input into the selection process in the past. According to a 2008 study on the Managing Director selection process: The United States played a major role in the earlier appointments—including the appointments of the first three MDs, Camille Gutt (Belgium), Ivar Rooth (Sweden) and Per Jacobsson (Sweden). In the last four appointments, efforts were made amongst Europeans to agree to a single European candidate, but only with the last three appointments were such efforts successful. Up until 2000, the membership had been presented with some choice of European candidates, giving the United States and other non-European industrial countries and/or the developing countries a say in the final choice. In 2000, the United States exercised a de facto veto over the first European choice, Caio Koch-Weser, forcing European countries to nominate a second candidate. The European-U.S. arrangement to split the leadership at the IMF and World Bank has created a lasting and lingering resentment throughout much of the world. Critics of the current selection process make two general arguments. First, the gentlemen's agreement on IMF and World Bank leadership is a relic of a global economy that no longer exists. Whereas the United States and Europe dominated the post-war economy, the current international economy is more diverse. Developing and emerging market countries contribute half of global output, up from 25% thirty years ago. At the same time, the share accounted for by the G-7 countries has declined from 65% in 2002 to 51% in 2010. The global economy is now characterized by, what some analysts call, "multiple poles" of economic growth. According to the Peterson Institute's Jacob Funk Kirkegaard, "the changes in the world economy mean that the IMF needs to be truly global, and that has implications for who takes over next." Any agreement that grants the leadership position based on nationality, critics argue, unnecessarily limits the pool of potential candidates, excluding non-Europeans that may be exceptionally competent in addressing the issues before the IMF. Second, critics also argue that the current system, where the Executive Board decides among candidates in secret closed door sessions potentially undermines the legitimacy of the eventual Managing Director. There is also concern that the IMF "practice what it preaches" since the IMF (along with the World Bank) aims to be at the forefront of promoting best practices in global governance. In July 2000, the IMF created a working group to advise the Executive Board and IMF staff on options for reforming the selection process. A draft report was endorsed by the Executive Directors on April 26, 2001, as guidance for the future selection of Managing Directors, but it was never formally adopted. Instead of implementing the report's five recommendations (see box), the Executive Board adopted in 2007 a procedure that specified qualification criteria, established a nomination period, and provided for an interview process. No explicit criteria or qualifications were defined. More recently, the selection process was discussed during various G-20 summits. Language was included in the 2009 Pittsburgh Summit communiqué, stating that "[a]s part of a comprehensive reform package, we agree that the heads and senior leadership of all international institutions should be appointed through an open, transparent and merit-based process." The issue was not addressed, however, in either of the two most recent G-20 meeting communiqués (Toronto and Seoul). Outside of the official sector, various non-governmental organizations have also expressed concerns about the process. An April 2011 statement by European civil society organizations is indicative of their concerns and recommendations: An open process is necessary to bolster public confidence. The following steps are uncontroversial and should be the minimum that apply: • The job description, timetable and application procedure should be publicly available, and open to any individual to apply. • The vacancy should be widely advertised. • Search committees or other professional assistance in finding suitable candidates can help the process, but should not be a substitute for a public application procedure. A fair process would mean ending the current overt discrimination on the basis of nationality, and tackling any underlying discrimination on the basis of gender or other factors. Furthermore, A 2010 report requested by Mr. Strauss-Kahn, representing a wide-range of NGOs, recommended that: The selection of the managing director and of his deputies should be based on a merit-based and transparent selection, without any restriction to the nationality of the candidates. As with the executive directors, the selection should rely on a thorough job description and a list of high professional requirements. Mr. Strauss-Kahn resigned his post on May 18, 2011. Earlier that day, U.S. Treasury Secretary Timothy Geithner commented that Mr. Strauss-Kahn "is obviously not in a position to run" the organization and it is important that the board of the IMF formally ratify Mr. Lipsky as Acting Managing Director. According Mohamed El-Erian, Pimco Chief Executive, "the IMF is like an army, and the general is very important in that institution," He added, "the IMF is involved right now in the debt crisis in Europe. Newly democratic countries like Egypt are looking to it for help. And you need the IMF to coordinate this global healing. It is the worst possible time to lose your general." Some analysts had expressed concerns that the IMF Executive Board did not act quickly enough, and should have terminated his employment with the IMF immediately following his arrest. The Managing Director serves at the pleasure of the country membership and can be removed by the Executive Board at any time and for any reason. Mr. Strauss-Kahn served via a contract with various benefits due him upon separation. Reportedly, some IMF members were reluctant to force Mr. Strauss-Kahn out prior to more details emerging, or the conviction of Mr. Strauss-Kahn for any crime. On May 23, the IMF Executive Board formally began the process of selecting the next Managing Director. Any IMF Governor or Managing Director may nominate a candidate prior to June 10, 2011, and the Board anticipates selecting among the candidates by June 30, 2011. China, Brazil, Russia, and other emerging market countries are increasing their efforts to appoint a non-European official to head the IMF. Some, including Bessma Momani at the University of Waterloo argue that giving emerging economic powers greater say in the Fund's leadership would make them "less prone to accumulate foreign currency reserves as insurance against a crisis and turn to the IMF for help instead." At the same time, European leaders are fiercely defending Europe's hold on the position. German Chancellor Angela Merkel has strongly advocated for a European successor to Mr. Strauss-Khan. "Of course, the emerging countries have a claim in the medium term to fill one of the positions, either IMF chief or World Bank chief." However, she added that "in the current situation, in which we have significant problems with the euro and the IMF is strongly involved in this, there is something to be said for it being possible to put up a European candidate and to canvass for that in the international community." According to European officials and some analysts, the current heavy IMF focus in Europe requires a European at the IMF's helm. However, of the 26 countries that are currently in IMF programs, only a handful are from Europe: Greece, Ireland, Latvia, Poland, Romania, and soon Portugal, and account for less than half of total IMF outstanding commitments. "Maybe the next Managing Director of the IMF will come from Europe," comments Edwin Truman, a former U.S. official currently at the Peterson Institute for International Economics, "but there is no reason that the person should come from Europe." Some analysts argue that calls for a non-European director from the emerging economies mask divides that make it difficult for emerging economies to unite behind one credible candidate. These calls, the argument goes, are part of the larger issue of the influence of emerging economies play in the international financial institutions, and could ultimately lead toward additional shifts toward emerging economies, even if the next IMF Managing Director is European. Potential candidates that have been mentioned in the press and by commentators include: Gordan Brown, former Prime Minister of the United Kingdom, Tharman Shanmugaratnam, Singaporean Finance Minister; Kemal Dervis, former Turkish finance minister; Christine Lagarde, French Finance Minister; Trevor Manuel, former South African finance minister; Agustin Carstens, Mexican central bank governor; Montek Singh Ahluwlia, an economic advisor to the Indian government and former head of the IMF's Independent Evaluation Office; and Min Zhu, Senior Advisor to the IMF Managing Director and former Deputy Governor of the People's Bank of China.
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On May 14, 2011, Dominique Strauss-Kahn, the Managing Director of the International Monetary Fund (IMF), was arrested at John F. Kennedy Airport and charged with the attempted rape, criminal sexual assault, and unlawful imprisonment of a maid at the New York City Sofitel hotel. He resigned on May 18, 2011. Mr. Strauss-Kahn's arrest and resignation come at a challenging time for the IMF, which he had led since 2007. Under his leadership, the IMF reasserted its role as the premier international organization for international economic corporation. In the wake of the financial crisis, Mr. Strauss-Kahn persuaded countries to substantially increase their funding to the IMF, enabling the Fund to sharply increase its financial support to troubled economies and its capacity to monitor global economic risks. He also brokered agreement between developing and advanced economies on a wide range of issues, including reform of IMF quotas that will increase the voting share of emerging economies; revamping the IMF's lending tool-kit to introduce greater flexibility and create new facilities for low-income countries; and placed the IMF at the center of G-20 efforts to increase multilateral surveillance by looking at the external implications of the domestic economic policies of several systemically important countries. The resignation has put the selection of Fund leadership back into the spotlight. Controversy focuses on whether a transatlantic "gentlemen's agreement" reserving the IMF leadership for a European and the World Bank leadership for a U.S. citizen is adequate for the current global economy. Proposals for a more open, transparent, and merit-based leadership selection process have been made consistently in the past, and at times have been incorporated in communiqués of various leaders summits, but have yet to change the outcome at either of the institutions. Although Congress can pass legislation directing the U.S. representatives at the IMF or hold oversight hearings, there is no congressional involvement in the selection of Fund management. U.S. participation in the IMF is authorized by the Bretton Woods Agreement Act of 1945. The Act delegates to the President ultimate authority under U.S. law to direct U.S. policy and instruct the U.S. representatives at the IMF. The President, in turn, has generally delegated authority to the Secretary of the Treasury. The largest shareholder of the IMF, United States has a 16.8% voting share. The formal requirements for the selection of the IMF Managing Director is that the Executive Directors appoint, by at least a 50% majority, an individual who is neither a member of the Board of Governors or Board of Executive Directors. There are no requirements on how individuals are selected, on what criteria, or by what process they are vetted. Moreover, although the IMF Executive Directors may select its Managing Director by a simple majority vote, they historically aim to reach agreement by consensus. With these factors combined, the convention guaranteeing European leadership at the IMF and American leadership at the World Bank has remained in place. The European-U.S. arrangement on the leadership positions at the IMF and World Bank has created resentment in many developing and emerging economies. Critics of the current selection process make two general arguments. First, the gentlemen's agreement on IMF and World Bank leadership is a relic of a post-war transatlantic global economy that no longer exists. Second, the IMF and the World Bank aim to be leaders in promoting transparency and good governance practices, which hardly justify the political horse-trading that have dominated past selections. At the same time, European officials and some commentators argue that given the intense IMF involvement in managing the crisis in the peripheral European economies and securing the future of the European Monetary Union, a European leader is needed to maintain the Fund's prominence and legitimacy.
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The United States does not just believe, as some people say, that India is a rising power; we believe that India has already risen. India is taking its rightful place in Asia and on the global stage. And we see India's emergence as good for the United States and good for the world. -President Barack Obama, Mumbai, India, November 7, 2010 With the lifting of Cold War geopolitical constraints and the near-simultaneous opening of India's economy in early 1990s, the world's largest democracy has emerged as an increasingly important player on the global stage. India dominates the geography of the now strategically vital South Asia region, and its vibrant economy, pluralist society, cultural influence, and growing military power have made the country a key focus of U.S. foreign policy attention in the 21 st century. This attention is to some degree motivated by China's longer-standing and more rapid rise, with many analysts viewing U.S. and Indian geopolitical interests as convergent on many fronts, perhaps especially in the area of Asian power balances. President George W. Bush is credited with building on the breakthrough visit by President Bill Clinton in 2000, which ended the estrangement of the post-1998 Indian nuclear weapons tests. Under President Bush and continuing with President Barack Obama the U.S. and Indian governments have been seeking to sustain a substantive "strategic partnership," even as bilateral commercial and people-to-people contacts flourish of their own accord. The U.S.-India partnership is based on shared values such as democracy, pluralism, and rule of law. Numerous economic, security, and global initiatives, including unprecedented plans for civilian nuclear cooperation, are underway. The two countries inked a ten-year defense framework agreement in 2005 to facilitate expanded bilateral security cooperation. In the new century, large-scale combined military exercises have become commonplace, and bilateral cooperation on intelligence and counterterrorism is increasing. Unprecedented major U.S. arms sales to India are underway; more are anticipated. The influence of a geographically dispersed and relatively wealthy Indian-American community of some 2.7 million is reflected in Congress's largest country-specific caucus. More than 100,000 Indian students are attending American universities. Notably, a number of Indian-Americans now occupy senior positions in the Obama Administration, Agency for International Development Administrator Rajiv Shah among them. Further U.S. interest in South Asia focuses on ongoing tensions between India and Pakistan rooted largely in competing claims to the Kashmir region and in "cross-border terrorism" in both Kashmir and major Indian cities. In the interests of regional stability, in particular as a means of forwarding U.S. interests in nearby Afghanistan, the United States strongly endorses an existing, but until recently moribund India-Pakistan peace initiative, and remains concerned about the potential for conflict over Kashmiri sovereignty to cause open hostilities between these two nuclear-armed countries. The United States also seeks to curtail the proliferation of nuclear weapons and missiles in South Asia. President Obama desires to continue expanded engagement and cooperation with India. His May 2010 National Security Strategy noted that, "The United States and India are building a strategic partnership that is underpinned by our shared interests, our shared values as the world's two largest democracies, and close connections among our people." Yet there are concerns among observers in both countries that momentum has waned (by some accounts due to U.S. inattention), that outstanding areas of friction continue to hinder optimal levels of cooperation, and that India's geostrategic, economic, and security circumstances combine with New Delhi's lingering skepticism over America's global and regional role to preclude the kind of "special relationship" that many boosters of U.S.-India ties envisage. While U.S.-India engagement under the Obama Administration has not (to date) realized any groundbreaking initiatives as was the case under the Bush Administration, it may be that the apparently growing "dominance of ordinariness" in the relationship is a hidden strength that demonstrates its maturing into diplomatic normalcy. Indeed, there is a pervasive sense in policy circles that dramatic new breakthroughs in U.S.-India relations are not on the horizon, and that President Obama's November 2010 travel to India may have brought the two countries to a plateau of sorts whereupon routinized, but still meaningful interactions take place in the near term. Both national governments have been dealing with serious domestic issues in 2011 (the United States with federal budget issues, India with major corruption scandals), as well as with more pressing foreign policy concerns. Given a setting in which the private sectors of both countries are impatient with the pace of economic reform in India and with rampant corruption there, some analysts call on the two governments to concentrate on limited goals with clear chances for success, such as in defense trade and with the development of multilateral and Asian architectures, in both the economic and security realms. One leading Indian commentator urges American patience and recognition that New Delhi views engagement with the United States as its highest foreign policy priority. The contention here is that India's four purported top long-term foreign policy objectives—a stable Afghanistan-Pakistan region; exerting influence across the Indian Ocean region; obtaining status as a "rule-maker" in the international system; and strengthening "global power" factors such as sustained economic growth and military modernization—all require strategic cooperation with the United States. Yet a more pessimistic view has the bilateral relationship constrained in large part by differences over the U.S.-Pakistan alliance and by India's apparent reluctance to exert power in its own region, resulting in years of "a lot of rhetoric but very little substantive movement" in U.S.-India ties. The sweeping scope of the bilateral relationship, as well as the perceived lack of focus within it, may be found in the various and usually large number of issue-areas listed in joint statements. However, in May 2011, the lead U.S. diplomat for the region helpfully summarized U.S.-India relations under the rubric of four major "agendas": an innovation agenda that includes collaboration on energy security, civil nuclear cooperation, agriculture, space, climate, and other sciences; a security agenda that includes military-to-military relations, arms sales, and nonproliferation; a people-to-people agenda that encourages civic engagement, and open governance and democracy initiatives; and a growth agenda focused on increasing bilateral trade and investment by removing barriers to both. Tangible progress is being made in each of these areas despite ongoing U.S. government irritants, in particular obstacles to full implementation of civil nuclear cooperation; overly restrictive limits on foreign investment; lingering barriers to trade; and insufficient protection of intellectual property rights, among others. Even leading American boosters of expanded U.S.-India ties insistently call on New Delhi to take more rapid action in these areas. U.S.-India cooperation in the area of nuclear energy—an initiative launched in 2005 and approved by Congress in 2008—continues to be delayed by the lack of both a liability arrangement and an agreement on monitoring arrangements for U.S. nuclear exports to certain Indian entities (see the "U.S.-India Civil Nuclear Cooperation" section below). In April, New Delhi announced that it had narrowed the list of competitors for a roughly $11 billion contract for 126 new medium multi-role combat aircraft (MMRCA) to two finalists, both European vendors. U.S. government officials expressed being "deeply disappointed" by news of the "deselection" of U.S.-based Boeing and Lockheed Martin from consideration, and what seemed a choice with major geostrategic implications elicited much debate over its meaning (see the "Defense Cooperation and Trade" section below). Major corruption scandals that broke in New Delhi in late 2010 have snowballed into a crisis not only for the sitting Congress Party-led United Progressive Alliance national coalition government, but also for India's political system writ large. Summer months have seen the emergence of a massive people's movement protesting the country's pervasive corruption, a movement lead in particular by social activist Anne Hazare (see the "Corruption Scandals and Congress Party Woes" section below). U.S. Ambassador to India Tim Roemer tendered his resignation on April 28, 2011, the same day that New Delhi announced the MMRCA deselection, and departed the New Delhi post on June 30. Roemer explained his departure as arising for personal, professional, and family reasons. The interim Chief of Mission, Peter Burleigh, is a highly competent veteran American diplomat with significant regional experience, but observers warn that U.S.-India relations could suffer if the Obama Administration does not move quickly to appoint a new permanent Ambassador. In June, Ranjan Mathai, a career foreign service office and former ambassador to France, was appointed to replace Nirupama Rao as Indian foreign secretary beginning in August. Rao retired from the Indian Foreign Service and was appointed to succeed Meera Shankar as Ambassador to the United States. Just days into President Obama's term, Secretary of State Hillary Clinton and Indian External Affairs Minister S.M. Krishna agreed to "further strengthen the excellent bilateral relationship" between the United States and India. Soon after, President Obama issued a statement asserting that, "Our rapidly growing and deepening friendship with India offers benefits to all the world's citizens" and that the people of India "should know they have no better friend and partner than the people of the United States." As part of her confirmation hearing to become Secretary of State, Clinton told Senators she would work to fulfill President Obama's commitment to "establish a true strategic partnership with India, increase our military cooperation, trade, and support democracies around the world." Despite such top-level assurances from the new U.S. Administration, during 2009 and into 2010, many in India became concerned that Washington was not focusing on the bilateral relationship with the same vigor as did the Bush Administration, which was viewed in India as having pursued both broader and stronger ties in an unprecedented manner. Many concerns arose in New Delhi, among them that the Obama Administration was overly focused on U.S. relations with China in ways that would reduce India's influence and visibility; that it was intent on deepening relations with India's main rival, Pakistan, in ways that could be harmful to Indian security and perhaps lead to a more interventionist approach to the Kashmir problem; that a new U.S. emphasis on nonproliferation and arms control would lead to pressure on India join such multilateral initiatives as the Comprehensive Test Ban Treaty and the Fissile Material Cutoff Treaty; and that the Administration might pursue so-called protectionist economic policies that could adversely affect bilateral commerce in goods and services. While some of these concerns persist, robust, positive, high-level U.S. attention to relations with India has continued. Secretary Clinton was widely seen to have concluded a successful visit to India in July 2009, inking several agreements, and also making important symbolic points by staying at Mumbai's Taj Mahal hotel (site of a major Islamist terrorist attack in 2008) and having a high-profile meeting with women's groups. In November 2009, President Obama hosted his inaugural state visit when Indian Prime Minister Manmohan Singh dined at the White House. Despite the important symbolism, the resulting diplomacy was seen by many proponents of closer ties as disappointing (if not an outright failure) in its outcome, at least to the extent that no "breakthroughs" in the bilateral relationship were announced. Yet from other perspectives there were visible ideational gains: the relationship was shown to transcend the preferences of any single leader or government; the two leaders demonstrated that their countries' strategic goals were increasingly well aligned; and plans were made to continue taking advantage of complementarities while differences are well managed. Perhaps most significantly, the visit itself contributed to ameliorating concerns in India that the Obama Administration was insufficiently attuned to India's potential role as a U.S. partner. Still, in the wake of Prime Minister Singh's U.S. travel, some observers continued voicing concerns at the Obama Administration's perceived "air of ambivalence" toward India, with one going so far as to accuse the U.S. Administration of "diplomatic negligence" in its allegedly insufficient attention to New Delhi's key concerns, and for policies that could "put India into its subcontinental box" by relegating it to a regional role through the Asia-wide elevation of China. The United States and India formally reengaged the U.S.-India Strategic Dialogue initiated under President G.W. Bush when a large delegation of high-ranking Indian officials led by External Affairs Minister Krishna visited Washington, DC, in June 2010. As leader of the U.S. delegation, Secretary Clinton lauded India as "an indispensable partner and a trusted friend." At a State Department reception, President Obama declared his firm belief that "the relationship between the United States and India will be a defining partnership in the 21 st century." In anticipation of the Dialogue, Undersecretary of State for Political Affairs William Burns had given a policy speech on "India's rise and the future of the U.S.-India relationship" in which he asserted, "The simple truth that India's strength and progress on the world stage is deeply in the strategic interest of the United States." Burns acknowledged that progress in the partnership is not automatic and would require sustained efforts on both sides, and also that some Indians worry the United States sees India through the prism of ties with Pakistan and/or was overly focused on China. He sought to ameliorate these concerns by assuring his audience that the United States does not view relations in Asia as a zero-sum game and that its relations with Pakistan did not come at the expense of India. Two days later, the Strategic Dialogue produced a joint statement in which the two countries pledged to "deepen people-to-people, business-to-business, and government-to-government linkages … for the mutual benefit of both countries and for the promotion of global peace, stability, and prosperity." As the U.S. President planned his November 2010 visit to India, an array of prickly bilateral issues confronted him, including differences over the proper regional roles to be played by China and Pakistan; the status of conflict in Afghanistan; international efforts to address Iran's controversial nuclear program; restrictions on high-technology exports to India, outsourcing, and sticking points on the conclusion of arrangements for both civil nuclear and defense cooperation, among others. Moreover, while Indian officials will present a long list of demands to their American interlocutors, they come under fire for paying insufficient attention to American interests and concerns, and for not recognizing the sometimes serious costs of appearing insensitive to same. Upon arriving in the Indian financial hub of Mumbai on November 7, 2010, President Obama laid a white rose at a memorial to the victims of the November 2008 terrorist attack and spoke at the Taj Mahal Palace hotel, a main target of that attack. While in that city, the President announced $10 billion in new trade deals, among them a $7.7 billion contract for Boeing to supply 30 737 commercial aircraft to India's SpiceJet airline. The new deals were projected to create some 50,000 U.S. jobs. Many Indian observers were irked by the President's failure to mention Pakistan in his initial remarks, fueling for some a persistent Indian belief that the United States remains too devoted to its alliance with Islamabad. When asked about this in a meeting with a group of Mumbai college students, President Obama sought to impress upon the audience a belief that no country has a bigger stake in Pakistan's success than does India, commenting, "I think that if Pakistan is unstable, that's bad for India. If Pakistan is stable and prosperous, that's good." In New Delhi, President Obama's historic speech to a joint session of the Indian Parliament characterized the U.S.-India partnership as serving three broad purposes: (1) promoting prosperity on both countries, especially through greater trade and two-way investment, and food security and health-related initiatives; (2) enhancing shared security by working together to prevent terrorist attacks, and; (3) strengthening democratic governance and human rights. In the context of this last issue-area, President Obama chided India for often "shying away" from taking clear public stands in the face of gross human rights violations and the suppression of democratic movements, as was recently seen to be the case in Burma. While appearing a joint news conference, Prime Minister Singh called the American President "a sincere and valued friend" of India, and he welcomed an acceleration of the deepening of bilateral ties with an aim of working "as equal partners" in the relationship. For his part, President Obama reiterated his view that the U.S.-India relationship will be one of the defining partnerships of the 21 st century, and he reviewed the litany of varied bilateral initiatives both underway and planned. Both leaders expressed satisfaction with adjustments in U.S. export control regulations that are expected to facilitate greater joint cooperation in high-technology fields. During his address to Indian parliamentarians, President Obama received thunderous applause for his endorsement of a permanent Indian seat on the U.N. Security Council as part of elevating that country to "its rightful place in the world." This was the most explicit such endorsement to date; previously, the U.S. government had endorsed only Japan as a new permanent member of that body. There is evidence of U.S. congressional support for a permanent Indian role on the Council. Although this unprecedented expression of support was widely hailed as a positive shift in U.S. policy, some Indian observers noted that the President's statement was not nearly as explicit an endorsement as was received by Japan and that, in the absence of a timeline for Security Council reform, it could be taken as little more than a "vague promise." In neighboring Pakistan, the endorsement met with expected resistance; Islamabad claimed India is undeserving of such status given New Delhi's "conduct in relations with its neighbors and its continued flagrant violations of Security Council resolutions on Jammu and Kashmir." President Obama's India trip was widely considered successful as a diplomatic exercise, although reviews of the substantive outcome were somewhat mixed. As External Affairs Minister Krishna later reported to his Parliament: "The visit was successful in strengthening mutual understanding on regional and global issues, accelerating the momentum of bilateral cooperation, and creating a long-term framework to elevate the India-U.S. strategic partnership to a new level." Assistant Secretary of State Robert Blake later said the trip "will be remembered as a watershed, when the U.S. and India embarked at a new level on concrete initiatives to build a global partnership." The President's visit was itself seen by many in India and abroad as reflective of the country's rising visibility on the global stage. Even in the absence of major new initiatives, there was a sense among some observers that the visit had exceeded expectations, with the U.S. President's "calm demeanor and soaring rhetoric" winning over a previously skeptical Indian audience. Other commentators, however, saw President Obama turning a blind eye toward or underestimating the seriousness of India's ongoing struggles with poverty, government bureaucracy, and health and education issues while remaining overly focused on the country's high-technology innovation successes. In these accounts, the New Delhi government's failure to push forward with economic reforms has made foreign investors wary, a problem only exacerbated by recent corruption scandals. There also continued to be contentions from some quarters that India's polity is skeptical about being subsumed into a U.S. "imperialist agenda," with fears that Indian commercial markets will be opened in ways that do not benefit the country's people and that India will be drawn into a military alliance with the United States. Another Strategic Dialogue was held in New Delhi in July 2011. Given the persistence of doubts about the robustness of the U.S.-India relationship, there were hopes that Secretary Clinton's attendance could reinvigorate a relationship that many analysts still see as incomplete and in need of more specific focus. Clinton traveled with a group of nine other senior U.S. officials, including the Director of National Intelligence. Yet even before the final Joint Statement was issued, commentators were lowering expectations with the assumption that neither government's circumstances was ripe for new large-scale initiatives. Upon her arrival, Secretary Clinton highlighted three issue areas: (1) trade and investment ("This is a good news story, but ... Each of our countries can do more to reduce barriers, open our markets, and find new opportunities for economic partnership"); (2) security cooperation (especially on counterterrorism and maritime security); and (3) the civil nuclear agreement ("[T]o reap the benefits of that investment and to see returns on the political capital that has been spent on both sides, we need to resolve remaining issues...."). The resulting Joint Statement highlighted a bilateral commitment to "broaden and deepen the U.S.-India global strategic partnership" in the cause of global stability and prosperity, and to enhance the partnership in numerous issue-areas. Among the notable clauses of the Statement were: a reaffirmation of the two countries' "commitment for consultation, coordination, and cooperation on Afghanistan," to include a reconciliation process there that is "Afghan-led, Afghan-owned, and inclusive"; a call for Pakistan "to move expeditiously in prosecuting those involved in the November 2008 Mumbai terrorist attack"; a continued commitment to "full implementation of the U.S.-India civil nuclear energy cooperation agreement"; and plans to resume technical-level negotiations on a bilateral investment treaty. In a major policy speech in the southern Indian city of Chennai (formerly Madras) the next day, Secretary Clinton laid out the Administration's vision for future relations, emphasizing India's growing leadership role in the world, especially in the Asia-Pacific and in South and Central Asia. On the former, and in what could be seen as a thinly veiled expression of concern about China's rise, she sought India's close cooperation in seeing formation of a regional architecture that adopts "international norms on security, trade, rule of law, human rights, and accountable governance." In this respect she welcomed New Delhi's "Look East" policy of closer engagement with the ASEAN countries. She also took the opportunity to issue an unusually open criticism of India's Burma policy, contending that, "As India takes on a larger role throughout the Asia-Pacific, it does have increasing responsibilities, including the duty to speak out against violations of universal human rights." This last reflects a pervasive view in Washington that New Delhi is too hesitant to exercise India's growing power and influence. On South and Central Asia, Secretary Clinton focused on three key issues. First, a reiteration of a strong and lasting U.S. commitment to Afghanistan well beyond the planned 2014 withdrawal of American combat troops, and a reiteration of "unambiguous redlines" for reconciliation with Afghan insurgents (their renunciation of violence, divorce from Al Qaeda, and acceptance of the laws and constitution of Afghanistan). She acknowledged New Delhi's "rightly expressed concerns about outside interference in the reconciliation process" and vowed to consult closely with India on this shared concern. Second, and related, Clinton stated that lasting peace and security in the region will "require a stable, democratic, prosperous Pakistan free from violent extremism," and assured listeners that the United States continues to press the Pakistani government to seek those ends. Finally, the new "Silk Road" initiative was raised: "an international web and network of economic and transit connections" that would facilitate regional commerce and prosperity. According to senior U.S. officials speaking later, this regional economic integration would be "anchored in the Indian economy." As with President Obama's earlier travel to India, the Administration's second Strategic Dialogue session and Secretary Clinton's public appearances in New Delhi and Chennai were widely hailed as successful in moving the bilateral relationship forward. Yet, in another indication that current U.S.-India relations have no obvious, specific focus, the read-outs from two major wire services highlighted very different issue-areas. The end of Cold War political constraints and the rapid growth of India's economy has allowed New Delhi to more energetically engage global diplomacy. Expanded engagement is evident through the huge increase in the number of bilateral defense arrangements the Indian government has made in the past decade, more than tripling from 7 in 2000 to at least 26 today. During the latter half of 2010, every major world leader paid a visit to India, including those from all five permanent U.N. Security Council members. Much of the international attention on India is due to the country's vast market potential—the retail sector alone is worth an estimated $450 billion. Some observers argue that the New Delhi government acts too timidly on the global stage, and that the country's regional and domestic difficulties continue to hinder its ability to exert influence in geopolitics. As a rising power, India has appeared unwilling to take the kinds of policy stances expected of major global players, in particular those who sit on the U.N. Security Council, as India has been in 2011. From vague positions on Middle East uprisings to the appearance of fence-sitting on issues such as U.S.-led efforts to isolate Iran and Burma, New Delhi's leaders may be finding it increasingly difficult to avoid taking on the responsibilities many in Washington and elsewhere are looking for. One example is New Delhi's largely hands-off response to uprisings in the Arab world, with External Affairs Minister Krishna saying India would not "jump into the fray" unless invited and would maintain a "very cautious" approach to the Libyan conflict. In March 2011, India officially opposed NATO's military action in Libya and notably abstained—along with Brazil, China, Russia, and Germany—from voting on U.N. Resolution 1973, which approved of such action. More recently, Secretary of State Clinton has sought greater Indian assistance in pressuring the faltering Syrian regime. Human rights activists have joined foreign governments in prodding India to be more proactive on key foreign policy issues, even those in India's own neighborhood such as in Burma and Sri Lanka. One such observer has criticized New Delhi for issuing "bland propositions" that "can convey indifference to the plight of subjugated people." She challenges India's leaders to "stand with people or with dictators." Many analysts view India's foreign policy establishment—its foreign service, think-tanks, public universities, and relevant media—as being too small and/or too poorly developed for India to achieve true great power status in the foreseeable future. By one substantive account, without a major modernizing and revamping of this establishment, "India's worldview will be parochial, reactive, and increasingly dominated by business rather than by strategic or political concerns." Thus, even as India's rising stature commands greater attention in many world capitals, the country's diplomatic influence remains limited—especially in comparison to that of China—and the central government continues to concentrate mainly on domestic development and poverty alleviation. Indeed, India's domestic and social indices continue to rank it as a developing country, or what one former senior Indian diplomat called a "premature power." Moreover, Indian bureaucrats' prickly and sometimes distrustful attitude toward their American counterparts survives long after the Cold War's end, and is sometimes evident in New Delhi's vehement reactions to what many Americans would consider minor and essentially meaningless slights. In the assessment of one former U.S. diplomat and longtime South Asia expert, there are two major schools of thought in India's current foreign policy approach: "21 st century Nehruvian" and "great power advocates." The former is notable for its essential continuation of Jawaharlal Nehru's emphasis on developing world unity and an attendant skepticism regarding U.S. power, which, from this view, may require taking action to balance against. The latter, energized by India's rapid economic growth and higher visibility on the world stage, concentrates on New Delhi's triangular relations with Washington and Beijing with an eye toward increasing India's relative power, mainly through economic growth and innovation. Yet both schools share several important basic characteristics, including a view of India as a more-or-less natural regional hegemon; limited attention to global governance issues; a commitment to maintaining India's "strategic autonomy"; and a preference for hedging strategies, be they balancing against a more aggressive China by welcoming a continued major U.S. presence in the region, or by working with China and Russia to preclude an excessively dominant American presence. In an informal but extensive survey of Indian elite opinion about the United States, this same expert found broad areas of consensus and concluded that Washington has now supplanted Moscow as New Delhi's most important external partner. As is reflected in opinion surveys of the Indian public more broadly, views of the United States, its varied power capabilities, and its continued substantive presence as a player in Asia are widely welcomed by Indian decision makers. The United States is seen to possess a unique ability to turn innovation into wealth and military power, both coveted by aspiring global powers such as India. America's national will and soft power tend to be admired by Indians, and the leading U.S. role in international institutions may serve as a model for New Delhi. Moreover—40 years after the Nixon Administration was seen to "tilt" toward Pakistan by sending the USS Enterprise carrier task force into the Bay of Bengal—American military capabilities and ability to project significant power into the Indian Ocean Region are no longer viewed as threatening to most in New Delhi, where there is a widely held view of the United States as the only viable hedge against the rise of a potentially adversarial or revisionist China. The above-noted schools of thought correspond closely to what two other senior observers identify as India's "traditional nationalist" and "pragmatist" strains of foreign policy visions. These analysts see policy makers tending to "split the difference" by mouthing traditional nationalist rhetoric while pursuing a largely pragmatic course. While nationalists are inherently opposed to any international alliance that would constrict India's autonomy and tend toward legal-moral rather than political arguments, pragmatists are accepting of a balance of power approach emphasizing a flexible pursuit of Indian national interests over ideological positioning. One result is that pragmatists are less averse to alliance-making and international treaties. Their rising influence thus opens greater possibilities for closer and more meaningful U.S.-India ties, perhaps especially in the area of nonproliferation (New Delhi's Iran policy has become a bellwether issue of contention between nationalists and pragmatists). Three full-scale wars—in 1947-1948, 1965, and 1971—and a constant state of military preparedness on both sides of their mutual border have marked more than six decades of bitter rivalry between India and its western neighbor, Pakistan. The acrimonious partition of British India into two successor states in 1947 and the unresolved issue of Kashmiri sovereignty have been major sources of tension. Both countries have built large defense establishments at significant cost to economic and social development, and the bilateral conflict has precluded the development of meaningful regional organizations. A major factor in U.S. interest in South Asia is ongoing tension between India and Pakistan rooted largely in competing territorial claims and in "cross-border terrorism" in both Kashmir and major Indian cities. In the interests of regional stability, the United States strongly endorses a recently revived India-Pakistan peace initiative, and it remains concerned about the potential for India-Pakistan to cause open hostilities between these two nuclear-armed countries. Senior Indian officials continue to press the U.S. government to convince Islamabad to take stronger action against anti-India terrorist groups operating inside Pakistan. The effects of this bilateral conflict are seen to negatively affect U.S.-led efforts to stabilize Afghanistan. Most observers assert that U.S. success in Afghanistan is to a significant degree dependent on improved India-Pakistan relations, the logic being that Pakistan will need to feel more secure vis-à-vis a perceived existential threat on its eastern front in order to shift its attention and military resources more toward the west. Some in Pakistan believe that, by feeding their country's insecurities, the increasingly warm U.S.-India relationship actually foments regional instability. In 2010, Indian decision makers became discomfited by signs that the United States and its allies are preparing to leave Afghanistan in such a way that would provide a central role for Pakistan in mediating between Kabul and Taliban elements, perhaps even to include a role for the latter in Afghanistan's governance. Such an outcome would be anathema to Indian leaders, who wish to limit Islamabad's influence in a post-war Afghanistan. During his 2010 confirmation hearing, the U.S. military commander in Afghanistan (and current Director of Central Intelligence), Gen. David Petraeus, said India "without question" has a legitimate interests in Afghanistan. Also in 2010, conflict over water resources emerged as another major exacerbating factor in the bilateral relationship. Some in Pakistan accuse India of violating international law, bilateral agreements, and ethical principles of peaceful coexistence through the allegedly illicit manipulation of water flows into Pakistan. Of particular concern for Indian and Western observers has been the fact that some of these complaints are emanating from the leaders of militant Pakistani Islamist groups such as Lashkar-e-Taiba. Pakistan's then-foreign minister said water was "emerging as a very serious source of [bilateral] tension," but a senior Indian official denied that India is in violation of the Indus Waters Treaty and called Pakistani rhetoric a "political gimmick" meant to distract from Islamabad's own poor water management. The Indian government suspended the bilateral peace process following the late 2008 terrorist attack on Mumbai that was traced to a Pakistan-based terrorist group. In early 2011, New Delhi chose to reengage dialogue with Islamabad despite the fact that many of the alleged planners of that attack have not been brought to justice. A panel of experts of security and terrorism brought together by India Today magazine in 2010 outlined ten strategies for India-Pakistan dialogue. Each of the top three involved actions to be taken by Pakistan: (1) firmer and more rapid action the perpetrators of the 11/08 Mumbai attack; (2) extradition of the fugitives most wanted in India; and (3) action against the "terrorist infrastructure" on Pakistani soil. The experts also called for establishment of a regular dialogue between the two countries' intelligence chiefs. These remain among New Delhi's key concerns. The immense pressures now faced by Islamabad—ongoing and widespread Islamist militancy and extremism, the unprecedented embarrassments of bin Laden's discovery and an attack on a naval base in May, and deteriorating relations with the United States foremost among them—may have the effect of shifting the focus of Pakistan's military decision makers away from conflict with New Delhi. This may in turn open a window of opportunity for India to pursue improved relations with Pakistan. A bilateral "Composite Dialogue" between New Delhi and Islamabad, initiated in the 1990s and officially resumed in 2004, has realized some modest but still meaningful successes, including a formal cease-fire along the entire shared frontier, and some unprecedented trade and people-to-people contacts across the Kashmiri Line of Control (LOC). As per New Delhi's and Islamabad's intents, the dialogue has been meant to bring about "peaceful settlement of all bilateral issues, including Jammu and Kashmir, to the satisfaction of both sides." Yet 2008 saw significant deterioration in India-Pakistan relations, especially following the large-scale November terrorist attack on Mumbai, India, that left some 165 civilians dead (22 of those killed were foreigners, including 6 Americans). More broadly, militarized territorial disputes over Kashmir, the Siachen Glacier, and the Sir Creek remain unresolved, and Pakistani officials regularly express unhappiness that more substantive progress, especially on the "core issue" of Kashmir, is not occurring. Officials in New Delhi continue to declare unacceptable the "terrorist-infrastructure" they say remains intact in Pakistani Kashmir. The Obama Administration continues to refrain from taking any direct role in the bilateral dispute, and Indian leaders see no need for third-party involvement, in any case. However, to the satisfaction of his Indian audience, while in New Delhi in late 2010, President Obama said, "We'll continue to insist to Pakistan's leaders that terrorist safe havens within their borders are unacceptable, and that terrorists behind the Mumbai attacks must be brought to justice." Despite its formal suspension of the peace process, New Delhi did continue engaging in high-level talks with Islamabad in 2010. Pakistani observers variously attributed this Indian willingness to an apparent failure of coercive diplomacy, to U.S. pressure, and to new talk of reconciliation with the Afghan Taliban, which could leave India in a disadvantageous position vis-à-vis Kabul. From the Indian perspective, New Delhi's leaders were compelled by the desire to offer Islamabad tangible benefits for cooperating, and by a perceived need for greater flexibility in the case of future terrorists attacks traced to Pakistan. Islamabad welcomed this Indian willingness to talk, seeing it as an opportunity to raise "all core issues" and urge India to resolve them quickly. New Delhi reiterated that the Composite Dialogue remained in suspension and that, while all subjects could be raised at impending meetings, India would focus solely on terrorism. A series of high-level interactions ensued, but none produced any new agreements or major initiatives. Pakistani Foreign Secretary Salman Bashir visited New Delhi in February. Following that meeting, India's then-Foreign Secretary Rao said the time was not yet right for a resumption of the Composite Dialogue as requested by Islamabad. Subsequent major military exercises by both countries near their shared border (India in February, Pakistan in April) indicated that mutual distrust remained serious. In April, senior Indian leaders still ruled out any renewal of substantive talks until Pakistan took "credible steps" to bring Mumbai perpetrators to justice. Yet Prime Minister Singh did meet with his Pakistani counterpart on the sidelines of a regional summit in April 2010 in Thimpu, Bhutan, where the Indian leader expressed a willingness to discuss all issues of mutual interest, apparently with the conviction that even a dialogue that produces no immediate results is preferable to a diplomatic freeze. More high-level talks were held in Islamabad in June when Secretary Rao again met her Pakistani counterpart. The very fact of the meeting had many observers optimistic that the bilateral peace process was getting back on track. External Affairs Minister Krishna was in Islamabad a month later, but what he called "good and constructive" talks produced only an agreement to keep talking. Islamabad called India's "selective" approach to outstanding issues (an oblique reference to Kashmir) a major impediment. Despite their strong suspicion of official Pakistani involvement in the 2008 Mumbai attack, Indian leaders saw no good option other than continuing the dialogue. Given a lack of progress with its so-called "coercive diplomacy," the national coalition-leading Congress Party announced that it would officially reengage dialogue with Pakistan. The decision met with some political resistance from the opposition. A June meeting of foreign secretaries in Islamabad appeared unexpectedly positive to many, with the two officials agreeing to expand confidence-building measures related to both nuclear and conventional weapons, as well as to increase trade and travel across the Kashmiri LOC. In July, new Pakistani Foreign Minister Hina Rabbani Khar was in New Delhi for talks with External Affairs Minister Krishna, who reaffirmed India's intention to reduce the bilateral trust deficit and conveyed New Delhi's desire for "a stable, prosperous Pakistan acting as a bulwark against terrorism, and at peace with itself and with its neighbors." Khar had raised some hackles in New Delhi—and an explicit expression of "displeasure" from Krishna—by meeting with Kashmiri separatists before seeing Indian government officials. Yet the resulting Joint Statement further loosened trade and travel restrictions across the LOC, and was widely taken as a successful representation of a peace process back on track after a more than two-year hiatus. The perpetrators of a horrific terrorist attack on India's business and entertainment capital that resulted in 165 innocent deaths were identified as members of the Pakistan-based Lashkar-e-Taiba (LeT), a U.S.-designated terrorist group that has received significant past support from Pakistani security agencies (the Jamaat-ud-Dawa or JuD, ostensibly a charitable organization, is widely considered to be a continuation of the LeT under a new name). The Indian government demands that Pakistan take conclusive action to shut down the LeT and bring its terrorist leadership to justice. At least one ranking Indian official has openly accused Pakistan's powerful main intelligence agency of overseeing the planning and execution of the attack. After being granted access to David Headley, an American national of Pakistani descent who pled guilty to participating in the planning of the attack, Indian officials claimed to have established an official Pakistani role, a claim Islamabad strongly rejected as "baseless." Yet reports continue to finger Pakistan's main intelligence service as being culpable. Of particular relevance for India is LeT founder Hafiz Saeed, whom India believes is demonstrably culpable, but whom Pakistani officials say they do not possess sufficient evidence to formally charge. In September 2009, Pakistani police placed Saeed under house arrest. Only weeks later, a court dismissed the two cases brought against him (unrelated to the Mumbai attack), but he remained confined to his home. The Islamabad government insisted that it was powerless to take further action against Saeed in the absence of more convincing evidence of wrongdoing. New Delhi countered that Pakistan was "shielding" the masterminds of the attack. In May 2010, Pakistan's Supreme Court dismissed a government appeal and upheld a lower court's decision to release Saeed, saying the case presented against him was insufficient. A senior Indian official expressed disappointment with the ruling. Many analysts believe Saeed maintains substantive control of the organization's daily operations even as he remains under house arrest. In late 2009, Pakistani authorities had brought formal charges against seven men accused of planning the Mumbai raid, among them Zaki ur-Rehman Lakhvi, a senior LeT figure said to have been the operational commander. New Delhi insists that the suspects be extradited to India. Yet the Islamabad government refuses and has to date pressed no further than preliminary hearings, and the start-and-stop nature of the proceedings has only engendered Indian and international skepticism about Pakistan's determination. While in India in July 2011, the Pakistani foreign minister asked Indian officials to have "patience, trust, and confidence in the proceedings," saying "Pakistan was not trying to abdicate responsibility." Osama bin Laden's May 2011 killing by U.S. commandos in the Pakistani city of Abbottabad elicited more insistent Indian demands that Islamabad hand over the Mumbai suspects, but to no avail. One senior observer, reflecting a widely-held view, contends that the Pakistani military "will do everything to preserve Lashkar as long as it believes there is a threat from India." Analysts warn that another major terrorist attack in India that is traced to Pakistan would likely lead to an international crisis. One has offered numerous U.S. policy options for preventing such an attack or managing any crisis that results. July 2011 terrorist bombings in Mumbai—most likely the work of indigenous Islamist militants—were evidence for many that the city remains highly vulnerable to attack. Well after the 2008 attacks, measures had been taking to improve the city's security, but major initiatives such as establishment of a dedicated federal ministry were not taken up, and nearly all of the political and police officials involved had avoided termination or even reprimand. Many U.S. officials, as well as the Pakistani government, aver that regional peace is inextricably linked to a solution of the Kashmir dispute. New Delhi views separatism in its Jammu and Kashmir state to be an internal issue or, at most, a bilateral one with Pakistan. It rejects any third-party or multilateral engagement. While levels of violence in Kashmir have declined significantly from their 1990s peak, the situation remains fragile, and Islamabad insists that what it calls New Delhi's "administrative and half-hearted political measures" will not resolve what is in essence a Kashmiri "struggle for the right to self-determination." Under the Obama Administration, the U.S. government has continued its long-standing policy of keeping distance from the Kashmir dispute and refraining from any mediation role therein. As expressed by President Obama in speaking to a joint session of the Indian Parliament, "We will continue to welcome dialogue between India and Pakistan, even as we recognize that disputes between your two countries can only be resolved by the people of your two countries." The now deceased U.S. Special Representative for Afghanistan and Pakistan, Richard Holbrooke, who at times used the term "K-word" in discussing Kashmir, said, "We are not going to negotiate or mediate on that issue and I'm going to try to keep my record and not even mention it by name." Officially, India lays claim to the entire former princely state, but in practice New Delhi is generally accepting of the status quo wherein it controls two-thirds, including the prized, Muslim-majority Kashmir Valley, site of the state's summer capital and largest city, Srinagar (pop. 1.3 million). Indian policy will not accept any territorial or border shifts, but Prime Minister Singh has for many years sought to "make the border irrelevant" and open the LOC to greater trade and people-to-people contacts. A rare major opinion survey of 3,700 Kashmiris on both sides of the LOC in 2010 found that less than half supported separatist goals. Only in the Muslim-majority valley did a large majority (up to 95%) express support for full Kashmiri independence. Indian officials consistently aver that, despite significant decreases in rates of separatist violence, the Pakistani threat to Indian Kashmir remains undiminished, with Pakistan accused of providing occasional support for militant infiltration across the LOC, as well as of maintaining—or at the very least tolerating—militant bases in Pakistani Kashmir. In 2010, India's defense minister claimed there were "conscious, calculated attempts" underway to push more militants into the Valley, and the army chief later reiterated his claim that Pakistan was not taking action to dismantle the "terror infrastructure" on its side of the LOC. According the Indian Home Ministry's most recent annual report, "[T]here are reports to indicate that the infrastructure for training to terrorist elements across-the border continues to remain intact and efforts to infiltrate militants into the State continue unabated." During the summer of 2010, Indian Kashmir experienced its worst separatist-related violence in years. The spasm began in June, when a 17-year-old protester was killed by a tear gas canister fired by police. By mid-September, more than 100 other mostly young street protesters died in clashes with security forces, a curfew was imposed in the Valley, dozens of separatist political leaders were arrested, and thousands of Indian police and paramilitary troops were deployed to quell the protests. Pakistan's Foreign Ministry issued a formal condemnation of "the blatant use of force by Indian security forces," called the ongoing violence "unacceptable," and asked New Delhi to "exercise restraint." The Pakistani Parliament subsequently passed resolutions on the issue; New Delhi angrily rejected the attempted interference in "what is purely an internal affair of India." Islamabad was not deterred, however, and further sharp diplomatic exchanges ensued. A feared repeat of such turmoil did not materialize in the summer of 2011 (see also the " Separatism in the Jammu and Kashmir State " section below). Indian leaders envisage a peaceful Afghanistan that can serve as a hub for regional trade and energy flows. India takes an active role in assisting reconstruction efforts in Afghanistan, having committed a total of some $2 billion to this cause since 2001 (the most recent pledge of $500 million was made in May), as well as contributing thousands of workers and opening four consulates there. It is the leading regional contributor to Afghan reconstruction. New Delhi characterizes its relations with Kabul as unique in that Indian humanitarian assistance and infrastructure development projects are geographically extensive while also entirely Afghan-led in terms of prioritization. India's wide-reaching assistance program in the country is aimed at boosting all sectors of development in all areas of Afghanistan. In May 2011, Prime Minister Singh met with Afghan President Hamid Karzai in Kabul, where the two leaders announced a new India-Afghanistan "Strategic Partnership" elevating bilateral ties to a higher level with regular summit meetings, expanded trade and commercial links, and institutionalized dialogues on an array of bilateral issues. New Delhi vows to assist in Afghanistan's emergence "as a land bridge and trade, transportation and energy hub connecting Central and South Asia by enabling free and more unfettered transport and transit linkages." Singh pledged another $500 million in bilateral development aid over the next six years. Among Indian assistance to Afghanistan are funding for a new $111 million power station, a $77 million dam project, construction of Kabul's new $67 million Parliament building, and construction of Afghanistan's leading children's hospital. Indian engineers also have completed a 160-mile-long, $84 million road project linking Afghanistan's southwestern Nimroz province with Iran's Chabahar port on the Arabian Sea in hopes of providing landlocked Afghanistan with an alternative supply route and reducing the country's dependence on access through Pakistan. India provides daily school lunches to 2 million Afghan children. In December 2010, India signed agreements to participate in the multi-billion-dollar Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline project, which leaders hope to see completed in 2015 (India's former petroleum minister characterized the project as a new "Silk Route" linking Central and South Asia). Thousands of Indian personnel are working on various relief and reconstruction projects inside Afghanistan. These workers are guarded by hundreds of Indian police forces which have sustained casualties in attacks by insurgents. In the private sector, Indian firms are vying for exploration rights in Bamiyan, Afghanistan, where the Hajigak mines contain some 1.8 billion tons of high-quality iron ore. New Delhi declares itself "committed to the unity, integrity, and independence of Afghanistan underpinned by democracy and cohesive pluralism and free from external interference." It supports efforts toward peace and reintegration with Taliban insurgents, but emphasizes that, to be successful and enduring, these should be wholly "Afghan-led and Afghan-owned," the clear implication being that Islamabad's substantive involvement is not desired. In May 2011, Prime Minister Singh reiterated his government's wish that an Afghan-led reconciliation process takes place "without outside interference or coercion." After a long period of uneasiness with the idea of President Karzai negotiating directly with Afghan insurgents, New Delhi's leadership—in line with a similar policy shift by the United States—now fully supports a reconciliation process that might include discussions with Taliban elements. Yet hardline Indian analysts foresee "catastrophic" implications for India's security if Pakistan takes a major role in the Afghan endgame, and New Delhi continues to worry about Washington's "toxic dependence" on the Pakistani army in pursuing a military victory in Afghanistan. New Delhi's keen security interests in Afghanistan are longstanding, and Indian investment in that country is motivated by a desire to bypass Pakistan when engaging West and Central Asia, constrain the spread of Islamist militancy on its western flank, and also dampen the influence of both Islamist and Hindutva extremism domestically. Yet Indian efforts to project influence into Afghanistan are significantly hindered by geography and ethnicity (where Pakistan enjoys clear advantages), Islamabad's demonstrated willingness to undertake provocative anti-India policies in Afghanistan, and, perhaps most importantly, ambivalence among Indian policy makers and ordinary citizens alike about the cost-benefit calculation of continuing what may be risky investments in an unstable country. Given the June 2011 announcement of an impending U.S. drawdown from Afghanistan, New Delhi faces a choice of maintaining/increasing its efforts in Afghanistan, risking potentially dangerous reactions from Islamabad, or scaling back its efforts in the hope of easing Pakistan's insecurities. The latter option may facilitate greater stability, but at considerable cost to India's aspirations for regional dominance and global power status. By some accounts, India and Pakistan are fighting a "shadow war" inside Afghanistan with spies and proxies, although it is exclusively high-visibility Indian targets that have come under attack there. A July 2008 suicide bombing at India's Kabul Embassy was traced to militants with ties to the Pakistani military, and was taken as a stark message to Indian leaders that Taliban militants and their allies want New Delhi to withdraw from Afghanistan. Prime Minster Singh instead responded by pledging $450 million in new Indian aid for Afghan reconstruction. Islamabad accuses New Delhi of using an exaggerated number of Indian consulates in Afghanistan as bases for malevolent interference in Pakistan's Baluchistan province, specifically by materially supporting Baloch separatist militants. The Pakistani government also accuses India of interfering in Pakistan's western tribal regions along the Afghanistan border. When asked about such claims in late 2009, Secretary of State Clinton said the U.S. government had seen no supporting evidence. Yet senior Pakistani officials remained insistent. In the view of many analysts, Pakistan's "paranoia" with regard to the perceived threat from India leads Pakistani leaders to engage a zero-sum regional competition with New Delhi. In this way, Pakistan's primary goal with regard to Afghanistan is to prevent any dominant Indian influence there. Signs of increasing cooperation between the Kabul and Islamabad governments can cause trepidation in other regional capitals, especially including New Delhi, for above-noted reasons. Some observers viewed a senior U.S. military commander's 2009 assessment that "increasing India's influence in Afghanistan is likely to exacerbate regional tensions" as a sign that U.S. officials might press India to keep a low or lower profile there, yet the U.S. government has continued to welcome and laud India's role in Afghanistan while at the same time rhetorically recognizing Islamabad's legitimate security interests in having a friendly western neighbor. Obama Administration officials have sought to ease India's fears by assuring New Delhi that it has a legitimate role to play in Afghanistan and that the United States does not view regional relationships as a zero-sum game. Still, the perception among some observers that the United States is in some way planning to abandon Afghanistan elicits great anxiety in New Delhi and fears of a Taliban role in a future Kabul government, with the attendant possibility that Afghanistan could again become a haven for anti-India militants. Even without this worst-case outcome, a U.S. withdrawal and deterioration of security would likely jeopardize India's role and standing in Afghanistan. New Delhi's leaders may not yet have a coherent plan for this possibility. According to one senior analyst, "So far, India's plans consist largely of hand-wringing and facile hopes." A presumed lack of U.S. consultation with India previous to President Obama's June 2011 drawdown announcement left some in India dubious about a U.S.-India partnership that did not (in their view) give sufficient consideration to India's security concerns about a potential future governance role for Afghan Taliban elements. Leaked U.S. diplomatic cables reportedly support the notion that New Delhi has been anxious about the implications of a U.S. withdrawal. India and China together account for one-third of the world's population, and are seen to be rising 21 st century powers and potential strategic rivals. As India has sought to expand its strategic horizons in recent years—eyeing influence over a vast region from Iran and the Persian Gulf states in the west to the Straits of Malacca and Gulf of Thailand and perhaps even the South China Sea in the east—it increasingly finds itself bumping into a spreading Chinese presence in the same area. New Delhi fears "encirclement" by Beijing, and many analysts view the Indian Ocean Region (IOR) as a key stage upon which 21 st century geopolitical power struggles will play out. Some further encourage Washington to leverage its own relationship with the region's leading pluralistic democracy to "set limits on Chinese expansion," perhaps especially through increased joint naval coordination. Meanwhile, some strategic thinkers in India worry that the United States is on a path of engagement with China that could threaten Indian interests and relegate India to a secondary role in Asia. India and China fought a brief but intense border war in 1962 that left China in control of large swaths of territory still claimed by India. Today, India accuses China of illegitimately occupying nearly 15,000 square miles of Indian territory in Kashmir (the Aksai Chin region), while China lays claim to 35,000 square miles in the northeastern Indian state of Arunachal Pradesh. The 1962 clash ended a previously friendly relationship between the two leaders of the Cold War "nonaligned movement" and left many Indians feeling shocked and betrayed. While some aspects of India-China relations, including bilateral trade, have warmed measurably in recent years, the two countries have yet to reach a final boundary agreement. Adding to New Delhi's sense of insecurity have been suspicions regarding China's long-term nuclear weapons capabilities and strategic intentions in South and Southeast Asia. A strategic orientation focused on China appears to have affected the course and scope of New Delhi's own nuclear weapons, ballistic missile, and other power projection programs. During a landmark 1993 visit to Beijing, Prime Minister Narasimha Rao signed an agreement to reduce troops and maintain peace along the Line of Actual Control (LOAC) that divides the two countries' forces at the disputed border. Numerous rounds of border talks and joint working group meetings aimed at reaching a final settlement have been held since 1981—13 of these since both countries appointed special representatives in 2003—with New Delhi and Beijing agreeing to move forward in other issue-areas even as territorial claims remain unresolved. Beijing's military and economic support for Pakistan—support that is widely understood to have included nuclear weapons- and missile-related transfers—is a major and ongoing source of bilateral friction. Past Chinese support for Pakistan's Kashmir position, along with more recent reports of a Chinese military presence in Aksai Chin, have added to the discomfort of Indian leaders. There have been reports of links between Chinese intelligence agencies and insurgent groups in India's northeast. India and China also have competed for trade partners and energy resources in other developing regions to feed their rapidly growing economies; India's relative poverty puts New Delhi at a significant disadvantage in such competition. The Chinese are increasingly wary over the growing strategic relationship between the United States and India, and Beijing has expressed concern over potential alignments in Asia that could result in the "encirclement" of China. Chinese concern in this regard was made evident when Beijing protested discussions under the Bush Administration to develop a quadrilateral group of like-minded democracies in Asia that would include the United States, Japan, Australia, and India. Still, while Indians can at times appear to be obsessed with comparisons to China, the Chinese are generally far more complacent, giving the rivalry an appearance of one-sidedness. China is also particularly sensitive to India's influence in Tibet. India allows the Dalai Lama to live in India and has allowed him to visit India's Arunachal Pradesh state abutting Tibet. The Indian territory of Ladakh, which is near the Chinese-held, Indian-claimed territory of Aksai Chin, is also ethnically Tibetan. Nonetheless, India is particularly sensitive to the development of U.S.-China relations, especially as they pertain to South Asia. This was evident as India railed at a clause in the 2009 U.S.-China Joint Statement that called for Washington and Beijing to "work together to promote peace, stability, and prosperity in South Asia." Despite the anxieties elicited by the now simultaneous rise of Asia's two largest countries, New Delhi calls its relationship with Beijing a "priority" and asserts that the two countries have "stepped up functional cooperation in all areas, including efforts to build military-to-military trust and confidence through bilateral defense interactions" that are "growing." It also notes ongoing bilateral cooperation in areas such as finance, agriculture, water resources, energy, environment, tourism, and information technology, along with joint efforts in multilateral fora on global issues such as trade negotiations and energy security, which includes "cooperating very closely" on climate change issues. Both governments have hailed their "strategic and cooperative partnership" which, according to New Delhi, has established important confidence-building measures and broadened people-to-people contacts. China has in recent years overtaken the United States as India's leading trade partner. The value of India-China trade surpassed $62 billion in 2010, up an impressive 43% over the previous year. China is the single largest source of imports for India, accounting for above $40 billion worth or more than 11% of all imports in FY2010/11. China is also the third largest export market for Indian goods (behind the United Arab Emirates and United States), accounting for $19.4 billion worth or about 7.7% of all exports in FY2010/11. Yet the course of the bilateral trade relationship may not favor India over the middle- and long-term, given clear signs of both qualitative and quantitative imbalances. China now accounts for nearly one-fifth of India's total trade deficit. Roughly half of India's electronics imports come from China, along with nearly one-quarter of machinery products imports and about one-sixth of total steel imports. Meanwhile iron ore is by far the leading Indian export to China, accounting for nearly half of the total value in recent years. India has not yet been able to exploit its advantages in the services sector, and many analysts see China trade as an area in which India can at least partially mitigate its badly lagging manufacturing sector. Numerous large state-owned Chinese companies have operations in India, especially in power generation, and machinery and infrastructure construction. The cumulative value of contractual Chinese investment projects in India is nearly $30 billion. Indian companies also operate in China, notably in the manufacturing, information technology, and banking sectors, but the degree is far more modest at less than $1 billion cumulatively. There are mounting fears among some in India that China is encroaching upon what New Delhi sees as its legitimate sphere of influence in South Asia. This concern focuses especially on China's construction of port facilities in the IOR, which has elicited a debate over Beijing's future intentions and concerns that it may seek to interdict or dominate sea lines of communication (SLOCs) there. In 2004, a Washington, DC-based consultancy firm identified China's involvement in developing major new ports in Pakistan (at Gwadar), Sri Lanka (at Hambantota), and Bangladesh (at Chittagong) as representing a potential "string of pearls" strategy which some strategic analysts and media commentators point to as evidence of Beijing's aim to encircle India with naval bases. In mid-2010, Chinese warships docked for a first-ever visit to Burma's Thilawa port. China's plans to develop an overland transportation and energy link from the northern reaches of the Bay of Bengal through Burma to Yunnan is another aspect of this perceived strategy. Port access to the Indian Ocean's strategically vital SLOCs does appear to be a source of considerable rivalry: For example, India desires to see Iran's Chabahar port grow in importance as a transit point into Central Asia that would bypass Pakistan. China, meanwhile, looks to Pakistan's Gwadar port as providing a major future land-line for energy and other supplies to East Asia that would reduce Chinese dependence on Indian Ocean and Malacca Straits sea lanes. Some analysts dismiss Indian fears as overwrought and note that China does not have the capability to project significant naval power into the IOR. Others take a longer view and see present developments as part of a long term strategic plan that will give the Chinese the necessary logistical infrastructure in the IOR to secure its SLOCs to the energy rich Persian Gulf. If developed, this infrastructure could give China a strong naval position relative to India in the IOR, though this will likely take decades to develop. China only just sent its first aircraft carrier out for sea trials in August 2011. The U.S. Department of Defense, in its most recent (August 2011) assessment of Chinese military capabilities, noted Beijing's civilian port projects in the IOR and their potential to improve China's peacetime logistical support options, but also contended that Beijing's power projection abilities in the region will remain limited in the absence of overseas military bases. China has no naval bases in the IOR at present, and available evidence suggests that Beijing's "string of pearls" strategy is in an embryonic phase. Some analysts encourage stronger U.S.-India strategic and military ties with an eye specifically on preventing China from dominating the region and its sea lanes. Others contend that a (limited) Chinese navy presence in the Indian Ocean is not inherently illegitimate or threatening. Some are relatively sanguine that, even if the Chinese navy were to establish overtly military posts on the Indian Ocean in the future, India would still enjoy considerable geographic and logistical advantages in the case of open conflict. Such advantages could be built upon with some fairly facile Indian policies, including reinforcing its Andaman and Nicobar Command, which could present a sturdy "barrier" to hostile forces entering the Bay of Bengal from the east, and expanding maritime intelligence-sharing with the United States. A strong Indian naval presence near the entrance to the Strait of Malacca would be well positioned to interdict Chinese shipping in the event of conflict. Tensions between India and China appear to have increased over the past year despite a 30-fold jump in the value of their bilateral trade over the past decade. Many commentators are speculating that a new "Great Game" is unfolding between Asia's two largest countries, perhaps to be centered on Kashmir, and that the bilateral relationship "has begun to take the form of a true geopolitical rivalry." In 2009, India added two full army divisions to those already deployed near the disputed border, built at least three new airstrips in the region, and moved two squadrons of advanced Sukhoi-30 MKI combat aircraft to a base in the nearby Assam state. The latter months of 2009 saw New Delhi and Beijing engage increasingly vituperative diplomatic and media barbs, placing U.S. officials in something of a dilemma over how to maintain friendly relations with both countries. China's 2010 decision to issue special visas to Indian citizens from Arunachal Pradesh and Jammu and Kashmir reflected Beijing's official position that residents of these states have different status than other Indians, a position that obviously antagonizes India. Meanwhile, the unresolved border dispute is seen to be a significant obstacle to expanded India-China economic and trade relations, and some analysts see Beijing's Kashmir stance becoming more adversarial, as was the case in the past, perhaps even more hostile to India than is Islamabad's. Indian sources have accused Chinese patrols of "transgressing" the LOAC—an average of about ten such incursions per month was reported in 2008—and periodic reports of incursions continue. Official Chinese news outlets at times accuse the Indian media of issuing "war rhetoric" and "sowing the seeds of enmity" with reports of Chinese "intrusions" across the LOAC. Earlier in 2011, Indian military officials issued statements that the alleged presence of Chinese troops in Pakistan-held Kashmir poses a serious military challenge to India. Beijing denies reports of a Chinese military presence in Kashmir. In August 2010, three separate episodes illuminated ongoing frictions. First, New Delhi and Beijing exchanged sharp diplomatic words after China refused to issue a visa to the Indian general responsible for Indian Kashmir. Later, India reportedly moved to counter the alleged deployment of advanced Chinese missiles to the border area with its own plans to place intermediate-range Agni II and short-range Prithvi III missiles near the frontier. Finally, two Chinese warships paid a first-ever port visit to Burma, exacerbating fears among some that Chinese naval power was being wielded too closely to Indian shores. In September 2010, Prime Minister Singh reportedly warned that China "would like to have a foothold in South Asia." Only days earlier, External Affairs Minister Krishna opined that China had been showing "more than the normal interest in the Indian Ocean affairs. So we are closely monitoring the Chinese intentions." While few Indian decision makers are desirous of direct conflict with China, there seems to be an upswing in negative views about Beijing's evolving regional and global role, with misgivings perhaps arising along a perspective that New Delhi's past policies have been too concessionary in dealing with a China that may increasingly be perceived as "an erratic, ultra-nationalist state that seeks to constrain India." The pessimistic Indian perspective sees Beijing as unworthy of New Delhi's trust and so rejects the Chinese government's rhetorical commitment to cooperation and dispute resolution as bromides veiling more nefarious intent. While there are causes for concern in the India-China relationship, there are also some new areas of convergence between the two states, as was made evident when the two governments closely coordinated their positions in the lead up to the Copenhagen Conference on climate change. The potential for future renewed conflict between India and China warrants a close watch as the correlates of power and strategic architectures evolve in Asia. Yet, while tensions appear to mount, neither country is likely to seek open conflict as both have made economic development their key national priority. From this perspective, increased economic interdependence will act as an inhibitor to conflict, but the workings of this dynamic are not so clear. Some analysts also note that the nature and imbalance of the dramatically growing trade between India and China is leading to a degree of mutual antagonism over the trade relationship. Yet China arguably faces strong disincentives to behave aggressively in the IOR given that doing so would be likely to accelerate India's partnership with the United States, and that any open conflict in the region could cause potentially major harm to the Chinese economy. The argument is thus that incentives for India and China to cooperate are strong. In a sign that recent India-China animosity may have crested, Indian National Security Advisor Shiv Shankar Menon announced in April 2011 that the two countries had agreed to restore suspended defense ties, take steps to enhance their balance of trade, and establish a new consultation mechanism to address border disputes. India's relationship with the island nation of Sri Lanka dates back millennia and is marked by intimate cultural, religious, and linguistic interaction. For most of the past three decades, relations have been dominated by the now-concluded Sri Lankan civil war between Colombo's government forces and the Liberation Tigers of Tamil Eelam (LTTE). Sri Lanka is divided between a largely Sinhalese-Buddhist majority in the south, which dominates the government, and a Hindu-Tamil minority in the north and east. The still-unresolved ethnic conflict has complicated the relationship between India and Sri Lanka due to the presence in south India of a large Tamil minority of more than 60 million (mainly the state of Tamil Nadu). Some strategic analysts in India are concerned by increased Chinese activity in Sri Lanka. Domestic sentiment and increased flows of refugees led India to intervene in the conflict in 1987 by sending a large Indian Peace Keeping Force to Sri Lanka to establish order and disarm Tamil militants. Former Indian Prime Minister Rajiv Gandhi was assassinated by an LTTE suicide bomber in 1991. India later withdrew its forces after they suffered some 1,000 deaths, and it subsequently refrained from direct involvement in the conflict. New Delhi did, however, continue to acknowledge Colombo's right to act against "terrorist forces." The mid-2009 end of combat in Sri Lanka opened the way for newly deepened bilateral relations. New Delhi offered an immediate $115 million grant and provided other support to assist in dealing with the resulting humanitarian crisis and resettlement of hundreds of thousands of internally displaced persons. During a mid-2010 visit to India, Sri Lankan President Mahinda Rajapaksa agreed with Prime Minister Singh that the two countries' "vibrant and multi-faceted partnership" warranted agreements on social, legal, and women's affairs, energy and transportation, as well as a soft loan of $800 million for the reconstruction of a northern railway that was destroyed during the war. The total value of bilateral trade exceeded $3 billion in 2010, up some 47% over the previous year. Indian defense ties with Sri Lanka have been revived. New Delhi today contends that relations with Colombo are "strong and poised for a quantum jump." Yet India remains concerned with the situation in Sri Lanka even after the end of open hostilities there. Members of India's Parliament worry that Indian aid intended for displaced Tamils has not reached the targeted community. Then-Foreign Secretary Rao traveled to Sri Lanka as Special Emissary in 2010 to assess rehabilitation efforts, reportedly conveying to Colombo India's hope that Sri Lanka would initiate a political process to resolve the underlying ethnic issues that fueled the previous civil war in addition to resettling and rehabilitating displaced Tamils. New Delhi continues to emphasize its view that Sri Lanka's national reconciliation must come through a negotiated political settlement of ethnic issues that is "acceptable to all communities within the framework of a united Sri Lanka and which is consistent with democracy, pluralism, and respect for human rights." In meetings with Sri Lanka's President in June 2011, three top Indian officials asked that his government move quickly to reach a political settlement with the Tamils. A 2011 report by the Brussels-based International Crisis Group acknowledged New Delhi's "active engagement and unprecedented financial assistance" in Sri Lanka, but contends that India's policies have failed to date in facilitating a sustainable peace on the island. The report urges the Indian government to work more closely with the United States, European Union, and Japan in pressing Colombo to negotiate a political settlement to Sri Lanka's ethnic disputes, in part by lifting blanket emergency rule, re-establishing civil administration in Tamil-majority areas, and taking other democratizing and reconciliatory actions. Some independent analysts likewise convey a perception that India has done too little to foster democracy, ensure that ethnic minority rights are respected, and hedge against growing Chinese influence in Sri Lanka. India shares close historical, cultural, linguistic, social, and economic ties with neighboring Bangladesh, a country also born of colonial British India. However, and despite India's key role in the 1971 "liberation" of the former East Pakistan, New Delhi's past relations with Dhaka have been fraught with tensions related mainly to the cross-border infiltration of Islamist and separatist militants, and to the tens of millions of illegal Bangladeshi migrants in India. The two countries share a heavily-populated, 2,540-mile-long border, the great majority of which New Delhi has attempted to seal through fence construction. The two countries' border forces have in the past engaged in sometimes lethal gun battles, and Bangladesh-based terrorists groups have been active inside India. Still, New Delhi and Dhaka have cooperated on joint counterterrorism efforts and talks on extensive energy cooperation continue. In 2010, India extended a $1 billion line of credit to Bangladesh to aid infrastructure development there, and New Delhi offers rice supplies at below-market prices. The value of bilateral trade was about $3.5 billion in 2009/2010, up more than 12% over the previous fiscal year. India-Bangladesh ties improved markedly after 2008, facilitated by the election that year of Bangladeshi Prime Minister Sheikh Hasina, whose Awami League has historically closer ties to India than does the opposition Bangladesh National Party. New Delhi has lauded the restoration of multi-party democracy in Dhaka. During her 2010 visit to India, Hasina—accompanied by a 123-person delegation and 50-member business contingent—agreed with Prime Minster Singh to put in place "a comprehensive framework of cooperation for development between the two countries," and signed a number of agreements, including pacts on cultural exchange, security, crime prevention, and power supply. India is also allowing increased trade access for Bangladesh across Indian territory to Bhutan and Nepal. External Affairs Minister Krishna was in Bangladesh in July 2011 for what he called a "very productive" visit marked by the signing of two new trade and commerce agreements, along with "significant forward movement" in bilateral power sector cooperation. However, Prime Minister Singh made some badly-timed remarks posted on an Indian government website: Just before his Krishna arrived in Dhaka, Singh claimed that "at least 25%" of Bangladeshis "swear by Jamaat-e-Islami [Bangladesh's largest Islamist political party] and are very anti-Indian." The comment was widely reported in Bangladesh and contributed to straining relations. Prime Minister Singh is scheduled to visit Bangladesh in September 2011. This will be the first such travel in 12 years. The visit is expected to develop ties between the two nations and help resolve differences over border disputes, trade, and water issues. There reportedly are 162 disputed enclaves on both sides of the border. The visit will also offer the two leaders the opportunity to discuss shared challenges arising from global climate change. Some observers see India developing east-west connectivity with Bangladesh to facilitate links with both its own isolated northeastern states and Southeast Asia, as well as with Bangladesh. A few express concern that Bangladesh's expanding ties with China could facilitate Beijing's north-south connectivity with the Indian Ocean littoral at the expense of India. Cross-border issues and the use of Bangladesh territory by insurgents in India's northeast remain key for New Delhi. A Joint Boundary Working Group established in 2000 met for the fourth time in late 2010, but demarcation disputes remain unresolved in numerous sectors. Human rights watchdogs have been critical of what they call the "shoot-to-kill" policy of India's border security forces, who reportedly have killed nearly 1,000 people, most of them unarmed Bangladeshis, who attempted to cross the border illegally over the past decade. The issue has become a sore point for Dhaka; Bangladesh's foreign minister has urged Indian border security forces to exercise "utmost restraint" and was assured by her Indian counterpart that steps were being taken to address the problem. Prime Minister Hasina has discussed with Prime Minister Singh her government's crackdown on Bangladesh-based Indian separatists, and reportedly made a commitment that she would not allow Bangladesh territory to be used for anti-Indian activities. Hasina's government reportedly arrested and handed over to India a key leader of the United Liberation Front of Assam early in 2010, then later in the year remanded to India 28 leaders of the United Liberation Front of Assam (ULFA). Dhaka's efforts to crack down on Indian separatist militants there apparently has led many of those elements to relocate to Burma. Improved ties with Bangladesh can provide India with an opportunity to counter Pakistani and Chinese influence there. China has been assisting Bangladesh in developing port facilities in Chittagong, and some Indian sources believe Pakistan's main intelligence agency has used Bangladesh to infiltrate operatives and even "terrorists" into India. In October 2010, Bangladesh formally sought Chinese assistance to build a deep water sea port in the Bay of Bengal near the southeastern island of Sonadia. The Dhaka government hopes that such a port could become a key shipping hub for northeast India and China's Yunnan Province, as well as for Nepal, Bhutan, and Burma. Bangladesh is also reportedly in discussion with China and Burma on plans to build a highway linking Bangladesh's Chittagong with Kunming, the capital of China's Yunnan Province. Such connectivity with China would likely be an issue of concern for India. India's multi-billion-dollar transit projects could go far in bringing development to isolated regions of both countries, but some in Dhaka worry that India intends to create a "security corridor" across Bangladesh to supply counterinsurgency forces in its northeastern states and potentially even defense forces facing China in Arunachal Pradesh, which could elicit reprisals from Beijing. India-Nepal relations traditionally have been close and come under the aegis of the 1950 Indo-Nepal Peace and Friendship Treaty, which allows for unrestricted travel and residency across their 1,150-mile-long shared border. From New Delhi's view, the Treaty affords Nepali citizens "unparalleled advantages in India," and has "enabled Nepal to overcome many of the disadvantages of being a landlocked country." India remains in close consultation with the Nepali government in an effort to support Nepal's transition to a democratic, peaceful, and prosperous state. Prime Minister Singh conveyed his "warmest felicitations" to newly elected Nepali Prime Minister Baburam Bhattarai in August 2011. Bhattarai received his doctorate degree from New Delhi's Jawaharlal Nehru University. Nepal is the world's only officially Hindu country, and India continues to be its leading trade partner, as well as source of foreign investment and tourist arrivals. India has taken a lead role in efforts to train and equip the Nepal Army. The Madhesh people of Nepal's Terai region bordering India share the Hindi language, as well as many familial ties across the open border. The largely Hindu social and religious structure of Nepal makes Nepali culture similar to India's in many respects. The bilateral relationship is driven by two major geopolitical considerations. First, Nepal is viewed as a "buffer state" between India and China. As such, India seeks to minimize (or at least balance against) Chinese influence there. The substantial Tibetan community in Nepal can at times complicate this dynamic. While the Kathmandu government allows Tibetans to live in Nepal, it has a policy of not allowing any "anti-China" activity inside Nepal. Nepali authorities prevented the election of a Tibetan community government-in-exile in October 2010, a step taken by some as a hardening of Kathmandu's stance toward Tibetan refugees. Tibetan protests in Nepal in the lead-up to the 2008 Beijing Olympics had also led to a crackdown by Nepali authorities. There is growing evidence of Chinese ties with Nepali Maoists. A high profile bribery case alleges that a Maoist leader asked a Chinese official for substantial amounts of money to influence Madheshi lawmakers in support of the Maoist's bid for the prime ministership. Former Nepali Prime Minister Prachanda traveled to China at least four times. Current Prime Minister Bhattarai, also of the CPN-M, has stated that Nepal needs to be sensitive to the security concerns of both India and China. Prachanda was viewed by some as having tilted towards China. India reportedly was "deeply uncomfortable with and suspicious of Maoist intentions" under the previous Prachanda government. Bhattarai has reportedly offered that "the days of playing India and China are over." The second key Indian geopolitical interest in Nepal is to maintain political stability in Kathmandu and keep Nepal from becoming a base of support for insurgents in India. India is concerned that a Maoist government in Nepal could lend support to the already significant Maoist insurgency in India. Thus far, there have been only limited connections between these groups, but it appears that India is concerned the links could grow should the Maoists assert their dominance over Nepal. Political stability in Nepal could lead to infrastructure development and the establishment of major new projects to tap the country's estimated 43,000 megawatts of hydropower potential that is seen to be technically feasible and economically viable. This could go far in addressing the growing energy needs of India's northern states. India and Burma share close historical, ethnic, cultural, and religious ties, along with a 1,000-mile-long border and maritime proximity in the Bay of Bengal. New Delhi continues to pursue closer relations with the repressive military regime in neighboring Rangoon for both economic and political reasons. India seeks to bolster its energy security by increasing "connectivity" between its northeastern states and western Burma. India is also concerned about the maintenance of political stability in Burma, fearful that instability could result in a surge of refugees into India and a further increase in China's regional influence. New Delhi may also view good relations with Rangoon as a key aspect of its strategy to address ongoing territorial disputes with China and Pakistan. In addition, many observers see past and continued cooperation by the Burmese military as being vital in New Delhi's efforts to battle separatist militants in India's northeast. India was Burma's fourth-largest trading partner in FY2009/10 (after Thailand, China, and Singapore), with total trade of a record $1.2 billion, up 27% over the previous fiscal year. India is engaged in more than a dozen major projects in Burma, most of them related to improving that country's transportation and communication links. In 2007, Burma's military junta, the State Peace and Development Council (SPDC), launched a violent crackdown to suppress major pro-democracy street protests led by Buddhist monks. In response, the United States imposed new sanctions on Burma and urged other countries to follow suit, yet New Delhi continued to favor dialogue and opposed the imposition of new sanctions. Moreover, during the protests and immediately afterwards, India moved ahead with plans to assist with the construction of a port in northwestern Burma as part of an effort to develop that country's natural gas industry. New Delhi's approach, justified by Indian leaders as being a pragmatic pursuit of their own national interests and as part of their "Look East" policy (see below), elicited accusations of Indian complicity in Burmese repression. Press reports in late 2007 indicated that New Delhi was halting arms sales to Rangoon; in fact, India's supply of military equipment to Burma was only "slowed." Burma again became the focus of international discussions in early 2010, when the SPDC released new laws governing parliamentary elections to be held later in the year. The laws appeared to restrict the participation of Burma's opposition parties, in particular the National League for Democracy and its leader, Aung San Suu Kyi. While the United States, the European Union, and others were quick to criticize the laws, India's response was comparatively muted. New Delhi chose to disassociate itself from a June 2010 U.N. Human Rights Council resolution that condemned "ongoing systematic violations of human rights" in Burma. However, as one of 14 countries in the "Group of Friends on Burma"—a consultative body formed by U.N. Secretary-General Ban Ki-Moon—New Delhi did support the Group's call for free and fair elections, and for the release of all political prisoners. In mid-2010, SPDC chief Senior General Than Shwe traveled to New Delhi—his second visit in six years—and met with Prime Minister Singh to discuss bilateral ties. The leaders reportedly discussed matters such as border security, economic relations, and upcoming elections in Burma. There were subsequent reports that the Indian military plan would move additional Border Security Force troops to guard the border with Burma. Even strident boosters of deepening U.S.-India relations issued criticisms of New Delhi's "Machiavellian turn" in welcoming the Burmese leader and pursuing greater links with his military regime. Independent analysts also insist that, as perhaps the only external power with the ability to tip the balance in favor of Burma's democratic forces, India has an obligation to look beyond its more mercenary interests to take a more principled stand. President Obama dismissed Burma's November 2010 elections as having been neither free nor fair. While concurrently visiting New Delhi, the President was openly critical of India's relative silence on the Burmese regime's suppression of democratic movements and violations of human rights, saying democracies with global aspirations have an obligation to condemn such actions. Soon after, an unnamed Indian official said New Delhi has "strategic interests" in Burma and that its policies are driven by "political compulsions." Secretary of State Clinton repeated the U.S. President's contention while in Chennai in mid-2011, expressing her hope that New Delhi would continue pressing Rangoon to move ahead with democratization and contending that India has "the duty to speak out against violations of universal human rights." Suu Kyi's November 2010 release from house arrest was officially welcomed by New Delhi with the hope that it would begin a process of reconciliation in Burma; Suu Kyi has herself urged India to play a more active role in standing up for democracy and "look beyond a commercial kind of view" when dealing with Burma. In June 2011, External Affairs Minister Krishna paid a three-day visit to Rangoon, but did not take the opportunity to meet Suu Kyi (a task undertaken by the Indian foreign secretary). Initiated by Prime Minister Narasimha Rao in 1991, India's "Look East" policy coincided with the country's economic liberalization and has for two decades reflected New Delhi's focused efforts to deepen commercial and diplomatic relations with East and Southeast Asia. It also has included security cooperation with many of India's eastern neighbors, likely in response to China's growing regional influence. As the ASEAN countries realized significant economic growth, Indian leaders have fairly consistently pursued greater engagement in Southeast Asia. Given the Indian foreign secretary's view that "India is as much a Southeast Asian nation as a South Asian nation," New Delhi's policy seeks to "reconnect and reach out in the civilizational space we share with our neighbors." Like the United States, India is designated as an ASEAN "Dialogue Partner." At the India-ASEAN Post-Ministerial Meeting in Indonesia in July 2011, there was unanimous agreement that engagement should be strengthened in the security and economic fields, to include upgraded efforts to combat international terrorism and threats to maritime security, and aspirations to finalize a pending Services and Investment Agreement. New Delhi hopes to boost trade with the ten ASEAN states to $70 billion by 2012. Moreover, India has since 1996 been a member of the ASEAN Regional Forum (ARF), in which 27 member states come together to consult on matters affecting regional peace and security. New Delhi's participation further reflects India's growing engagement with the Asia-Pacific region and tracks well with its Look East policy. India's Look East Policy may not be entirely welcome by China. New Delhi is reportedly spending $2 billion to set up a military command in the Andaman Islands located to the northwest of the Strait of Malacca, through which much of China's energy and trade flow. In July, an Indian Navy vessel based in the Andamans reportedly received a warning from the Chinese navy that it was entering Chinese waters as it sailed from Vietnam's Nha Trang port towards Haiphong. Some interpret the presence of Indian naval ships in Vietnam as "possibly the start of an Indian bid for influence in the South China Sea." India's relations with Iran traditionally have been positive and are marked by centuries of substantive interactions between the Indus Valley and Persian civilizations. Diplomatic ties were formalized in 1950, and New Delhi has maintained high-level engagement with Tehran's Islamist regime after 1979. In 2003, the two countries launched a bilateral "strategic partnership" of their own, setting out to deepen economic, energy, science, and education cooperation, as well as work together on Afghan reconstruction and counterterrorism. Yet, as India has grown closer to the United States and other Western countries in the new century, New Delhi's policy has slowly shifted—perhaps most notably when India voted with the United States (and the majority) at key International Atomic Energy Agency sessions in 2005 and 2006—leaving most aspects of the envisaged India-Iran partnership unrealized. Most recently, New Delhi has moved to more fully embrace the international sanctions regime against Tehran, causing new tensions with Iran. In late 2010, Iran's Ayatollah Ali Khamenei made repeated mention of the "Kashmir problem," leading some to see an "anti-India tilt" in Iranian policy. In a reflection of more constricted bilateral commercial relations, the total value of bilateral trade dropped by more than 10% in FY2009/2010 after peaking at nearly $15 billion the previous year. There are U.S. concerns that India will seek greater energy resources from Iran, thus benefitting financially a country the United States is seeking to isolate. Indian firms have in recent years taken long-term contracts for purchase of Iranian gas and oil. Natural gas purchases could be worth many billions of dollars, but thus far differences over pricing and transport have precluded sales. Building upon growing energy ties is the proposed construction of a pipeline to deliver Iranian natural gas to India through Pakistan (the "IPI" pipeline), but participation in this project apparently has been abandoned by New Delhi. Still, India has imported an average of about 400,000 barrels of Iranian crude oil per day in recent years, accounting for about one-seventh of India's total oil imports and making it Iran's third-largest market in this category. Officially, New Delhi continues to discuss the IPI pipeline project with Tehran, along with long-term supplies of liquid natural gas (LNG), development of Iran's South Pars LNG project, the development of the Farsi oil and gas blocks, and Iran's Chabahar port and railway projects. Many in New Delhi see development of Iran's Chabahar port as providing India with access to Central Asian markets bypassing Pakistan. Indian officials have for years been encouraging Iran to more quickly develop the port's facilities, but Chabahar's current capacity of 2.5 million tons per year is only about one-fifth of the target. Tehran's reluctance to move faster may be linked to its concerns about security in Iran's Sistan-Baluchistan region, the site of a Sunni Muslim insurgency. Plans by India's state-owned natural gas company to purchase a 40% stake in Iran's South Pars Phase 12 gas project have been delayed by concerns about violating the international sanctions regime; banks have been unwilling to fund the investment while global pressure grows over Iran's nuclear program. In its new role as a nonpermanent member of the U.N. Security Council, India has firmed its stand on the need to fully implement Iran sanctions. In the final week of 2010, the Reserve Bank of India declared that a regional clearinghouse, the Asian Clearing Union, could no longer be used to settle energy trade transactions. The Obama Administration praised the decision; Washington had long sought the move as a way of making Indian companies' purchases of Iranian oil and gas more difficult, and thus of tightening sanctions targeting Iran. New Delhi may have taken the action as a means of bolstering its case for a permanent seat on the UNSC. Tehran at first refused to sell outside the previous arrangement, but quickly agreed to ensure continuing shipments as officials in both countries scrambled to find a lasting solution. By February, the two countries appeared to have found resolution by agreeing to make transactions in euros through an Iranian bank with German accounts, but, in May, proliferation-related EU scrutiny of that bank jeopardized this new arrangement and Indian payments were again halted. In early summer, Iran's state oil firm threatened Indian refiners with an August supply cutoff if the issue wasn't resolved, but Tehran quickly stated that no cutoff was planned. Still, Iranian exports were reduced, Saudi Arabia increased its sales to India to compensate, and the now estimated $4.8 billion impasse may yet lead to a full cutoff. The Iran-Libya Sanctions Act ( P.L. 107-24 ) required the President to impose sanctions on foreign companies that make an "investment" of more than $20 million in one year in Iran's energy sector. The 109 th Congress extended this provision in the Iran Freedom Support Act ( P.L. 109-293 ). The Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010, which became P.L. 111-195 , further tightened sanctions on Iran. To date, no Indian firms have been sanctioned under these Acts, although Indian firms potentially involved in the gas pipeline project would be sanctionable, as would companies that sell gasoline to Iran. Reliance Industries of Mumbai, a major supplier in recent years, has halted such sales. During the period 2004-2006, the United States sanctioned Indian scientists and chemical companies for transferring to Iran WMD-related equipment and/or technology (most sanctions were chemical-related, but one scientist was alleged to have aided Iran's nuclear program). New Delhi called the moves unjustified. Included in legislation to enable U.S.-India civil nuclear cooperation ( P.L. 109-401 , the "Hyde Act") was a non-binding assertion that U.S. policy should "secure India's full and active participation" in U.S. efforts to prevent Iran from acquiring weapons of mass destruction. New Delhi firmly opposes the emergence of any new nuclear weapons powers in the region, but also opposes the use of force and even sanctions, favoring instead diplomacy to address Iran's controversial nuclear program. The 2003 India-Iran Joint Statement included plans to "explore opportunities for cooperation in defense in agreed areas, including training and exchange of visits." While some in Congress have expressed concerns about signs of nascent India-Iran defense cooperation, most observers view such relations as remaining thin and patchy to date, at most, although some Indian strategic analysts call for increasing these as a means of strengthening regional security, as well as to maintain New Delhi's foreign policy independence, especially vis-à-vis the United States. Moscow was New Delhi's main foreign benefactor for the first four decades of Indian independence. Today, Russia continues to be "a trusted and reliable strategic partner," and New Delhi views its ties with Moscow as a "key pillar of India's foreign policy." The Russian President was in New Delhi in December 2010 in an effort to sustain close India-Russia relations despite New Delhi's warmer relations with the West. During a follow-on visit to Moscow, External Affairs Minister Krishna described the India-Russia friendship as being a "special and privileged strategic partnership." Moscow seeks to continue supplies of nuclear technology and expertise, as well as win millions of dollars worth of contracts for the maintenance of India's extensive inventory of Russian-made military hardware. Among the outcomes of the December summit was the inking of agreements to deepen cooperation in the nuclear energy, pharmaceutical, and information technology sectors. The governments also seek to more than double annual bilateral trade to $20 billion by 2015 (trade topped $8.5 billion in 2010, up 15% over the previous year). India's single largest foreign investment is a $1 billion stake in a joint oil and gas venture on Russia's Sakhalin Island. Despite some post-Cold War diversification of its defense suppliers, India continues to obtain the great bulk of its imported military hardware from Russian firms, which are estimated to have been the source of more than 80% of India's total arms imports for the period 2006-2010. Russia's status as a main supplier of Indian defense equipment has come under threat in several disputes, including over the refitting of an aircraft carrier (which has seen major delays and cost overruns), a spat over Russia's allegedly substandard upgradation of an Indian attack submarine, and other irritants. Still, the New Delhi government appears proud to have shifted from a buyer-seller defense relationship to "more elaborate and advanced cooperation" involving joint design, production, and marketing of such weapons systems as the Fifth Generation Fighter Aircraft and the Brahmos cruise missile. India's relations with Japan only began to blossom in the current century after being significantly undermined by India's 1998 nuclear weapons tests. Today, leaders from both countries acknowledge numerous common values and interests. They are engaging a "strategic and global partnership" formally launched in 2006, when the Indian foreign minister spoke of Japan as a "natural partner in the quest to create an arc of advantage and prosperity" in Asia. He also emphasized India's desire for economic integration in Asia and cooperative efforts to secure vital sea lanes, especially in the Indian Ocean. Japan's support for the latter initiative has included plans for unprecedented joint naval exercises. New Delhi and Tokyo also share an interest in seeing membership of the U.N. Security Council expanded—both governments aspire to permanent seats. After years of negotiations, New Delhi and Tokyo finalized a free trade agreement in October 2010, after differences over Indian tariff rates and Japanese restrictions on the importation of generic Indian pharmaceuticals were settled. Bilateral trade was already increasing rapidly: its total value in 2010 exceeded $14.5 billion, up by some 46% over 2009. India has also secured a $4.5 billion loan from Japan for construction of a 900-mile freight railway between Delhi and Mumbai, the largest-ever single-project overseas loan offered by Japan. The Indian government hopes that the "Delhi-Mumbai Industrial Corridor" project will attract more than $90 billion in foreign investment following completion. According to the Japanese Ministry of Foreign Affairs, Japan has since 1986 been India's largest aid donor. U.S., Indian, and Japanese naval vessels held unprecedented combined naval exercises in the Bay of Bengal in 2007 (Australian and Singaporean vessels also participated). Officials stressed that the exercises—which involved a total of 27 ships and submarines, among them two U.S. aircraft carriers—were not prompted by China's growing military strength. New Delhi favors greater trilateral India-U.S.-Japan cooperation, especially in the areas of trade and energy security, but shies from anything that could be construed as a multilateral security alliance. Washington, New Delhi, and Tokyo have plans to commence a senior-level trilateral dialogue in 2011. India's historic engagement with Africa has been considerable and has included ancient trade patterns, active support for African liberation movements in the 20 th century, and robust participation in U.N. peacekeeping operations on the continent. Indian leaders appear to be reviving links to old friends in the developing world with an eye on access to natural resources and perhaps also support for a permanent seat on the U.N. Security Council. While speaking to a group of African leaders in Ethiopia in May 2011, Prime Minister Singh offered a $5 billion line of Indian credit to nations there and pledged his government's support for African education and infrastructure. India's interests and influence in Africa arguably align well with those of the United States, especially given New Delhi's commitment to secularism, pluralism, and democracy. This stands in contrast to China's role in Africa, which may be considered more mercantile. China's foreign exchange reserves of more than $3 trillion are some ten times greater than India's, and China has been aggressive in using its state-owned development banks to make huge investments in oil, gas, and other natural resources in Africa. At $46 billion in 2010, the value of India's total trade with the continent remains less than half of that of China. The United States may thus benefit by welcoming and coordinating with India in engagement of African countries, perhaps especially in the area of security initiatives. India is the world's most populous democracy and remains firmly committed to representative government and rule of law. As a nation-state, India contains hundreds of different ethnic groups, religious sects, and social castes. U.S. policymakers commonly identify in the Indian political system shared core values, and this has facilitated increasingly friendly relations between the U.S. and Indian governments. In 2011, the often-cited Freedom House again rated India as "free" in the areas of political rights and civil liberties, assigning it a score identical to that of Indonesia. With a robust and working democratic system, India is a federal republic where the bulk of executive power rests with the prime minister and his or her cabinet (the Indian president is a ceremonial chief of state with limited executive powers). Most of India's 15 prime ministers have come from the country's Hindi-speaking northern regions and all but two have been upper-caste Hindus. The 543-seat Lok Sabha (People's House) is the locus of national power, with directly elected representatives from each of the country's 28 states and 7 union territories. A smaller upper house, the Rajya Sabha (Council of States), may review, but not veto, most legislation, and has no power over the prime minister or the cabinet. National and state legislators are elected to five-year terms. The most recent parliamentary elections were held in the spring of 2009 when the incumbent Indian National Congress Party (hereinafter "Congress")-led coalition won a convincing victory, as it had five years earlier. National elections in 1999 had secured ruling power for a Bharatiya Janata Party (BJP)-led coalition government headed by Prime Minister Atal Vajpayee. That outcome decisively ended the historic dominance of the Nehru-Gandhi-led Congress Party, which was relegated to sitting in opposition at the national level (its members continued to lead many state governments). However, a surprise Congress resurgence under party president Sonia Gandhi in the 2004 elections brought to power a new left-leaning coalition government led by former finance minister and Oxford-educated economist Manmohan Singh, a Sikh and India's first-ever non-Hindu prime minister. Many analysts attributed Congress's 2004 resurgence to the resentment of rural and poverty-stricken urban voters who felt left out of the "India shining" campaign of a BJP more associated with urban, middle-class interests. Others saw in the results a rejection of the Hindu nationalism associated with the BJP. The Congress Party and its major coalition allies significantly improved their national standing in the spring 2009 elections. More than 1,000 parties vied for office and 60% of the country's 714 million eligible voters turned out at 838,000 polling stations. Congress Party candidates performed strongly both in direct contests against BJP opponents, as well as when contending against so-called "Third Front" candidates from a coalition of smaller regional parties that had sought to displace the incumbents. The result was a net increase of 61 Lok Sabha seats for Congress, bringing its total representation to 206 seats, or 38% of the total. Although the BJP's percentage share of the total vote was similar to that in 2004, it lost 22 more seats, and its second consecutive national defeat left it leaderless and in disarray. Meanwhile, the Left Front grouping of communist parties (former supporters of the Congress-led coalition) was devastated, losing 35 of its 60 seats. See Figure 1 for major party representation in the current Lok Sabha. Prime Minister Singh oversees the United Progressive Alliance (UPA) ruling coalition that has now marked more than seven years in power, far exceeding the expectations of some early observers. Both he and party chief Gandhi have remained fairly popular national figures, although both have seen their favorability suffer with major corruption scandals breaking since late 2010. Despite some notable successes, the UPA government has remained unpopular by many measures, having failed to capitalize on opportunities, and appearing to many as meek and indecisive. Singh himself, though still generally admired as an honest and intelligent figure, has been unable to succeed in pushing through much of the UPA's domestic agenda, which focuses on development and uplift for India's hundreds of millions of poor citizens. Congress's electoral strength had reached a nadir in 1999, when the party won only 110 Lok Sabha seats. Observers attributed the poor showing to a number of factors, including the failure of Congress to make strong pre-election alliances (as had the BJP) and perceptions that party leader Sonia Gandhi lacked the experience to lead the country. Support for the Congress, which dominated Indian politics for decades, had been in fairly steady decline following the 1984 assassination of Prime Minister Indira Gandhi and the 1991 assassination of her son, Prime Minister Rajiv Gandhi. Sonia Gandhi, Rajiv's Italian-born, Catholic widow, refrained from active politics until the late 1990s. She later made efforts to revitalize the party by phasing out older leaders and attracting more women and lower castes—efforts that appear to have paid off in 2004. Today, Congress again occupies more parliamentary seats (206) than any other party and, through unprecedented alliances with powerful regional parties, it again leads India's government under the UPA coalition. As party chief and UPA chair, Gandhi is seen to wield considerable influence over the coalition's policy making process. Her foreign origins have presented an obstacle and likely were a major factor in her surprising 2004 decision to decline the prime ministership. As discussed below, her son, Rahul, is widely seen as the most likely heir to Congress leadership. With the rise of Hindu nationalism, the BJP rapidly increased its parliamentary strength during the 1980s. In 1993, the party's image was tarnished among some, burnished for others, by its alleged complicity in serious communal violence in Mumbai and elsewhere. Some hold elements of the BJP, as the political arm of extremist Hindu groups, responsible for the incidents (the party has advocated "Hindutva," or an India based on Hindu culture, and views this as key to nation-building; Hindutva can at times take an anti-Western cast). While leading a national coalition from 1998-2004, the BJP worked—with only limited success—to change its image from right-wing Hindu fundamentalist to conservative and secular, although 2002 communal rioting in Gujarat again damaged the party's credentials as a moderate organization. The BJP-led National Democratic Alliance (NDA) was overseen by party notable Prime Minister Atal Vajpayee, whose widespread personal popularity helped to keep the BJP in power. Following its upset loss in 2004 and even sounder defeat in 2009, the party has been in some disarray. While it continues to lead several important state governments, its national influence has eroded in recent years. Party leader Lal Krishna Advani, who had served as Vajpayee's deputy and home minister while the BJP was in power, apparently sought to transcend his Hindu nationalist roots by posturing mostly as "governance, security, development" candidate in 2009; the party's loss likely ended his political career. At present, the BJP president is Nitin Gadkari, a former Maharashtran official known for his avid support of privatization. Although still in some disorder in 2011, there are signs that the BJP has made changes necessary to be a formidable challenger in scheduled 2014 polls. These include a more effective branding of the party as one focused on development and good governance rather than emotive, Hindutva-related issues, and Gadkari's success at quelling intra-party dissidence and, by some accounts, showing superior strategizing and organizing skills as compared to his predecessors. Yet among the party's likely candidates for the prime ministership in future elections is Gujarat Chief Minister Narendra Modi, who has overseen impressive development successes in his state, but who is also dogged by controversy over his alleged complicity in lethal anti-Muslim rioting there in 2002 (Modi has in the past been denied a U.S. visa under an American law barring entry for foreign government officials found to be complicit in severe violations of religious freedom). The influence of regional and caste-based parties has become an increasingly important variable in Indian politics; both the 2004 and 2009 national elections saw such parties receiving about half of all votes cast. Never before 2004 had the Congress Party entered into pre-poll alliances at the national level, and numerous analysts attributed Congress's success to precisely this new tack, especially thorough arrangements with the Bihar-based Rashtriya Janata Dal and Tamil Nadu's Dravida Munnetra Kazhagam. The newfound power of both large and smaller regional parties, alike, is reflected in the UPA's ministerial appointments, and in the Congress-led coalition's professed attention to rural issues and to relations between state governments and New Delhi. Two of India's three most notable regional parties are based in the densely-populated northern state of Uttar Pradesh (UP), home to some 190 million persons. The Samajwadi Party, a largely Muslim- and lower caste-based organization, is highly influential there, and holds 23 Lok Sabha seats. The rival Bahujan Samaj Party (BSP) controls the UP state government; its lower-caste, female leader and current Chief Minister Mayawati, is believed to have national political aspirations. The BSP occupies 21 Lok Sabha seats. A final regional party of note is the Janata Dal (United) (JDU), based out of neighboring Bihar and led by that state's Chief Minister, Nitish Kumar. The JDU holds 20 Lok Sabha seats. Although the Communist Party of India (Marxist) (CPI-M) seated the third largest number of parliamentarians after the 2004 elections (43), its vote bank has been almost wholly limited to West Bengal and Kerala. Communist parties (the CPI-M and several smaller allies) have in the past been bitter rivals of the Congress in these states, but a mutual commitment to secularism motivated their cooperation against the BJP in 2004. This "Left Front" is vocal in its criticisms of closer India-U.S. relations, adamantly opposing bilateral civil nuclear cooperation and railing at any signs that the United States seeks to make India a "junior partner" in efforts to counter China. This made the communists difficult partners for the first UPA government, and they subsequently were jettisoned as Congress supporters. In the 2009 national elections, the Left Front competed for 130 seats, but won only 20, suffering especially costly losses in their traditional strongholds. Many analysts attributed their setbacks to poor governance records in these very states. What may be the final blow came when 34 uninterrupted years of communist rule in West Bengal ended upon the Congress-allied Trinamool Congress Party's electoral rout of the communist coalition in May 2011 state assembly elections. Corruption has long been a serious problem in India (see also " India's Economy " section, below). Pervasive, major, and high-level corruption and iniquity is now identified as a central obstacle to India's economic and social development, and is seen as a key cause of a steep decline in foreign investment in late 2010 and early 2011. November 2010 witnessed a baring of two major Indian scandals that have left the national government largely paralyzed and unable to effectively govern to date. The first involves apparent corruption and gross negligence by officials overseeing the October 2010 Commonwealth Games hosted by New Delhi; the second relates to the government's sale of broadband licenses at far below market prices, costing the government many billions of dollars. First, in November 2010, two senior Congress Party figures—the chief organizer of the Commonwealth Games and Maharashtra's Chief Minister—were forced to resign under a cloud of corruption allegations. In February 2011, two more senior Commonwealth Games officials were arrested on suspicion of corruption, specifically, for conspiring to inflate costs while procuring timers and scoring equipment from a Swiss firm at a net loss to the government of nearly $24 million. Two months later, federal agents arrested the former chief organizer of the games on similar charges. By July, Sports Minister M.S. Gill had resigned his post. Yet it is the telecom scandal that has been the most sensational and damaging of the several recent corruption stories, especially after an independent auditor estimated that the central government had lost some $39 billion by selling the 2G spectrum rights too cheaply. Soon after the Commonwealth Games story broke came a spate of revelations about the process by which federal Communications and Information Technology Ministry officials had auctioned off parts of the 2G spectrum, apparently receiving only $3.6 billion for licenses that should have been worth as much as $45 billion. In November 2010, Communications and Information Technology Minister A. Raja, a leading Congress Party-allied DMK party figure who personally approved of the improper spectrum license sales, resigned under intense pressure and subsequently was arrested along with two other ministry officials. Police, acting upon evidence of their collusion with private sector figures, arrested a telecom company executive in February 2011. In July, another federal cabinet figure and DMK colleague of Raja's, Textile Minister Dayanidhi Maran, quit his post after coming under investigation in the scandal. In a further embarrassment for the ruling coalition, the qualifications of a new high-level anti-corruption official, P.J. Thomas, who had been appointed in September 2010, was questioned by the Supreme Court later that year due to his potentially criminal role in an alleged palm oil import scam in his home state of Kerala. By the final month of 2010, outrage from opposition parties had essentially shut down Parliament for three weeks; the Congress-led coalition was able use its majority to pass some spending bills, but most major legislation was blocked. The multiple scandals have continued to render the Congress-led coalition unable to push through major economic reforms that would require the acquiescence of opposition parties. While it has benefitted from the UPA's woes, the main opposition BJP has not escaped culpability in recent corruption scandals. In July 2011, Karnataka's ombudsman issued a report implicating the state's BJP chief minister, B.S. Yeddyurappa, in a $3.5 billion scandal involving the illegal mining of iron ore. Yeddyurappa, accused of receiving a $2 million illicit payment from a mining company and selling state land at an inflated price, quickly lost the support of his party and resigned. In addition to the major incidents of graft and corruptions discussed above, reports of large-scale political bribery sparked much outrage in early 2011 when U.S. diplomatic cables released by Wikileaks reportedly described an American diplomat's eyewitness mid-2008 account of being shown chests containing about $25 million in cash that a Congress Party aide allegedly said was to be used as payoffs to secure Parliament's endorsement of the controversial U.S.-India civil nuclear deal. Although Prime Minster Singh himself denied that his party had paid any bribes or broken any laws, and described the account as "unverified and unverifiable," the episode has led to at least two arrests in an ongoing probe and provided further fuel for opposition party attacks on the UPA government. Moreover, in the current year, new attention also has focused on hundreds of billions of dollars in funds illicitly stashed by Indians abroad. In July 2011, India's Supreme Court requested that the government find and repatriate this so called "black money," adding new pressure on the Congress-led coalition to combat high-level corruption. While Prime Minister Singh is not accused of personal wrongdoing, he has come under fire for an allegedly inattentive management style that, for some observers, facilitated an environment in which corruption could spread. In the face of mounting pressure to act, Congress President Sonia Gandhi acknowledged that problems existed "at all levels" of society, but she squashed rumors of any rift between herself and the Prime Minister, expressing full confidence in Singh's leadership. Soon after, Singh himself offered to appear before any investigative body, declaring he had nothing to hide about his actions. Yet, as his government continued to be paralyzed by scandals and infighting into 2011, speculation about Singh's status mounted, and in February the Prime Minister gave a nationally-televised interview in which he defended his own actions, promised to crack down on corruption, and called the related scandals the greatest regret of his term in office. Days later, Singh dropped his longstanding resistance and acceded to opposition demands for a parliamentary investigation of the telecom scandal in return for an end to their filibuster that had paralyzed the legislature for two months. By the spring of 2011, negative emotions sparked by months-long revelations of high-level corruption reached the point where mass public mobilization could occur. Two figures were notable in initiating this development: In early June, prominent yoga guru Swami Ramdev—his television program attracts about 30 million viewers—staged a major anticorruption protest in the Indian capital, and launched his own mass hunger strike to demand government action to recover "black money." That night, after apparently inaccurate reports that the government had acceded to Ramdev's demands, hundreds of police swept through the protesters, using tear gas and batons to disperse them; at least 30 people were injured. Government officials explained that Ramdev's permit allowed only for yoga and not a political demonstration; police said that permit was for a maximum of 5,000 attendees and some 40,000-60,000 showed up. Critics accused the government of using unnecessary force against peaceful protesters. Over following days, Ramdev's fast attracted thousands of participants across the country. Public officials were discomfited by the exercise of political influence through a perceived "publicity stunt"; other observers were alarmed that hardline Hindu nationalists were at times sharing the stage with Ramdev. There was thus relief felt across India's political spectrum when, in mid-June, Ramdev called off his fast. Yet a previously unknown figure has assumed far more influence at the national level. Two months before the Ramdev-led protest, social activist Anna Hazare, an uneducated 72-year-old from an indigent Maharashtran family, had set himself up at a New Delhi tourist sight and vowed to "fast unto death" unless the central government moved to toughen its anti-corruption laws, in particular by establishing a new "Lokpal" (ombudsman) post to review corruption complaints reaching to the highest levels of government. Less than a week later, after many thousands in cities across India had taken up his cause, Hazare ended his strike and declared victory upon the government's announcement that it would form a committee to draft Lokpal legislation. The composition of that committee—five government officials and five nongovernmental activists—quickly became a matter of controversy, with critics questioning why members of civil society groups, with no standing as elected representatives of the people, should be involved in a process with major political implications. Moreover, the government representatives found themselves in serious disagreement with "Team Anna," as the civil society members and other Hazare supporters came to be known. In the end, the government officials produced one version (the Lokpal bill) and civil society members produced another (the Jan Lokpal bill). Opinion surveys have found huge majorities (80%-90%) of Indians favoring the civil society version. Top Congress Party leaders, including Prime Minister Singh, have argued that multiple tactics to combat corruption are required, and that no single group could claim to represent the whole of civil society. Still, the government has come under fire for failing to open lines of communication with alternative civil society groups, leaving an impression that Hazare's movement speaks for the entire nation. Meanwhile, "Team Anna" itself has been criticized for allegedly dividing poorer minority communities, and for signs that Hindu nationalists are providing the bulk of its organizational muscle. On July 28, 2011, 43 years after the first draft was conceived, India's federal cabinet approved a Lokpal bill that did not include serving prime ministers or the higher judiciary under its purview. The bill did, however, incorporate some minor provisions of the Jan Lokpal bill and had the support of all but one of the Congress Party's coalition partners. Nevertheless, Hazare called the bill "unacceptable," and the opposition BJP joined him in expressing disappointment that the prime minister was excluded from oversight. To express his dissatisfaction with the government's actions, Hazare vowed to begin another fast "unto death" in New Delhi on August 16. On that morning, as thousands of supporters began to gather at a city park, plain-clothes police arrested Hazare and took him away. At this point, his supporters released a pre-recorded videotape in which Hazare, anticipating his own detention, announced the start of a "second independence campaign" for India. By jailing Hazare, the government looked both inept and undemocratic, and united a wide range of otherwise reluctant actors in support of Hazare's movement. In a further twist, Hazare refused an offer to be released until he was given permission to launch a 15-day hunger strike without any restrictions on crowd size at the anticipated protest site. In late August, a parliamentary committee began considering the Jan Lokpal bill submitted by Hazare and his supporters, thus meeting a central demand of the protestors. Yet Hazare rejected a personal plea from the prime minister to end his fast until being guaranteed that certain key provisions of the bill would be enacted. On August 27, the 13 th day of his latest fast, Hazare declared victory when negotiations among government ministers, opposition lawmakers, and civil society representatives resulted in an agreement. Even before major corruption scandals broke in late 2010, the Congress-led UPA was under considerable criticism for drift and ineffectiveness. Since that time, the decline of the Congress Party's standing has been precipitous: less than two years after the party won a convincing 2009 national reelection victory, opinion polls showed a majority of Indians believing the UPA coalition had lost its moral authority to rule. Many analysts identify the slow response to corruption scandals as having been particularly damaging. In the face of growing public anger, Prime Minister Singh made changes to the federal cabinet in January, demoting several ministers who had been tainted by scandal or criticized for ineffectiveness. Yet the changes were relatively minor, leaving most commentators unimpressed, and the opposition BJP accused the government of lacking enough courage to remove corrupt figures. Over the course of recent political upheaval, Singh's mild, nonpolitical bearing, once considered part of his appeal, has for many become a liability, especially as the Indian leader has appeared slow-footed in reacting to national outrage over increasing evidence of high-level corruption. In June, he publically denied charges that he had become a "lame duck" leader. Poor economic news also continues to leech support for the Congress-led government; in February, some 100,000 trade unionists took to the streets of New Delhi to protest high food prices and unemployment. In March, the Congress Party nearly lost one of its key coalition partners, Tamil Nadu's Dravida Munnetra Kazhagam (DMK), which has 18 seats in Parliament but was badly beaten in state elections. Some Congress leaders reportedly wanted to end ties with the DMK, given that the federal minister at the center of the ongoing telecom scandal, A. Raja, was a DMK figure who was seen to taint the overall coalition. In the end, however, Congress president Sonia Gandhi chose to maintain a DMK role in the UPA coalition upon condition that it concede to Congress's demand for more Tamil Nadu state assembly seats. Meanwhile, Congress President Gandhi is suffering from an unknown illness, and in early August virtually disappeared from India's political stage, having left the country for surgery at an undisclosed U.S. hospital. Moreover, as key Congress figures express support for the future leadership role of Sonia Gandhi's youthful son, parliamentarian Rahul Gandhi, Manmohan Singh's political authority is correspondingly undermined. The 2009 polls may have represented a coming out party of sorts for the younger Gandhi, who many expect to be put forward as Congress's prime ministerial candidate in scheduled 2014 elections. Yet this heir-apparent remains dogged by questions about his abilities to lead the party, given a mixed record as an election strategist, uneasy style in public appearances, and reputation for gaffes. Perhaps India's best example of effective governance and impressive development is found in Gujarat (pop. 60 million), where controversial Chief Minister Narendra Modi has streamlined economic processes, removing red tape and curtailing corruption in ways that have made the state a key driver of national economic growth. Seeking to overcome the taint of his alleged complicity in deadly 2002 anti-Muslim riots, Modi has overseen heavy investment in modern roads and power infrastructure, and annual growth of more than 11% in recent years. The state has attracted major international investors such as General Motors and Mitsubishi and, with only 5% of the country's population, Gujarat now accounts for more than one-fifth of India's exports. Another positive example in 2011 has been Bihar (pop. 104 million), one of India's poorest states, where Chief Minister Nitish Kumar has won national attention through his considerable success in emphasizing good governance over caste-based politics; he is credited with restoring law and order across much of the state, as well as overseeing infrastructure and educational improvements of direct benefit to common citizens projects. Kumar's Janata Dal (United) party, in alliance with the main national opposition BJP, won an overwhelming reelection majority in November 2010 state elections. The examples set in by Chief Ministers Modi and Kumar may have inspired the popular leader of India's most populous state, Uttar Pradesh (pop. 200 million). Chief Minister Mayawati, who is widely believed to maintain national political ambitions and was at the forefront of a nascent "Third Front" in 2009, has shifted her own focus much more toward infrastructure projects such as road-building and improving the state's poor energy grid. An ongoing movement to carve a new state out of Andhra Pradesh (pop. 85 million) has caused sometimes major public disturbances. The UPA government had first committed to form the new state in late 2009, but has since deferred, causing protests. Because the new state would include the important high-technology hub of Hyderabad, the movement could have both domestic and international economic implications. In March 2011, 100,000 proponents of a new Telangana state were detained by police and another 50,000 rallied in defiance of an unofficial curfew. In July, a statewide protest strike disrupted business and transportation, and nine Congress party Lok Sabha members resigned over their party's failure to take a stand on the issue. In the key eastern state of West Bengal (pop. 91 million), the group of communist parties that had ruled the state for 24 years met with an historic reversal in 2011 state elections, falling from 235 assembly seats to only 61. The big winner was the Trinamool Congress of Mamata Banerjee, a federal cabinet minister in the Congress-led national coalition (her party had in the past allied with the BJP). As West Bengal's new Chief Minister, Banerjee is faced with repairing one of India's poorest states. In Tamil Nadu (pop. 72 million), the Dravida Munnetra Kazhagam (DMK), a major Congress Party ally in the national coalition, was routed and lost power in June state assembly elections, winning only 30 seats after having won 160. Their rivals, sometime BJP allies All India Anna Dravida Munnetra Kazhagam (AIADMK), now enjoy an overwhelming majority in that state. Finally, Jammu and Kashmir (pop. 13 million) held local Panchayat (village-level) elections from April to June, described by the state's chief minister as the first "real" such poll in 33 years (the 2006 round was deferred due to security circumstances and the 2001 round was not considered credible by most observers). More than 5 million voters representing more than three-quarters of the electorate cast votes in the largely peaceful election. New Delhi urges the state government to move quickly on a devolution plan that would transfer more power to the more than 4,000 newly elected village leaders. India has been in the midst of a major and rapid economic expansion, with an economy projected to soon be the world's third largest. Although there is widespread and serious poverty in the country, observers believe long-term economic potential is tremendous, and recent strides in the technology sector have brought international attention to such new global high-technology centers as Bangalore and Hyderabad. However, many analysts and business leaders, along with U.S. government officials, point to excessive regulatory and bureaucratic structures as a hindrance to the realization of India's full economic potential. Although India has made major progress in reducing corruption, it is still perceived as a major obstacle for the economy. The high cost of capital (rooted in large government budget deficits) and an abysmal infrastructure also draw negative appraisals as obstacles to growth. Ubiquitous comparisons with the progress of the Chinese economy show India lagging in rates of growth, foreign investment, poverty reduction, and in the removal of trade barriers. It is a testament to the strength of India's economy that, even in the face of widespread corruption, poor infrastructure, political uncertainty, inflationary pressures, and more recently, declining rates of foreign investment, it has continued to grow by at least 8% annually in recent years. In the absence of such major obstacles, the national economy would most likely enjoy double-digit growth, and in many respects government is seen to be an impediment rather than facilitator of better performance. According to the International Monetary Fund (IMF), India's nominal gross domestic product (GDP) in 2010 was $1.538 trillion, making it the 9 th largest economy in the world. However, with a population of 1.17 billion people, India's per capita GDP is $1,265, 139 th in the world and slightly higher than that of Pakistan, but still below that of Bhutan. Although India has had one of the fastest growing economies in the world since 2001, relatively high income disparities have left much of India's population in poverty. According to the United Nations Development Program (UNDP), nearly a third of India's population, and more than 60% of its women, live below the national poverty line. India was struck by the secondary effects of the global financial crisis of 2008, but its impact was comparatively light. According to the IMF, real GDP growth decreased from 7.3% in 2008 to 5.7% in 2009. While its financial sectors were largely insulated from the collapse of selected financial markets, the ensuing economic slowdown (particularly in Europe and the United States) led to a drop in demand for India's leading exports. In addition, the decline in global liquidity placed downward pressure on India's currency, the rupee. With less access to overseas capital, India's private sector turned to domestic sources, leading to a rise in interest rates. To expedite India's recovery, the Indian government passed a fiscal stimulus package amounting to about 3% of GDP in December 2008. Consultations have begun for the India's 12 th five-year plan. Deputy Chairman of India's Planning Commission Montek Ahluwalia wrote a May 2011 article summarizing India's performance during the 11 th five-year plan and setting out four major challenges for the 12 th five-year plan. According to Ahluwalia, India had done well in achieving the growth targets of the latest plan, but was less successful in efforts to reduce poverty. Although overall poverty rates were lowered, India continues to struggle with significant income and wealth inequality across regions, and between the urban and rural population. Looking ahead to the 12 th five-year plan, Ahluwalia sees four major challenges: (1) managing the energy sector; (2) managing the water resources; (3) addressing the problems associated with the expected urbanization; and (4) protecting the environment during rapid economic growth. He also highlights ongoing issues for India that include provision of basic services to the poor, access to education (particularly in rural areas), and the rise of "crony capitalism," wherein government officials and major corporations selfishly manipulate markets and government procurement to the detriment of India. India's economy is showing signs of rebounding from the 2009 slowdown. Real GDP growth in FY2010 was 7.4% and in FY2011 was 8.5%. India's Planning Commission has set a goal of 10% annual growth for the nation's 12 th Five-Year Plan (2012-2017). However, the nation faces several major obstacles to further economic development, including endemic and stubborn poverty; poor infrastructure; corruption and market economy restrictions; inflationary pressures; fluctuating rates of foreign investment; and other issues. Despite impressive economic growth, India continues to fare poorly in human development measures; the U.N.'s 2010 Human Development Index ranked India 119 th among 169 countries, but lowered India's composite score by some 30% over the previous year, in large part due to increasing inequalities. A "Multidimensional Poverty Index" created by the University of Oxford found in 2010 that more than half of the world's poor people live in South Asia, and that 645 million—more than half of all Indian citizens—are "poor" by their measure. Critics of neoliberal economic policies say the growth resulting since post-1991 reforms has been uneven, favoring only a fraction of the population, especially those in the services sector, while harming the vital agriculture sector and doing little to alleviate poverty, which continues to affect at least one-third of the population. The benefits of India's recent economic growth has also been geographically mixed. Less attention is given to the fact that India's impressive economic boom has not been country-wide. Some states—especially Maharashtra, Gujarat, Karnataka, Tamil Nadu, and Delhi—have enjoyed rapid growth, while others—most notably densely-populated Uttar Pradesh—continue to struggle with underdevelopment. Such uneven performance becomes stark when malnourishment rates are considered: the average caloric intake among India's poorest states has remained static for more than a decade, and more than half of India's children under the age of five suffer developmental problems due to inadequate nutrition. Some analysts contend that static rates of malnutrition among India's children are evidence that economic growth there is benefiting only narrow sections of the society. Young females remain particularly vulnerable to malnutrition. Decades of central government social uplift schemes have a poor record of success to date. Massive government spending on poverty-reduction programs have met with halting progress, at best, most likely because of corruption and poor administration. Despite spending about 2% of its GDP on such programs in 2010—a higher percentage than any country in Asia and some three times that spent by China—food, health, and job insecurity persist. India's infrastructure is inadequate and inefficient. Analysts continue to identify this poor infrastructure as perhaps the most serious impediment to greater economic development, and they urge political reforms at the state level so as to better deliver reliable energy and transportation services. Indian officials report that only 20% of India's urban sewage is treated before disposal and less than 25% of its 85 largest cities have local bus service. According to a U.S. State Department official, India will need to invest $1.25 trillion in energy production, $392 billion in transportation infrastructure, and $143 billion in health care by 2030 to support its rapidly growing population. Poor infrastructure costs India an estimated 2% in annual economic growth. Urban areas are especially affected, with the pace of urban development outstripping that of population increases; the country spends only $17 per capita on urban infrastructure as compared with $116 per capita in China. A World Bank study estimated that a lack of toilets and poor public hygiene cost India some $54 billion each year though premature deaths, treatment for the sick, and lost tourism revenue. India's system for generating and distributing electricity poses a particular problem for the nation's economic growth, as undercapacity and poor management lead to frequent brownouts and blackouts. In addition, many businesses and households illegally tap into the electrical grid for power. Efforts to reform India's electricity system have been repeatedly thwarted by local politicians, who use access to electricity as a means of staying in power. India's transportation infrastructure is also in need of greater investment. The Indian government has been making significant investments in the nation's roads, but much still needs to be done. Berlin-based Transparency International placed India 87 th out of 178 countries in its 2010 "corruption perceptions index," characterizing it as moderately corrupt, with a score of 3.3, comparable to China, Greece, and Thailand. India also appears in the lowest cluster of the group's 2008 "bribe payer's index." Evidence of rampant, high-level corruption is another contributor to a downturn in India's economic outlook, leading to what one parliamentarian and former businessman called a "psychological crisis of confidence" for the country. By some accounts, graft now rivals poor infrastructure as the most acute concern of foreign investors. The Heritage Foundation's 2011 Index of Economic Freedom —which may overemphasize the value of absolute growth and downplay broader quality-of-life measurements—rated India's economy as being "55% free" and ranked it 124 th out of 179 countries. The index highlights restrictive trade policies, heavy government involvement in the banking and finance sectors, rigorous investment caps, demanding regulatory structures, and a high incidence of corruption. The Vancouver-based Fraser Institute provides a more positive assessment, while also faulting India's excessive restrictions on capital markets. Inflationary pressures in India remain strong, particularly for food, which has a disproportionally harmful effect on the poor. India's wholesale price index for July 2011 was up 9.44% compared to a year before. The Reserve Bank of India (RBI) raised interest rates in June 2011—the 10 th such interest rate increase in 16 months—in an effort to reduce inflation. The RBI reportedly attributes some of India's inflation problems to the ongoing government debt crisis in Europe. Prime Minister Singh has called inflation a "serious threat" to future economic growth, saying that rates above 8% are unsustainable. Food inflation has been a particular concern, with prices rising at annual rates of up to 18% in late 2010 and early 2011. Rising food and crude oil prices have evoked fears among some that India's high rates of inflation may be structural rather than cyclical, given a national economy characterized by supply constraints, shortages of skilled labor, and quickly rising expectations among the populace. India has become an increasingly lucrative investment destination for international finance in recent years. Yet FDI into India dropped by nearly one-third over the entire course of 2010, and the country's Nifty 50 stock index was down 17% in the first month of 2011, falling from record highs only two months earlier. Along with infamous bureaucratic hurdles to investment, foreign investors are more recently seen to be deterred by India's corruption scandals and high rates of inflation. Despite such hiccups, FDI levels were on the rise again by mid-2011. FDI dropped by 25% in the fiscal year ending March 2011, but shot up by 300% for the month of June 2011. Also in June, the central government halted efforts to secure land for what would be the country's largest-ever foreign investment project, a long-delayed $12 billion steel plant to be built by a South Korean interest. Although the project received final go-ahead in May after a five-year delay, protesting farmers' families have blocked the selected site, halting work "indefinitely." The tensions between the government's central aim of further economic development is persistently at odds with the country's still relatively closed and restrictive economy. Employment, monetary policy, and bureaucratic "red tape" are further problem areas for New Delhi's economic decision makers. India continues to be bedeviled by unemployment and underemployment. Despite years of comparatively high economic growth, job creation has lagged well behind the increases in international trade and GDP. In contrast to neighboring China, India's economic growth has relied on more capital-intensive, low employment sectors (such as information technology) and less on labor-intensive manufacturing. In addition, for much of rural India, there are few employment alternatives to agriculture. Moreover, India's monetary policy is under pressure from differing directions. After nearly two decades of economic reform, India's financial sector remains a mixture of state and private institutions subject to selective strict regulatory control. India's central bank and chief regulator of the nation's financial system is the Reserve Bank of India (RBI). The Indian government and the RBI have generally maintained a relatively conservative view on financial regulation, prohibiting institutions from taking on excessive risk or allowing overexposure to international capital flows. This has been reinforced by the Asian financial crisis of 1997, as well as the global financial crisis of 2008. To sustain economic growth, the RBI could lower interest rates, but its concerns about inflation would support raising interest rates. In addition, India's comparatively high interest rates (India's commercial banks' prime lending rates are between 11% and 14%) have contributed to inward capital flows and a strengthening of the rupee. However, under India's "managed float" exchange rate regime, the RBI has attempted to reduce upward pressure on the rupee to maintain the competitiveness of India's exports. As of September 2011, U.S. $1 = 45.85 rupees. Finally, although the days of the infamous "License Raj" are gone, India continues to have a very complex bureaucratic system, often involving multiple layers of government and numerous agencies with regulatory oversight of the economy. India's continued economic growth and security are intimately linked to the supply of energy resources. Indeed, Indian leaders insist that energy security is an essential component of the country's development agenda, calling for an integrated national energy policy, diversification of energy supplies, greater energy efficiency, and rationalization of pricing mechanisms. The country's relatively poor natural energy resource endowment and poorly functioning energy market are widely viewed as major constraints on continued economic growth. The current New Delhi government aspires to increase the nation's electricity generation by five-fold by the year 2030. The U.S. government has committed to assist India in promoting the development of stable and efficient energy markets there; a U.S.-India Energy Dialogue was launched in 2005 to provide a forum for bolstering bilateral energy cooperation. India was the world's fourth largest energy consumer in 2009 (after the United States, China, and Japan) and may become third by the middle of this century. Overall power generation in the country more than doubled from 1991 to 2005, and the country's energy demands are expected to quadruple by 2035. Estimates suggest that in order to maintain current rates of economic growth India will need to expand energy consumption by approximately 4% per year while reducing energy intensity. As of March 2011, India's total installed power generation capacity mix was 54% coal, 22% hydro, 11% renewables (including biomass, waste, wind, and solar), 10% gas, and 3% nuclear. India is the world's third most productive coal producer (although most of India's coal is an inefficient low-grade, high-ash variety), but also the world's fourth-ranked importer. New Delhi is beginning to develop coalbed methane despite concerns about carbon emissions and the impact on limited water resources. About 70% of India's oil is imported (at a rate of 2.1 million barrels per day in 2009), mostly from the West Asia/Middle East region, making India a leading net importer in this category, as well. India's domestic natural gas supply, while significant, has not keep pace with demand, and the country has been a net importer since 2004. Hydropower, especially abundant in the country's northeast and near the border with Nepal, is a booming sector. Nuclear power, which Indian government officials and some experts say is a sector in dire need of expansion, continues to account for less than 3% of total electricity generation. Roughly one-fifth of the India's power is consumed by farmers' irrigation systems, making the farm lobby a powerful obstacle to curtailing subsidies provided by State Electricity Boards, which collectively lose billions of dollars annually. Moreover, from one-quarter to one-half of India's electricity is said to disappear though "transmission losses," i.e., theft. Approximately 44% of rural households, representing some 400 million Indians, do not have access to electricity. Government plans to increase energy production by 65% in less than a decade will increase demand for coal-fired power plants by an estimated 2% per annum to nearly double by 2030. India's dependence on oil imports presents India with a strategic and economic vulnerability and acts as an impetus for developing alternative sources of energy and reducing demand. In the absence of alternative energy sources, India's net oil imports are projected to increase to 90% by 2030. New Delhi's 11 th five-year plan includes a target of increasing energy efficiency by 20% by the year 2017. New Delhi has set a goal of 20% of its energy coming from renewable sources by 2020 and having 15% of its greenhouse gasses taken up by its forests by 2030. India hopes to create a new carbon sink by expanding forest cover from 22% of total land area to 33% of its land area. A shift to relatively cleaner oil or gas will likely necessitate further dependence on foreign sources of energy, most from the Middle East. It is likely that the Government of India will continue developing alternative energy sources, such as solar, because there is a perception that India's growth will be jeopardized unless it embraces alternative sources of energy. The country's Solar Mission's Plan may face major challenges in its goal of increasing solar energy production to 20 gigawatts by 2020. The extent to which it will be successful in this objective and the time frame within which it may do so remain obscure. A market-based mechanism known as the Perform, Achieve, and Trade (PAT) scheme was initiated in 2011 to set benchmark efficiency standards for 563 power plants, steel mills, and cement plants that collectively account for more than half of India's energy consumption. The scheme includes energy savings certificates that can be sold and traded. The carrying capacity of India's land is under stress. India has 2% of the world's surface area, 4% of the its fresh water, and 17% of its population. Over 70% of Indians depend on farm incomes with about 65% of Indian farms dependant on rain fall. Pressure on agricultural production from climate change is exacerbated by degraded soils and water shortages. An estimated 45% of Indian land is seriously degraded due to erosion, soil acidity, alkalinity and salinity, and water logging. Rain has become more erratic in recent years as ground water is being depleted. One study found that the water table in India's northwest is falling by 1.6 inches per year. Global climate change is anticipated to affect India in a number of ways. Sea level rise from global warming would inundate low lying areas. More intense and destructive weather events, such as cyclones, are also anticipated. Potential changes to the monsoon rains, which are critical for agricultural production in India, could also reduce agricultural output and undermine food security for millions in India. Rising temperatures will also likely lead to Himalayan glacial melt that would alter the flow of India's rivers. The Indian Institute for Meteorology has demonstrated that global warming will likely cause erratic monsoon behavior in India that would itself lead to static or declining food output for India. Agricultural yield in India grew over 3% for the 1980s. This has already slowed to a growth rate of 1.5% for the 2001 to 2010 period for rice and wheat. The annual increase in demand for food grains in India is projected to be 5% to 6% per annum. The Indian Ministry of Agriculture has reportedly asked for funding to develop new varieties of wheat and rice that consume 30% to 40% less water than traditional varieties. The Prime Minister's Council on Climate Change issued a National Action Plan on Climate Change in 2008 that envisaged a gradual shift to greater reliance on sustainable sources of energy with an emphasis on solar power, but India has not made a commitment to binding carbon emissions cuts. In announcing the National Action Plan, Prime Minister Dr. Manmohan Singh pointed out that in order to eradicate poverty in India there was a necessity for rapid economic growth but added that "I also believe that ecologically sustainable development need not be in contradiction to achieving our growth objectives." The Plan has eight key components: (1) solar; (2) enhanced energy efficiency; (3) sustainable habitat; (4) water; (5) sustaining the Himalayan ecosystem; (6) "Green India"; (7) sustainable agriculture; and (8) strategic knowledge on climate change. A report titled "Environment and Energy Sustainability: An Approach for India," published by McKinsey Co. in 2009 has estimated that India could reduce its carbon footprint by half by 2030 through significant investment in energy efficiency. The Prime Minister's Council on Climate Change announced in 2011 that it approved a National Mission for a Green India Initiative with plans for significant investment in India's forests. Despite the likely negative consequences of climate change and some moves to place new emphasis on renewable sources of energy in its energy mix, India has not taken a leadership role in addressing climate change on the world stage. As a developing economy that long suffered underdevelopment due to its colonial subjugation under the British, India is reluctant to undertake measures that it feels will hinder or slow its economic development for a problem it believes was largely caused by the West. India notes the fact that, on a per capita basis, its emissions are low. Indians emit 1.16 tons of CO 2 on a per capita basis as compared to 19.78 for the United States, 9.66 for the United Kingdom, and 4.58 for China according to one source. While very low at present, India's CO 2 emissions are projected to rise significantly to 3-3.5 tons annually by 2030. Climate change is an issue that has the possibility to create tensions between India and the West at a time when the United States has been seeking a closer relationship with India and will likely require adept diplomacy to bring India along in global efforts to address the problem. India shares with China the fear that global efforts to contain carbon emissions will hinder its economic development. This commonality of interests with China was made evident by their dual opposition to European efforts to obtain meaningful binding carbon emissions reductions at the December 2009 U.N. Climate Conference in Copenhagen. China and India subsequently signed the last-minute agreement that emerged from the summit. The Copenhagen Accord calls for limiting global temperature rise to no more than 2 degrees Celsius beyond preindustrial levels, but is not legally binding. The United States and India have begun working together on energy efficiency and carbon reduction projects. In November 2009, the U.S. and India announced that they would work together to jointly develop clean coal technologies, smart grids, and increased energy efficiency. Prime Minister Singh and President Obama launched a Clean Energy and Climate Change Initiative as part of their reaffirmation of their global strategic partnership. The November 2009 MoU is to Enhance Cooperation on Energy Security, Energy Efficiency, Clean Energy and Climate Change. India shares China's position that the Kyoto Protocol should be extended when it expires in 2012 to lock in commitments by developed states to cut emissions. While India has pledged reductions under the Copenhagen accord it is not subject to binding reductions. Developed states sought to shape a successor agreement to Kyoto that would be legally binding and would replace the Kyoto Protocol during the October 2010 meeting of 177 governments in Tianjin, China. Many in the United States and other developed nations want India and China to accept firm emissions goals which they have resisted. A key tension in the talks has been the view by developing nations that the developed world needs to do more because the bulk of carbon emissions since the beginning of the industrial revolution have been caused by developed nations. India is in the midst of transforming its military into one with global reach. With more than 1.3 million active personnel, India's is the world's third-largest military (after China and the United States). New Delhi's defense budget rose above $38 billion for 2010, a nearly 12% increase over the previous year. Another 11.6% boost is proposed for FY2011/12, but this increase would be partially mitigated by high rates of inflation. The army—more than 1 million strong and accounting for about half of the total budget—has traditionally dominated, but the navy and air force are becoming more important as India seeks to project its power and protect an Exclusive Economic Zone of more than 2 million square kilometers. For 2011, the air force procurement budget of $6.8 billion accounts for about half of the service-specific total, with the army receiving $4 billion and the navy another $3 billion. The late 2008 Mumbai terrorist attacks elicited a spike in Indian security spending, including plans to enhance the navy's surveillance capabilities, across-the-board strengthening of the National Security Guard (NSG) counterterrorism force, and the raising of 29 new Border Security Force battalions (elite NSG commandos now operate from four new regional hubs—in Chennai, Hyderabad, Kolkata, and Mumbai—to improve response time in emergencies). In 2010, Indian defense planners were seen to be focusing much more attention on China, a apparent shift from their decades-long Pakistan-specific planning. A much-discussed "Cold Start" doctrine, informally aired in 2004, apparently represents an Indian effort to address the escalatory problems posed by Pakistan's nuclear deterrent and the perceived inability of the Indian military to respond effectively to Pakistani provocations in 2002. It calls for the establishment of smooth interservices coordination and forward deployments that would allow for rapid but limited retaliatory strikes by "integrated battle groups." Observers in Islamabad and elsewhere see in the doctrine an offensive military strategy with the potential to destabilize the region's fragile strategic balance. Although the Cold Start concept was discussed by India's Army Chief until 2008, Indian military leaders now officially deny that any such doctrine exists. Yet leaked U.S. diplomatic cables reportedly confirm at least indirect Indian government endorsement of the doctrine. Moreover, these documents may exhibit widespread doubts about Cold Start's efficacy held in both New Delhi and Washington, based in particular on limited Indian government support for the doctrine, potentially serious logistical problems with its execution, and worries that it could heighten the risk of escalation above the nuclear threshold, among others. Moreover, some reports indicate that the doctrine has come under criticism from top American military commanders and Administration officials who view it as a source of further India-Pakistan tension and thus as a hindrance of the U.S. military effort in Afghanistan. The Indian army operates more than 4,100 main battle tanks, the majority of them Russian-built T-72s and T-55s, and some 4,000 towed artillery tubes. The navy has grown rapidly in recent years, currently operating 23 principal surface combatants (including one aircraft carrier) and 16 submarines. There also is a significant amphibious capacity: 17 landing ships (including one acquired from the United States) can carry 4,000 troops or 88 tanks. The navy has developed an indigenous nuclear-powered attack submarine (INS Arihant ) to be armed with nuclear-tipped cruise missiles, and it also plans to lease a Russian Akula -class boat in 2011 as part of its "sea-based strategic deterrence." The air force flies some 655 combat-capable aircraft, the majority of them Russian-built MiGs, but also including 122 late-model Su-30 MKIs, as well as French-built Mirage and Anglo-French Jaguar aircraft. It also possesses modest airborne early warning and in-flight refueling capabilities provided by Russian-made platforms. A Strategic Forces Command oversees as many as 180 intermediate- and 280 short-range ballistic missiles capable of delivering nuclear warheads, and has plans to field a new Agni-IV missile with a range that would give it intercontinental capabilities. A three-stage, 5,000-km-range Agni-V is set to be tested in late 2011. The Stockholm International Peace Research Institute named India as the world's largest weapons importer—accounting for fully 9% of the world's total arms imports from 2006 to 2010—a designation the country is likely to keep for the foreseeable future. Current army programs concentrate on tank and missile acquisitions; the navy is pursuing major aircraft carrier and submarine programs; and the air force is seeking to procure more than 100 additional advanced, Russian-made Su-30 fighters, along with upgradation of its fleet of French-built Mirage ground attack aircraft. Russia continues to provide the bulk of India's imported defense wares. Moscow does not require enduse monitoring agreements for most arms sales as does Washington. This has made Russia an appealing supplier for India, which in the past has been willing to accept less advanced technology in return for both lower costs and fewer doubts about supplier reliability. More recently, however, India's rapid economic growth has provided New Delhi with larger procurement budgets and thus an ability to purchase the most advanced weaponry on the market. In recent years, Israel has roughly equaled Russia in the value of defense exports to India—arms trade with Israel now tops $2 billion annually and, like Russia, Israel does not impose political conditions on purchases. Moreover, India and Israel are engaging in new joint development projects involving missile technology. New Delhi increasingly seeks to shift advanced military imports from finished platforms to co-production with foreign suppliers. Under a license arrangement with Russia, India's Hindustan Aeronautics Limited is building hundreds of advanced Su-30 MKI ground attack jets. A 2005 deal with France provides for technology transfers and Indian construction of six Scorpene submarines to be delivered in 2015-2017. In seeking to replace its aging arsenal of MiG-21 fighters, India plans to purchase up to 186 new jets (126 for the air force and 60 for the navy) and has signaled a desire for technology sharing and co-production in this effort: only 18 of the new air force jets are to be manufactured abroad. In addition to the Scorpene submarines, other notable recent purchases for the Indian military include 347 of the latest Russian T-90 tanks (with another 1,000 such tanks to be built in India under a technology-sharing agreement) and upgrades on 600 existing T-72s; 3 new Russian-built missile frigates; 24 new MiG-29K naval jets for deployment on the INS Vitramaditya (formerly the Russian Gorshkov ); 42 additional upgraded Su-30s, major upgrades on existing MiG and Jaguar aircraft; and 66 jet trainers from Britain. Some analysts predict that, in the absence of major policy and organizational adjustments, India's efforts to modernize its armed forces will have little or no impact on the country's overall capacity to address security threats. Among the recommended changes are development of a more transparent and efficient procurement process, creation of a new Chief of Defense Staff position (to better integrate interservices planning), and the opening of India's defense research agencies to greater oversight. Although improvements in the procurement system have been effected, transparency and corruption continue to plague the process. Although India suffers from several militant regional separatist movements, the Kashmir issue has proven the most lethal and intractable. It also poses the most serious international dilemma, given competing territorial claims with Pakistan. Gun battles and bomb blasts in India's Jammu and Kashmir state reportedly killed an average of five or six people every day over the period 1989-2006. Conflict over Kashmiri sovereignty also has brought global attention to a potential "flashpoint" for interstate war between nuclear-armed powers. Yet—despite a peaceful uprising in the summer of 2008, a resurgence of international attention to the issue following the late 2008 terrorist attack in Mumbai, and another round of sometimes lethal street demonstrations in mid-2010—the number of militant incidents in the state has been falling continuously and is now at its lowest point since the violence began. Critics continue to accuse New Delhi of using brutal tactics to squash true democracy in the region. India has long blamed Pakistan for supporting "cross-border terrorism" and for fueling a separatist rebellion in the Muslim-majority Kashmir Valley with arms, training, and militants through an "terrorism infrastructure" on the Pakistani side of the LOC. Islamabad, for its part, claims to provide only diplomatic and moral support to what it calls "freedom fighters" who resist Indian rule and suffer alleged human rights abuses in the region. New Delhi insists that the dispute should not be "internationalized" through involvement by third-party mediators and India is widely believed to be content with the territorial status quo. Islamabad has sought to bring external major power persuasion to bear on India, especially from the United States. The longstanding U.S. position on Kashmir is that the issue must be resolved through negotiations between India and Pakistan while taking into account the wishes of the Kashmiri people. When asked about Kashmir while in New Delhi in November 2010, President Obama described a "longstanding dispute between India and Pakistan" upon which "the United States cannot impose a solution." He did, however, reiterate the U.S. government's willingness to play a role in reducing tensions in whatever way the two parties think appropriate. The United Nations refrains from playing a role in the Kashmir issue unless both India and Pakistan request its engagement. The Kashmir problem is rooted in competing claims to the former princely state, divided since 1948 by a military Line of Control (LOC) separating India's Muslim-majority Jammu and Kashmir state and Pakistan-controlled Azad [Free] Kashmir and Gilgit-Baltistan (formerly known as the Northern Areas) (see Figure 2 ). The dispute relates to the national identities of both countries: India has long sought to maintain its secular, multi-religious credentials, in part by successfully incorporating a Muslim-majority region, while Pakistan has since independence been conceived as a homeland for the subcontinent's Muslims. India and Pakistan fought full-scale wars over Kashmir in 1947-1948 and 1965. Some Kashmiris seek independence from both countries. Spurred by a perception of rigged state elections in 1989, an ongoing separatist war between Islamic militants (and their supporters) and Indian security forces in Indian-held Kashmir is ongoing and has claimed tens of thousands of lives. Soon after the armed insurgency began, much of the Kashmir Valley's indigenous Hindu population fled. At least 8,000 Kashmiris have "disappeared" during the conflict; some of these may occupy the unmarked graves discovered in 55 villages over a three-year study. Some separatist groups, such as the Jammu and Kashmir Liberation Front (JKLF), continue to seek an independent or autonomous Kashmir. Others, including the militant Hizbul Mujahideen (HuM), seek union with Pakistan. In 1993, the All Parties Hurriyat [Freedom] Conference was formed as an umbrella organization for groups opposed to Indian rule in Kashmir. The Hurriyat membership of more than 20 political and religious groups has included the JKLF (originally a leading militant force, now a political group) and Jamaat-e-Islami (the political wing of the HuM). The Hurriyat Conference, which states that it is committed to seeking dialogue with the Indian government on a broad range of issues, calls for a tripartite conference on Kashmir, including Pakistan, India, and representatives of the Kashmiri people. Hurriyat leaders demand Kashmiri representation at any talks between India and Pakistan on Kashmir. The Hurriyat formally split in 2003 after a dispute between hardliners allied with Islamabad and moderates favoring negotiation with New Delhi. Subsequent efforts to reunify the group failed. In 2005, the Congress Party-led government renewed high-level contact with moderate Hurriyat leaders begun by the previous BJP-led coalition. Two years later, however, Hurriyat leader and noted Kashmiri cleric Mirwaiz Umar Farooq said talks between the Indian government and moderate Kashmiri separatists had suffered a "complete breakdown of communication," and he accused New Delhi of lacking the will needed to find a political solution to the problem. Levels of violence in Kashmir were high and steady through the mid- and late 1990s, peaked in 2001, and have been in steady decline since (see Figure 3 ). The long-term reduction in violence has allowed for a rebirth of the scenic region's major tourist industry. Yet, despite waning rates of infiltration and separatist-related violence, the issue continues to rankle leaders in New Delhi and remains a serious impediment to progress in the current India-Pakistan peace initiative. Even as the normalization of India-Pakistan relations moves forward—and to some extent in reaction to their apparent marginalization in the face of this development—separatist militants continue their attacks on both civilians and Indian security forces, and many observers in both India and the United States believe that active support for Kashmiri militants remains Pakistani policy. The militants, seeing their relevance and goals threatened by movement toward peaceful resolution, still lash out with bloody attacks likely meant to derail the process. A more-or-less spontaneous resurgence of open separatist protest emerged in the summer of 2010. In June of that year, large-scale street protests led to violence and the deaths of several protestors in clashes with paramilitary police. Within weeks, regular Indian army troops were being deployed on the streets of Srinagar to restore and maintain order, yet civil unrest only increased and spread to other parts of Indian Kashmir, even as separatist leaders appealed for calm. By August, the unrest—comprised mainly of large numbers of youths hurling stones at security personnel—was being called a "full-blown separatist uprising"—the most serious challenge to central rule in two decades—and evidence grew that the current iteration of unrest represented a wider and more spontaneous movement than those in past years. New Delhi imposed an indefinite curfew in September, but the central government, along with that of the state's Chief Minister, Omar Abdullah, were seen to be flummoxed by the resilience and depth of resentment demonstrated by protestors. International human rights groups urged Indian government officials to avoid excessive use of force while investigating the deaths of children. Prime Minister Singh convened an all-parties meeting in September to discuss the crisis with opposition parties and announced modest efforts to reduce the presence of security forces and facilities in the region even as the Indian military continued to resist amendment or suspension of the controversial Armed Forces Special Powers Act (AFSPA) that is named by rights groups as a facilitator of abuses in Kashmir and elsewhere. In November, Chief Minister Abdullah ordered nearly 1,000 paramilitary Central Reserve Police Force personnel withdrawn from Srinagar as part of a peace initiative. Singh later contended the "troubled period" of summer 2010 street protests by youths highlighted the need for security forces to develop better nonlethal means of response, and he has directed his home ministry to prepare these. Meanwhile, Hurriyat leaders have discouraged any repeat of the protests; even hardline separatist leader Syed Ali Shah Geelani has come out against stone throwing as a form of resistance, saying it gives security forces "an excuse to kill" Kashmiris and that only peaceful resistance will forward his cause. Still, Srinagar and the surrounding Kashmir Valley have remained unsettled. In October 2010, the UPA government appointed a trio of official and unofficial "mediators," but the team's composition was widely deemed to be disappointing. During the closing months of the year, the three interlocutors—senior journalist Dileep Padgaonkar, social activist Radha Kumar, and former information commissioner M.M. Ansari—made multiple trips to the state in an effort to find "a political solution for a political problem." Some of their preliminary recommendations to Home Minister Chidambaram were made public in December and included expediting cases of under-trials, permitting peaceful protests, releasing militants/protestors against whom there are no serious charges, training of security forces, identifying jobs for young men and women in Central/State Government offices, announcing scholarships for Kashmiri students, enhancing monetary assistance to widows and orphans, enhanced efforts to trace missing persons, promoting investments in Kashmir, ... increasing monthly allowances to Kashmiri Pandits, etc. A final report is expected in September 2011. While the value of the interlocutor's efforts to meet with a wide spectrum of the state's population is generally acknowledged, two key weaknesses are identified in their approach. First, their interaction has been almost exclusively with Kashmiris who accept the state's status as a part of India; while their mandate officially includes dialogue with "separatists," this has not occurred in practice, and Hurriyat leaders have refused to meet with them. Second, these interlocutors have no mandate to interact with another major stakeholder: Pakistan. Given these two problems, any progress realized though this tack is likely to remain limited. Moreover, cynics contend that those most energetically seeking a "political solution" in Kashmir are often themselves the major obstacles to progress. The argument here is that the key breakthroughs such as the split among separatists into moderate and militant wings are made without the involvement of federal or state officials, and that the government's unilateral reductions in security force levels amount to "appeasement of extremist elements." From this perspective, resolution lies in maintaining pressure on violent, Pakistan-backed separatists, including the "stone-pelters" of mid-2010, while empowering moderate Hurriyat figures who are willing to disown the "terrorists" who have "hijacked" the movement, in part by having New Delhi's interlocutors meet directly with such figures. Kashmiri separatist leaders have themselves called New Delhi's efforts "cosmetic" and they continue to demand a blanket lifting of AFSPA, the withdrawal of army troops from the Valley, and the release of all political prisoners as preconditions for talks with the government. Chief Minister Abdullah has chided Hurriyat leaders for resisting talks with New Delhi's interlocutors while showing no hesitation for meeting with the Pakistani High Commissioner and Foreign Minister in the Indian capital. Abdullah is among many state politicians who believe dialogue with New Delhi is the only way forward for separatist leaders. Some of the separatist demands noted above also appear as suggestions in independent analyses, many of which emphasize economic development and political devolution as the best means of mitigating Kashmiri discontent. Indeed, economic uplift, perhaps in the form of a large-scale jobs program for the region, could be the most effective policy to address the growing numbers of disaffected Kashmiri youth. In 2011, New Delhi has sought to mollify Kashmiri anger with a "charm offensive" of sorts, including new job training programs, the launching of numerous cricket and soccer clubs in the Valley, language courses for Indian security forces to speak the local tongue, and blanket amnesty for the "stone-pelters" of mid-2010. Yet, while these initiatives and smarter police tactics have kept the Valley calm in mid-2011, in the absence of a substantive political settlement, these measures are seen as conflict management only. As a vast mosaic of ethnicities, languages, cultures, and religions, India can be difficult to govern. Internal instability resulting from diversity is further complicated by colonial legacies such as international borders that separate members of the same ethnic groups, creating flashpoints for regional dissidence and separatism. In addition to the violent, decades-old Kashmir dispute, Maoist rebels continue to operate in numerous states and represent a serious and growing threat to internal sovereignty. At the same time, separatist insurgents in remote and underdeveloped northeast regions confound New Delhi and create international tensions by operating out of neighboring Bangladesh, Burma, Bhutan, and Nepal. New Delhi has at times blamed the governments of those countries for "sheltering" separatist groups beyond the reach of Indian security forces, and New Delhi has launched joint counter-insurgency operations with some of these neighbors. India also has suffered outbreaks of serious communal violence between Hindus and Muslims, especially in the western Gujarat state. More than half of India's 636 administrative districts are said to suffer from chronic activity by insurgent, terrorist, and/or separatist groups. The State Department's most recent Country Reports on Terrorism (released August 2011) found that, although rates of terrorist violence in India declined in 2010, "the loss of nearly 1,900 lives (civilian, security forces, and terrorists) still made India one of the world's most terrorism-afflicted countries." Increasingly prevalent in India are "Naxalites"—Maoist insurgents ostensibly engaged in violent struggle on behalf of landless laborers and tribals. These groups, most active in inland areas of east-central India, claim to be battling oppression and exploitation in order to create a classless society. Their opponents call them terrorists and extortionists. The rebels get their name from Naxalbari, a West Bengal village and site of a militant peasant uprising in 1967. In 2006, Prime Minister Singh identified a worsening Maoist insurgency as "the single biggest internal security challenge" ever faced by India, saying it threatened India's democracy and "way of life." At least 8,000 hardcore Naxalite fighters now operate in 20 of India's 28 states, more than one-third of the country's 636 administrative districts, and one-seventh of the country's 14,000 police districts. Related violence has killed more than 5,000 people over the six years, including more 1,000 deaths in both 2009 and 2010, the great majority of these in the states of West Bengal and Chhattisgarh. Analysts warn that, by blocking access to raw materials vital to India's manufacturing sector and deterring investors, the Naxalite movement could thwart India's long-term economic success. The most notable of India's Maoist militant outfits are the People's War Group (PWG), emanating from the southern Andhra Pradesh state, and the Maoist Communist Center of West Bengal and Bihar. In 2004, the two groups merged to form the Communist Party of India (Maoist). Both have appeared on the U.S. State Department Counterterrorism Office's list of "groups of concern" and both are designated as terrorist organizations by the New Delhi government. In 2005, the Chhattisgarh state government began sponsoring a grassroots anti-Maoist effort. This "Salwa Judum" ("Campaign for Peace" or, literally, "collective hunt") militia—comprised of some 5,000 lightly-armed tribals paid about $1 per day—was viewed by some as an effective countervailing people's movement. Others labeled it a vigilante group that engaged in its own coercive and violent tactics against innocent tribals, serving only to accentuate the conflict as "a cure that is worse than the disease." A 2008 report for India's Planning Commission contended that the Salwa Judum campaign represented "an abdication of the state itself" and should immediately cease. New York-based Human Rights Watch later called on the New Delhi and Chhattisgarh governments to end all official support for the campaign, including provision of weapons, and to launch "serious and independent investigations" of related human rights abuses. In July 2011, India's Supreme Court barred Chhattisgarh from arming tribal militias to fight the Maoists, calling the renamed Special Police Officers "cannon fodder." The New Delhi government has sought to undermine the Maoist rebellion in part by boosting development spending in affected areas. Yet unsettled debate among national-level political leaders between those favoring a militarized counterinsurgency effort versus those calling for a development/welfare approach may be hindering New Delhi's anti-Maoist policies. Naxalite activity—including swarming attacks on government facilities and coordinated, multi-state economic blockades—is spreading and becoming more audacious in the face of incoherent and insufficient Indian government policies to halt it. A shortage of police personnel appears to be a key problem; the rebels are able to attack in large enough numbers that most police units, oftentimes fighting with inferior weapons, are rendered helpless. Top Indian leaders continue to identify Maoist rebels as the leading domestic security threat and some 60,000 paramilitary forces (the Central Reserve Police Force) have been deployed to combat them in several affected states. In mid-2010, New Delhi announced that it would increase its assistance to state governments through the provision of more helicopters, the establishment or strengthening of 400 police stations, and the improvement of road connectivity in affected areas, among other measures. It also asked the governments of the four most-affected states (Chhattisgarh, Jharkhand, Orissa, and West Bengal) to create a Unified Command for anti-Naxal operations. However, these efforts do not address the "intellectual appeal" of the Maoists, which India's former national security advisor has identified as a key problem. In February 2011, Prime Minister Singh noted that, while the incidence of Maoist violence had been somewhat reduced in 2010, the number of civilian casualties in such violence increased that year, and he listed Naxalite activity in six states—Chhattisgarh, Bihar, West Bengal, Jharkhand, Orissa, and Maharashtra—as being of serious concern. His government currently seeks to implement an "Integrated Action Plan" for 60 districts in affected areas that will allow substantive district-level control of resources. Maoist militants continue to stage sometimes spectacular attacks on both civilian and security targets, indicating that their capabilities are only growing (perhaps most notable among these was an April 2010 ambush in Chhattisgarh's Dantewada district that killed 75 Indian paramilitary soldiers). According to New Delhi's Institute for Conflict Management, Maoist-related violence in India during the first half of 2011 left an average of two people dead every day . Since the time of India's foundation as an independent nation, numerous militant groups have fought for greater ethnic autonomy, tribal rights, or independence in the country's northeast region. Some of the tribal struggles in the small states known as the Seven Sisters are centuries old; there are more than 200 ethnic groups in India's northeast alone. More than 50,000 people are estimated to have been killed in such fighting since 1948, including about 20,000 deaths in a 30-year-old Naga insurgency and another 10,000 deaths in 17 years of fighting in the Assam state. In the small state of Manipur alone there are said to be more than 20 separatists groups fighting the Indian army at a cost of more than 8,000 lives over two decades, and the writ of the central government there remains tenuous in many areas. As militant groups are seen to benefit from highly profitable criminal activities such as informal taxation, kidnapping, and smuggling, many observers conclude that only more effective economic development and integration of India's northeast will allow for the resolution of myriad ethnic conflicts there. In a possible indication that such policies are being effective, fatalities linked to separatist militancy in the northeast fell dramatically in 2010 as compared with the previous year (from 852 to 322), with the historically most-affected states of Manipur and Assam enjoying particularly strong improvements in the security situation. The United Liberation Front of Assam (ULFA), the National Liberation Front of Tripura, the National Democratic Front of Bodoland, and the United National Liberation Front (seeking an independent Manipur) are among the approximately 40 northeastern militant groups warring with the central government. They reportedly field a total of no more than 20,000 trained cadres. ULFA, like other groups, accuses New Delhi of exploiting their state's resources while doing little to forward development and allowing thousands of non-indigenous people (often Hindi-speakers from Bihar) to flood the local job markets. In 2005, the U.S. State Department's Counterterrorism Office listed ULFA among its "other groups of concern," the first time an Indian separatist group outside Kashmir was so named. In September 2011, the central government and ULFA signed a mutual ceasefire agreement pending political settlement of their dispute. Hindu-Muslim Conflict. Some elements of India's Hindu majority have at times engaged in violent communal conflict with the country's large Muslim minority of some 150 million, which is relatively poor, uneducated, and underrepresented in professions such as law and medicine. In 1992, a huge mob of Hindu activists in the western city of Ayodhya demolished a 16 th -century mosque said to have been built at the birth site of the Hindu god Rama. Ensuing communal riots left many hundreds dead in cities across India. Mumbai was especially hard hit as the site of coordinated 1993 terrorist bombings believed to have been a retaliatory strike by Muslims. In 2002, another group of Hindu activists returning by train to the western state of Gujarat after a visit to the Ayodhya site of the now razed Babri Mosque (and a proposed Hindu temple) were attacked by a Muslim mob in the town of Godhra; 58 were killed. Up to 2,000 people died in the fearsome communal rioting that followed, most of them Muslims. The BJP-led state and national governments came under fire for inaction; some observers saw evidence of state government complicity in anti-Muslim attacks. In February 2011, a court found 31 Muslims guilty of setting fire to the train; another 63 people were acquitted. Of those convicted, 11 were sentenced to death and the remaining 20 to life imprisonment. The U.S. State Department and human rights groups have been critical of New Delhi's largely ineffectual efforts to bring those responsible for the post-Godhra rioting and murders to justice; some of these criticisms were echoed by the Indian Supreme Court in 2003. In 2005, the State Department made a controversial decision to deny a U.S. visa to Gujarat Chief Minster Narendra Modi under a U.S. law barring entry for foreign government officials found to be complicit in severe violations of religious freedom. The decision was strongly criticized in India. In 2008, a Gujarat state government commission exonerated Modi, claiming to have found "absolutely no evidence" that he or his ministers had acted improperly. More than nine years after the Gujarat riots, international human rights groups express concerns about obstacles faced by victims seeking justice, the continuing internal displacement of thousands of families who lack basic necessities, and large numbers of uninvestigated related criminal cases (despite the Indian Supreme Court's 2004 order to reopen nearly 1,600 such cases). In September 2010, the Allahabad High Court issued a much-anticipated ruling on the Ayodhya site, determining that Hindus and Muslims should share the land. Expected large-scale communal violence did not occur. However, in May 2011, India's Supreme Court suspended the ruling, saying it had opened the doors to a flood of unnecessary litigation. Indigenous Islamist Terrorism. Despite New Delhi's reluctance to openly acknowledge the fact, India also has its own indigenous Islamist terrorism threat. The newly emergent "Indian Mujahideen" (IM) group, widely believed to be an offshoot or pseudonym of the Students Islamic Movement of India (SIMI), has been found complicit in a number of recent bombings, even as government leaders continue to name Pakistan as an abettor of such episodes. The New Delhi government formally outlawed the IM in 2010; months later, the group claimed responsibility for a December bombing in the Hindu holy city of Varanasi that left a child dead and at least 20 people injured. In July 2011, three synchronized bomb blasts killed 17 people and injured some 130 more during Mumbai's evening rush hour. No credible claims of responsibility were received and, to date, Indian officials have refrained from naming any specific foreign or domestic groups as suspects, but the coordinated bombings appear to have required sophisticated explosives training (Pakistan's two top leaders had immediately condemned the attack). Early indications are that the perpetrators were India-based, perhaps from the IM, rather than from a Pakistan-based group. Some Indian experts assert that the IM's top operators, drawn mostly from SIMI's ranks, receive training at camps inside Pakistan. Prime Minister Singh acknowledged in 2008 that the involvement of "local elements" in terrorist attacks added a "new dimension" to the country's indigenous militancy problem. SIMI may be viewed in alignment with the greater international jihadi movement, given its endorsement of the goals of Al Qaeda and its links with other international terrorist groups such as the Pakistan-based Lashkar-e-Taiba and Harakat-ul-Jihad-Islami. As India's Muslim minority continues to suffer from glaring social inequities, it is likely that some among its numbers will remain vulnerable to recruitment in SIMI and/or the IM. Indigenous Hindu Terrorism. Even more recent are overt signs that India is home to militant Hindu nationalist groups intent on launching domestic terrorist attacks. In September 2008, seven people were killed by two bomb blasts in the Maharashtran city of Malegaon, a hotbed of Hindu-Muslim communal strife. By year's end, police had arrested nine members of a "Hindu terrorist cell" in connection with the bombing, including an active army lieutenant colonel and a Hindu nun with links to the main opposition BJP. Thus did "Hindu terrorism" become a new and highly controversial phrase in India's national dialogue. Never before in the country's history had the phrase been so widely used, and the development had major and continuing effects on India's national psyche. Many Indian observers warned of the danger of a "militant majoritarianism" among Hindu nationalists that threatens to rend the secular fabric of the nation. In late 2010, Hindutva extremist Swami Aseemanand confessed to involvement in a number of terrorist attacks previously blamed on Islamist militants, including the 2006 bombing of a Muslim cemetery in Malegaon that killed 37 people and the 2007 bombing of the transborder Samjhauta Express, a train linking Delhi and Lahore, Pakistan, that killed 68 people, most of them Pakistani civilians. Aseemanand said these and other attacks were to avenge Islamist terrorist attacks on Hindu temples. The confessions were an embarrassment for law enforcement agencies that had arrested Muslim suspects, and gave credibility to analysts who identify Hindu militancy as a threat to India's security. Hindu-Christian Conflict . In 2008, lethal attacks on Orissa Christians erupted in apparent retaliation for the murder of a prominent local Hindu leader. Police blamed the murder on Maoist rebels, but Hindu radicals blamed local Christians. Rampaging mobs burned churches and other Christian buildings, killing at least 38 people and leaving up to 50,000 more homeless. U.S. officials took note of the unrest and urged the Indian government to protect religious freedom throughout the country. By some accounts, the Hindu radicals were pursuing a political agenda; there was speculation that violent attacks on Orissa's Christian communities was part of an organized political project by Hindu nationalist parties. Communal strife continued throughout the remainder of the year at a lower level, and state-level officials may have failed to provide sufficient security for the Christian minority. For some, the violence provided "a window into India's hidden fragility, its sometimes dangerous political climate, and the fierce historical divisions buried in its vast diversity." There continue to be small-scale attacks on and harassment of Christians and their places of worship in India (see also the " Religious Freedom " section below). India exploded a "peaceful" nuclear device in 1974 and tested nuclear weapons again in 1998. The country has 60-100 nuclear warheads, according to public estimates, and continues to produce plutonium for weapons. New Delhi has stated that it will not engage in a nuclear arms race and needs only a "credible minimum deterrent," but India has never defined what it means by such a deterrent. Both the U.S.-India nuclear cooperation agreement and the associated 2008 Nuclear Suppliers Group decision described below have renewed New Delhi's access to the international uranium market. This access will result in more indigenous Indian uranium available for weapons because it will not be consumed by India's newly safeguarded reactors. New Delhi has refused either to sign the nuclear Nonproliferation Treaty (NPT) or accept International Atomic Energy Agency (IAEA) safeguards on all of its nuclear material and facilities. The NPT states-parties adopted language following the 2010 NPT Review Conference, which ended on May 28, 2010, calling on non-signatories to accede to the treaty as "non-nuclear-weapon States ... promptly and without any conditions." U.N. Security Council Resolution 1172, adopted after New Delhi's 1998 nuclear tests, called on India to take a number of steps which it has not taken, such as acceding to the NPT, ratifying the Comprehensive Test Ban Treaty (CTBT), and refraining from developing nuclear-capable ballistic missiles. Despite this resistance to international arms control and nonproliferation agreements, M.K. Narayanan, then-National Security Adviser to Prime Minister Singh, stated in December 2009 that "India has a long-standing commitment to global, non-discriminatory and verifiable nuclear disarmament." Indeed, New Delhi has issued proposals for achieving global nuclear disarmament. For example, a 2007 working paper to the Conference on Disarmament called for the "[n]egotiation of a Nuclear Weapons Convention prohibiting the development, production, stockpiling and use of nuclear weapons and on their destruction, leading to the global, non-discriminatory and verifiable elimination of nuclear weapons with a specified timeframe." Moreover, Singh stated during the April 2010 Nuclear Security Summit that New Delhi is ready to "participate in the negotiation of an internationally verifiable Fissile Material Cut-off Treaty." Additionally, India has, despite its refusal to sign the CTBT, committed itself to a voluntary unilateral moratorium on nuclear testing. New Delhi also supported the joint statement adopted at the Nuclear Security Summit, which contained a pledge to improve nuclear security standards and share best practices with other countries. Indian Prime Minister Manmohan Singh announced April 13, 2010, that New Delhi had "decided to set up a 'Global Centre for Nuclear Energy Partnership' in India." Describing the center as "a state of the art facility based on international participation from the IAEA and other interested foreign partners," Singh stated that it would include a "School" dealing with nuclear security. The United States and India signed in November 2010 a Memorandum of Understanding (MOU) providing "a general framework for cooperative activities in working with" the center. There is no public evidence that India has since conducted nuclear security activities with the United States, but the two governments are to hold the first meeting regarding implementation of the MOU sometime in 2011, according to a July 19, 2011, joint statement. An off-the-record May 2011 gathering of regional and nuclear proliferation experts in Washington, DC, found widespread agreement that Pakistan's current weapons proliferation activities are destabilizing, that India's potential adoption of an altered nuclear doctrine (to include a delivery triad and ballistic missile defense) could exacerbate instability, and that the U.S. government may in the near future confront new nonproliferation challenges in South Asia that could even supplant counterterrorism imperatives. As one of India's leading trade and investment partners, the United States strongly supports New Delhi's continuing economic reform policies. A U.S.-India Trade Policy Forum was created in 2005 to expand bilateral economic engagement and provide a venue for discussing multilateral trade issues. According to U.S. trade statistics, U.S. exports to India in 2010 totaled $19.222 billion and imports from India totaled $29.531 billion, for a bilateral trade deficit of $10.309 billion. With a total trade of $48.753 billion, India was the 12 th largest trading partner for the United States in 2010. The leading U.S. exports to India in 2010 were (in order): Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal and articles thereof and imitation jewelry (chapter 71)—$4.206 billion; nuclear reactors, boilers, machinery, and mechanical appliances, or parts thereof (chapter 84)—$ 2.607 billion; and electrical machinery and equipment and parts thereof (chapter 85)—$1.367 billion. The top imports from India were (in order): Natural or cultured pearls, precious or semi-precious stones, precious metals, metals clad with precious metal and articles thereof and imitation jewelry (chapter 71)—$6.850 billion; pharmaceutical products (chapter 30)—$2.388 billion; and mineral fuels, mineral oils and products of their distillation (chapter 27)—$2.324 billion. The cross-trade in items under chapter 71 reflects a strong interrelationship for the industries in both nations. India is a major global supplier of precious gems and stones, whereas the United States is a major supplier of finished jewelry. In addition to their merchandise trade flows, India and the United States have significant service trade relations. In 2009 (latest available figures), U.S. private services exports to India totaled $9.940 billion, and imports from India totaled $12.377 billion. The leading U.S. service export to India was education ($3.155 billion), and the leading service import from India was "business, professional, and technical services" ($8.920 billion). Annual inward foreign direct investment (FDI) to India from all countries rose from about $100 million in FY1990/91 to nearly $3 billion in FY2000/01 and over $19 billion in FY2010/11. The stock of U.S. FDI in India as of March 2011 stood at $9.4 billion. According to the Indian Ministry of Commerce and Industry, about 7.5% of FDI in India since 2000 has come from U.S. firms; in recent years, the major U.S.-based companies Microsoft, Dell, Oracle, and IBM have made multi-billion-dollar investments in India. Wisconsin-based Harley-Davidson recently opened a motorcycle manufacturing plant in India's northern Haryana state, its second outside the United States. Michigan-based Ford Motor Company has plans to expand its operation in India by investing $1 billion in a new factory in Gujarat, its second production line in India. In 2011, Illinois-based Boeing, which sees no more important a potential customer in the world, projected that India will spend some $150 billion on more than 1,300 new passenger airplanes over the next two decades. India is also among the fastest growing investors in the United States; the Administration reports that investment capital from India grew at an annualized rate of 53% over the past decade, reaching about $4.4 billion in 2009. Among the most important investors has been India's Tata Group, which reportedly employs some 19,000 people in the United States. While bilateral relations are generally good, there are a number of economic and trade issues between India and the United States of varying degrees of importance. For the United States, the more pressing issues are intellectual property rights protection, trade in dual-use technology, access to selective Indian markets, and India's participation in the U.S. Generalized System of Preferences (GSP) program. For India, the key issues are negotiations of a bilateral investment treaty (BIT), U.S. restrictions on the trade in services (including the limited supply of H1-B visas), high-technology export controls, and the U.S. farm subsidy program. Commerce Secretary Locke led a trade mission to New Delhi, Bangalore, and Mumbai in February 2011, accompanied by representatives of 24 U.S. companies, many of them seeking to strike weapons sales deals or capitalize on the 2008 U.S.-India civil nuclear agreement. In meetings with his Indian counterpart, Locke raised longstanding issues of friction, including market access barriers and intellectual property protection. Speaking at a Confederation of Indian Industry luncheon, the Secretary went into some detail on these and other issues, asserting that seizing the full potential of bilateral cooperation will require India to take further steps to open its economy by reducing an array of tariff and nontariff barriers, and lifting restrictions on foreign direct investment: Ultimately, what America seeks is a level playing field for its companies, where the cost and quality of their products determines whether or not they win business. In seeking a level playing field, we are merely asking for the same treatment foreign companies and investors receive in America. Repeats of this message from the Administration have become both firmer and more common in 2011. In a major May speech on the future of U.S.-India relations, Assistant Secretary Blake said: [E]conomic impediments make it hard for American exporters to gain access to Indian markets, especially in agricultural goods. Restrictions in retail, insurance, defense, and other key areas have also limited the expansion of American firms, and the Indian firms with whom they seek to partner. To maintain this trajectory [of increased trade], we need to methodically address trade and investment barriers and foster market openings that position us to capitalize on this continued growth, and allow our private sectors to thrive. The outgoing U.S. Ambassador put it even more bluntly, saying, "India needs to be asking itself: Is it delivering on the global partnership? ... There's no doubt this needs to be a two-way street." Commerce Department officials and the White House Chief of Staff have more recently admonished New Delhi to move forward with economic reforms. Of particular recent concern to Secretary Locke and other U.S. officials is New Delhi's restrictions on imports of solar power technology. The central government plans to disburse some $20 billion in subsidies to power-plant developers this decade, but is barring importation of foreign-made solar panels, making it difficult for U.S. firms to get a share of the market. In June 2011, Treasury Secretary Tim Geithner led the U.S. delegation at the second meeting of the U.S.-India Financial and Trade Partnership in Washington, DC, where he and his Indian counterpart, Finance Minister Pranab Mukherjee, agreed to further expand bilateral trade and investment links. While acknowledging that reducing barriers to investment was politically challenging for the Indian government, he reiterated the U.S. contention that easing such barriers would benefit both national economies and be an important step toward their "integration." Inadequate intellectual property rights protection is a long-standing issue between the United States and India. India remained on the U.S. Special 301 "Priority Watch List" in 2011 for failing to provide an adequate level of IPR protection or enforcement, or market access for persons relying on intellectual property protection. The report recognized the introduction of a Copyright Amendment Bill as an improvement in the regulatory regime, but expressed concerns about its compliance with international standards. The United States also acknowledged India's progress on enforcement, but maintained that piracy and counterfeiting, including the counterfeiting of pharmaceuticals, remains widespread. India remains critical of U.S. efforts to pressure developing nations, including India, to adopt laws and regulations governing pharmaceuticals that are overly supportive of the major pharmaceutical companies and could potentially deny poorer nations of access to important medicines. The year 2003 saw the inaugural session of the U.S.-India High-Technology Cooperation Group (HTCG), a forum in which officials can discuss a wide range of issues relevant to creating the conditions for more robust bilateral high technology commerce. The 8 th HTCG meeting was held in New Delhi, India, on July 19, 2011, with discussion focusing on dual-use technology and ways to foster greater research and development cooperation. In 2007, India and the United States concluded a bilateral 123 Agreement on civil nuclear cooperation. While the accord addressed many concerns about India's nuclear program and trade in dual-use technology, there remain concerns in the United States about India's ability to prevent the distribution of potentially dangerous technology and equipment to undesirable recipients. Since 1998, a number of Indian entities have been subjected to case-by-case licensing requirements and appear on the U.S. export control "Entity List" of foreign end users involved in weapons proliferation activities. In 2004, as part of NSSP implementation, the United States modified some export licensing policies and removed the Indian Space Research Organization (ISRO) headquarters from the Entity List. Further adjustments came in 2005 when six more subordinate entities were removed. In January 2011, Commerce's Bureau of Industry and Security removed several Indian space- and defense-related companies from the Entity List. The United States would like greater access to India's domestic markets, particularly for such products and services as agricultural goods, financial services, and retail distribution. India's extensive trade and investment barriers have been criticized by U.S. government officials and business leaders as an impediment to its own economic development, as well as to stronger U.S.-India ties. The U.S. government maintains that India is using sanitary and phytosanitary (SPS) regulations to restrict the import of certain U.S. agricultural goods. India denies these claims, arguing that the U.S. farm subsidy program unfairly subsidies U.S. agricultural exports and greater market access would threaten the livelihood of many of India's farmers. Multi-brand foreign retailers such as Wal-Mart and Target continue to be barred from the Indian market due to fears that India's small shops (there are as many as 12 million of them) would be overwhelmed by the competition. The U.S.-India Business Council is among those commercial groups contending that liberalization and greater international participation would benefit India by creating new and better employment opportunities, and by modernizing the country's supply chain management and distribution. India is designated as a beneficiary developing country (BDC) in the U.S. GSP program since its inception in 1974. As such, a limited amount of Indian imports of selected goods can enter the United States duty-free. Some in Congress believe that India is too developed to remain a GSP beneficiary, while others contend that India should be removed from the GSP program because of its stance on various issues related to the World Trade Organization's Doha Round negotiations. India was the third largest GSP beneficiary in 2010, after Angola and Thailand. India is pressing the United States to carry out negotiations of a bilateral investment treaty (BIT). A BIT is frequently seen as the first step in the possible progress towards a free trade agreement (FTA). In addition, a BIT between India and the United States might foster greater FDI flows between the two nations. Preliminary talks were held in 2009, and there has been only rhetorical progress on the issue since. The United States may be missing out on multiple business opportunities as India goes forward with comprehensive trade agreements that will lower tariffs on imports into India from countries such as Japan and Malaysia. Faster movement toward a U.S.-India BIT could improve prospects for American investors, as well as reassure those in Asia who question the U.S. commitment to a long-term economic role in the region. During a session of the U.S.-India Trade Policy Forum in Washington, DC, in June 2011, visiting Indian Commerce Minister Anand Sharma and U.S. Trade Representative Ron Kirk agreed to "fast-track technical negotiations for an early conclusion" of a BIT. India would like to have greater access to U.S. services market, particularly the ability of Indian nationals to provide services in the United States. There are two aspects of this issue. First, via its various certification programs, the United States restricts the ability of many Indian professionals (such as accountants, medical doctors, and lawyers) from providing services in the United States. Second, the United States limits the number of people who can work in the country under its H1-B visa program for certain high-skilled jobs. India would like the United States to increase or remove the limit on H1-B visas. India maintains that the U.S. farm subsidy program—worth an estimated $17.7 billion per year—provides U.S. agricultural exports with an unfair trade advantage. To the Indian government, the U.S. program poses a threat to millions of Indian farmers, hence it maintains restrictions on U.S. agricultural imports. In addition, India sees the U.S. reluctance to curtail or eliminate its farm subsidy program as a major roadblock in making progress in the Doha Round negotiations. In 2006, the World Trade Organization's "Doha Round" of multilateral trade negotiations were suspended due to disagreement among the WTO's six core group members—which include the United States and India—over methods to reduce trade-distorting domestic subsidies, eliminate export subsidies, and increase market access for agricultural products. The United States and other developed countries seek substantial tariff reductions in the developing world. India, like other members of the "G-20" group of developing states, has sought more market access for its goods and services in the developed countries, while claiming that developing countries should be given additional time to liberalize their own markets. In particular, India resists opening its markets to subsidized agricultural products from developed countries, claiming this would be detrimental to tens of millions of Indian farmers and lead to further depopulation of the countryside. According to Indian officials, the WTO's narrow focus on economic issues excludes political and social variables which are equally sensitive for New Delhi and which constrain the options available to the Indian government. They seek greater U.S. understanding of this dynamic. The Indian economy could benefit significantly from lowered farm subsidies in developed countries and expanded trade in services, but indigenous industries could also be harmed if New Delhi were to reduce tariffs that currently protect India's exporting sectors, especially in textiles and garments. Bilateral space cooperation may be a particularly productive pursuit now that the U.S. Commerce Department has removed obstacles to trade with India's civil space agencies. The United States welcomes India's robust participation in multilateral fora such as the Committee on Earth Observation Satellites and the Group on Earth Observations, and has engaged in preliminary talks on human space flight cooperation. Earth observation cooperation benefits agricultural productivity through more accurate weather and climate forecasting. Some analysts view bilateral space cooperation as a particularly productive pursuit now that the U.S. Commerce Department has removed obstacles to trade with India's civil space agencies. However, India's space program suffered a major setback in late 2010 when the country's Geo-Synchronous Launch Vehicle (GSLV) went out of control 47 seconds after launch and was destroyed along with its telecommunications satellite payload. With a 50% success rate, the GSLV may no longer be considered a viable option for many commercial satellite launches. India's status as a non-signatory to the 1968 Nuclear Nonproliferation Treaty (NPT) kept it from accessing most nuclear technology and fuels on the international market for more than three decades. New Delhi's 1974 "peaceful nuclear explosion" spurred the U.S.-led creation of the Nuclear Suppliers Group (NSG)—an international export control regime for nuclear-related trade—and Washington further tightened its own export laws with the Nuclear Nonproliferation Act of 1978 ( P.L. 95-242 ). New Delhi has long railed at a "nuclear apartheid" created by an apparent double standard inherent in the NPT, which, they maintain, has allowed certain states to deploy nuclear weapons legitimately while other states cannot. Senior Indian officials maintain the widely held Indian perspective that reaching a civil nuclear deal with the United States was crucial to the process of removing constraints placed on India by "an increasingly selective, rigorous, and continually expanding regime of technology denial," claiming that only by "turning the nuclear key" would India be able to open the door to global trade in dual use and other sophisticated technologies, including nuclear technologies. Differences over nuclear policy bedeviled U.S.-India ties for decades and—given New Delhi's lingering resentments—presented a serious psychological obstacle to more expansive bilateral relations. In a major policy shift, a July 2005 U.S.-India Joint Statement notably asserted that "as a responsible state with advanced nuclear technology, India should acquire the same benefits and advantages as other such states," and President Bush vowed to work on achieving "full civilian nuclear energy cooperation with India." As a reversal of three decades of U.S. nonproliferation policy, such proposed cooperation stirred controversy and required changes in both U.S. law and in NSG guidelines. India reciprocally agreed to take its own steps, including identifying and separating its civilian and military nuclear facilities in a phased manner and placing the former under International Atomic Energy Agency safeguards. After extensive and difficult negotiations, U.S. legislation allowing the United States to conclude a peaceful nuclear cooperation agreement with India became law in December 2006 ( P.L. 109-401 ). President Bush signed P.L. 110-369 , which approved the agreement, into law in October 2008. Secretary of State Condoleezza Rice and India's External Affairs Minister Pranab Mukherjee signed the agreement later that month and it entered into force in December 2008. Following an intense U.S. lobbying effort, the NSG decided in September 2008 to exempt India from some of its export requirements—a decision that enabled the government to conclude nuclear cooperation agreements with several countries. In the realm of geopolitics, much of the Bush Administration's argument for moving forward with the U.S.-India nuclear initiative appeared rooted in an anticipation/expectation that New Delhi would in coming years and decades make policy choices that are more congruent with U.S. regional and global interests (a desire for such congruence is, in fact, written into the enabling legislation, P.L. 109-401 ). Proponents have suggested that this U.S. "gesture" would have significant and lasting psychological and symbolic effects in addition to the material ones, and that Indian leaders require such a gesture in order to feel confident in the United States as a reliable partner on the world stage. Skeptics aver that the potential strategic benefits of the nuclear initiative have been over-sold. Indeed, centuries of Indian anti-colonial sentiments and oftentimes prickly, independent foreign policy choices are unlikely to be set aside in the short run, meaning that the anticipated geopolitical benefits of civil nuclear cooperation with India remain largely speculative and at least somewhat dependent upon unknowable global political developments. It is worth noting that, although proponents of the nuclear agreement argued that it would bring New Delhi into the "nonproliferation mainstream," India has not made any significant changes to its nuclear-weapons policies. U.S. companies have not yet started nuclear trade with India. Washington and New Delhi announced March 29, 2010, that they had concluded an agreement on a reprocessing facility in India; the two countries signed the agreement July 30, 2010. The arrangement, which the Administration had submitted to Congress on May 11, 2010, would not have taken effect if Congress had adopted a joint resolution of disapproval within 30 days of continuous session; Congress did not adopt such a resolution. New Delhi had reportedly insisted that India and the United States conclude the arrangement before New Delhi would sign contracts with U.S. nuclear firms. Despite the subsequent arrangement, U.S. firms may be reluctant to engage in nuclear trade with India if the government does not resolve concerns regarding its policies on liability for nuclear reactor operators and suppliers. India signed the Convention on Supplementary Compensation for Nuclear Damage (CSC), which has not yet entered into force, October 27, 2010. However, many observers have argued that India's Civil Liability for Nuclear Damage Bill, which both houses of India's parliament adopted in August 2010, is not consistent with the CSC, citing the provisions which make reactor suppliers, in addition to operators, liable for damages caused by a reactor accident. U.S. officials have argued that India's law should be consistent with the Convention. Assistant Secretary of State Robert Blake stated in a June 9, 2010, interview with India Abroad that the U.S. interest is to "ensure that the bill that ultimately is enacted is compliant" with the CSC. Although Under Secretary of State William Burns described New Delhi's signing of the CSC as a "very positive step" during an October 27 press briefing, he also indicated that India will need to take additional steps in order to resolve U.S. concerns regarding India's liability policies. Secretary of State Hillary Clinton indicated during a July 19, 2011, press conference that the United States wants India to ratify the CSC by the end of 2011, as well as adopt a liability regulatory regime that "fully conforms with the international requirements" under the CSC. India's then-Foreign Secretary Nirupama Rao stated in a July 29, 2011, interview that India would ratify the CSC "before the end of the year." She also explained that "the rules and regulations concerning the civil nuclear liability bill ... are in the process of being framed and in this process we are consulting with both the domestic companies and the foreign companies concerned." Washington and New Delhi are also discussing necessary monitoring arrangements for U.S. nuclear exports. Section 104 (d)(5) of the Hyde Act requires the President to "ensure that all appropriate measures are taken to maintain accountability with respect to nuclear materials, equipment, and technology sold, leased, exported, or re-exported to India," including a "detailed system of reporting and accounting for technology transfers, including any retransfers in India, authorized by the Department of Energy pursuant to section 57 b. of the Atomic Energy Act." India has provided retransfer assurances covering several state-owned entities, but has not yet provided them for private entities. Defense cooperation between the United States and India remains in relatively early stages of development (unlike U.S.-Pakistan military ties, which date back to the 1950s). Since late 2001, and despite a concurrent U.S. rapprochement with Pakistan, U.S.-India security cooperation has flourished; U.S. diplomats rate military cooperation among the most important aspects of transformed bilateral relations. The India-U.S. Defense Policy Group (DPG)—moribund after India's 1998 nuclear tests and ensuing U.S. sanctions—was revived in 2001 and meets annually. At the most recent session, in Washington, DC, in March 2011, senior U.S. State Department and Pentagon officials and their Indian counterparts reaffirmed the importance of and expressed satisfaction with ongoing bilateral defense cooperation, especially in the areas of joint military exercises and arms sales. The DPG operates four subgroups—a Military Cooperation Group, a Joint Technology Group, a Senior Technology Security Group, and a Defense Procurement and Production Group—which meet throughout the year. In June 2005, the United States and India signed a ten-year defense pact outlining planned collaboration in multilateral operations, expanded two-way defense trade, increasing opportunities for technology transfers and co-production, expanded collaboration related to missile defense, and establishment of a bilateral Defense Procurement and Production Group. The agreement may be the most ambitious such security pact ever engaged by New Delhi. A Maritime Security Cooperation Agreement, inked in 2006, commits both countries to "comprehensive cooperation" in protecting the free flow of commerce and addressing a wide array of threats to maritime security, including piracy and the illicit trafficking of weapons of mass destruction and related materials. The United States views defense cooperation with India in the context of "common principles and shared national interests" such as defeating terrorism, preventing weapons proliferation, and maintaining regional stability. Senior officials in the Obama Administration's Pentagon have assured New Delhi that the United States is "fully committed to strengthening ties through the enhancement of our defense relationship." In a report accompanying the Department of Defense Authorization Act for FY2012 ( S. 1253 , S.Rept. 112-26 ), the Senate Armed Services Committee, in expressing its belief that a deepened strategic partnership with India will be "critical" to the promotion of core mutual national interests in the 21 st century, would direct the Secretary of Defense to report to Congress a detailed plan to enhance U.S.-India security cooperation. Many analysts view increased U.S.-India security ties as providing an alleged "hedge" against or "counterbalance" to growing Chinese influence in Asia, though both Washington and New Delhi repeatedly downplay such probable motives. Still, while a congruence of U.S. and Indian national security objectives is unlikely in the foreseeable future, convergences are identified in areas such as shared values, the emergence of a new balance-of-power arrangement in the region, and on distinct challenges such as WMD proliferation, Islamist extremism, and energy security. There remain indications that the perceptions and expectations of top U.S. and Indian strategic planners are divergent on several key issues, perhaps especially on the role of Pakistan and policies toward the ongoing Afghan insurgency, as well as on India's relations with Iran and repressive governments in places such as Burma and Sudan. One facet of the emerging "strategic partnership" between the United States and India is greatly increased intelligence and counterterrorism cooperation. In 2000, the two governments established a U.S.-India Joint Working Group on Counterterrorism to coordinate bilateral efforts in this realm. In 2002, India and the United States launched the Indo-U.S. Cyber Security Forum to safeguard critical infrastructures from cyber attack. The 2005 "New Framework for the U.S.-India Defense Relationship" listed "defeating terrorism and violent religious extremism" as one of four key shared security interests, and it called for a bolstering of mutual defense capabilities required for such a goal. A bilateral Counterterrorism Cooperation Initiative was formally launched in July 2010. Counterterrorism cooperation is described by the Administration as a pillar of the bilateral relationship. Programs include exchanges of law enforcement best practices, reciprocal visits of senior-level officials, joint military training exercises, and joint approaches in relevant international fora. The FBI's Quantico laboratory has hosted visits by senior Indian forensics experts and the agency regularly shares best-practices with senior Indian law enforcement officials. The State Department's Anti-Terrorism Assistance program has conducted scores of training courses for more than 1,600 Indian law enforcement officials. CIA and FBI personnel have worked in India to investigate terrorist attacks, including a major 2006 bombing in Mumbai, as well as the 2008 attack on the same city (FBI forensics experts provided testimony to the Indian court trying the sole surviving gunmen in the latter attack). In June 2010, the Indian government was granted access to David Headley, an American national who has confessed to participating in planning the November 2008 Mumbai assault. Then-U.S. Ambassador to India Tim Roemer identified the development as "historic in the nature of security cooperation" and expressed optimism about multiple U.S.-India partnerships in this area, including cooperation on launching a National Counterterrorism Center in India modeled on that in the United States. Yet lingering and significant distrust of the United States—and its close relationship with Pakistan's military and intelligence services—became evident after it was learned that U.S. officials had received prior warnings about LeT intentions to attack Mumbai from Coleman's former wives. U.S. officials deny that any useful intelligence information had been withheld from India, but some observers remained skeptical. Homeland Security Secretary Janet Napolitano was in New Delhi and Mumbai in May 2011, where she meet with Indian officials and representatives of private industry to promote counterterrorism and law enforcement cooperation. Under the rubric of the bilateral Strategic Dialogue, a U.S.-India Homeland Security dialogue was established, with Indian Home Minister Chidambaram as co-chair, wherein agency-to-agency engagements are being fostered on a wide array of law enforcement issues, including counternarcotics counterfeit currency, illicit financing and transnational crime, infrastructure security, transportation and trade, coastal security, and large-city policing. Since early 2002, the United States and India have held a series of unprecedented and increasingly substantive combined exercises involving all military services. Such military-to-military relations have been key aspect of U.S.-India relations in recent years—India now conducts more exercises and personnel exchanges with the United States than with any other country. These include "Cope India" air exercises, joint Special Forces training, and major annual "Malabar" joint naval exercises are held off the Indian coast. U.S. and Indian officials tout ongoing joint maneuvers as improving interoperability and as evidence of an overall deepening of the bilateral defense relationship. Countries such as China and Pakistan are acutely interested in the progress of such relations, seeing them as the potential seeds of a more formal defense alliance. Along with increasing military-to-military ties, the issue of U.S. arms sales to India has taken a higher profile. New Delhi is undertaking a major military modernization program, potentially spending $100 billion over the next decade to update its mostly Soviet-era arsenal. U.S. weapons makers are eager to gain a slice of this lucrative pie, and American security companies also see in India a potentially also huge new market for sophisticated equipment such as surveillance and detection systems. Some analysts suggest that increased defense trade could be a means of reviving what are perceived as stagnating U.S.-India relations. Yet many Indians continue to be wary of closer defense ties with the United States and are concerned that these could lead to future strings, such as conditionality and/or cutoffs, and perhaps constrain New Delhi's foreign policy freedom. In an unusually open expression of frustration with the United States in this realm, India's Army Chief in May 2010 informed his Defense Ministry that the U.S. Foreign Military Sales program had proven troublesome for India. Nevertheless, the value of new and unprecedented major defense sales to India has continued to grow, with the United States now offering to sell India some of its most sophisticated military hardware. The first-ever major U.S. arms sale to India came in 2002, when the Pentagon negotiated delivery of 12 counter-battery radar sets (or "Firefinder" radars) worth a total of $190 million. In 2006, Congress authorized and New Delhi approved the $44 million purchase of the USS Trenton , a decommissioned American amphibious transport dock. The ship, which became the second-largest in the Indian navy when it was commissioned as the INS Jalashwa in 2007, set sail for India carrying six surplus Sikorsky UH-3H Sea King helicopters purchased for another $39 million. The Security Cooperation Act of 2010 ( P.L. 111-266 ) authorized the President to transfer to India two Osprey-class coastal minehunter ships as Excess Defense Articles. In 2008, Washington and New Delhi finalized a deal to send to India six C-130J Hercules military transport aircraft (along with related equipment, training, and services). The deal, which represented the largest-ever U.S. defense sale to India to date, is worth nearly $1 billion to the manufacturer, Maryland-based Lockheed Martin (the C-130Js, configured to support Indian special operations requirements, were delivered in December 2010). In 2009, New Delhi signed a $2.1 billion deal to purchase eight P-8I maritime surveillance aircraft from Illinois-based Boeing. These aircraft, slated for delivery in 2013, also provide anti-submarine warfare capabilities, and their sale set a new record as the largest-ever U.S. arms transfer to India. In 2010, the Pentagon notified Congress of a potential sale to India of ten C-17 Globemaster III military transport aircraft (with training equipment, spare parts, and other support). Yet another new record sale was realized when, in June 2011, New Delhi formally approved the $4.1 billion purchase, the largest-ever Indian defense contract with a U.S. company. Washington welcomed the sale as both advancing the U.S.-India partnership and in sustaining some 23,000 American jobs in 44 states. Other potential upcoming sales include 22 Boeing AH-64D Apache attack helicopters, along with accompanying General Electric engines, and radars, missiles, training, and other support that could be worth an estimated $1.4 billion; 145 lightweight 155mm M777 towed howitzers with laser targeting systems (worth $647 million); and 26 Harpoon anti-ship missiles for $200 million and 32 Mk-54 torpedoes for $86 million—both weapons intended for use on the Indian Navy's newly-purchased P-8I Neptune maritime patrol aircraft. Yet by far the most lucrative hoped-for sale would have served India's quest for 126 new medium, multi-role combat aircraft (MMRCA) in a deal that could be worth some $11 billion. Lockheed Martin's F-16 and Boeing's F/A-18 were competing with aircraft built in Russia, France, Sweden, and by a European consortium. Hopes of an American firm landing the MMCA deal received a boost in 2009 when General Electric won in its bid to provide India with 99 jet engines for its Tejas light combat aircraft for some $800 million, but in 2011 New Delhi announced that it would not look to American firms for this larger sale (see below). Some Indian officials express concern that the United States is a "fickle" partner that may not always be relied upon to provide the reciprocity, sensitivity, and high-technology transfers sought by New Delhi, and that may act intrusively. This has contributed to New Delhi's years-long political resistance to sign several defense cooperation accords, including the Communications Interoperability and Security Memorandum of Agreement (CISMoA), the Basic Exchange and Cooperation Agreement for Geospatial Cooperation (BECA), and the Logistics Support Agreement (LSA). U.S. law requires that certain sensitive defense technologies can only be transferred to recipient countries that have signed the CISMoA and/or the BECA. All three outstanding accords have been opposed by some influential Indian politicians for their "intrusive" nature, and the issue was not taken up at the July 2011 Strategic Dialogue talks. New Delhi did in 2009 sign on to an End User Monitoring Agreement (EUMA) after two years of protracted negotiations, but only after receiving the concession that the time and location of equipment verification would be determined by Indian officials. Then-Secretary of Defense Robert Gates, on a visit to New Delhi in 2010, stated that not getting the outstanding agreements signed "is an obstacle to Indian access to the very highest level of technology." Despite U.S. claims that India's military capabilities are hampered by lack of access to U.S. equipment and technologies, senior Indian military officers have reported to their government that the absence of these agreements makes no substantial difference in their operational abilities. By the turn of the new century, New Delhi began to address the need to replace their air force's large and aging fleet of Russian-built MiG-21 combat aircraft, which were crashing regularly and became known to some Indian pilots as "flying coffins." Refurbishment was deemed impractical, and no indigenously-built replacement could be online for up to two decades so, in 2004, the government issued formal Requests For Information (RFIs) on potentially purchasing 126 new aircraft from one of four vendors: Lockheed Martin (F-16IN), France's Dassault (Rafale), Sweden's Saab (Gripen JAS-39), and Russia's Mikoyan (MiG-35). Soon after, Boeing (F/A-18E/F) and a European consortium (Eurofighter Typhoon) joined in the bidding. In April 2011, seven years after the first RFIs were issued, New Delhi announced that it had narrowed the list of competitors to two finalists: the French Rafale and the Eurofighter. The government described the decision as having been wholly rooted in technical assessments of the contending aircraft. These assessments determined that the Rafale and the Typhoon were best suited to the needs of their air forces. Assistant Secretary of State Blake expressed Washington's obvious disappointment, while also stressing that the United States will remain committed to the bilateral defense partnership—he contended that India had "shown confidence in American products" such as C-130J, C-17, and P-8 military aircraft—as well as to the greater strategic partnership. Blake later said that choosing one of the American-made platforms would have "provided a ladder to even higher levels of U.S.-India technology transfers" and it was "a source of puzzlement" that the Indian Air Force deselected them. New Delhi's decision elicited much criticism both from U.S.-based analysts as well as some Indian strategic thinkers, and sparked some debate over the "real" reasons for what seemed a major geostrategic choice. Some commentators considered the Indian decision short-sighted and potentially damaging to the greater U.S.-India partnership. From this perspective, political and geostrategic considerations were given short-shrift or even ignored in New Delhi's apparently narrow focus on purely technical variables. The decision may not have been the great surprise that was perceived by some in Washington: Indian skepticism about U.S. reliability as an arms supplier is longstanding, and Washington's close defense relationship with Islamabad over the past decade has added to New Delhi's doubts. Indeed, many analysts sought to explain the decision by pointing to Indian concerns about U.S. reliability and Indian annoyance with U.S. arms supplies to Pakistan, with some also viewing the Europeans as being more willing than the Americans to transfer technologies desired by India. Supply reliability may have played a central role in what may have been a largely political decision. A few even suspected that deselecting the U.S.-built planes was an indirect statement that New Delhi did not seek full alignment with the United States. When viewed in light of serious obstacles to implementing bilateral civil nuclear commerce, and New Delhi's UNSC abstention on Libya and tepid support for Burmese democratization, the MMRCA decision was for some observers a (troubling) signal that Indian decision makers are uncomfortable with developing closer ties with the United States. Others rejected these arguments as unreasonable, given that most major powers seek to diversify their strategic relationships, the United States among them. For these commentators, the overarching relationship was not diminished by this one development and does best when a transactional approach is avoided. The judgment here is that there was no "strategic rebuff" of the United States, and Indian doubts about American reliability in arms trade is much diminished in recent years (U.S. firms have won numerous other Indian defense contracts). In the words of one close observer, "[T]he current threats to the burgeoning defense partnership derive less from abortive military sales and more from a lack of vision, focus, and determination to create the strategic affiliation that serves common interests." Moreover, it does appear that the Indian procurement process worked exactly as it was supposed to—divorced from political considerations—and that corruption scandals in New Delhi and the ruling coalition's recent travails made strategic factors even more unlikely to have played a role. Many of India's more than 1 billion citizens suffer from oftentimes serious human rights abuses. Some analysts are concerned that, as Washington pursues a new "strategic partnership" with New Delhi, U.S. government attention to such abuses has waned. In a notable shift, the State Department's most recent Country Report on Human Rights Practices (released April 2011) does not include what had been regular overarching statements in previous reports about the Indian government's general respect for the rights of its citizens, nor does its introductory section make note of Indian government efforts or improvements in certain areas. Instead, the report moves quickly to a listing of India's "major human rights problems," including reported extrajudicial killings of persons in custody, killings of protesters, and torture and rape by police and other security forces. Investigations into individual abuses and legal punishment for perpetrators occurred, but for many abuses, a lack of accountability due to weak law enforcement, a lack of trained police, and an overburdened court system created an atmosphere of impunity; lengthy court backlogs prolong the latter. Poor prison conditions and lengthy detentions were significant problems. Unlike in previous years (2008 and 2009), there were no instances of officials using antiterrorism legislation to justify excessive use of force; however, indiscriminate use of force by Border Security Forces was a problem. Corruption existed at all levels of government and police. There were reports of delays in obtaining legal redress for past attacks against minorities. The law in some states restricted religious conversion, but there were no reports of convictions under these restrictions. Violence associated with caste bias occurred. Domestic violence, child marriage, bonded labor, dowry-related deaths, honor crimes, and female feticide remained serious problems. Separatist insurgents and terrorists in Jammu and Kashmir, the Northeastern States, and the Naxalite belt committed numerous serious abuses, including killing armed forces personnel, police, government officials, and civilians. Insurgents engaged in widespread torture, rape, beheadings, kidnapping, and extortion. The number of incidents, however, declined compared with the previous year. International human rights groups echo many of these findings. According to the 201 1 World Report of Human Rights Watch, Authorities made little progress [in 2010] in reforming the police; improving healthcare, education, and food security for millions still struggling for subsistence; ending discrimination against Dalits ("untouchables"), tribal groups, and religious minorities; and protecting the rights of women and children. Constraints on religious freedom are another matter of concern; India's Muslim and Christian minorities continue to face sometimes violent persecution. Moreover, rampant caste-based discrimination is identified as a major societal problem, as are female infanticide and feticide. "Honor killings" of couples accused of violating Hindu marriage traditions may be on the rise. The State Department's Bureau of Democracy, Human Rights, and Labor has in the past claimed that India's human right abuses "are generated by a traditionally hierarchical social structure, deeply rooted tensions among the country's many ethnic and religious communities, violent secessionist movements and the authorities' attempts to repress them, and deficient police methods and training." Government treatment of actual or suspected militants and terrorists can be severe and potentially unlawful. India's 1958 Armed Forces Special Powers Act, which gives security forces wide leeway to act with impunity in conflict zones, has been called a facilitator of grave human rights abuses in several Indian states. Visits by representatives of the International Committee of the Red Cross in 2002-2004 reportedly revealed evidence of widespread torture by security forces in Kashmir. Such evidence was presented to U.S. officials, according to press reports about leaked diplomatic cables. A senior Indian police official in Kashmir called the allegations "baseless propaganda." A 2010 report by the Delhi-based Asian Center for Human Rights found that the incidence of torture and prison custody deaths in India is on the rise, and it chastised the current New Delhi government for failing to address these problems through legislative changes. After examining India's nonconflict areas, Human Rights Watch issued a 2011 report detailing what it calls India's "numerous, serious human rights violations" in the treatment of terrorism suspects detained following attacks, saying the "abuses are both unlawful under Indian and international law and counterproductive in the fight against terrorism." Indian authorities have brought and threatened to bring sedition charges against prominent social activists. According to watchdog groups, India's colonial-era sedition law has been used to intimidate peaceful political dissenters in cases involving activists such as Dr. Binayak Sen and Arundhati Roy. Human Rights Watch repeatedly has called for the law's repeal. Sen, who spent in a total of 28 months in what he described as horrific prison conditions, later accused the government of using the sedition laws "to silence voices of dissent." An officially secular nation, India has a long tradition of religious tolerance (with periodic lapses), which is protected under its constitution. The population includes a Hindu majority of 82% as well as a large Muslim minority of some 150 million (14%). Christians, Sikhs, Buddhists, Jains, and others total less than 4%. Although freedom of religion is protected by the Indian government, human rights groups have noted that India's religious tolerance is susceptible to attack by religious extremists. In its annual report on international religious freedom released in November 2010, the State Department contended that the New Delhi government generally respected, provided incentives for, and intervened to protect religious freedom; however, some state and local governments imposed limits on this freedom. There was no change in the status of respect for religious freedom by the government during the reporting period. The national government, led by the United Progressive Alliance (UPA), continued to implement an inclusive and secular platform that included respect for the right to religious freedom. Despite the national government's rejection of Hindutva (Hindu nationalism), a few state and local governments continued to be influenced by Hindutva.... The law generally provided remedy for violations of religious freedom, however, due to a lack of sufficient trained police and corruption, the law was not always enforced rigorously or effectively in some cases pertaining to religiously oriented violence. A May 2011 report of the U.S. Commission on International Religious Freedom found that "India's progress in protecting and promoting religious freedom during the past year continued to be mixed" and that "justice for victims of communal violence ... remains slow and often ineffective." While noting the Indian government's creation of some structures to address past problems of communal violence, and recognizing positive steps taken by the central and state governments to improve religious freedom, the Commission again placed India on a "Watch List" of countries where it believes violations of religious freedom require very close attention. It urged the U.S. government to encourage and assist New Delhi in being more vigorous and effective in efforts to better protect religious freedom in India, including those aimed at halting violent attacks on religious minorities, undertaking more timely investigations and prosecutions of those alleged to have perpetrated such violence, among others. The millennia-old Hindu caste system reflects Indian occupational and socially defined hierarchies. Sanskrit sources refer to four social categories: priests (Brahmin), warriors (Kshatriya), traders (Vayisha) and farmers (Shudra). Tribals and lower castes were long known as "untouchables"—a term now officially banned but still widely used—or Dalits. Although these categories are understood throughout India, they describe reality only in the most general terms. National-level legislation exists to protect India's lower castes, yet, according to the U.S. State Department, "The Scheduled Castes and Scheduled Tribes (Prevention of Atrocities) Act lists offenses against disadvantaged persons and prescribes stiff penalties for offenders; however, this act had only a modest effect in curbing abuse and there were very few convictions." In the 110 th Congress, H.Con.Res. 139 , expressing the sense of Congress that the United States should address the ongoing problem of untouchability in India, was passed by the full House, but was not considered by the Senate. The State Department's latest annual report on trafficking in persons (issued June 2011) again said, "India is a source, destination, and transit country for men, women, and children subjected to forced labor and sex trafficking.... The Government of India does not fully comply with the minimum standards for the elimination of trafficking; however, it is making significant efforts to do so." Moreover, in noting the Indian Home Ministry's more focused efforts and the government's ratification a relevant U.N. Protocol in May, India's designation as a "Tier 2 Watch List" country, which it had held since 2004, was upgraded to "Tier 2," the second highest of four designations. Still, State criticized law enforcement efforts against bonded labor as remaining "inadequate," and said the complicity of public officials in human trafficking "remained a serious problem" and "impeded progress. Given traditional societal discrimination against females, uneven female-to-male ratios are a matter of growing concern for India. The incidence of female infanticide and gender-selective abortions is identified as a serious human rights problem in India. The diffusion of enabling medical technology and the existence of unethical doctors have made sex-selective abortions more common there. Prime Minister Singh has called female feticide a "national shame" and said the government has a responsibility to curtail the widespread practice. The country's 2001 census found only 927 girls aged 0-6 for every 1,000 boys nationwide. Wealthier states, such as Delhi, Punjab, and Gujarat, have the lowest ratios (Punjab's was the lowest at 798). A 2006 study published in the British medical journal Lancet estimated that up to 10 million Indian females are "missing" due to sex-selective abortions and infanticide over the past two decades, and that some 500,000 girls are being "lost" annually. In subsequent years, the incidence of such practices only appears to be increasing. The most recent U.S. State Department Country Report on Human Rights for India (released April 2011), identified Punjab and Haryana as states in which female feticide was an especially "serious problem," and noted reports of relatives "forcing" women to engage in female feticide. A June 2011 survey of gender experts ranked India as the world's fourth most dangerous country for women, citing high rates of female feticide, infanticide, and human trafficking (neighboring Pakistan was ranked third). A total of more than $15.9 billion in direct U.S. aid went to India from 1947 through 2010, nearly all of it in the form of economic grants and loans, more than half as food aid. In 2007, in response to several years of rapid Indian economic expansion and New Delhi's new status as a donor government, the State Department announced a 35% reduction in assistance programs for India. The bulk of the cuts came from development assistance and food aid programs. Another smaller decrease came in 2008 "in recognition of the continuing growth of the Indian economy and the ability of the government to fund more" development programs. Under the Obama Administration, however, increases in Global Health and Child Survival funds, along with some added Development Assistance, have reverted aid amounts to their previous levels. Table 1 shows U.S. foreign assistance categories and figures for FY2001-FY2012. According to the U.S. Agency for International Development (USAID), India has the world's largest concentration of people living in poverty (more than 700 million earning less than $2 per day). USAID and economic-related State Department programs in India, budgeted nearly $120 million in FY2010, concentrate on five areas: economic growth; health; disaster management; energy and environment; and opportunity and equity. The United States has provided about $175 million in military assistance to India since 1947, more than 90% of this distributed from 1962-1966. In recent years, modest security-related assistance has emphasized export control enhancements, counterterrorism and counternarcotics programs, and military training.
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South Asia emerged in the 21st century as increasingly vital to core U.S. foreign policy interests. India, the region's dominant actor with more than 1 billion citizens, is often characterized as a nascent great power and "indispensable partner" of the United States, one that many analysts view as a potential counterweight to China's growing clout. Since 2004, Washington and New Delhi have been pursuing a "strategic partnership" based on shared values and apparently convergent geopolitical interests. Numerous economic, security, and global initiatives, including plans for civilian nuclear cooperation, are underway. This latter initiative—first launched in 2005 and codified in U.S. law in 2008—reversed three decades of U.S. nonproliferation policy, but has not been implemented to date. Also in 2005, the United States and India signed a ten-year defense framework agreement to expanding bilateral security cooperation. The two countries now engage in numerous and unprecedented combined military exercises, and major U.S. arms sales to India are underway. The value of all bilateral trade tripled from 2004 to 2008 and continues to grow; significant two-way investment also flourishes. The influence of a large, relatively wealthy, and geographically dispersed Indian-American community is reflected in Congress's largest country-specific caucus. More than 100,000 Indian students are attending American universities. Further U.S. attention on South Asia focuses on ongoing, historically rooted tensions between India and Pakistan. In the interests of regional stability, in particular as a means of facilitating U.S.-led efforts to stabilize nearby Afghanistan, the United States strongly endorses an existing, but largely moribund India-Pakistan peace initiative, and remains concerned about the potential for conflict over Kashmiri sovereignty to cause open hostilities between these two nuclear-armed countries. The United States also seeks to curtail the proliferation of nuclear weapons and missiles in South Asia. President Barack Obama's Administration has sought to build upon the deepened U.S. engagement with India begun by President Bill Clinton in 2000 and expanded upon during much of the past decade under President G.W. Bush. This "U.S.-India 3.0" diplomacy was most recently on display in July 2011, when the second U.S.-India Strategic Dialogue session saw a large delegation of senior U.S. officials visit New Delhi to discuss a broad range of global and bilateral issues. Many analysts view the U.S.-India relationship as being among the world's most important in coming decades and see potentially large benefits to be accrued through engagement on many convergent interests. Bilateral initiatives are underway in all areas, although independent analysts in both countries worry that the partnership has lost momentum in recent years. Outstanding areas of bilateral friction include obstacles to bilateral trade and investment, including in the high-technology sector; outsourcing; the status of conflict in Afghanistan; climate change; and stalled efforts to initiate civil nuclear cooperation. India is the world's most populous democracy and remains firmly committed to representative government and rule of law. Its left-leaning Congress Party-led ruling national coalition has been in power for more than seven years under the leadership of Prime Minister Manmohan Singh, an Oxford-trained economist. New Delhi's engagement with regional and other states is extensive and reflects its rising geopolitical status. The national economy has been growing rapidly—India's is projected to be the world's third-largest economy in the foreseeable future—yet poor infrastructure, booming energy demand, and restrictive trade and investment practices are seen to hamper full economic potential. Despite the growth of a large urban middle-class, India's remains a largely rural and agriculture-based society, and is home to some 500-600 million people living in poverty. This report will be updated periodically.
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As the complexities of the problems facing America have increased, Congress has responded the way hundreds of their constituents have, by going back to school. Early organization and orientation have provided Members a "leg up" in addressing pressing needs. When the first Congress convened over 200 years ago, farmers and soldiers, journalists and scientists, carpenters and statesmen travelled from throughout the colonies to New York to take the oath of office as Members of the first Congress. They adopted rules, organized the structure of their chambers, and began legislating, each in accordance with the Member's own individual understanding of just how to do that and how to be both a representative and a legislator, that is, how to be a Member of Congress. There was no specific precedent to follow, no educational institution to attend to explore the intricacies of the legislative process, no classes to take to practice the politics of bicameralism and bipartisanship, no management consultant to teach them how to administer their offices. And so, these Members, and the hundreds who followed them, learned on the job, learned from their predecessors and each other, and learned from their mistakes. As the nation grew and prospered, and the number of Members increased with "manifest destiny," it became clear that "on the job training" was no longer sufficient. The issues were becoming more complex, the procedures more intricate. In the early 1970s, nearly 200 years after the first Members arrived to legislate, Congress began to consider formalizing its pre-Congress preparations, both structural and educational. The belief seemed to be that the sooner the organizational decisions were made and the structure was in place, the faster the start Members would have in solving the problems of the day. As well, the more Members knew about the intricacies and complexities of those problems, the more sophisticated the deliberations would be, the sooner those deliberations could begin, and the more comprehensive and appropriate the eventual response would be. Accordingly, in 1974, pursuant to the adoption of H.Res. 988 (93 rd Congress), the Committee Reform Amendments of 1974, the House authorized early organizational meetings for its Members. The Senate followed suit soon thereafter. Speaker Carl Albert and Minority Leader Gerald Ford agreed that during the transition time between Congresses, preparation for the next Congress would be of invaluable help in reducing the organizational and legislative congestion that normally accompanies the start of a Congress. Prior to the convening of a new Congress (somewhere between November 13 and December 20 of any even-numbered year), Democratic party caucuses or Republican party conferences may be called by the majority and minority leaders after consultation with the Speaker. If done, the business is, among other things, to choose party leaders, committee leaders, and committee members. As well, Members can pick up political tips, technical and administrative lessons, policy facts, figures and interpretations, and a sense of the informal "rules of the game." Members-elect receive travel and per diem allowances, while reelected Members receive travel allowances if the House has adjourned sine die . Both groups are expected to attend. In the past four decades, these meetings have become more formalized, more comprehensive, more valued, and more necessary. In fact, these sessions go far beyond those envisioned in 1974. Now, not only are there meetings for making organizational decisions, but also ones for educational purposes. Now, not only are they for Members, but some are for Members and staff together while others are for staff only. Some are for Members and their spouses, some even are limited to spouses of newly elected Members. Now, not only are they sponsored by the party caucus and conferences, but by the respective campaign committees, the House Administration and Senate Rules and Administration Committees, Harvard University's Institute of Politics, the Congressional Management Foundation, the Congressional Research Service, the Heritage Foundation, and numerous informal groups both on and off the Hill. Now, not only are they held in Washington, DC, but in Cambridge, MA, Annapolis, MD, and Williamsburg, VA, as well. Each is well attended. The educational sessions available range from legislative procedures, both in committee and on the floor, to how to hire a staff, and how to construct an office budget. They cover the broad range of current issues from defense to the environment to agriculture, from the specifics of a particular weapons system to the best method of reducing the federal deficit. They are taught by current Members, former Members, government practitioners, and academic experts. They focus on the substance of issues, previous attempts at legislative changes, the Administration's position, and the outlook for action in the current Congress. Numerous interest groups provide information for consideration, as does the party leadership. The organizational sessions serve as the first introduction to Congress and to each other for the new Members and attest to the value and intent of the early meetings envisioned in 1974. Accordingly, before the end of the year, class officers are elected, party leaders selected, and chamber officers, such as the chaplain, chosen. Regional representatives to steering and policy committees, designees to the committees on committees, and other party officials are named. Chairmen of selected committees are elected and members of those committees are often chosen. Each of these actions is then subject only to official ratification at the start of the Congress. Room selection drawings and room assignments are also accomplished during these sessions. Each January of a recent odd-numbered year, Congress has begun work earlier than it used to. Both chambers immediately make remaining committee assignments, while committees hold their organizational sessions to establish subcommittees, make subcommittee assignments, hire staff, and adopt committee rules. Accordingly, when the scores of measures introduced on the first day are referred to committee, Congress is ready to get to work on its legislative agenda without having to spend time on organizational and administrative matters.
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Since the mid-1970s, the House and Senate have convened early organization meetings in November or December of even-numbered years to prepare for the start of the new Congress in January. The purposes of these meetings are both educational and organizational. Educational sessions range from legislative procedures and staff hiring to current issues. Organizational sessions elect class officers, party leaders, and chamber officers; name committee representatives and other party officials; and select committee chairmen and often committee members. Such actions are officially ratified at the start of the new Congress.
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On August 2, 2005, H.R. 2361 , the Interior, Environment, and Related Agencies Appropriations Act for FY2006, was enacted as P.L. 109-54 . The law contained a total of $26.20 billion for Interior, Environment, and Related Agencies. The law also contained $1.50 billion in supplemental funds to cover a shortfall in veterans health care resources. On December 30, 2005, H.R. 2863 was signed into law as P.L. 109-148 . The law affected funding levels enacted in P.L. 109-54 , through rescissions and emergency supplemental funds, which are not reflected in this report. The FY2006 Interior, Environment, and Related Agencies appropriations law included funding for agencies and programs in three separate federal departments, as well as numerous related agencies and bureaus. The law provided funding for Department of the Interior (DOI) agencies (except for the Bureau of Reclamation, funded in Energy and Water Development appropriations laws), many of which manage land and other natural resource or regulatory programs. The law also provided funds for agencies in two other departments: for the Forest Service in the Department of Agriculture, and the Indian Health Service in the Department of Health and Human Services, as well as funds for the Environmental Protection Agency. Further, the FY2006 law included funding for arts and cultural agencies, such as the Smithsonian Institution, National Gallery of Art, National Endowment for the Arts, and National Endowment for the Humanities, and for numerous other entities and agencies. In recent years, the appropriations laws for Interior and Related Agencies provided funds for several activities within the Department of Energy (DOE), including research, development, and conservation programs; the Naval Petroleum Reserves; and the Strategic Petroleum Reserve. However, at the outset of the 109 th Congress, these DOE programs were transferred to the House and Senate Appropriations subcommittees covering energy and water, to consolidate jurisdiction over DOE. At the same time, jurisdiction over the Environmental Protection Agency (EPA), and several smaller entities, was moved to the House and Senate Appropriations subcommittees covering Interior and Related Agencies. This change resulted from the abolition of the House and Senate Appropriations Subcommittees on Veterans Affairs, Housing and Urban Development, and Independent Agencies, which previously had jurisdiction over EPA. In the recent past, Interior and Related Agencies appropriations acts typically contained two primary titles providing funding. Title I provided funds for Interior agencies, and Title II contained funds for other agencies, programs, and entities. The FY2006 appropriations law contained three primary titles providing funding. This report is organized along the lines of the law. Accordingly, the first section (Title I) provides information on Interior agencies; the second section (Title II) discusses EPA; and the third section (Title III) addresses other agencies, programs, and entities funded in the FY2006 law. A fourth section of this report discusses cross-cutting topics that encompass more than one agency. In general, in this report the term appropriations represents total funds available, including regular annual and supplemental appropriations, as well as rescissions, transfers, and deferrals, but excludes permanent budget authorities. Increases and decreases generally are calculated on comparisons between the funding levels enacted for FY2006, requested by the President, recommended by the House and Senate for FY2006, and appropriated for FY2005. The House Committee on Appropriations is the primary source of the funding figures used throughout the report. Other sources of information include the Senate Committee on Appropriations, agency budget justifications, and the Congressional Record . In the tables throughout this report, some columns of funding figures do not add to the precise totals provided due to rounding. Finally, some of the DOI websites provided throughout the report have not been consistently operational due to a court order regarding Indian trust funds litigation. Nevertheless, they are included herein for reference when the websites are operational. The Interior, Environment, and Related Agencies appropriations bill ( H.R. 2361 ) was signed into law on August 2, 2005 as P.L. 109-54 . On July 28 th , 2005, the House approved the conference agreement (410-10), and on July 29 th , 2005, the Senate agreed to the conference report (99-1). Congress also included in this law $1.50 billion in supplemental funds to cover a shortfall in veterans' health care resources. The FY2006 appropriations law provided $26.20 billion, an increase of 2% over the President's budget request for FY2006 of $25.72 billion, but a decrease of 3% below the FY2005 enacted level of $27.02 billion. The FY2006 total appropriation reflects an across-the-board rescission of 0.476% to be applied across accounts. However, it does not reflect a 1% across-the-board rescission, other rescissions, and emergency supplemental funds contained in P.L. 109-148 . Further, the figures used throughout this report do not reflect these supplemental funds or the rescissions in either law because their effect on individual agencies, programs, and activities has not yet been calculated. The FY2006 appropriations law reflected lower funding as compared to the FY2005 enacted level in areas including: $-507.1 million for the Forest Service (FS); $-294.1 million for the Environmental Protection Agency (EPA); $-75.8 million for the National Park Service (NPS); and $-36.4 million for the Bureau of Land Management. The FY2006 appropriations law reflected higher funding than the FY2005 enacted level in areas including $105.7 million for Indian Health Service; $31.5 million for the United States Geological Survey (USGS); $12.5 million for the Bureau of Indian Affairs (BIA); and $10.0 million total for National Endowment for the Arts (NEA) and National Endowment for the Humanities (NEH). During initial consideration of H.R. 2361 , on June 29 th , 2005, the Senate passed H.R. 2361 unanimously (94-0). As passed by the Senate, H.R. 2361 would have provided appropriations of $26.26 billion for Interior, Environment, and Related Agencies. On May 19, 2005, the House had passed H.R. 2361 (329-89) containing $26.16 billion in FY2006 appropriations. The House-passed level was a 3% decrease from the FY2005 enacted level and a 0.4% decrease from the Senate-passed total, but a 2% increase over the President's request for FY2006. During Senate debate on H.R. 2361 , the Senate had considered about four dozen floor amendments, some of which addressed major issues and activities of agencies that are discussed in relevant sections of this report. Amendments generally not discussed in this report include those that dealt with Interior appropriations more generally or were cross-cutting in nature. Examples include an amendment to reduce each appropriation in the bill by 1.7% (withdrawn) and another to require limitations, directives, and earmarks in committee reports to be included also in conference reports in order to be regarded as having been approved by Congress (not agreed to). Still other amendments not covered in this report are those that did not relate directly to Interior, Environment, and Related Agencies. Examples include an amendment seeking to facilitate family travel to Cuba (not agreed to) and an amendment providing emergency supplemental appropriations for FY2005 for the Veterans Health Administration (agreed to). During floor debate, the House considered about two dozen amendments before voting on final passage of the FY2006 appropriations bill. Many of these amendments are discussed in pertinent sections throughout this report. In some cases, the inclusion of legislation in the bill was controversial. The presiding officer sustained points of order against several provisions in the bill on the grounds that House rules bar legislation on an appropriations bill, thereby striking the provisions from the bill. These points of order were raised by chairmen of authorizing panels, namely the Chairman of the House Committee on Government Reform and the Chairman of the Subcommittee on Environment and Hazardous Materials of the Committee on Energy and Commerce. The inclusion in the bill of appropriations not previously authorized by law also was controversial in some instances. The Chairman of the House Resources Committee offered an amendment seeking to prevent money in the bill from being spent for 10 programs within the Committee's jurisdiction which are not authorized to be appropriated in FY2006, according to the Chairman. The presiding officer sustained a point of order against the amendment on the grounds that it too constituted legislation, so it was not in order to be considered. In earlier action, on June 10, 2005, the Senate Appropriations Committee unanimously reported (28-0) H.R. 2361 ( S.Rept. 109-80 ), providing $26.27 billion for Interior, Environment, and Related Agencies. On May 13, 2005, the House Appropriations Committee reported H.R. 2361 ( H.Rept. 109-80 ) with $26.16 billion in FY2006 Interior appropriations. Both the House and Senate Appropriations Subcommittees on Interior had marked up funding bills and held hearings on the President's budget request for Interior, Environment, and Related Agencies. Hearings examined the requests for individual agencies and programs as well as cross-cutting issues. For FY2006, the President had sought $25.72 billion, a 5% decrease from the FY2005 enacted level of $27.02 billion. The FY2005 total reflects two across-the-board rescissions in the Consolidated Appropriations Act for FY2005 ( P.L. 108-447 ) of 0.594% and 0.80%. The President's FY2006 budget had recommended depositing, into the general fund of the Treasury, 70% of receipts from BLM land sales under the Southern Nevada Public Land Management Act (SNPLMA). This issue is covered briefly in the " Bureau of Land Management " section below. (For more information, see CRS Issue Brief IB10076, Bureau of Land Management (BLM) Lands and National Forests , coordinated by [author name scrubbed] and [author name scrubbed].) The budget also assumed enactment of legislation to open part of the Coastal Plain in the Arctic National Wildlife Refuge to oil and gas exploration and development. This issue is covered briefly in the " Fish and Wildlife Service " section below. (For more information, see CRS Issue Brief IB10136, Arctic National Wildlife Refuge (ANWR): Controversies for the 109 th Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].) Table 1 below shows the budget authority for Interior and Related Agencies for FY2004-2006. See Table 23 for a budgetary history of each agency, bureau, and program for FY2004 and FY2005; the President's budget request for FY2006; the FY2006 House- and Senate-passed levels; and the FY2006 levels enacted into law. Controversial policy and funding issues typically have been debated during consideration of the annual Interior and Related Agencies appropriations bills. Current debate on FY2006 funding levels encompasses a variety of issues, many of which have been controversial in the past, including the issues listed below. Abandoned Mine Lands (AML) Fund , including whether, as part of AML reauthorization, to change the program as sought by the Administration to address state and regional concerns, including a change to return unobligated state share balances in the fund to the states. (For more information, see the " Office of Surface Mining Reclamation and Enforcement " section in this report.) Arts and Humanities , including whether funding for the arts and humanities is an appropriate federal responsibility, and, if so, what should be the proper level of federal support for cultural activities. (For more information, see the " National Endowment for the Arts and National Endowment for the Humanities " section in this report.) BIA Schools and IHS Hospitals , particularly whether to enact funding cuts proposed in the President's FY2006 budget. (For more information, see the " Bureau of Indian Affairs " and the "Indian Health Service" sections in this report.) Clean Water and Drinking Water State Revolving Funds , especially the adequacy of funding to meet state and local wastewater and drinking water needs. These state revolving funds provide seed monies for state loans to communities for wastewater and drinking water infrastructure projects. (For more information, see the "Environmental Protection Agency" section in this report.) Competitive Sourcing , namely the extent to which government functions should be privatized, agency funds can and should be used for such efforts, and agencies are communicating appropriately with Congress on their competitive sourcing activities. (For more information, see the " Competitive Sourcing of Government Jobs " section in this report.) Fish and Wildlife Service Programs , including the appropriate levels of funding for the endangered species program, state and tribal wildlife grants, and the multinational species conservation fund, and whether changes to the endangered species program are warranted. (For more information, see the " Fish and Wildlife Service " section in this report.) Indian Trust Funds , especially the method by which an historical accounting will be conducted of Individual Indian Money (IIM) accounts to determine correct balances in the class-action lawsuit against the government involving tribal and IIM accounts. (For more information, see the " Office of Special Trustee for American Indians " section in this report.) Intentional Human Dosing Studies , in particular the adequacy of health safety standards for research subjects and general ethical questions with respect to EPA's use of data from such studies, whether conducted by EPA or others, for determining associated human health risks of pesticides. (For more information, see the "Environmental Protection Agency" section in this report.) Land Acquisition , including the appropriate level of funding for the Land and Water Conservation Fund for federal land acquisition and the state grant program, and extent to which the fund should be used for activities not involving land acquisition. (For more information, see " The Land and Water Conservation Fund (LWCF) " section in this report.) Outer Continental Shelf Leasing , particularly the moratoria on preleasing and leasing activities in offshore areas, and oil and gas leases in offshore California. (For more information, see the " Minerals Management Service " section in this report.) Superfund , notably the adequacy of proposed funding to meet hazardous waste cleanup needs, and whether to continue using general Treasury revenues to fund the account or reinstate a tax on industry that originally paid for most of the program. (For more information, see the "Environmental Protection Agency" section in this report.) Wild Horses and Burros , particularly the sale of excess animals under new authority and the slaughter of some animals. (For more information, see the " Bureau of Land Management " section in this report.) Wildland Fire Fighting , involving questions about the appropriate level of funding to fight fires on agency lands; advisability of borrowing funds from other agency programs to fight wildfires; implementation of a new program for wildland fire protection and locations for fire protection treatments; and impact of environmental analysis, public involvement, and challenges to agency decisions on fuel reduction activities. (For more information, see the " Bureau of Land Management " and " Department of Agriculture: Forest Service " sections in this report.) Table 2 below contains information on congressional consideration of the FY2006 Interior appropriations bill. The Bureau of Land Management (BLM) manages approximately 261 million acres of public land for diverse and sometimes conflicting uses, such as energy and minerals development, livestock grazing, recreation, and preservation. The agency also is responsible for about 700 million acres of federal subsurface mineral resources throughout the nation, and supervises the mineral operations on an estimated 56 million acres of Indian Trust lands. Another key BLM function is wildland fire management on about 370 million acres of DOI, other federal, and certain nonfederal land. For FY2006, the appropriations law included $1.78 billion for BLM, a reduction from the FY2005 enacted level of $1.82 billion. The original House-passed bill had included $1.76 billion and the original Senate-passed bill had contained $1.79 billion. See Table 3 below. The Administration's FY2006 budget supported amending the Southern Nevada Public Land Management Act (SNPLMA) to change the allocation of proceeds of BLM land sales in Nevada. Under current law, none of the funds are deposited in the general fund of the Treasury. The President supported depositing 70% of the receipts there, instead of using the money in Nevada, for instance, to buy environmentally sensitive lands. The House-passed bill had sought to require the Secretary of the Interior to report to the House Appropriations Committee on past expenditures under SNPLMA during FY2003 and FY2004. This provision was not included in the FY2006 law. (For information on this issue, see CRS Issue Brief IB10076, Bureau of Land Management (BLM) Lands and National Forests , coordinated by [author name scrubbed] and [author name scrubbed].) For Management of Lands and Resources, the FY2006 law contained $860.8 million, an increase of 3% over FY2005. The House originally had approved $845.8 million for FY2006, while the Senate had supported $867.0 million. This line item includes funds for an array of BLM land programs, including protection, recreational use, improvement, development, disposal, and general BLM administration. The FY2006 law would increase some programs over FY2005, including resource protection and law enforcement; resource management planning; and management of forests, rangelands, riparian areas, recreation, wildlife, and oil and gas. The law provided a 35% increase to the Challenge Cost Share Program, rather than the 89% increase that had been sought by the Administration. Through this program, BLM and local communities and citizens jointly fund and carry out conservation programs. The law did not fund the Cooperative Conservation Initiative, for which the Administration had requested $6.0 million for restoration and conservation projects. The FY2006 law decreased funds for some other programs from FY2005, including Alaska minerals, wild horses and burros, and deferred maintenance. The FY2006 appropriations law continued to bar funds from being used for energy leasing activities within the boundaries of national monuments, as they were on January 20, 2001, except where allowed by the presidential proclamations that created the monuments. The law also continued the moratorium on accepting and processing applications for patents for mining and mill site claims on federal lands. However, applications meeting certain requirements that were filed on or before September 30, 1994, would be allowed to proceed, and third party contractors would be authorized to process the mineral examinations on those applications. In report language, the House Appropriations Committee directed BLM to report by December 31, 2005, on the steps that may be needed to proceed with oil shale development. The Senate Appropriations Committee, in report language, supported accelerating oil shale development. The FY2006 law did not include a limitation on funds for wild horses and burros, as originally passed by the House. Specifically, the House language would have prohibited funds in the bill from being used for the sale or slaughter of wild horses and burros (as defined in P.L. 92-195). Proponents of the amendment had sought to prevent BLM from selling, during FY2006, excess wild horses and burros under new authority enacted in last year's appropriations law ( P.L. 108-447 ). According to BLM, 41 animals that were sold under the new authority were subsequently resold or traded, and then sent to slaughterhouses by the new owners. Advocates of the amendment asserted that there are alternatives for controlling populations of wild horses and burros on federal lands, such as through the adoption program. Opponents of the amendment contended that BLM's recent efforts to revise the sale procedure will prevent sold animals from ending up in slaughterhouses. They maintain that the new sale authority is needed because adoptions and other efforts to reduce herd sizes have been insufficient. Further, they assert that significant funds used for caring for animals in holding facilities could be redirected to other government priorities. The report of the Senate Appropriations Committee encouraged BLM to fund the pilot adoption program of the National Wild Horse Association in Nevada. (For information on this issue, see CRS Issue Brief IB10076, Bureau of Land Management (BLM) Lands and National Forests , coordinated by [author name scrubbed] and [author name scrubbed].) For Wildland Fire Management for FY2006, the appropriations law contained $766.6 million as previously passed by the Senate. This is a decrease of 8% from the FY2005 level (including emergency appropriations). The original House-passed bill was similar to the Senate-passed version, but contained $761.6 million due to less funding for state and local fire assistance. The Administration sought to zero out funds for state and local fire assistance, on the grounds that the fire assistance programs of the Forest Service (FS) and Federal Emergency Management Agency (FEMA) address the needs of local fire departments. The House originally supported $5.0 million while the Senate had approved $10.0 million, essentially the same as the FY2005 appropriation ($9.9 million). The $10.0 million was included in the FY2006 law. In report language, the Senate Appropriations Committee expressed "dismay" at the proposal to eliminate this rural fire assistance ( S.Rept. 109-80 , p. 12). (For additional information on wildland fires, see the " Department of Agriculture: Forest Service " section in this report.) For FY2006, the appropriations law included $272.9 million for fire preparedness—5% over the FY2005 enacted level of $258.9 million. The increase was sought to cover aviation support contracts and firefighter training, among other costs. For fire suppression, the FY2006 law provided $234.2 million, a 26% decrease from the FY2005 enacted level of $317.1 million (including emergency funds) and a 40% decrease from FY2004. While the average annual cost of fire suppression has increased overall over the past decade, the FY2006 request represents the ten-year average cost of fire suppression, according to the Administration. In report language, the House Appropriations Committee expressed continued concern with the high costs of fire suppression, and directed DOI and the FS to examine fires with suppression costs exceeding $10.0 million. For other fire operations during FY2006, the law included $259.5 million. This constitutes a 2% increase over the FY2005 level of $255.3 million. It contained an increase of 5% for hazardous fuels reduction, for an FY2006 level of $211.2 million. The wildland fire funds appropriated to BLM are used for fire fighting on all Interior Department lands. Interior appropriations laws also provide funds for wildland fire management to the Forest Service (Department of Agriculture) for fire programs primarily on its lands. A focus of both departments is implementing the Healthy Forests Restoration Act of 2003 ( P.L. 108-148 ) and the National Fire Plan, which emphasize reducing hazardous fuels which can contribute to catastrophic fires. For FY2006, the appropriations law included $11.9 million for BLM construction, a 5% increase over the FY2005 level. The original House-passed bill had contained $11.5 million while the Senate-passed bill had contained $10.0 million. The President had sought a reduction of 43% from FY2005. For Land Acquisition for FY2006, the law included $8.8 million, 22% less than the FY2005 enacted level. Within that total, funding was provided for five specific acquisitions. The House originally had approved $3.8 million, providing funds for management of the acquisition program and emergencies rather than specific new acquisitions. The original Senate-passed bill had contained $12.3 million, and had funding for specified new acquisitions. A Senate amendment had sought to eliminate funds for BLM land acquisition, and reduce or eliminate acquisition funds for other land management agencies, while providing additional funds for certain Indian health programs. The amendment fell on a point of order. The appropriation for BLM acquisitions fell steadily from $49.9 million in FY2002 through the FY2005 enacted level. Money for land acquisition is appropriated from the Land and Water Conservation Fund. (For more information, see the " The Land and Water Conservation Fund (LWCF) " section in this report.) For the O&C Lands, which include highly productive timber lands, the FY2006 law contained $110.1 million for FY2006, an increase of 2% over the FY2005 enacted level of $107.5 million. The House, Senate, and Administration had supported that level. This activity funds programs related to revested Oregon and California Railroad grant lands and related areas, including for land improvements and for managing, protecting, and developing resources on these lands. For further information on the Department of the Interior , see its website at http://www.doi.gov . For further information on the Bureau of Land Management , see its website at http://www.blm.gov/nhp/index.htm . CRS Report RL32244, Grazing Regulations: Changes by the Bureau of Land Management , by [author name scrubbed]. CRS Report RL32315, Oil and Gas Exploration and Development on Public Lands , by [author name scrubbed]. CRS Issue Brief IB10076. Bureau of Land Management (BLM) Lands and National Forests , by [author name scrubbed] and [author name scrubbed], coordinators. For FY2006, the President requested $1.32 billion for the Fish and Wildlife Service (FWS), slightly less (0.7%) than the enacted level for FY2005 ($1.33 billion). The FY2006 House-passed level was $1.31 billion; the Senate-passed level was $1.32 billion. P.L. 109-54 contained $1.33 billion. By far the largest portion of the FWS annual appropriation is for the Resources Management account. The President's FY2006 request was $985.6 million, a 2% increase over the FY2005 level of $962.9 million. The House approved $1.01 billion, a 4% increase over FY2005. The Senate-passed level was $993.5 billion, a 3% increase over FY2005. The FY2006 appropriations law provided $1.01 billion, a 5% increase over FY2005. Among the programs included in Resources Management are the Endangered Species program, the Refuge System, and Law Enforcement. The President's FY2006 budget proposed enacting legislation to open part of the Coastal Plain in the Arctic National Wildlife Refuge to oil and gas exploration and development. The budget proposed that the first lease sale would be held in 2007. Under the proposal, this and subsequent sales were estimated to generate $2.4 billion in federal revenues from bonus bids over the next five years. While no such provision was included in H.R. 6 , as signed by the President on August 8, 2005, many expect to see such a measure included in a reconciliation bill in the fall of 2005. (For information on the debate over whether to approve energy development in the Refuge, see CRS Issue Brief IB10136, Arctic National Wildlife Refuge (ANWR): Controversies for the 109 th Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed].) Funding for the Endangered Species program is one of the perennially controversial portions of the FWS budget. The Administration proposed to reduce the program (by 2%) from $143.2 million in FY2005 to $140.1 million in FY2006. The FY2006 law contained $151.6 million, a 6% increase over FY2005. See Table 4 below. A number of other related programs also benefit conservation of species that are listed, or proposed for listing, under the Endangered Species Act. The President's request would have increased the Landowner Incentive Program from $21.7 million in FY2005 to $40.0 million in FY2006. Congress approved $24.0 million for the program. Stewardship Grants would have risen from $6.9 million in FY2005 to $10.0 million under the President's request. The final bill contained $7.4 million. The Cooperative Endangered Species Conservation Fund (for grants to states and territories to conserve threatened and endangered species) would have fallen from $80.5 million in FY2005 to $80.0 million for FY2006 under the Administration's request. In the end, Congress appropriated $82.2 million for FY2006. See Table 4 below. Under the President's request, total FY2006 funding for the Endangered Species program and related programs would have increased to $270.1 million. Congress increased these programs overall to $265.2 million. For refuge operations and maintenance in FY2006, the President proposed $393.9 million, an increase from $381.0 million in FY2005. The President's request restructured the account, dividing it into several new subaccounts. The House approved $394.4 million; the Senate-passed level was $393.9 million. The FY2006 appropriations law bill contained $393.4 million. The President proposed $57.6 million for Law Enforcement—an increase of $2.0 million from the FY2005 level ($55.6 million). The House-passed level was $57.8 million, and the Senate-passed level was $57.6 million. The FY2006 appropriations law contained $57.7 million. For FY2006, the Administration proposed $41.0 million for Land Acquisition, 11% over FY2005, but 5% less than the FY2004 level of $43.1 million. (See Table 5 .) P.L. 109-54 reduced the program to $28.4 million. This program is funded from appropriations from LWCF. In the past, the bulk of this FWS program had been for specified acquisitions of federal refuge land, but a portion was used for closely related functions such as acquisition management, land exchanges, emergency acquisitions, purchase of inholdings, and general overhead ("Cost Allocation Methodology"). In recent years, less of the funding has been reserved for traditional land acquisition. Congress continued this trend for FY2006, reserving $13.7 million for specified acquisitions, and funding the remainder of the program at $14.7 million. (For more information, see " The Land and Water Conservation Fund (LWCF) " section in this report.) The National Wildlife Refuge Fund (also called the Refuge Revenue Sharing Fund) compensates counties for the presence of the non-taxable federal lands of the National Wildlife Refuge System (NWRS). A portion of the fund is supported by the permanent appropriation of receipts from various activities carried out on the NWRS. However, these receipts are not sufficient for full funding of authorized amounts, and county governments have long urged additional appropriations to make up the difference. Congress generally provides additional funding. The President requested and Congress enacted $14.4 million for FY2006; the FY2005 level was $14.2 million. This FY2006 level, combined with expected receipts, would provide about 41% of the authorized full payment, down from 44% in FY2005 and 47% in FY2004. The MSCF has generated considerable constituent interest despite the small size of the program. It benefits Asian and African elephants, tigers, rhinoceroses, great apes, and marine turtles. The President's FY2006 budget again proposed to move funding for the Neotropical Migratory Bird Conservation Fund (NMBCF) into the MSCF. Congress has rejected the proposed transfer annually from FY2002 to FY2006. For FY2006, the President proposed $8.3 million for the MSCF (including the proposed transfer of the NMBCF to this program). The proposal included cuts in programs for great apes, rhinos, tigers, and African and Asian elephants, in contrast to increases in programs for marine turtles and neotropical migratory birds. Congress enacted modest increases over FY2005 for the subprograms. (See Table 6 below.) The State and Tribal Wildlife Grants program helps fund efforts to conserve species (including non-game species) of concern to states and tribes. The program was created in the FY2001 Interior appropriations law ( P.L. 106-291 ) and further detailed in subsequent Interior appropriations bills. (It lacks any separate authorizing statute.) Funds may be used to develop conservation plans as well as to support specific practical conservation projects. A portion of the funding is set aside for competitive grants to tribal governments or tribal wildlife agencies. The remaining state portion is for matching grants to states. A state's allocation is determined by formula. The President proposed $74.0 million, an increase from $69.0 million in FY2005. The FY2006 appropriations law decreased the program to $68.5 million. See Table 7 below. For further information on the Fish and Wildlife Service , see its website at http://www.fws.gov/ . CRS Issue Brief IB10136. Arctic National Wildlife Refuge (ANWR): Controversies for the 109 th Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Issue Brief IB10144. The Endangered Species Act (ESA) in the 109 th Congress: Conflicting Values and Difficult Choices , by [author name scrubbed], [author name scrubbed], [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RS21157, Multinational Species Conservation Fund , by [author name scrubbed] and [author name scrubbed]. The National Park Service (NPS) is responsible for the National Park System, currently comprising 388 separate and very diverse park units with more than 84 million acres. The NPS and its 20,000 employees protect, preserve, interpret, and administer the park system's diverse natural and historic areas representing the cultural identity of the American people. The Park System has some 20 types of area designations, including national parks, monuments, memorials, historic sites, battlefields, seashores, recreational areas, and other classifications. The NPS also supports resource conservation activities outside the Park System. The FY2006 Interior appropriations law provided $2.29 billion for the NPS, a decrease of $75.8 million from the FY2005 enacted level ($2.37 billion), but $40.6 million more than the request ($2.25 billion). (See Table 8 below.) The FY2006 request had sought increases for the operations line item, but decreases or level funding for most other line items. This year, enhanced security and infrastructure upgrades are planned for certain parks. The original House-passed bill contained $2.23 billion, while the Senate originally approved $2.32 billion. Issues affecting the NPS but not tied to specific funding accounts were addressed. One provision included in the FY2006 Interior appropriations law would prevent the NPS from studying or implementing any plan to reduce the water level of Lake Powell below levels required to operate Glen Canyon Dam. The law also contained a Senate-backed provision of $10.0 million, which must be matched with nonfederal contributions, for a Martin Luther King, Jr., memorial in Washington, DC. Another provision extended the controversial rule to allow individual snowmobiles into Yellowstone and Grand Teton National Parks for another year (covering the upcoming winter season of 2005-2006). Congress enacted a similar provision as part of the FY2005 Consolidated Appropriations Act ( P.L. 108-447 ) to prevent lawsuits from blocking snowmobile access to those parks last winter. Not included in the law was House language that had sought to prohibit DOI funds from being used for concession contracts except those that require that souvenir-type merchandise sold at NPS units be made in the United States. Instead, conference report language directed the NPS to explore ways to encourage the sale of American-made souvenirs by NPS concessioners, with a written progress report by December 1, 2006. The park operations line-item is the primary source of funding for the national parks and accounts for more than two-thirds of the total NPS budget. It supports the activities, programs, and services essential to the day-to-day operations of the Park System, and covers resource protection, visitors' services, facility operations, facility maintenance, and park support programs, as well as employee pay, benefits, and other fixed costs. The majority of operations funding is provided directly to park managers. The FY2006 Interior appropriations law provided $1.74 billion for park operations, or $60.5 million more than the FY2005 enacted level ($1.68 billion). The FY2006 request for NPS operations was $1.73 billion, and the House and Senate originally had passed funding of about $1.75 billion. Park advocacy groups have estimated that, in recent years, the national parks operate, on average, with two-thirds of needed funding. The condition of the national parks and the adequacy of their care and operation continue to be controversial. This budget item supports the U.S. Park Police, a full-service, uniformed law enforcement entity of the NPS with primary jurisdiction at park sites within metropolitan areas of Washington, DC; New York City; and San Francisco. The USPP also provides specialized law enforcement services to other park units when requested, through deployment of professional police officers to support law enforcement trained and commissioned park rangers working in park units system-wide. The enacted level for FY2005 was $80.1 million. For FY2006, the Senate approved $80.4 million, the same as the request, but $2.0 million below the House allowance of $82.4 million. The conferees split the difference and the law provided $81.4 million for FY2006. An internal review concluded in December 2004 reportedly addressed long-standing fiscal and management problems and redefined USPP priorities to be: 1) protection of "iconic," symbols of democracy park units and their visitors, 2) patrol of the National Mall and adjacent parks, 3) special events and crowd management, 4) criminal investigations, and 5) traffic control and parkway patrol. This line item funds a variety of park recreation and resource protection programs and an international park affairs office, as well as programs connected with state and local community efforts to preserve natural, cultural, and heritage resources. The FY2006 request was $36.8 million, a decrease of $24.2 million (40%) from the FY2005 appropriation of $61.0 million. The request did not seek funds for statutory or contractual aid. The Administration has previously proposed discontinuing these programs, requesting no funds for FY2005, but Congress provided $11.2 million. For FY2006, the original House-passed bill contained $49.0 million for National Recreation and Preservation, but no funds for statutory or contractual aid. The original Senate-passed bill contained $8.2 million for statutory or contractual aid, with $56.7 million for the entire line item. The FY2006 Interior appropriations law provided $7.1 million for statutory or contractual aid and $55.0 million for the whole line item, which is $6.0 million below FY2005. The FY2006 request proposed $5.0 million for funding the 27 existing National Heritage Areas (NHAs), a reduction of $9.6 million (66%) from the FY2005 enacted level ($14.6 million). In recent years, the Administration's requests for heritage area partnerships have been significantly lower than the previous year's appropriation, but Congress has maintained or increased NHA funding. The House included $15.0 million for Heritage Partnership Programs for FY2006, while the Senate approved $13.6 million for NHAs. The FY2006 law provided $13.5 million for NHAs. DOI officials had testified that the $12.5 million requested for FY2006 for Preserve America, a proposed program that was not funded in FY2005, could be used in part to fund NHAs. The original House-passed bill did not contain FY2006 funding for Preserve America, while the Senate-passed bill had allowed that not more than $7.5 million of the allocation to Save America's Treasures could be used for Preserve America pilot grants. The FY2006 Interior appropriations law did not fund Preserve America. This once-popular matching grant program, created in 1978, provided direct federal assistance to urban localities to rehabilitate recreational facilities. In FY2001 and FY2002, Congress appropriated $30.0 million annually for UPARR. Since then, no money has been provided for new grants. For FY2006, neither the President, the House, nor the Senate sought funds for new grants and none was provided. The grant administration portion of the program was transferred to the National Recreation and Preservation line item in FY2005. Administration of more than 100 active grants approved in FY2000-FY2002 continues. The enabling legislation, the Urban Park and Recreation Act of 1978 ( P.L. 95-625 , title X; 16 U.S.C. §§2501-2514), requires that grant-assisted sites remain recreation facilities and ongoing NPS stewardship and protection activities continue for the 1,528 recreation sites. The construction line item funds new construction, as well as rehabilitation and replacement of park facilities. The FY2006 Interior appropriations law provided $301.3 million for NPS construction, $10.1 million more than the House and $2.1 million above the Senate, but $51.7 million less than FY2005 enacted. In addition, the law provided $17.0 million from prior year balances, which had been requested by the Administration and approved by the House and Senate (but is not included in the figures herein). For FY2006, the Administration had requested $307.4 million for NPS construction for high priority health, safety, and resource protection needs. This was a decrease of $45.6 million from the FY2005 enacted appropriation of $353.0 million (including $50.8 million in emergency funding for disaster response). The original House-passed bill contained $291.2 million while the original Senate-passed bill included $299.2 million. (For information on NPS maintenance, see CRS Issue Brief IB10145, National Park Management , coordinated by [author name scrubbed].) For FY2006, appropriations under the Land and Water Conservation Fund (LWCF) totaled $64.9 million, with $34.9 million for NPS land acquisition and $30.0 million for state assistance programs, known as stateside assistance. An additional $9.9 million from prior year balances is to be used for land acquisition. The land acquisition funds are used to acquire lands, or interests in lands, for inclusion within the National Park System. State assistance is for recreation-related land acquisition and recreation planning and development by the states, with the funds allocated by a formula and states determining their spending priorities. The FY2006 total was $81.4 million below the FY2005 enacted level. The Administration had requested $54.5 million. For FY2006, the House originally had approved $9.4 million, while the Senate-passed bill included $86.0 million. The sizable reduction in the original House-passed level in large part stemmed from not providing funds for new LWCF State Assistance Grants, as had been recommended by the President. However, the House did include $1.6 million, as requested, to administer existing grants. FY2005 funding for state assistance programs was $91.2 million. The Senate approved $30.0 million for the state assistance program, and this amount prevailed in conference. Administration representatives had testified that state project grants are more appropriately funded through other means, and that in a period of budgetary constraint, such programs should have a lower priority than other NPS activities. (For more information, see " The Land and Water Conservation Fund (LWCF) " section in this report.) The reduction proposed by the House was due also to a reduction for federal land acquisition. The FY2006 budget request was $52.9 million. The original House-passed bill contained $7.8 million for NPS land acquisition management activities (plus $9.9 million of prior year appropriations), but did not include money for specified acquisitions. The Senate had approved $56.0 million for NPS land acquisition and provided specific park unit recommendations. A Senate amendment to cut NPS land acquisition, and reduce or eliminate acquisition funding for other land management agencies, fell on a point of order. The Historic Preservation Fund (HPF), administered by the NPS, provides grants-in-aid to states (primarily through State Historic Preservation Offices), territories, the Federated States of Micronesia, and certified local governments, for activities specified in the National Historic Preservation Act (P.L. 89-665; 16 U.S.C. §470). These activities include protecting cultural resources and enhancing economic development by restoring historic districts, sites, buildings, and objects significant in American history and culture. Preservation grants are normally funded on a 60% federal/40% state matching share basis. HPF also provides funding for cultural heritage projects for Indian tribes, Alaska Natives, and Native Hawaiians. For FY2006, the final appropriation was $73.3 million for the HPF, including $36.3 million for grants-in aid to states, $4.0 million for tribal grants, $30.0 million for Save America's Treasures and $3.0 million for HBCUs. The FY2006 appropriation for HPF reflected an increase over the FY2006 House-passed bill ($72.7 million), the FY2006 Administration request ($66.2 million), and the FY2005 level ($71.7 million). However, it was a decrease from the Senate-passed bill ($74.5 million.) The FY2006 enacted appropriation for HPF included $30.0 million for Save America's Treasures, which the President had proposed to cut in half. The Save America's Treasures program preserves nationally significant intellectual and cultural artifacts and historic structures. Due to concerns that the program did not reflect geographic diversity, annual appropriations laws have required that project recommendations be subject to approval by the Appropriations Committees prior to distribution of funds. From the total for Save America's Treasures for FY2006, $13.3 million would be for competitive grants with $16.8 million specified by Congress for designated projects. The House-passed bill did not specify funding for a proposed "Preserve America" program. However, the Senate-passed bill provided that not to exceed $7.5 million of the funding for Save America's Treasures may be allocated to Preserve America pilot grants. The FY2005 appropriations law did not fund these grants. The FY2006 appropriation provided that not to exceed $5.0 million could be allocated to Preserve America grants. Preserve America grants-in-aid would supplement Save America's Treasures in supporting community efforts to develop resource management strategies and to encourage heritage tourism. Preserve America grants would be competitively awarded on a matching basis, as one-time seed money grants. (See Table 9 below.) The Senate Appropriations Committee report stated that the consideration in this session of a bill to reauthorize the National Historic Preservation Act would likely include discussion of the Preserve America program and Save America's Treasures. An issue that is often considered during the appropriations process is whether historic preservation programs should be funded by private money rather than the federal government. Congress eliminated permanent federal funding for the National Trust for Historic Preservation, but has funded on a temporary basis the Trust's endowment fund for endangered properties. Also, HPF previously included funds for preserving and restoring historic buildings and structures on HBCU campuses. An appropriation in FY2001 of $7.2 million represented the unused authorization remaining under law. There was no funding for HBCUs under HPF for FY2002 or FY2003. The FY2004 appropriations law provided $3.0 million through competitive grants administered by the NPS, and the FY2005 law provided $3.4 million. For FY2006, the Administration did not propose funding for HBCUs under HPF, but the House-passed bill would have provided $3.5 million. During Senate floor consideration, an amendment was agreed to that would provide $2.0 million for HBCUs. The final FY2006 law provided $3.0 million for HBCUs. During House debate on FY2006 Interior appropriations, the Chairman of the House Resources Committee objected to the appropriation for the Historic Preservation Fund (and other programs) on the grounds that it was not authorized for FY2006 and that there should be no appropriation without an authorization. His amendment on this issue was ruled out of order as constituting legislation on an appropriations bill. For further information on the National Park Service , see its website at http://www.nps.gov/ . For further information on Historic Preservation , see its website at http://www.cr.nps.gov/hps/ . CRS Report 96-123. Historic Preservation: Background and Funding, by [author name scrubbed]. CRS Issue Brief IB10145. National Park Management , coordinated by [author name scrubbed]. CRS Issue Brief IB10141. Recreation on Federal Lands , coordinated by Kori Calvert and [author name scrubbed]. The U.S. Geological Survey (USGS) is the nation's premier science agency in providing physical and biological information related to natural hazards; certain aspects of the environment; and energy, mineral, water, and biological sciences. In addition, it is the federal government's principal civilian mapping agency and a primary source of data on the quality of the nation's water resources. Funds for the USGS are provided in the line item Surveys, Investigations, and Research , for seven activities: the National Mapping Program; Geologic Hazards, Resources, and Processes; Water Resources Investigations; Biological Research; Enterprise Information; Science Support; and Facilities. For FY2006, P.L. 109-54 appropriated $976.0 million for the USGS, which is an increase of $31.5 million over the FY2005 enacted level of $944.6 million, and $42.5 million over the Administration's request of $933.5 million. See Table 10 below. P.L. 109-54 provided $131.2 million for the National Mapping Program; $238.8 million for Geologic Hazards, Resource, and Processes; $214.9 million for Water Resources Investigations; $177.5 million for Biological Research; $47.1 million for Enterprise Information; $70.3 million for Science Support; and $96.2 million for Facilities. All of these accounts received funding above their FY2005 enacted levels. In this past year, more than 27 major disasters were declared in the United States from earthquakes to landslides, hurricanes, fires, and floods. Further, the United States and its territories have 169 volcanoes considered to be active, more than any other country in the world. USGS has the lead federal responsibility under the Disaster Relief Act ( P.L. 93-288 , popularly known as the Stafford Act) to provide notification for earthquakes, volcanoes, and landslides and reduce losses through effective forecasts and warnings based on the best possible scientific information. The FY2006 budget request sought to address these responsibilities by proposing funding increases to assist in the development and use of tsunami monitoring systems, seismic activity monitoring, and geothermal assessments. P.L. 109-54 provided approximately $6.2 million more than the FY2005 enacted level for the account that addresses natural hazards. Of the proposed reductions in the Administration's FY2006 budget, the largest would have been for $28.3 million in the Geologic Hazards, Resource, and Processes line item due to cuts in programs related to mineral resources. Both the House- and Senate-passed bills recommended restoring this funding, and in the enacted legislation funding was restored for FY2006. The FY2006 request also proposed to eliminate funding for the Water Resources Research Institutes, which the Administration claims have been generally self-supporting. The Institutes were funded at $6.4 million in FY2005. P.L. 109-54 provided $6.5 million to these institutes for FY2006. In FY2005, the Administration proposed a new line item for funding within the USGS called Enterprise Information. This program consolidates funding of all USGS information needs including information technology, security, services, and resources management, as well as capital asset planning. Funding for these functions previously was distributed among several different USGS offices and budget subactivities. P.L. 109-54 provided $47.1 million for this account, which is $2.7 million above the FY2005 enacted level and $0.7 million less than the Administration's request. There are three primary programs within Enterprise Information: (1) Enterprise Information Security and Technology, which supports management and operations of USGS telecommunications (e.g., computing infrastructure and email); (2) Enterprise Information Resources, which provides policy support, information management, and oversight over information services; and (3) Federal Geographic Data Coordination, which provides operational support and management for the Federal Geographic Data Committee (FGDC). The FGDC is an interagency, intergovernmental committee that encourages collaboration to make geospatial data available to state, local, and tribal governments, as well as communities. The National Mapping Program aims to provide access to high quality geospatial information to the public. P.L. 109-54 provided $131.2 million for FY2006, which was $12.5 million above the FY2005 enacted level of $118.8 million and $2.3 million below the Administration's request of $133.5 million. The FY2006 appropriations law reflected an increase of $11.7 million over the FY2005 enacted level to support land remote sensing archives and capability. This increase is anticipated to allow the continued availability of Landsat data and provide the necessary resources for data reception, processing, and archiving. As part of the budget response to a funding shortfall in Landsat 7, due to fewer purchases of the data, the USGS sought $6.0 million in FY2006 for the Landsat Program. Landsat 7 is a satellite that takes remotely-sensed images of the Earth's land surface and surrounding coastal areas primarily for environmental monitoring. Last year, approximately 25% of the data from the Landsat 7 Satellite began showing signs of degradation. Nevertheless, an interagency panel concluded that the Landsat 7 Satellite data "continues to provide a unique, cost-effective solution to operational and scientific problems." In report language, the House Appropriations Committee commended the Administration and the USGS for providing a proposal to continue Landsat operations. In contrast to the House-passed bill, the Senate-passed bill would have provided a reduction of $6.0 million from the Administration's request for the Landsat 7 program. Although in report language the Senate Appropriations Committee commended the DOI and others for working out a plan for the program, it expressed that the plan is no different from previous recommendations which amounted to a subsidy of current operations. The Committee stated that it expected the USGS and the DOI to provide more explanation of this proposal before the FY2006 Interior bill was conferenced, and before it gave the Administration's request more consideration ( S.Rept. 109-80 , p. 33-34). For Geologic Hazards, Resources, and Processes activities, P.L. 109-54 provided $238.8 million, which was $9.6 million above the FY2005 enacted level of $229.2 million, and $30.7 million above the Administration's request. This line item covers programs in three activities: Hazard Assessments, Landscape and Coastal Assessments, and Resource Assessments. P.L. 109-54 provided funding of $77.7 million for the Resource Assessments line item, although the Administration had sought a reduction of $28.3 million for FY2006. Both the House and Senate-passed bills would have restored funding for this program. According to the Administration, proposed cuts in the mineral resources program would terminate the collection of basic geologic and mineral deposit data for the nation, the internationally-coordinated global mineral resource assessment, and many mineral commodity reports. The approximately $25 million the Administration had sought for the minerals program was to continue funding minerals surveys and studies relevant to ongoing federal land management, regulatory, and remediation activities. The conference committee report stated that it would seem "irresponsible for the Administration to decrease or eliminate funding for what is clearly an inherently Federal responsibility." ( H.Rept. 109-188 , p. 89). The House Appropriations Committee, in report language, asserted that minerals and mineral products are important to the U.S. economy, and that minerals resources research and assessments are a core responsibility of the USGS. The House Committee further stated that objective data on mineral commodities cannot be generated by the private sector. The Geologic Hazards Assessments program received $82.2 million from P.L. 109-54 , as recommended by the Administration, an increase of $6.2 million over the FY2005 enacted level. This reflected increased attention to monitoring natural hazards and mitigating their effects. For Water Resources Investigations, P.L. 109-54 provided $214.9 million for FY2006, which was $3.7 million above the FY2005 enacted level, and $10.8 million above the Administration's request. The Hydrologic Monitoring, Assessments, and Research activity was funded at $144.7 million for FY2006, $2.2 million above the FY2005 enacted level. As with the Bush Administration's FY2002-FY2005 budget requests, the FY2006 request sought to discontinue USGS support for Water Resources Research Institutes because, the Administration alleged, most institutes have succeeded in leveraging sufficient funding for program activities from non-USGS sources. However, Congress provided funding for the institutes from FY2002 to FY2005. P.L. 109-54 funded the institutes at a level of $6.5 million. The National Assessment of Water Availability and Use is a program under Water Resources that is being implemented this year. This program aims to provide a better understanding of the nation's water resources, trends in water use, and forecasting water availability. In FY2005, the program began a $1.2 million pilot study in the Great Lakes Basin to evaluate water resources and use. The FY2006 budget proposed to extend the program to the western United States through a pilot effort that would provide and analyze information to characterize changes in ground-water availability in large regional aquifer systems. In report language, the House Appropriations Committee stated an expectation that USGS continue this project, implement a second pilot project, and continue to expand this program to other parts of the country. Conference managers expressed concern over reports that suggest that the USGS water resources program is providing, or seeking to provide, commercial services to federal and non-federal entities in competition with the private sector. The managers expect that the USGS will use the services of the private sector to the best of its ability whenever feasible, cost effective, and consistent with the principles of government standards. The Biological Research Program under the USGS generates and distributes information related to the conservation and management of the nation's biological resources. P.L. 109-54 provided $177.5 million for this activity for FY2006, which is $5.8 million above the FY2005 enacted level of $171.7 million and $4.6 million above the requested amount of $172.9 million. The activities under Biological Research include Biological Research and Monitoring, Biological Information Management and Delivery, and Cooperative Research Units. The FY2006 request had proposed increases for projects and research in deepwater fisheries in the Great Lakes, freshwater fisheries in the western United States, and control of invasive species, such as the tamarisk in the Rio Grande Basin. Conference managers included funding increases for the invasive species initiative within this program and directed the USGS to fund leafy spurge eradication. Further, the managers included funding for surveying efforts to describe the population range of the ivory-billed woodpecker. In concordance with the Senate Appropriations Committee, conference managers expressed concern that no coordinated budgetary and programmatic plan has been made for the expansion of the National Biological Information Infrastructure (NBII). The NBII is a program that provides increased access to data on the nation's biological resources. Science Support focuses on those costs associated with modernizing the infrastructure for managing and disseminating scientific information. P.L. 109-54 provided $70.3 million for Science Support for FY2006, which was an increase of $4.8 million from the FY2005 enacted level of $65.6 million, and a decrease of $2.0 million from the Administration's request of $72.3 million. Facilities focuses on the costs for maintenance and repair of facilities. P.L. 109-54 provided $96.2 million for facilities, which was $1.5 million over the Administration request of $94.7 million, and $1.6 million over the FY2005 enacted level of $94.6 million. For further information on the U.S. Geological Survey , see its website at http://www.usgs.gov/ . The Minerals Management Service (MMS) administers two programs: the Offshore Minerals Management (OMM) Program and the Minerals Revenue Management (MRM) Program. OMM administers competitive leasing on Outer Continental Shelf (OCS) lands and oversees production of offshore oil, gas, and other minerals. MRM collects and disburses bonuses, rents, and royalties paid on federal onshore and OCS leases and Indian mineral leases. Revenues from onshore leases are distributed to states in which they were collected, the general fund of the U.S. Treasury, and designated programs. Revenues from the offshore leases are allocated among the coastal states, Land and Water Conservation Fund, the Historic Preservation Fund, and the U.S. Treasury. The MMS estimates that it collects and disburses over $6 billion in revenue annually. This amount fluctuates based primarily on the prices of oil and natural gas. Over the past decade, royalties from natural gas production have accounted for 40% to 45% of annual MMS receipts, while oil royalties have been not more than 25%. The Administration submitted an FY2006 total MMS budget of $290.2 million. This included $7.0 million for Oil Spill Research and $283.1 million for Royalty and Offshore Minerals Management. The Royalty and Offshore Minerals Management total budget would have included $148.3 million for OMM, $87.3 million for MRM, and $47.5 million for general administration. The total FY2006 budget of $290.2 million in the Administration request reflected $167.4 million in appropriations and an additional $122.7 million from offsetting collections which MMS has been retaining since 1994. The Administration's total budget was 5% above the $277.6 million provided for FY2005. The Administration proposed to reduce the FY2006 appropriations by 4%, from $173.8 million enacted for FY2005 to $167.4 million for FY2006. The House-passed version contained $282.4 million for MMS programs (including Oil Spill Research). The major differences between the Administration's request and the House bill were in two Royalty Management programs: the Strategic Petroleum Reserve to Royalty-in-Kind (RIK) conversion and the Compliance and Asset Management (CAM) initiative. The House considered the $9.8 million in the budget request to fund these programs unnecessary, because the House had included a provision to allow the RIK program to recover its costs directly. Thus, while the President requested $51.9 million for CAM, the House bill would have provided $42.1 million. The Senate-passed version included a total of $282.2 million for MMS programs (including Oil Spill Research) and would have funded the CAM initiative at $43.1 million. The Senate bill generally would have funded MMS programs at or near the requested or House-passed levels in all other categories. See Table 11 below. The conferees settled on a total MMS budget of $283.4 million. This included $149.9 million for OMM, $78.5 million for MRM, $47.9 million for General Administration, and $7.0 million for oil spill research. They supported the use of $122.7 million in offsetting collections, for a net appropriation of $160.7 million. These were the levels enacted in the FY2006 appropriations law, making the FY2006 appropriation 8% lower than the FY2005 level. Issues not directly tied to specific funding accounts were once again considered during the FY2006 appropriations process, as they were in recent years. Oil and gas development moratoria along the Atlantic and Pacific Coasts, parts of Alaska, and the Gulf of Mexico (GOM) have been in place since 1982, as a result of public laws and executive orders of the President. The FY2006 moratoria language, in virtually every respect, was in agreement with the House- and Senate-passed bills. The FY2006 appropriations law retained the moratorium on funding preleasing and leasing activities in the Eastern Gulf of Mexico (GOM), as had the FY2005 appropriations law. Sales in the Eastern GOM have been especially controversial. There are several blocks that were removed by the Administration from Eastern GOM sale 181 that could become available for release after 2007, as part of the Administration's new five-year leasing program. Industry groups contend that Eastern GOM sales are too limited, arguing that the resource potential is significant. Environmental groups and some state officials contend that the risks of development to the environment and local economies are too great. The FY2006 appropriations law included House- and Senate-passed language, which continued leasing moratoria in other areas, including the Atlantic and Pacific Coasts, as did the FY2005 appropriations law. The House- and Senate-passed versions of the FY2006 Interior Appropriations bill did not include language to prohibit funding for preleasing and leasing activity in the North Aleutian Basin Planning Area, nor did the FY2006 appropriations law. The FY2005 and FY2004 appropriations laws also omitted this language. However, the issue remains controversial. There is some industry interest in eventually opening the area to oil and gas development as an offset to the depressed fishing industry in the Bristol Bay area. Environmentalists and others oppose this effort. The North Aleutian Basin Planning Area, containing Bristol Bay, is not in the MMS current five-year (2002-2007) leasing plan. Under the Outer Continental Shelf Lands Act of 1953 (OCSLA, 43 U.S.C. §1331), the Secretary of the Interior submits five-year leasing programs that specify the time, location, and size of lease sales to be held during that period. Industry groups are seeking legislation to allow natural-gas-only drilling in areas currently under the moratoria. The industry proposal would allow state governors to veto any proposal within 60 miles of their shores and would extend states' coastal boundaries up to 12 miles to increase the potential of generating more revenue for the states. During the FY2006 House Appropriations Committee markup, an amendment that would lift the moratoria in the Eastern Gulf of Mexico if U.S. oil imports reach two-thirds of consumption was withdrawn. Another amendment, also withdrawn, would have allocated $50.0 million to inventory offshore natural gas. The amendment to lift the moratoria in the Eastern Gulf of Mexico was offered again on the House floor (by Representative Istook), but a point of order was sustained on the grounds that it constituted legislation on an appropriations bill. A second amendment (by Representative John E. Peterson) that would have lifted the moratorium on offshore natural gas was defeated (157-262). Oil and gas leasing in offshore California also has continued to be a controversial issue. Under the Coastal Zone Management Act of 1972 (16 U.S.C. §1451), development of federal offshore leases must be consistent with state coastal zone management plans. In 1999, MMS extended 36 of the 40 leases at issue in offshore California by granting lease suspensions, but the State of California contended that it should have first reviewed the suspensions for consistency with the state's coastal zone management plan. In June 2001, the U.S. Court for the Northern District of California agreed with the State of California and struck down the MMS suspensions. The Bush Administration appealed this decision January 9, 2002, to the U.S. Ninth Circuit Court of Appeals, after the state rejected a more limited lease development plan that involved 20 leases using existing drilling platforms. However, on December 2, 2002, a three-judge panel of the Ninth Circuit upheld the District Court decision. The Department of the Interior did not appeal this decision and is currently working with lessees to resolve the issue. The breach-of-contract lawsuit that was filed against MMS by nine oil companies seeking $1.2 billion in compensation for their undeveloped leases is pending further action. Several oil and gas lessees submitted a new round of suspension requests to prevent lease termination and loss of development rights. The MMS has prepared six environmental assessments and found no significant impact for processing the applications for Suspension of Production or Operations. Under the Coastal Zone Management Act, a consistency review by MMS and the state's response to that review will occur before a decision is made to grant or deny the requests. For further information on the Minerals Management Service , see its website at http://www.mms.gov . CRS Report RL31521. Outer Continental Shelf Oil and Gas: Energy Security and Other Major Issues , by [author name scrubbed]. The Surface Mining Control and Reclamation Act of 1977 (SMCRA, P.L. 95-87 ; 30 U.S.C. §1201 note) established the Office of Surface Mining Reclamation and Enforcement (OSM) to ensure that land mined for coal would be returned to a condition capable of supporting its pre-mining land use. SMCRA also established an Abandoned Mine Lands (AML) fund, with fees levied on coal production, to reclaim abandoned sites that pose serious health or safety hazards. The law provided that individual states and Indian tribes would develop their own regulatory programs incorporating minimum standards established by law and regulations. Fee collections have been broken up into federal and state shares. Grants are awarded to the states after applying a distribution formula to the annual appropriation and drawing upon both the federal and state shares. In instances where states have no approved program, OSM directs reclamation. Several states have been pressing in recent years for increases in the AML appropriations, with an eye on the unappropriated balances in the state-share accounts that now exceed $1 billion. The total unappropriated balance—including both federal and state share accounts in the AML fund—was nearly $1.7 billion by the end of FY2004. Western states are additionally critical of the program because, as coal production has shifted westward, these states are paying more into the fund. They contend that they are shouldering a disproportionate share of the reclamation burden as more of the sites requiring remediation are in the East. In both the 108 th and 109 th Congresses, legislation was introduced to reauthorize fee collections and make a number of changes to the program to address state and regional concerns. Other legislative proposals for reauthorization of AML collections were introduced in the House and Senate. The 108 th Congress was unable to reach a resolution of the issues surrounding the structure of the program. In light of the narrowing prospects that a broader AML bill would be enacted before the conclusion of the 108 th Congress, the Senate Committee on Appropriations added a short-term extension—to May 31, 2005—during its markup of the FY2005 Interior appropriations bill. The House version of the bill had no comparable language. However, authorization for collection of AML fees was extended to the end of June 2005 by the Consolidated Appropriations Act for 2005 ( P.L. 108-447 ). Pending a longer-term settlement of unresolved issues about the structure of the AML program, the Emergency Supplemental Appropriations Act for FY2005 ( P.L. 109-13 ) extended authorization for collection of the fees that are deposited to the AML reclamation fund to the end of FY2005. As passed by the Senate, the FY2006 Interior appropriations bill sought to provide a further extension of the AML fund to June 30, 2006. The House bill included no similar provision. The FY2006 appropriations law included the Senate language extending the authorization for collections to the end of June 2006. The FY2005 budget request, which included a proposal to restructure the program to return the unobligated balances to the states, totaled $243.9 million for the AML fund. However, neither the House nor Senate embraced the Administration's plan. The final appropriation for the fund for FY2005 was $188.2 million. The FY2006 request again sought to return unobligated state-share balances to the states over ten years. This part of the request accounted for $58.0 million of the Administration's total FY2006 OSM request of $356.5 million. The FY2006 request for additional funds to begin return of unobligated state share balances also was rejected by both the House and Senate. With that exception, the House and Senate were in agreement with the levels requested by the Administration for OSM, including $188.0 million for the AML fund. This was the level enacted. The other component of the OSM budget is for regulation and technology programs. For regulation and technology, Congress provided $108.4 million in FY2005. The House and Senate agreed to the Administration's request for $110.5 million for FY2006 and that level was enacted into law. Included in the FY2006 request was $10.0 million for the Appalachian Clean Streams Initiative (ACSI), the same level as in FY2002-FY2005. This figure was retained in the FY2006 appropriations law. Owing to the Administration proposal to return unobligated state balances, and as noted above, the Administration requested $356.5 million for OSM, a 20% increase over the FY2005 level of $296.6 million. However, the total for OSM enacted for FY2006 was $298.5 million, reflecting House and Senate agreement with the other components of the Administration's request. In its FY2006 budget, the Administration requested $1.5 million for minimum program states . These states have significant AML problems, but insufficient levels of current coal production to generate significant fees to the AML fund. Currently, grants to the states from the AML fund are based on states' current and historic coal production. The minimum funding level for each of these states was increased to $2.0 million in 1992. However, over the objection of those states who would have preferred the full authorization, Congress has appropriated $1.5 million to minimum program states since FY1996. While the Administration sought $2.0 million for minimum program states in its FY2005 request, it returned to $1.5 million for FY2006. This level was provided in the FY2006 law. Also, SMCRA included a provision for a $10.0 million allocation from the AML collections for the Small Operators Assistance Program (SOAP). However, no appropriation was requested for FY2006, and none was included in the FY2006 appropriations law. For further information on the Office of Surface Mining Reclamation and Enforcement , see its website at http://www.osmre.gov/osm.htm . CRS Report RL32373, Abandoned Mine Land Fund Reauthorization: Selected Issues , by [author name scrubbed] (pdf). The Bureau of Indian Affairs (BIA) provides a variety of services to federally-recognized American Indian and Alaska Native tribes and their members, and historically has been the lead agency in federal dealings with tribes. Programs provided or funded through the BIA include government operations, courts, law enforcement, fire protection, social programs, education, roads, economic development, employment assistance, housing repair, dams, Indian rights protection, implementation of land and water settlements, management of trust assets (real estate and natural resources), and partial gaming oversight. BIA's FY2005 direct appropriations are $2.30 billion. For FY2006, the Administration proposed $2.19 billion, a decrease of $108.2 million (5%) below FY2005. The House approved $2.32 billion, an increase of $22.3 million (1%) over FY2005 and of $130.5 million (6%) over the Administration's proposal. The Senate approved $2.27 billion, which was $26.3 million (1%) less than FY2005, $81.9 million (4%) more than the FY2006 proposal, and $48.6 million (2%) less than the House FY2006 amount. Congress enacted an FY2006 total of $2.31 billion, an increase of $12.5 million (less than 1%) over FY2005 and of $120.8 million (6%) over the Administration's proposal. For the BIA, its major budget components, and selected BIA programs, Table 12 below presents figures for FY2005-FY2006 and the percentages of change from FY2005 to FY2006 for the enacted levels. Decreases are shown with minuses. Key issues for the BIA, discussed below, include the reorganization of the Bureau, especially its trust asset management functions, and problems in the BIA school system. In April 2003, Secretary of the Interior Norton began implementing a reorganization of the BIA, the Office of Assistant Secretary-Indian Affairs (AS-IA), and the Office of Special Trustee for American Indians (OST) in the Office of the (see " Office of Special Trustee for American Indians " section below). The reorganization arises from issues and events related to trust funds and trust assets management, and is integrally related to the reform and improvement of trust management. Historically, the BIA has been responsible for managing Indian tribes' and individuals' trust funds and trust assets. Trust assets include trust lands and the lands' surface and subsurface economic resources (e.g., timber, grazing, or minerals), and cover about 45 million acres of tribal trust land and 10 million acres of individual Indian trust land. Trust assets management includes real estate services, processing of transactions (e.g., sales and leases), surveys, appraisals, probate functions, land title records activities, and other functions. The BIA, however, has been frequently charged with mismanaging Indian trust funds and trust assets. Investigations and audits in the 1980s and after supported these criticisms, especially in the areas of accounting, linkage of owners to assets, and retention of records. This led to a trust reform act in 1994 and the filing of an extensive court case in 1996. (See " Office of Special Trustee for American Indians " section below.) The 1994 act created the OST, assigning it responsibility for oversight of trust management reform. In 1996, trust fund management was transferred to the OST from the BIA, but the BIA retained management of trust assets. Unsuccessful efforts at trust management reform in the 1990s led DOI to contract in 2001 with a management consultant firm. The firm's recommendations included both improvements in trust management and reorganization of the DOI agencies carrying out trust management and improvement. Following nearly a year of DOI consultation on reorganization with Indian tribes and individuals, DOI announced the reorganization in December 2002, even though the department and tribal leaders had not reached agreement on all aspects of reorganization. DOI, however, faced a deadline in the court case to file a plan for overall trust management reform, and reorganization was part of DOI's plan. The current reorganization plan of BIA, AS-IA, and OST—which DOI expects to complete in FY2005—chiefly involves trust management structures and functions. Under the plan, the BIA's trust operations at regional and agency levels remains in those offices but is split off from other BIA services. The OST adds trust officers to BIA regional and agency offices to oversee trust management and provide information to Indian trust beneficiaries. Certain tribes, however, that had been operating trust management reform pilot projects with their regional BIA offices under self-governance compacts were excluded from the reorganization, under the FY2004 and FY2005 appropriations acts. The BIA, OST, and AS-IA, together with the Office of Historical Trust Accounting in the Secretary's office, also are implementing a separate trust management improvement project, announced in March 2003, which includes improvements in trust asset systems, policies, and procedures, historical accounting for trust accounts, reduction of backlogs, modernization of computer technology (the court case led in 2001 to a continuing shutdown of BIA's World-Wide-Web connections), and maintenance of the improved system. Many Indian tribes and tribal organizations, and the plaintiffs in the court case, have been critical of the new reorganization and have urgently asked that it be suspended. Tribes argue that the reorganization is premature, because new trust procedures and policies are still being developed; that it insufficiently defines new OST duties; and that other major BIA service programs are being limited or cut to pay for the reorganization. For FY2004-FY2005, Congress responded to tribal concerns by excluding from BIA reorganization certain tribes that have been operating trust management reform pilot projects with their regional BIA offices. Congress retained this exclusion for FY2006. Congress has not, however, suspended or stopped the reorganization, and Congress agreed with the Administration's proposed FY2006 funding for BIA Central Office trust reform and reorganization. The BIA funds 185 elementary and secondary schools and peripheral dormitories, with over 2,000 structures, educating about 48,000 students in 23 states. Tribes and tribal organizations, under self-determination contracts and other grants, operate 120 of these institutions; the BIA operates the remainder. BIA-funded schools' key problems are low student achievement and, especially, a large number of inadequate school facilities. Some observers feel tribal operation of schools will improve student achievement. To encourage tribal boards to take over operation of current BIA-operated schools, for FY2004-FY2005, Congress created an administrative cost fund to pay tribal school boards' start-up administrative costs. The fund's FY2005 appropriation was $986,000. The Administration's FY2006 proposal reduced this fund to $500,000, and Congress agreed. Many BIA school facilities are old and dilapidated, with health and safety deficiencies. BIA education construction covers both construction of new school facilities to replace facilities that cannot be repaired, and improvement and repair of existing facilities. Schools are replaced or repaired according to priority lists. The BIA has estimated the current backlog in education facility repairs at $942 million, but this figure changes as new repair needs appear each year. Table 12 above shows FY2005 education construction funds, and for FY2006 the Administration's proposal, the House and Senate amounts, and the enacted level for education construction. The Administration proposed reducing the total FY2006 appropriation for education construction by $89.5 million (34%). Included in the proposal was a reduction for replacement-school construction of $62.1 million (59%); the Administration asserted that a majority of school replacement projects funded in previous years are still under construction and that BIA needed to focus on completing them. Congress disagreed with the Administration's assertion and partly restored the Administration's cuts, reducing FY2006 total education construction by $53.5 million (20%) and replacement-school construction by $40.1 million (38%) from the FY2005 enacted levels. In response to the Administration's position that some projects under self-determination contracts have been too slow in commencing, the FY2005 appropriations act authorized the BIA to reassume management of school construction projects that are under tribal self-determination contracts if the construction does not begin within 18 months of funding availability. Congress retained this provision for FY2006. Because construction appropriations are, in some tribes' views, not reducing construction needs fast enough, Indian tribes have urged Congress to explore additional sources of construction financing. In the FY2001-FY2005 Interior appropriations acts, Congress authorized a demonstration program that allows tribes to help fund construction of BIA-funded, tribally-controlled schools. For FY2005, Congress funded the program at $12.3 million (earmarking all the funding for three projects). For FY2006, the Administration proposed no funding for this program and Congress agreed. For further information on education programs of the Bureau of Indian Affairs , see its website at http://www.oiep.bia.edu . CRS Report RS22056, Native American Issues in the 109 th Congress , by [author name scrubbed]. The Office of Insular Affairs (OIA) provides financial assistance to four insular areas—American Samoa, the Commonwealth of the Northern Mariana Islands (CNMI), Guam, and the U.S. Virgin Islands—as well as three former insular areas—the Federated States of Micronesia (FSM), Palau, and the Republic of the Marshall Islands (RMI). OIA staff also manages relations between these jurisdictions and the federal government and works to build the fiscal and governmental capacity of units of local government. Funding for the OIA consists of two parts: (1) permanent and indefinite appropriations and (2) discretionary and current mandatory funding subject to the appropriations process. The total request for FY2006 was $392 million; of this total, $345.5 million (88%) is mandated through statutes. A total of $343 million in permanent funding would be provided in FY2006 as follows: $198 million to three freely associated states (RMI, FSM, and Palau) under conditions set forth in the respective Compacts of Free Association; $115 million in fiscal assistance, divided between the U.S. Virgin Islands for estimated rum excise and income tax collections and Guam for income tax collections; and $30 million in each year for American Samoa, Guam, CNMI, or the state of Hawaii, from FY2004 through FY2023, for health, educational, social, or public safety services, or infrastructure costs, associated with the residence of "qualified nonimmigrants" from the RMI, FSM, or Palau. Discretionary and current mandatory funds that require annual appropriations constitute the balance of the OIA budget. Two accounts—Assistance to Territories (AT) and the Compact of Free Association (CFA)—comprise discretionary and current mandatory funding. AT funding is used to provide grants for the operation of the government of American Samoa, infrastructure improvement projects on many of the insular area islands, and specified natural resource initiatives. The CFA account provides federal assistance to the freely associated states pursuant to compact agreements negotiated with the federal government. Appropriations for FY2005 total $81.0 million, with AT funded at $75.6 million and CFA at $5.5 million. The FY2006 request sought to reduce AT funding to $74.3 million, and CFA assistance to $4.9 million, for a total of $79.1 million. The House approved amounts higher than requested for AT ($76.6 million) and CFA ($5.4 million), resulting in total recommended discretionary and mandatory funding of almost $82 million. The Senate approved a total of $81.6 million, $76.7 million for AT and $4.9 million for CFA. Little debate has occurred in recent years on funding for the territories and the OIA. For FY2006, Congress enacted a total of $82.2 million for the Insular Affairs account—$76.9 million for AT, and $5.4 million for CFA. For further information on Insular Affairs, see its website at http://www.doi.gov/oia/index.html . For FY2006, Congress enacted $236.0 million for PILT. Originally the House had passed $242.0 million for PILT, while the Senate had approved $235.0 million. The FY2006 enacted level is an increase over the FY2005 level ($226.8 million) and a larger increase over the Administration's FY2006 request ($200.0 million). The Administration had recommended cutting PILT as part of an effort to reduce the deficit and to provide funding at a level that is more consistent with historical appropriations levels. In earlier action, the House Appropriations Committee had recommended $230.0 million for PILT, but the House agreed to a floor amendment to increase PILT funding by $12.0 million with an offset in the DOI Departmental Management account. The amendment was supported on the grounds that local governments need additional PILT funds to provide vital services, and that additional funds would help close the gap between authorized and appropriated funding. The amendment was opposed on the assertion that there were insufficient funds in the bill overall to direct more money to PILT, and that it would have an adverse impact on management of important DOI programs and result in the elimination of staff positions. The House subsequently rejected another amendment that sought to increase PILT funding by an additional $4.8 million, with an offset in funds for the National Endowment for the Arts. A Senate amendment seeking to increase PILT funding to $242.0 million, equal to the House passed level, was withdrawn. The PILT program compensates local governments for federal land within their jurisdictions because federal land is not taxed. Since the beginning of the program in 1976, payments of more than $3 billion have been made. The PILT program has been controversial, because in recent years appropriations have been substantially less than authorized amounts, ranging from 42% to 68% of authorized levels between FY2000 and FY2004 (the most recent year available). County governments claim that rural areas in particular need additional PILT funds to provide the kinds of services that counties with more private land are able to provide. Beginning in FY2004, the Administration proposed, and Congress agreed, to shift the program from the BLM to Departmental Offices in DOI. The shift was supported because PILT payments are made for lands of the Fish and Wildlife Service, National Park Service, Forest Service, and certain other federal lands, in addition to BLM lands. For further information on the Payments in Lieu of Taxes program, see the BLM website at http://www.doi.gov/pilt/ . CRS Report RL31392, PILT (Payme nts in Lieu of Taxes): Somewhat Simplified , by [author name scrubbed]. The Office of Special Trustee for American Indians (OST), in the Secretary of the Interior's office, was authorized by Title III of the American Indian Trust Fund Management Reform Act of 1994 ( P.L. 103-412 ; 25 U.S.C. §§4001 et seq). The OST generally oversees the reform of Interior Department management of Indian trust assets, the direct management of Indian trust funds, establishment of an adequate trust fund management system, and support of department claims settlement activities related to the trust funds. Indian trust funds formerly were managed by the BIA, but in 1996, as authorized by P.L. 103-412 , the Secretary of the Interior transferred trust fund management from the BIA to the OST. (See " Bureau of Indian Affairs " section above.) Indian trust funds managed by the OST comprise two sets of funds: (1) tribal funds owned by about 300 tribes in approximately 1,400 accounts, with a total asset value of about $3 billion; and (2) individual Indians' funds, known as Individual Indian Money (IIM) accounts, in about 245,000 accounts with a current total asset value of about $400 million. (Figures are from the OST FY2006 budget justifications.) The funds include monies received from claims awards, land or water rights settlements, and other one-time payments, and from income from land-based trust assets (e.g., land, timber, minerals), as well as from investment income. OST's FY2005 appropriation was $228.1 million. The Administration proposed $303.9 million for FY2006, an increase of $75.9 million (33%). Congress approved $226.1 million, a decrease of $1.9 million (1%) from FY2005 and of $77.8 million (26%) from the Administration's proposal. Table 13 below presents figures for FY2005-FY2006 for the OST. Key issues for the OST are its current reorganization, an historical accounting for tribal and IIM accounts, and litigation involving tribal and IIM accounts. Both OST and BIA began a reorganization in 2003 (see " Bureau of Indian Affairs " section above), one aspect of which is the creation of OST field operations. OST is installing fiduciary trust officers and administrators at the level of BIA agency and regional offices. OST and BIA plan on completing the reorganization in FY2005. Many Indian tribes disagree with parts of the OST and BIA reorganization and have asked Congress to put it on hold so that OST and BIA can conduct further consultation with the tribes. The historical accounting effort seeks to assign correct balances to all tribal and IIM accounts, especially because of litigation. Because of the long historical period to be covered (some accounts date from the 19 th century), the large number of IIM accounts, and the large number of missing account documents, an historical accounting based on actual account transactions is expected to be large and time-consuming. The Interior Department in 2003 proposed an extensive, five-year, $335 million project to reconcile IIM accounts. OST continues to follow this historical accounting plan for IIM accounts, subject to court rulings (see " Litigation " below) or congressional actions. All of the increase that the Administration sought for the OST for FY2006 was for historical accounting, which was proposed to increase from $57.2 million in FY2005 to $135.0 million in FY2006. Of the proposed $135.0 million, $95.0 million was to be for IIM accounts and $40.0 million for tribal accounts. The House and Senate rejected the Administration's proposed $77.8 million increase for historical accounting and instead capped FY2006 historical accounting funds at $58.0 million (the FY2005 pre-rescission level). The House Appropriations Committee's report recommended using the $77.8 million to restore the Administration's proposed cuts in BIA education and Indian Health Service funding. The Senate Appropriations Committee's report also cited "ongoing litigation and uncertainty" as reasons for not funding the Administration's full request for historical accounting ( S.Rept. 109-80 , p. 50). The FY2006 Interior appropriations law capped funding for historical accounting activities at $58.0 million. An IIM trust funds class-action lawsuit ( Cobell v. Norton ) was filed in 1996, in the federal district court for the District of Columbia, against the federal government by IIM account holders. Many OST activities are related to the Cobell case, including litigation support activities, but the most significant issue for appropriations concerns the method by which the historical accounting will be conducted to estimate IIM accounts' proper balances. The DOI estimated its proposed method would cost $335 million over five years and produce a total owed to IIM accounts in the low millions; the plaintiffs' method, the cost of which is uncertain, was estimated to produce a total owed to IIM accounts over $100 billion . In 2003, the district court conducted a lengthy trial to decide which historical accounting method to use in estimating the IIM accounts' proper balances. The court's decision on historical accounting was delivered on September 25, 2003. The court rejected both the plaintiffs' and DOI's proposed historical accounting plans and instead ordered DOI to account for all trust fund and asset transactions since 1887, without using statistical sampling. The Interior Department estimated that the court's choice for historical accounting would cost $6-12 billion. In the FY2004 Interior appropriations act, Congress enacted a controversial provision aimed at the court's September 25, 2003 decision. The provision directed that no statute or trust law principle should be construed to require the Interior Department to conduct the historical accounting until either Congress had delineated the department's specific historical accounting obligations or December 31, 2004, whichever was earlier. Based on this provision, the DOI appealed the court's September 25, 2003 order. The U.S. Court of Appeals for the District of Columbia temporarily stayed the September 25 order. During the stay, on April 5, 2004, the IIM plaintiffs and the federal government announced agreement on two mediators in their case and mediation commenced. Meanwhile, no bill was introduced in the 108 th Congress to delineate the government's historical accounting obligation. On December 10, 2004, the Appeals Court overturned much of the September 25 order, finding among other things that the congressional provision prevented the district court from requiring DOI to follow its directions for a historical accounting. The Appeals Court noted that the provision expired on December 31, 2004, but did not discuss the district court's possible reissue of the order. On February 23, 2005, the district court issued an order on historical accounting very similar to its September 2003 order, requiring that an accounting cover all trust fund and asset transactions since 1887 and not use statistical sampling. The DOI, which estimates that compliance with the new order would cost $12-13 billion, appealed the order. The district court did not stay its order during the appeal, however, so various deadlines that DOI must meet are still in effect. One news story suggests DOI is seeking congressional action to delay the court-ordered accounting, similar to the provision in the FY2004 Interior appropriations act. Congress has long been concerned that the current and potential costs of the Cobell lawsuit may jeopardize DOI trust reform implementation, reduce spending on other Indian programs, and be difficult to fund. Besides the ongoing expenses of the litigation, possible costs include $12-13 billion for the court-ordered historical accounting, a Cobell settlement that might cost as much as the court-ordered historical accounting, the over-$100 billion that Cobell plaintiffs estimate their IIM accounts are owed, or the $27.5 billion that the Cobell plaintiffs have proposed as a settlement amount. Among the funding sources for these large costs discussed in a recent House Interior Appropriations Subcommittee hearing were discretionary appropriations and the Treasury Department's "Judgment Fund," but some senior appropriators consider the Fund insufficient even for a $6-$13 billion dollar settlement. Among other options, Congress may await a stay, reversal, or other appeals court action, or it may enact another delay to the court-ordered accounting, or it may take other actions such as directing a settlement or delineating the department's historical accounting obligations. In their reports for FY2006, both the House Appropriations Committee and the conference committee stated that they rejected the position that Congress intended in the 1994 Act to order an historical accounting on the scale of that ordered by the district court. The House Appropriations Committee also noted that House and Senate authorizing committees are committed to developing a legislative solution, and a settlement bill ( S. 1439 ) has been introduced and received hearings. No language in the FY2006 appropriations law either delayed the court-ordered historical accounting or otherwise settled the suit. For further information on the Office of Special Trustee for American Indians , see its website at http://www.ost.doi.gov/ . CRS Report RS21738. The Indian Trust Fund Litigation: An Overview of Cobell v. Norton, by [author name scrubbed]. CRS Report RS22056, Native American Issues in the 109 th Congress , by [author name scrubbed]. The National Indian Gaming Commission (NIGC) was established by the Indian Gaming Regulatory Act (IGRA) of 1988 ( P.L. 100-497 ; 25 U.S.C. §§2701 et seq) to oversee Indian tribal regulation of tribal bingo and other Class II operations, as well as aspects of Class III gaming (e.g., casinos and racing). The primary appropriations issue for NIGC is whether its funding is adequate for its regulatory responsibilities. The NIGC is authorized to receive annual appropriations of $2 million, but its budget authority consists chiefly of annual fees assessed on tribes' Class II and III operations. IGRA currently caps NIGC fees at $8 million per year. The NIGC in recent years has requested additional funding because it has experienced increased demand for its oversight resources, especially audits and field investigations. Congress, in the FY2003-FY2005 appropriations acts, increased the NIGC's fee ceiling to $12 million, but only for FY2004-FY2006. The FY2006 NIGC budget proposal requested that this increased fee ceiling be continued through FY2007, and Congress agreed in the FY2006 appropriations law. In the FY2006 budget, as in its FY2005 request, the Administration proposed language amending IGRA to create an adjustable, formula-based ceiling for fees instead of the current fixed ceiling. The Administration contends that a formula-based fee ceiling would allow NIGC funding to grow as the Indian gaming industry grows. Gaming tribes do not support the increased fee ceiling or the proposed amendment of IGRA's fee ceiling, arguing that NIGC's budget should first be reviewed in the context of extensive tribal and state expenditures on regulation of Indian gaming, and that changes in NIGC's fees should be developed in consultation with tribes. Congress did not agree to the Administration's proposed amendment to IGRA in the FY2005 or FY2006 appropriations laws. During FY1999-FY2005, all NIGC activities have been funded from fees, with no direct appropriations. The Administration did not propose a direct appropriation for the NIGC for FY2006, nor did Congress consider one. For further information on the National Indian Gaming Commission , see its website at http://www.nigc.gov/nigc/index.jsp . In the first session of 109 th Congress, EPA's funding was moved to the jurisdiction of the Interior subcommittees beginning with the FY2006 appropriations. This was the result of the abolition of the House and Senate Appropriations Subcommittees on Veterans Affairs, Housing and Urban Development, and Independent Agencies, which previously had jurisdiction over EPA. EPA's responsibilities have grown since it was established in 1970, as Congress has enacted an increasing number of environmental laws, as well as major amendments to these statutes. The Agency's primary responsibilities include the regulation of air quality, water quality, pesticides, and toxic substances; the management and disposal of solid and hazardous wastes; and the cleanup of environmental contamination. EPA also awards grants to assist state, tribal and local areas in controlling pollution. Without adjusting for inflation, the agency's appropriation has risen from $1.0 billion when the agency was established in FY1970 to $8.03 billion in FY2005. For FY2006, P.L. 109-54 provided $7.81 billion for EPA, including $80.0 million in funds rescinded from past fiscal year appropriations. In effect, the rescinded funds are an offset in the FY2006 appropriations resulting in a net appropriation of $7.73 million. The rescissions of previous years appropriations are to be taken from grants, contracts, and interagency agreements for various program activities, whose availability under their original agreements has expired. Although included in the State and Tribal Assistance Grants (STAG) account, the joint explanatory statement in the conference report ( H.Rept. 109-188 , p.112) emphasized that the provision applies to all EPA appropriations accounts. Unlike the House-passed bill, neither text of P.L. 109-54 nor the joint explanatory statement specify redirecting the rescinded funds for specific EPA activities for FY2006. The House-passed bill had specified that a rescission of $100.0 million in unobligated funds from past appropriations be used for increased support for the clean water State Revolving Fund (SRF) under the STAG account (see discussion under " Water Infrastructure " in this EPA section of the report). The Senate-passed bill included $58.0 million in "rescinded" previous year funds within the STAG account but did not specify its allocation for FY2006. P.L. 109-54 contained significant increases for some activities and programs within each of the EPA appropriations accounts, while calling for sizeable decreases or similar funding in other areas when compared to the President's FY2006 request and the FY2005 appropriations. Traditionally, EPA's annual appropriation has been requested and enacted according to various line-item appropriations accounts, of which there currently are eight: Science and Technology; Environmental Programs and Management; Office of Inspector General; Buildings and Facilities; Hazardous Substance Superfund; Leaking Underground Storage Tank Program; Oil Spill Response; and State and Tribal Assistance Grants. Table 14 presents a breakdown of appropriations for EPA by account for FY2005 and FY2006. Figure 1 displays the portion of the FY2006 appropriations provided to EPA in P.L. 109-54 that was allocated for each account. Funding for water infrastructure, cleanup of hazardous waste sites under the Superfund program, and the Brownfields program have been among the prominent issues of debate. Other areas debated include funding for EPA's homeland security activities, "congressional project priorities" or earmarks, EPA's use and consideration of intentional human dosing studies, and EPA's implementation of Clean Air Act provisions. These funding issues are discussed below. (For more information on these and other issues, see CRS Report RL32856, Environmental Protection Agency: Appropriations for FY2006 , by [author name scrubbed] and [author name scrubbed].) Appropriations for water infrastructure projects are allocated within EPA's STAG account. P.L. 109-54 provided $900.0 million for the clean water SRF for FY2006, compared to $1.1 billion in the Senate-passed bill and $850.0 million in the House-passed bill. The FY2006 President's request was $730.0 million, and Congress appropriated $1.09 billion for FY2005. As noted earlier, the House total for the clean water SRF included $100.0 million in the form of redirected unobligated balances from past EPA appropriations. P.L. 109-54 provided $850.0 million for the drinking water SRF, the same as the House- and Senate-passed bills and the President's FY2006 request. For FY2005, Congress appropriated $843.2 million for the drinking water SRF. Together, these funds provide seed monies for state loans to communities for wastewater and drinking water infrastructure projects. Reducing funding for the clean water SRF has been contentious, as there is disagreement over the adequacy of funding to meet these needs. In recent years, Congress has appropriated significantly more funding than the Administration has requested for the clean water SRF. There has been less disagreement between Congress and the Administration about the appropriate funding level for the drinking water SRF, although some Members support higher funding to meet local needs, such as assistance to help communities comply with new standards for drinking water contaminants (e.g., arsenic and radium). Two amendments to further increase FY2006 funding for the clean water SRF were offered during the House floor debate. One amendment which would have increased the clean water SRF by $500 million was ruled out of order. A second amendment would have increased funding by $100 million but was not adopted. An amendment introduced during the Senate debate that would have modified the formula for distributing SRF funds to the states was withdrawn. Earlier this year, in agreeing to the FY2006 budget resolution ( S.Con.Res. 18 ), the Senate agreed to a floor amendment recommending $1.35 billion for the clean water SRF in FY2006, $620 million more than the FY2006 request. Although the amendment was not included in the final FY2006 budget resolution ( H.Con.Res. 95 ), the Senate approved $1.1 billion for FY2006 for the clean water SRF in passing its version of H.R. 2361 . In past EPA appropriations, Congress has set aside or designated funds for individual projects, locations, or institutions (sometimes referred to as earmarked funding ) within the various accounts. For FY2006, funding has been reduced below FY2005 appropriations for these types of projects, defined in the conference report as "high priority projects." The House Appropriations Committee had recommended a different approach for allocating some of this funding, which was not adopted in conference. The conference report provides an allocation of $33.3 million within the Science and Technology (S&T) account for "research/congressional priorities," and $50.5 million within the Environmental Programs and Management (EPM) account for "environmental protection/congressional priorities." The House-passed bill had included $40.0 million for each account, and the Senate-passed bill included $50.0 million. The FY2005 appropriations included $65.7 million in the S&T account and $92.3 million in the EPM account, for these "congressional priority" projects. The President's FY2006 request did not include funding for these projects. Unlike most grant funding, these types of congressional designations have traditionally been awarded non-competitively. The conferees did not agree to competitive solicitation for these projects within the EPM and S&T accounts as recommended by the House Appropriations Committee in its report ( H.Rept. 109-80 , p. 105-106). Instead, funding was designated for specified projects or locations within these two accounts in the conference report. P.L. 109-54 allocated $200.0 million for special project grants in the STAG account for FY2006 as proposed by both the House- and Senate-passed bills. These projects, referred to in the conference report tables as "STAG infrastructure grants/congressional priorities," include wastewater, drinking water, and storm water infrastructure projects. Communities compete for loan funds provided through the SRFs which must be repaid. Funding designated by Congress for specific locations and communities (earmarked funding) has been awarded noncompetitively as grants that require matching funds but not repayment. Whether these needs should be met with SRF loan monies or grant assistance has become an issue of debate. Congress designated (earmarked) $309.5 million within the STAG account for specified projects for FY2005. The President's FY2006 budget did not include funding for these projects. In past years, the House and Senate Appropriations Committees have proposed designated funding for specific projects in the reports on their respective bills. However, in reporting its FY2006 bill, the House Appropriations Committee did not allocate the $200.0 million for FY2006 among specific community projects. Rather the House Committee commented in its report that the allocation of these funds would be determined later in conference. The $200.0 million included in the Senate-passed bill was designated for specific projects in the Senate Appropriations Committee report. The conference report ( H.Rept. 109-188 , p. 106-112) specified individual projects for allocations of the $200.0 million appropriated in P.L. 109-54 for FY2006. FY2006 funding for EPA's homeland security activities are allocated within five of the eight EPA appropriations accounts: S&T, EPM, Hazardous Substance Superfund (Superfund), Building and Facilities, and STAG. This funding would support various activities, including critical infrastructure protection, laboratory preparedness, decontamination, protection of EPA personnel and operations, and communication. P.L. 109-54 provided $130.1 million for EPA's homeland security activities in the five accounts combined, the same as proposed in the House-passed bill. The Senate-passed bill would have provided a total of $116.0 million, while the FY2006 President's request included $184.6 million. Congress had appropriated $106.2 million for FY2005. In P.L. 109-54 , the reductions in funds provided to support EPA homeland security activities below the FY2006 requested level are within the S&T and the Superfund accounts. P.L. 109-54 provided $1.22 billion for the Hazardous Substance Superfund account after total transfers of $44.1 million to the S&T account and to the Office of the Inspector General account. The Senate- and House-passed bills would have provided similar amounts of $1.21 billion after transfers to these accounts. The President's FY2006 request included $1.24 billion and Congress appropriated $1.20 billion for FY2005. A prominent issue is the adequacy of funding for the Superfund program to clean up the nation's most hazardous waste sites. Some Members have asserted that more funds are necessary to speed the pace of remediation at contaminated sites, while other Members contend that steady funding allows a pace of cleanup that protects human health and the environment. An amendment offered during the House floor debate, but not adopted, would have provided an additional $130.0 million for the Superfund account by reducing funding in the S&T account by the same amount. Another ongoing issue has been whether the Superfund program should continue to be funded with general Treasury revenues or a tax on industry should be reinstated (which originally supported the program). The amounts in P.L. 109-54 are provided from general Treasury revenues as the Administration proposed and as recommended in the House-passed and the Senate-passed bill. Some Members of Congress advocate reinstating the Superfund taxes and contend that the use of general Treasury revenues undermines the "polluter pays" principle. Other Members and the Administration counter that viable parties are still required to pay for the cleanup of contamination and that polluters are therefore not escaping their responsibility. According to EPA, responsible parties pay for the cleanup at more than 70% of Superfund sites. P.L. 109-54 provided a combined $165.0 million for EPA's Brownfields Program for FY2006, the same as the Senate-passed bill. The House-passed bill proposed $172.1 million; the FY2005 appropriation was $163.2 million; and the FY2006 budget request included $210.1 million. This program provides assistance to states and tribes for the assessment, cleanup and redevelopment of abandoned or underutilized commercial and industrial sites. Funding for the Brownfields Program is allocated within the EPM account to cover EPA's costs of administering the program, and the STAG account for grants to perform brownfield assessments, establish revolving loan funds, clean up sites, create job training programs, and assist states and Indian tribes in establishing or enhancing their voluntary response (cleanup) programs. There is significant interest in Congress regarding EPA's policies for use of intentional human dosing studies in regulatory decision making for pesticides. P.L. 109-54 (Sec. 201) included an administrative provision prohibiting EPA's use of FY2006 appropriations to conduct or to accept, consider or rely on third-party, intentional human dosing studies for pesticides until the Agency issues relevant final rulemaking on the subject. The provision further stipulated that the final EPA rule will not permit pregnant women, infants, and children to be used as subjects in such testing, and will be consistent with National Academy of Sciences (NAS) 2004 recommendations and human experimentation principles of the Nuremberg Code. The provision included in P.L. 109-54 reflected a combination of a Senate-adopted amendment regarding the rulemkaing, and identical House- and Senate-adopted amendments that would have prohibited EPA's use of FY2006 funds to conduct or consider intentional human dosing studies for pesticides for the fiscal year. Some manufacturers, scientists, and Members assert that human dosing studies provide valuable scientific evidence regarding risks of certain chemicals that can not be obtained with non-human research. Others recognize the potential value and validity of such studies but advocate the establishment of strict safeguards and protocols to protect the health of those subjects participating in such studies. Some scientists, public interest groups, and Members counter that, given ethical questions and potential economic motivation, caution and substantial further evaluation is needed to ensure alternative approaches have been exhausted. Others suggest that purposefully exposing humans is not worth the potential risk under any circumstances. EPA's implementation of, and proposed changes to, several Clean Air Act provisions, as well as efforts to address climate change, have elevated interest in funding for air quality programs among Members of Congress. Prominent air quality issues include the adequacy of new ambient air quality standards for ozone and particulate matter; how best to reduce human exposure to mercury; and proposed regulations and legislation regarding the control of emissions from power plants, vehicles, and other sources. (See CRS Issue Brief IB10137, Clean Air Act Issues in the 109 th Congress, by [author name scrubbed]; and CRS Report RL32755, Air Quality: Multi-Pollutant Legislation in the 109 th Congress , by [author name scrubbed] and [author name scrubbed].) As indicated in the conference report, P.L. 109-54 provided a total of $528.1 million within the S&T, EPM, and Superfund accounts for air quality programs for FY2006. Funding supports various programmatic implementation, research, and monitoring activities including air toxics and air quality, radiation, climate protection, indoor air quality, and radon. An additional $249.2 million was provided in the STAG account for FY2006, primarily to support grants for state, local, and tribal air quality management. Comparatively, for FY2005 Congress appropriated a total of $506.8 million in the three accounts and $248.3 million in the STAG account. In addition, an administrative provision in P.L. 109-54 (Sec. 205), similar to a provision included in the Senate-passed bill, would impact a pending EPA regulation to reduce emissions of new small engines (less than 50 horsepower). This provision would prohibit the use of FY2006 appropriated funds in P.L. 109-54 or any other Act to publish a proposed, or final, small engine emissions regulation until the Agency completes a study of safety issues associated with compliance, including potential risks of fire and burns to individuals. Existing state standards for these small engines, currently only in California, would not be impacted by this provision. The small engine issue was not addressed in the House-passed bill. For further information on the Environmental Protection Agency and its budget, see its websites http://www.epa.gov and http://epa.gov/ocfo/budget/ . CRS Report RL30798, Environmental Laws: Summaries of Major Statutes Administered by the Environmental Protection Agency (EPA) , by [author name scrubbed] et al. CRS Report RL32856, Environmental Protection Agency: Appropriations for FY2006 , by [author name scrubbed] and [author name scrubbed]. CRS Report RS22064, Environmental Protection Agency: FY2006 Appropriations Highlights , by [author name scrubbed] and [author name scrubbed]. CRS Issue Brief IB10146. Environmental Protection Issues in the 109 th Congress , coordinated by [author name scrubbed] and Margaret Isler. The FY2006 Interior Appropriations Act, P.L. 109-54 , provided $4.26 billion for the Forest Service (FS). This is $547.1 million (11%) less than total FY2005 appropriations of $4.81 billion. Title V of the act is the Forest Service Facility Realignment and Enhancement Act of 2005. This provision authorizes the FS to dispose of "administrative sites" by sale, lease, or exchange at least their fair market value. Receipts would be permanently appropriated to acquire, improve, maintain, or construct/reconstruct facilities; to make improvements within the National Forest System; or to proceed with further administrative site disposals. Several amendments pertaining to FS programs were considered on the House and Senate floor. Two House amendments altered funding for the National Forest System; the net effect was a decline of $6.0 million in funding from the level recommended by the House Appropriations Committee. A House amendment (by Representative Chabot) would have prohibited funds for designing or building forest development roads for timber harvesting in the Tongass National Forest (AK); a point of order, asserting that the amendment was legislation on an appropriations bill, was raised and sustained, preventing the amendment from being considered. A similar amendment was agreed to in the House during consideration of the FY2005 Interior appropriations bill, but it was not included by the Senate or in the conference agreement for FY2005. The Senate also considered an amendment to the FY2006 bill (by Senator Sununu) to prohibit timber road construction in the Tongass, but it was defeated 39-59. The conference did not include Senate language on the Biscuit fire (OR) recovery, but the report directed a study of the issue by March 1, 2006. Fire funding and fire protection programs have been controversial. The ongoing discussion includes questions about funding levels and locations for various fire protection treatments, such as thinning and prescribed burning to reduce fuel loads and clearing around structures to protect them during fires. Another focus is whether, and to what extent, environmental analysis, public involvement, and challenges to decisions hinder fuel reduction activities. (For historical background and descriptions of funded activities, see CRS Report RL33990, Wildfire Funding , by [author name scrubbed].) The National Fire Plan comprises the FS wildland fire program (including fire programs funded under other line items) and fire fighting on DOI lands; the DOI wildland fire monies are appropriated to BLM. Congress does not fund the National Fire Plan in any one place in Interior appropriations acts. The total can be derived by combining the several accounts which the agencies identify as National Fire Plan funding. Total FY2006 funding was $2.56 billion, $76.7 million (3%) more than requested, and $413.2 million (14%) less than appropriated for FY2005 (including $524.1 million in emergency and supplemental appropriations enacted in FY2005). See Table 15 below. The act provided BLM wildfire funding for FY2006 of $766.6 million, more than the request, and less than the FY2005 appropriation (including emergency and supplemental funding). The act contained $1.82 billion for the FS for FY2006. This included $286.0 million in fuel reduction which the FS proposed to fund under the National Forest System line item, but Congress did not include it in the FY2006 law. The FS total also was more than the request, and less than FY2005 funding. The lower FY2006 funding for both agencies' wildfire budgets was primarily due to the emergency funding enacted for FY2005. The FS and BLM wildfire line items include funds for fire suppression (fighting fires), preparedness (equipment, training, baseline personnel, prevention, and detection), and other operations (rehabilitation, fuel reduction, research, and state and private assistance). This table differs from the detailed tables in CRS Report RL33990, Wildfire Funding , by [author name scrubbed], because that report rearranges data to distinguish funding for protecting federal lands, for assisting in nonfederal land protection, and for fire research and other activities. Wildfire suppression funding for FY2006 totaled $934.7 million, equal to the request, and less than FY2005 suppression funding, with emergency appropriations. The decrease from FY2005 is greater for the FS (35%) than for the BLM (26%). The request was based on an average fire year, with no contingent or emergency funding ($524.1 million enacted for FY2005). If the fire season is worse than average, the agencies have the authority to borrow unobligated funds from any other account to pay for firefighting. Such borrowing typically is repaid, commonly through subsequent emergency appropriations bills. The act provided $948.9 million for fire preparedness for FY2006, equaling the request, and more than the FY2005 appropriation. The Administration's request and the enacted increase were entirely for the BLM. The act contained a total of $701.9 million for FY2006 for other fire operations, more than the request, and more than the FY2005 appropriation. The conference restored most of the programs that the Administration proposed to terminate. Fuel reduction funding (under the President's Healthy Forests Initiative and the Healthy Forests Restoration Act of 2003, P.L. 108-148 ) was approved at $497.2 million, $5.0 million more than the request, and $33.3 million more than for FY2005. The increase over FY2005 was greater for the FS (9%) than for the BLM (5%). The conference report directed that $5.0 million of FS fuel reduction funding be used for community fire protection, and up to $5.0 million more could be used to encourage use of biomass fuels removed from the national forests. Both of these programs were authorized in the Healthy Forests Restoration Act. While funding for wildfires has been the center of debate, the Administration proposed many controversial changes in State and Private Forestry (S&PF)—programs that provide financial and technical assistance to states and to private forest owners. The FY2006 Interior Appropriations Act included passed total S&PF funding of $283.6 million—substantially (more than 10%) more than the Senate, the House, and the requested level, and substantially (17%) less than the FY2005 appropriations (including $49.1 million of emergency S&PF appropriations). However, the conference shifted funds among forest health management, cooperative fire assistance, cooperative forestry, and international programs as compared with the request. The FY2006 Interior Appropriations Act provided $101.9 million for forest health management (insect and disease control on federal and cooperative [nonfederal] lands), matching the FY2005 funding, and substantially more than the Administration had requested. In addition, funds for forest health management are included in the National Fire Plan, under Other Operations (see above). For FY2006, the act accepted the House-passed level for these additional forest health management funds, which was slightly higher than FY2005 and substantially above (more than double) the Senate-passed and requested amounts. For S&PF Cooperative Fire Assistance to states and volunteer fire departments, the act included $39.4 million, more than the FY2005 level and substantially (47%) more than the request. Nearly all the differences are in assistance to states, with assistance to volunteer fire departments differing by less than 2%. In addition, funds for cooperative fire assistance are included in the National Fire Plan, under Other Operations (see above). The FY2006 Act included funding of $54.4 million for these programs, substantially (46%) more than the request, and 13% above FY2005. For FY2006, for Cooperative Forestry (assistance for forestry activities on state and private lands), the act provided $135.3 million. Forest Legacy (for purchasing title or easements for lands threatened with conversion to nonforest uses, such as for residences) was appropriated at $57.4 million, between the House- and Senate-passed levels, and substantially less than the request of $80.0 million. For FY2006, Forest Stewardship (for states to assist private landowners) was funded at $34.7 million, more than the FY2005 level, and less than the request. Urban and Community Forestry (financial and technical assistance to localities) was funded at $28.9 million, more than the request, and less than FY2005. The act funded resource inventory at the requested level, and less than the FY2005 amount. The Administration again proposed to terminate the Economic Action Program (EAP; for rural community assistance, wood recycling, and Pacific Northwest economic assistance); the act provided $9.7 million for FY2006, more than the House-passed level and less than the Senate, and substantially below FY2005 funding of $19.0 million. For international programs (technical forestry assistance to other nations), the act provided $7.0 million, more than requested by the Administration and enacted for FY2005. The act provided total FY2006 funding of $441.2 million for FS Capital Improvement and Maintenance, $73.5 million (14%) below regular FY2005 funding of $514.7 million, and $148.7 million (25%) below total FY2005 funding, including $85.2 million in emergency and supplemental funding. The primary difference from the regular FY2005 funding was the decline in funds for constructing and maintaining facilities. The Administration had proposed cutting regular FY2005 facility funding by 41%, road funding by 16%, and trail funding by 16%. The FY2006 funds were 36% below regular FY2005 funds for facilities, and nearly matched regular FY2005 funds for roads and trails. The act also included $13.0 million for infrastructure improvement, to reduce the agency's backlog of deferred maintenance (estimated at $6.5 billion), slightly (6%) less than appropriated for FY2005. The FY2006 Interior appropriations act included $42.5 million for FS Land Acquisition from the Land and Water Conservation Fund—$30.0 million for acquisitions (including cash equalization payments and critical inholding acquisitions) and $12.5 million for acquisition management. This was nearly triple the House-passed level of $15.0 million, which included $13.0 million for acquisition management, and slightly lower than the Senate-passed level of $44.9 million (with $12.5 million for acquisition management). FY2005 appropriations for FS land acquisition totaled $61.0 million (including $12.8 million for acquisition management). (See " The Land and Water Conservation Fund (LWCF) " section in this report.) The FY2006 Interior appropriations act included $283.1 million for FS research, $6.7 million (2%) more than FY2005; fire research funding in the National Fire Plan, under Other Operations (see above) was approved at $31.2 million, $1.6 million (5%) more than FY2005. National Forest System (NFS) funding was supported at $1.42 billion, $31.4 million (2%) more than the FY2005 level. Except for minerals and geology management (which rose by $30.1 million, 54%, from FY2005), most changes in NFS funding from FY2005 were relatively modest. For information on the Department of Agriculture, see its website at http://www.usda.gov/wps/portal/usdahome . For further information on the U.S. Forest Service , see its website at http://www.fs.fed.us/ . CRS Report RL30755, Forest Fire/Wildfire Protection , by [author name scrubbed]. CRS Report RL30647, National Forest System Roadless Area Initiatives , by [author name scrubbed] and [author name scrubbed]. CRS Issue Brief IB10076. Bureau of Land Management (BLM) Lands and National Forests , by [author name scrubbed] and [author name scrubbed], coordinators. CRS Report RL33990, Wildfire Funding , by [author name scrubbed]. The Indian Health Service (IHS) is responsible for providing comprehensive medical and environmental health services for approximately 1.8 million American Indians and Alaska Natives (AI/AN) who belong to 561 federally recognized tribes located in 35 states. Health care is provided through a system of federal, tribal, and urban Indian-operated programs and facilities. IHS provides direct health care services through 34 hospitals, 59 health centers, 3 school health centers, 50 health stations, and 5 residential treatment centers. Tribes and tribal groups, through IHS contracts and compacts, operate another 14 hospitals, 179 health centers, 3 school health centers, 297 health stations (including 180 Alaska Native village clinics), and 28 residential treatment centers. IHS, tribes, and tribal groups also operate 9 regional youth substance abuse treatment centers and 2,252 units of residential quarters for staff working in the clinics. P.L. 109-54 contained an FY2006 IHS appropriation of $3.09 billion, a 4% increase from the FY2005 appropriation of $2.99 billion. The Administration had proposed $3.05 billion for FY2006, an increase of 2% over FY2005. (See Table 17 below.) IHS funding is separated into two budget categories: Health Services, and Facilities. Of the total IHS appropriation enacted for FY2006, 88% will be used for health services and 12% for the health facilities program. For the Health Services budget, the FY2006 enacted and Administration's requested levels were the same. IHS Health Services are funded not only through congressional appropriations, but also from money reimbursed from private health insurance and federal programs such as Medicare, Medicaid, and the State Children's Health Insurance Program (SCHIP). Estimated total reimbursements were $598.7 million in FY2005 and are expected to be $648.2 million in FY2006. For the FY2006 Health Services budget, Congress enacted the same amount as the Administration requested, $2.73 billion, a 5% increase over the FY2005 appropriation of $2.60 billion. The IHS Health Services budget has three subcategories: clinical services; preventive health services; and other services. The clinical services budget includes by far the most program funding. The clinical services budget enacted for FY2006 was $2.21 billion, an increase of 6% over $2.09 billion in FY2005. Clinical services include primary care at IHS and tribally run hospitals and clinics. Hospital and health clinic programs make up 62% of the clinical services budget. For hospitals and clinic programs, the FY2006 appropriation was $1.36 billion, a 5% increase over $1.29 billion in FY2005. For other programs within clinical services in FY2006, dental programs will receive $119.5 million, mental health programs $59.3 million, alcohol and substance abuse programs $145.3 million, and the catastrophic health emergency fund $18.0 million. Contract care, another clinical services budget item, refers to health services purchased from local and community health care providers when IHS cannot provide medical care and specific services through its own system. Contract care will receive $507.0 million for FY2006, 6% more than the appropriation for FY2005 of $480.3 million. For preventive health services, Congress enacted $118.9 million, an 8% increase for FY2006 over the $110.4 million for FY2005. Approved funding for the programs within preventive health services in FY2006 was $49.7 million for public health nursing, $13.8 million for health education in schools and communities, $1.7 million for immunizations in Alaska, and $53.7 million for the tribally administered community health representatives program that supports tribal community members who work to prevent illness and disease in their communities. For other health services, the law contained $404.7 million for FY2006, a 2% increase over the FY2005 appropriation of $395.5 million. The largest item in this category is contract support costs, with $268.7 million for FY2006. Contract support costs are awarded to tribes for administering programs under contracts or compacts authorized by the Indian Self-Determination Act ( P.L. 93-638 , as amended). They pay for costs tribes incur for financial management, accounting, training, and program start up. Most tribes and tribal organizations are participating in new and expanded self-determination contracts and self-governing compacts. The law provided FY2006 funding of $31.5 million for health-care scholarships, $2.4 million for tribal management grants, $33.2 million for urban Indian health, $63.1 million for direct operations, and $5.8 million for self-governance technical assistance. The FY2006 conference agreement noted that both the House and Senate Appropriations Committees expect IHS to recommend, by December 31, 2005, how to improve secondary and tertiary health care in Nevada, including facility needs and the contract health services program, after consulting with representatives of the 22 tribes of that state. The IHS's facilities category includes money for the equipment, construction, maintenance, improvement of both health and sanitation facilities, and environmental health support programs. While the Administration's proposal was $315.7 million, a 19% decrease from the total FY2005 appropriation of $388.6 million, the conference agreed to $358.5 million, 8% less than FY2005. Of this amount, the managers agreed to use of $38.3 million to fund the following facilities: Barrow Hospital, AK ($8.0 million); Fort Belknap, MT staff quarters ($3.3 million); Kayenta, AZ Health Center ($3.9 million); mobile dental units ($2.0 million); Phoenix Indian Medical Center, AZ ($8.0 million); San Carlos, AZ Health Center ($6.1 million); and small ambulatory centers ($7.0 million). See Table 17 above. The FY2006 appropriations law included language to replace a health facility in Nome, Alaska. The conferees also expect that IHS will include a "much more aggressive" proposal to fund health facility construction in future budget submissions, as expressed in the joint explanatory statement. Indians suffer from a disproportionately high rate of Type 2 diabetes. In fact, diabetes mortality is 4.3 times higher in the Indian population than in the general U.S. population. In the Balanced Budget Act of 1997 ( P.L. 105-33 ), Congress created two programs for diabetes: the IHS Special Diabetes Program for Indians, and the National Institutes of Health (NIH) Special Research Program for Type 1 Diabetes. The law required that the SCHIP appropriation for FY1998 through FY2002 be reduced by $60 million each year, with $30 million allocated to the IHS diabetes program and $30 million going to the NIH Type 1 research program. In 2000, the Benefits Improvement and Protection Act (part of P.L. 106-534 ) increased funding for each of these diabetes programs and extended authority for grants to be made under both. For each grant program, total funding was increased to $100 million for FY2001, FY2002, and FY2003. For FY2001 and FY2002, $30 million of the $100 million came from the SCHIP program appropriation and $70 million came from the general Treasury. In FY2003, the total $100 million for each program was drawn from the general Treasury. In December 2002, Congress extended the funding for these special diabetes programs through amendments to the Public Health Service Act ( P.L. 107-360 ), authorizing $150 million for each of the programs each year for FY2004 through FY2008. This funding from the general Treasury is separate from regular IHS and NIH appropriations, as noted in Table 17 . A December 2004 Interim Report to Congress on the Special Diabetes Program for Indians gave an accounting of how the money has been distributed to communities through grants. The formula for distribution of these grants depended on the prevalence and mortality or the disease burden; the number of active users of IHS services in a tribe; and a tribal size adjustment for very small communities. The funding is being used to provide prevention services. Both the House and Senate Appropriations Committee reports on FY2006 legislation mentioned this interim report. For further information on the Indian Health Service, see its website at http://www.ihs.gov/ . CRS Report RL33022, Indian Health Service: Health Care Delivery, Status, Funding, and Legislative Issues , by [author name scrubbed]. CRS Report RS22056, Native American Issues in the 109 th Congress , by [author name scrubbed]. The Office of Navajo and Hopi Indian Relocation (ONHIR) and its predecessor were created pursuant to a 1974 act ( P.L. 93-531 , as amended) to resolve a lengthy dispute between the Hopi and Navajo tribes involving lands originally set aside by the federal government for a reservation in 1882. Pursuant to the 1974 act, the lands were partitioned between the two tribes. Members of one tribe living on land partitioned to the other tribe were to be relocated and provided new homes, and bonuses, at federal expense. Relocation is to be voluntary. ONHIR's chief activities consist of land acquisition, housing acquisition or construction, infrastructure construction, and post-move support, all for families being relocated, as well as certification of families' eligibility for relocation benefits. Congress has been concerned, at times, about the speed of the relocation process and about avoiding forced relocations or evictions. For FY2005, ONHIR received an appropriation of $4.9 million, a 63% reduction from FY2004, when it received $13.4 million. Congress reduced funding because it anticipated that carryover funds from previous fiscal years would offset the reduction in appropriations. ONHIR estimates it will use $18.9 million in carryover funds in FY2005. For FY2006, the Administration proposed $8.6 million in appropriations, a 74% increase from FY2005. (ONHIR's proposal included using $10.4 million in carryover funds in FY2006.) Congress approved the Administration's proposed FY2006 appropriations for ONHIR. Navajo-Hopi relocation began in 1977 and is not yet complete. ONHIR has a backlog of relocatees who are approved for replacement homes but have not yet received them. Most families subject to relocation were Navajo. An estimated 3,400 eligible Navajo families resided on land partitioned (or judicially confirmed) to the Hopi, while only 26 eligible Hopi families lived on Navajo partitioned land, according to ONHIR data. Moreover about 250 Navajo families—only some of them among the 3,400 eligible families—signed "accommodation agreements" in the late 1990s under P.L. 104-301 (a 1996 settlement of related Hopi-U.S. issues) that allowed them to stay on Hopi land under Hopi law. About half of them, however, may wish to opt out of these agreements and relocate using ONHIR benefits, according to ONHIR. Of the 26 Hopi families on Navajo partitioned land, 100% were relocated to replacement homes by the end of FY2004, according to ONHIR. While 96% of the Navajo families have completed relocation, ONHIR estimates that 130 Navajo families were awaiting relocation as of the end of FY2004. Of these 130 remaining Navajo families, 119 are not currently residing on Hopi partitioned land but are in various stages of acquiring replacement housing (50 of the 119 families are currently having homes built, or seeking homes; others are in earlier stages). Eleven of the 130 Navajo families are still residing on Hopi partitioned land, according to ONHIR. Three of these 11 Navajo families are having homes built or seeking homes, but the other eight families refuse to relocate or sign an accommodation agreement. ONHIR and the U.S. Department of Justice are negotiating with the Hopi Tribe to allow the eight families to stay on Hopi land, as autonomous families, in return for ONHIR's relocating off Hopi land those families who signed agreements but wish to opt out. ONHIR estimated in its FY2006 budget justification that relocation moves for currently eligible families will be completed by the end of FY2006. The addition of Navajo families who have opted out of accommodation agreements, and of Navajo families who filed late applications or appeals but whom ONHIR proposes to accommodate to avoid litigation—together estimated at 210 families—would mean that all relocation moves would not be completed until the end of FY2008, according to ONHIR. However, this schedule would depend on infrastructure needs and relocatees' decisions. Required post-move assistance to relocatees would necessitate another two years of expenditures after the last relocation move (whether in FY2006 or FY2008), according to ONHIR. ONHIR contends that the government would be vulnerable to litigation if the 210 families were not accommodated. Congress has at times expressed impatience at the speed of relocation, and legislation has been introduced in this Congress ( S. 1003 ) to sunset ONHIR in 2008 and transfer any remaining duties to the Secretary of the Interior. A long-standing proviso in ONHIR appropriations language, retained for FY2006 in the appropriations law, prohibits ONHIR from evicting any Navajo family from Hopi partitioned lands unless a replacement home were provided. This language appears to prevent ONHIR from forcibly relocating Navajo families in the near future, because of ONHIR's backlog of approved relocatees awaiting replacement homes. As the backlog is reduced, however, forced eviction may become an issue, if any remaining Navajo families refuse relocation and if the Hopi Tribe were to exercise a right under P.L. 104-301 to begin legal action against the United States for failure to give the Hopi Tribe "quiet possession" of all Hopi partitioned lands. The agreement that ONHIR reports it is negotiating with the Justice Department and the Hopi Tribe seeks to avoid this. The Smithsonian Institution (SI) is a museum, education, and research complex of 18 museums and galleries, the National Zoo, and 9 research facilities throughout the United States and around the world, plus 138 affiliate museums. Nine of its museums and galleries are located on the National Mall between the U.S. Capitol and the Washington Monument. The SI is responsible for over 400 buildings with approximately 8 million square feet of space. It is estimated to be over two-thirds federally funded, and also is supported by various types of trust funds. A federal commitment to fund the SI was established by legislation in 1846. For FY2006, the Congress enacted $624.3 million for the Smithsonian Institute, an increase over the enacted FY2005 level ($615.2 million), the Administration budget ($615.0 million), the House-passed bill ($615.3), and the Senate-passed bill ($624.1 million). (See Table 18 below.) For Salaries and Expenses, Congress enacted $524.3 million, a 7% increase over the FY2005 amount of $489.0 million. Salaries and Expenses cover administration of all of the museums and research institutions that are part of the Smithsonian Institution. It also includes program support and outreach, and facilities services (security and maintenance). For FY2006, Congress enacted $100.0 million for Facilities Capital, 21% less than the $126.1 million enacted for FY2005, due in part to the completion of the renovation of the Patent Office Building. The appropriation for FY2006 consisted of $73.9 million for revitalization, $18.1 million for construction, and $8.0 million for facilities planning and design. Revitalization funds are for addressing advanced deterioration in SI buildings, helping with routine maintenance and repair in SI facilities, and making critical repairs. These funds would support projects at the National Museum of American History and the National Museum of Natural History. The FY2006 appropriations law provided $30.5 million for operating resources for the National Museum of the American Indian. For FY2005, Congress enacted $31.7 million. The estimated total cost of construction for the NMAI was approximately $219.3 million. The groundbreaking ceremony for the NMAI took place September 28, 1999, and the grand opening ceremony was September 21, 2004, beginning with a celebration called the "First Americans Festival." Other groups, such as Latinos, have been seeking museum space on the Mall. A new National Museum of African American History and Culture (NMAAHC) has been authorized within the Smithsonian Institution through P.L. 108-184 . The museum will collect, preserve, study, and exhibit African American historical and cultural material and will focus on specific periods of history, including the time of slavery, Reconstruction, the Harlem Renaissance, and the civil rights movement. For FY2006, Congress enacted $3.9 million for the NMAAHC, the same as the FY2005 appropriation but $1.2 million below the Administration's request of $5.1 million. In report language, the Senate Appropriations Committee expressed support for this new museum and an intention to "make every effort to meet future requests for additional funds" ( S.Rept. 108-90 , p. 97). The funding would cover operating costs, including personnel for planning, site selection, and capital fund raising. The opening of the National Museum of the American Indian brings with it the question of space left on the Mall for the NMAAHC. The House Appropriations Committee's report for FY2006 stipulated that the Smithsonian's purchase of any additional buildings would require initial consultation with the House and Senate Committees on Appropriations. The FY2006 appropriations law contained the same provision. For FY2006, P.L. 109-54 provided $20.2 million for salaries and expenses at the National Zoo, the same as the FY2006 Administration request, and a $2.6 million increase over the $17.6 million enacted for FY2005. Recently, Congress and the public have expressed increased concern about the National Zoo's facilities and the care and health of its animals. The Smithsonian Institution has a plan to revitalize the zoo, to make the facilities safer for the public and healthier for the animals. The Administration's FY2006 request estimated $13.0 million (under the Facilities Capital account) to begin the revitalization, to include renovation of the wetlands area of the bird exhibit that was destroyed by fire ($8.4 million); new roofs, skylights, and facades at Rock Creek ($2.0 million); and an upgrade of critical infrastructure ($2.4 million), including to install fire protection systems and upgrade the water, sewer, mechanical, electrical, and plumbing systems. Site planning continues for several projects, including the construction of the new elephant yard to provide ample space for the elephants (Asia II). The new construction will help the Zoo come into compliance with the Department of Agriculture and American Zoo and Aquarium Association standards, and help correct "infrastructure deficiencies" found throughout the National Zoo. The House concurred with the redirection of $8 million under Facilities Capital from the wetland exhibit at the Zoo to the Asia II exhibit project to allow the elephants to stay together in a family group while the work is being completed. The Senate-passed bill did not contain instructions about the National Zoo's construction projects, except to state in report language ( S.Rept. 109-80 ) that there is a base of $13.0 million for the Zoo's facilities capital projects. The FY2006 appropriations law did not contain instruction about the Zoo's construction projects, except to state that funds could not be used for the Holt House on the Zoo's property unless it was to minimize water damage. In addition to federal appropriations, the Smithsonian Institution receives income from trust funds to expand its programs. The SI trust funds include general trust funds, contributions from private sources, and government grants and contracts from other agencies. General trust funds include investment income and revenue from business ventures such as the Smithsonian magazine and retail shops. There are also private donor-designated funds that typically specify the purpose of funds. Government grants and contracts are provided by various government agencies for projects specific to the Smithsonian Institution. For FY2005, the trust funds available for operations were estimated at $254.9 million, comprised of $54.9 million for general trust, $124.7 million for government grants and contracts, and $75.3 million for donor-designated funds. Of concern to Congress is the extent to which the Smithsonian Institution has control when donor- and sponsor-designated funds put restrictions on the use of that funding. There is concern that donor-designated funding may require a building to be renamed for that individual or corporate donor, even if an appropriate name is already being used. In addition, there is debate over whether companies who are allowed to advertise at cultural events might in some way compromise the integrity of the Smithsonian Institution. Congress has considered these issues as part of appropriations debates in recent years. For further information on the Smithsonian Institution , see its website at http://www.si.edu/ . One of the primary vehicles for federal support for the arts and the humanities is the National Foundation on the Arts and the Humanities, composed of the National Endowment for the Arts (NEA); the National Endowment for the Humanities (NEH); and the Institute of Museum and Library Services with an Office of Museum Services. The NEA and NEH authorization (P.L. 89-209; 20 U.S.C. §951) expired at the end of FY1993, but the agencies have been operating on temporary authority through appropriations law. The Institute of Museum and Library Services and the Office of Museum Services were created by P.L. 104-208 , and reauthorized by P.L. 108-81 . They receive appropriations through acts for the Departments of Labor, Health and Human Services, and Education, and Related Agencies. (For further information on IMLS appropriations, see CRS Report RL32952, Labor, Health and Human Services, and Education: FY2006 Appropriations , by [author name scrubbed].) Among the questions Congress continually considers is whether funding for the arts and humanities is an appropriate federal role and responsibility. Some opponents of federal arts funding argue that NEA and NEH should be abolished altogether. Other opponents argue that culture can and does flourish on its own through private support. Proponents of federal support for arts and humanities contend that the federal government has had a long tradition of support for culture and that abolishing NEA and NEH could curtail or eliminate programs that have national significance and purpose, such as national touring theater and dance companies. Some representatives of the private sector say that they would be unable to make up the funding gap that would be left by the loss of federal funds for the arts. The NEA is a major federal source of support for many arts disciplines through grants for the arts. Since 1965 it has provided over 120,000 grants that have been distributed to all states. For FY2006, Congress enacted $126.3 million for NEA, $5.0 million above the Administration's FY2006 request and the FY2005 appropriation, and the same as the Senate-passed bill. The conference agreement included the additional funding that the Senate appropriations Committee and full Senate had agreed to that added $5.0 million in general increases to NEA and NEH. In earlier action, a House floor amendment had increased NEA's appropriation by $10.0 million (to $131.3 million) and the NEH by $5.0 million (to $143.1 million), but the Senate figures were sustained in conference. The FY2006 appropriations law allowed $17.9 million (including $3.0 million of the general increase) to be used for Challenge America grants. The Challenge America Arts Fund is a program of matching grants for arts education, outreach, and community arts activities for rural and under-served areas. The FY2006 appropriations law also included $10.0 million for the American Masterpieces program (including an additional $2.0 million from the $5.0 million general increase). It is funded jointly under NEA grants and state partnerships. This national initiative includes touring programs, local presentations, and arts education in the fields of dance, visual, arts and music. (See Table 19 below.) Although there appears to be congressional support for the NEA, concern often arises about previous questionable NEA grants when appropriations are considered. In the past, Congress continued to restate the language of NEA reforms in appropriations laws. For example, both the FY2004 and FY2005 appropriations laws retained language on funding priorities and restrictions on grants. The FY2006 appropriations law does not contain the restrictive language that the House-passed bill included, as the formal NEA guidelines now officially state that no grant may be used generally for seasonal support to a group, and no grants may be for individuals except for literature fellowships, National Heritage fellowships, or American Jazz Master fellowships. The NEH generally supports grants for humanities education, research, preservation and public humanities programs; the creation of regional humanities centers; and development of humanities programs under the jurisdiction of the 56 state humanities councils. Since 1965, NEH has provided approximately 61,000 grants. NEH also supports a Challenge Grant program to stimulate and match private donations in support of humanities institutions. For NEH, for FY2006, Congress enacted $143.1 million, the same as the House- and Senate-passed bills and $5.0 million above the FY2006 request and the FY2005 appropriation. The FY2006 appropriations law, like the House- and Senate-passed bills, provided $15.4 million for matching grants, and $127.6 million for grants and administration. (See Table 19 below.) The FY2006 law would allow $11.2 million for the "We the People" initiative. These grants include model curriculum projects for schools to improve course offerings in the humanities—American history, culture, and civics. For further information on the National Endowment for the Arts , see its website at http://arts.endow.gov/ . For further information on the National Endowment for the Humanities , see its website at http://www.neh.gov/ . CRS Report RS20287, Arts and Humanities: Background on Funding , by [author name scrubbed]. The LWCF is authorized at $900 million annually through FY2015. However, these funds may not be spent without an appropriation. The LWCF is used for three purposes. First, the four principal federal land management agencies—Bureau of Land Management, Fish and Wildlife Service, National Park Service, and Forest Service—draw primarily on the LWCF to acquire lands. The sections on each of those agencies earlier in this report identify funding levels and other details for their land acquisition activities. Second, the LWCF funds acquisition and recreational development by state and local governments through a grant program administered by the NPS. Third, Administrations have requested, and Congress has appropriated, money from the LWCF to fund some related activities that do not involve land acquisition. This third use is a relatively recent addition, starting with the FY1998 appropriation. Programs funded have varied from year to year. Most of the appropriations for federal acquisitions generally are specified for management units, such as a specific National Wildlife Refuge, while the state grant program and appropriations for related activities are rarely earmarked. Through FY2005, the total authorized amount that could have been appropriated from the LWCF since its inception in FY1964 was $28.1 billion. Actual appropriations totaled $14.2 billion. Table 20 shows recent funding for LWCF. For the five years ending in FY2001, appropriators had provided generally increasing amounts from the fund for federal land acquisition. The total had more than quadrupled, rising from a low of $138.0 million in FY1996 to $453.2 million in FY2001. However, since then the appropriation for land acquisition has declined, to $114.6 million for FY2006 (plus $9.9 million in prior year balances). The table shows that in FY2006, the Administration requested a much larger amount from the Fund for other programs than Congress provided, due in part to different spending priorities and views on how the fund should be used, as well as concerns over the budget deficit. Reductions of the magnitude that have occurred since FY2002 for federal land acquisition and state grants were last seen in the early and mid 1990s as part of efforts to address the federal budget deficit. Not only did the total for federal land acquisition and grants to states (excluding other programs) decline each year from FY2002 to FY2006, but each of the five component accounts (except NPS from FY2004 to FY2005) also declined each year. Currently, the federal budget deficit has drawn increased attention, as it did during the early and mid 1990s. Also, there has been enhanced interest in funding unrelated national priorities, mostly tied to the war on terrorism. P.L. 109-54 contained $363.9 million for LWCF for FY2006, plus $9.9 million in prior year balances for the NPS for land acquisition. This figure was between the original House-passed level of $228.4 million (plus $9.9 million in prior year balances) and the Senate-passed level of $404.2 million. It was a sizeable decrease from the FY2005 appropriation ($458.9 million) and the Administration's request for FY2006 ($680.6 million). In report language, the House Appropriations Committee explained that in general its FY2006 budget recommendations reflected the need to stay within a constrained allocation and that new land acquisition is a low priority. Accordingly, appropriations in the original House-passed bill generally mirrored, or were reductions from, the Administration's FY2006 request and the FY2005 appropriation. The Senate originally provided more than the Administration's FY2006 request for federal land acquisition and stateside grants, but less for other programs. A Senate amendment to reduce funds for land acquisition fell on a point of order. It had sought to eliminate BLM and FS land acquisition funding and significantly reduce FWS and NPS acquisition funds, and to increase funds for the Indian Health Service. For federal land acquisition, the FY2006 appropriations law provided $114.6 million, plus $9.9 million for the NPS from prior year balances. The enacted level was between the original House-passed level of $41.5 million (plus $9.9 million in prior year balances) and the Senate-passed figure of $154.0 million. It was a decrease from the FY2006 Administration's request ($147.3 million) and the FY2005 appropriation ($164.3). For each agency, the conference report earmarked a portion of the funds for particular acquisitions. The original House-passed bill had included funds for management of the acquisition program and for emergencies, but did not earmark funds for specified federal acquisitions, as typically has been the case. By contrast, the Senate had sought to earmark the bulk of the funds for specific federal land acquisitions. For the stateside grant program, the FY2006 appropriations law provided $30.0 million, a large reduction from the $91.2 million appropriated for FY2005. The original Senate-passed bill also had contained $30.0 million, and an amendment seeking to augment money for the stateside program through state retention of certain recreational user fees was withdrawn. The House, as in the Administration request, had included $1.6 million for administration of the stateside grant program, but did not include funding for new state grants. The Administration did not seek funds for state grants in FY2006, on the grounds that large federal deficits require a focus on core federal responsibilities, state and local governments have alternative sources of funding for parkland acquisition and development, and the current program could not adequately measure performance or demonstrate results. This is not a new phenomenon; the Clinton Administration, in FY2000 and several preceding years, also proposed eliminating funding for the stateside program, and Congress concurred. The largest appropriation for the LWCF for FY2006 was for purposes other than land acquisition and stateside grants—that is, for other programs. The FY2006 appropriations law contained $219.3 million for several programs, an increase over the FY2005 level of $203.4 million. The FY2006 enacted level was sizeably smaller than the Administration's request of $531.7 million for other programs, the second largest such request in the history of the LWCF. As shown in Table 21 , the FY2006 appropriations law provided the indicated programs with no funding from the LWCF or with less than the Administration requested. In some cases, however, Congress provided these programs with non-LWCF funding. The Senate originally had approved $220.2 million in LWCF funding for other programs, while the House had supported $185.3 million. CRS Report RL33531, Land and Water Conservation Fund: Overview, Funding History, and Current Issues , by [author name scrubbed]. Congress created the Conservation Spending Category (CSC) as an amendment to the Balanced Budget and Emergency Deficit Control Act of 1985 in the FY2001 Interior appropriations law ( P.L. 106-291 ). It is authorized for five years, and would terminate at the end of FY2006, unless reauthorized. The CSC, which is also called the Conservation Trust Fund by some, combines funding for more than two dozen resource protection programs including the LWCF. (It also includes some coastal and marine programs funded through Commerce Department appropriations). This action was in response to both the Clinton Administration request for substantial funding increases in these programs under its Lands Legacy Initiative, and congressional interest in increasing conservation funding through legislation known as the Conservation and Reinvestment Act (CARA), which passed the House in the 106 th Congress. The FY2001 Interior appropriations law authorized that total spending for CSC would increase each year by $160.0 million, from $1.6 billion in FY2001 (of which $1.2 billion would be through Interior appropriations laws) to $2.4 billion in FY2006. All CSC funding is subject to the appropriations process. The appropriations history through FY2006 is as follows. The FY2001 laws exceeded the target of $1.6 billion by appropriating a total of $1.68 billion; $1.20 billion for Interior appropriations programs and $0.48 billion for Commerce appropriations programs. (Totals for Interior and Commerce funding were both increases from FY2000, when the CSC did not exist, with funding of $566 and $160 million, respectively.) The FY2002 request totaled $1.54 billion for this group of programs, and Congress appropriated $1.75 billion, thus almost reaching the target of $1.76 billion for FY2002. The appropriation for the Interior portion was $1.32 billion, reaching the authorized target amount. The FY2003 request totaled $1.67 billion for this group of programs, a decrease from FY2002 funding, and below the target of $1.92 billion for FY2003. Congress appropriated a total of $1.51 billion. For the Interior portion, Congress provided $1.03 billion, about $410 million less than the authorized target of $1.44 billion. The FY2004 request totaled $1.33 billion, according to estimates compiled by Interior and Commerce appropriations subcommittee staffs. This amount was below the FY2004 target of $2.08 billion. For the Interior portion, the request was $1.00 billion and the target was $1.56 billion. The Administration had an alternative estimate that increased the total FY2004 request to $1.22 billion for Interior programs, but it was based on some different assumptions about which programs to include. The total appropriation was not specified in congressional documents. The FY2005 request from the Department of the Interior included $1.05 billion for the CSC, an increase of $140 million over the FY2004 appropriation for the same group of programs, according to the Department. However, this total did not include requests from the Forest Service or Department of Commerce. Neither the Forest Service nor the Department of Commerce used the CSC as a structure for organizing or tabulating their requests. The total appropriated amount credited to the CSC in FY2005 is unclear, as the only bill or accompanying committee report to identify funding levels for the CSC was the House Appropriations Committee's report. In this report, the CSC is mentioned in the minority views, where Representatives Obey and Dicks state that the bill would fund the CSC at $850 million below the $1.7 billion target for FY2005 ( H.Rept. 108-542 , p. 180-181). The report did not include other CSC funding levels or broader discussions of the CSC. The Senate Appropriations Committee's report included a discussion of conservation funding ( S.Rept. 108-341 , p. 5), but did not mention CSC. It stated that the committee "remains concerned" about proposals to create "direct entitlement funding" for selected conservation programs, thereby removing them from the annual oversight of the appropriations process. It noted that the Committee continues to provide funding for many of these programs. For FY2006, the appropriations law did not appear to delineate funding for CSC, nor did the request from DOI , or the House- or Senate-passed bills. Therefore, it appears that Congress is discontinuing use of the CSC structure for appropriations decisions. CRS Report RL30444, Conservation and Reinvestment Act (CARA) (H.R. 701) and a Related Initiative in the 106 th Congress , by [author name scrubbed] and [author name scrubbed] (pdf). CRS Report RS20471. The Conservation Spending Category: Funding for Natural Resource Protection , by Jeffrey Zinn. Altered natural flows of water by a series of canals, levees, and pumping stations, combined with agricultural and urban development, are thought to be the leading causes of environmental deterioration in South Florida. In 1996, Congress authorized the U.S. Army Corps of Engineers to create a comprehensive plan to restore, protect, and preserve the entire South Florida ecosystem, which includes the Everglades ( P.L. 104-303 ). A portion of this plan, the Comprehensive Everglades Restoration Plan (CERP), was completed in 1999, and provides for federal involvement in restoring the ecosystem. Congress authorized the Corps to implement CERP in Title IV of the Water Resources Development Act of 2000 (WRDA 2000, P.L. 106-541 ). While restoration activities in the South Florida ecosystem are conducted under several federal laws, WRDA 2000 is considered the seminal law for Everglades restoration. Based on CERP and other previously authorized restoration projects, the federal government, along with state, local, and tribal entities, is engaged in a collaborative effort to restore the South Florida ecosystem. The principal objective of CERP is to redirect and store "excess" freshwater currently being discharged to the ocean via canals, and use it to restore the natural hydrological functions of the South Florida ecosystem. CERP seeks to deliver sufficient water to the natural system without impinging on the water needs of agricultural and urban areas. The federal government is responsible for half the cost of implementing CERP, and the other half is borne by the State of Florida, and to a lesser extent, local tribes and other stakeholders. CERP consists of 68 projects that are expected to be implemented over approximately 36 years, with an estimated total cost of $7.8 billion; the total federal share is estimated at $3.9 billion. WRDA 2000 authorizes $1.4 billion (the federal share is $700 million) for an initial set of projects under CERP. Appropriations for restoration projects in the South Florida ecosystem have been provided to various agencies as part of several annual appropriations bills. The Interior and Related Agencies appropriations laws have provided funds to several DOI agencies for restoration projects. Specifically, DOI conducts CERP and non-CERP activities in southern Florida through the National Park Service, Fish and Wildlife Service, U.S. Geological Survey, and Bureau of Indian Affairs. (For more on Everglades funding, see CRS Report RS22048, Everglades Restoration: The Federal Role in Funding , by [author name scrubbed] and [author name scrubbed].) From FY1993-FY2005, federal appropriations for projects and services related to the restoration of the South Florida ecosystem exceeded $2.3 billion dollars, and state funding topped $3.6 billion. The average annual federal cost for restoration activities in southern Florida in the next 10 years is expected to be approximately $286 million per year. For FY2006, the Administration requested $220.0 million for the Department of the Interior and the Army Corps of Engineers for restoration efforts in the Everglades. Of this total, $76.6 million was to implement CERP. For DOI, the Administration requested $83.5 million for CERP and non-CERP activities related to restoration in the South Florida ecosystem for FY2006. Of this total, the NPS requested $62.7 million for land acquisition, construction, and research activities; the FWS requested $12.5 million for land acquisition, refuges, ecological services, and other activities; the USGS requested $7.9 million for research, planning, and modeling; and the BIA requested $0.4 million for water projects on Seminole Tribal lands. For conducting activities authorized by CERP, DOI requested $8.6 million for FY2006. See Table 22 below. P.L. 109-54 provided $84.0 million for Everglades restoration for FY2006, according to a press release of the House Committee on Appropriations. This is $18.5 million above the FY2005 enacted level of $65.5 million and similar to the Administration's request. Funding for specific restoration projects is unclear since figures are not specified in either the FY2006 law or the conference report. The amounts for specific agencies that conduct restoration in the Everglades typically are not available in law or report language and funding for specific restoration activities included in Administration requests generally is not known until a period after enactment of appropriations legislation. Funding for two components of Everglades restoration is specified in P.L. 109-54 or in the accompanying conference report language. The Modified Water Deliveries project (Mod Waters) would receive $25.0 million, of which $17.0 million would come from a transfer of unobligated balances in the Land Acquisition and State Assistance account for Everglades National Park land acquisitions. The law set out conditions on the availability of this funding, as discussed below. P.L. 109-54 also would provide $9.9 million to the National Park Service for planning and interagency coordination in support of Everglades restoration. Programs included in this funding were not specified and therefore could not be compared to the Administration's request or FY2005 enacted level. The primary increase in funding for Everglades restoration for FY2006 compared to FY2005 was due to increased funding for the Modified Water Deliveries Project (Mod Waters) under NPS, where $25.0 million was funded for constructing the restoration project—an increase of approximately $17.0 million over the FY2005 enacted level. This project is designed to improve water deliveries to Everglades National Park, and to the extent possible, restore the natural hydrological conditions within the Park.[ftn29] The completion of this project is required prior to the construction of certain projects under CERP. In addition, the Corps requested $35.0 million for Mod Waters for FY2006. According to DOI, from 2007 to 2009, the Corps is expected request an additional $89.0 million, and DOI $42.0 million, for the project. Under P.L. 109-54 , funds provided for the construction of Mod Waters will not be available if matching funds appropriated to the Corps become unavailable for implementing Mod Waters, including funds that would support the creation of detailed design documents for a bridge or series of bridges for the Tamiami Trail highway in southern Florida. A funding issue receiving broad attention is the level of commitment by the federal government to implement restoration activities in the Everglades. Some observers measure commitment by the frequency and number of projects authorized under CERP, and the appropriations they receive. Because no restoration projects have been authorized since WRDA 2000, these observers are concerned that federal commitment to CERP implementation is waning. Others assert that the federal commitment will be measurable by the amount of federal funding for construction, expected when the first projects break ground in the next few years. Some state and federal officials contend that federal funding will increase compared to state funding as CERP projects move beyond design, into construction. Still others question whether the federal government should maintain the current level of funding, or increase its commitment, because of escalating costs and project delays. In report language, the House Appropriations Committee noted that there are challenges to restoration, but emphasized that they must be overcome and restoration goals must be achieved. The House Committee expressed concern that the restoration initiative may not be achieving the primary federal interest—the restoration of the Everglades. The House Appropriations Committee cited concerns expressed by stakeholders that a new Florida initiative termed Acceler8 is focused too heavily on water storage projects that do not provide anticipated natural benefits. The House Appropriations Committee directed the Secretary of the Interior, in consultation with the Secretary of the Army, to submit a report on the status of Everglades projects underway including on anticipated environmental benefits, collaborative efforts, and any changes needed to be made in project implementation priorities. The Senate Appropriations Committee report did not comment on restoration activities in the Everglades. P.L. 109-54 conditioned funding for the Modified Water Deliveries Project based on meeting state water quality standards. It provided that funds appropriated in the act and any prior Acts for the Modified Water Deliveries Project would be provided unless administrators of four federal departments/agencies (Secretary of the Interior, Secretary of the Army, Administrator of the EPA, and the Attorney General) indicate in their joint report (to be filed annually until December 31, 2006) that water entering the A.R.M. Loxahatchee National Wildlife Refuge and Everglades National Park do not meet state water quality standards, and the House and Senate Committees on Appropriations respond in writing disapproving the further expenditure of funds. This same provision also was enacted in the FY2004 and FY2005 Interior appropriations laws. These provisions were enacted based on concerns regarding a Florida state law (Chapter 2003-12, enacted on May 20, 2003) that amended the Everglades Forever Act of 1994 (Florida Statutes §373.4592) by authorizing a new plan to mitigate phosphorus pollution in the Everglades. Phosphorus is one of the primary water pollutants in the Everglades and a primary cause for ecosystem degradation. Some Members of Congress expressed disapproval with the Florida laws. Provisions conditioning funds on the achievement of water quality standards were not requested in the Administration's budget for FY2006. (For more information see CRS Report RL32131, Phosphorus Mitigation in the Everglades , by [author name scrubbed] and [author name scrubbed].) In report language, the House Appropriations Committee expressed concern over efforts to improve water quality in the Everglades. The House Committee noted that efforts by the State of Florida to reduce phosphorus have not been successful and that the state may not be fully achieving its obligations under a 1992 consent decree. The House Committee directed the FWS to keep the Committee fully appraised of water quality modeling and monitoring in the A.R.M. Loxahatchee National Wildlife Refuge, and to provide monitoring and modeling information in annual and quarterly reports of the refuge. For further information on Everglades Restoration , see the website of the South Florida Ecosystem Restoration Program at http://www.sfrestore.org and the website of the Corps of Engineers at http://www.evergladesplan.org/ . CRS Report RS22048, Everglades Restoration: The Federal Role in Funding , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21331, Evergla des Restoration: Modified Water Deliveries Project , by [author name scrubbed]. CRS Report RL32131, Phosphorus Mitigation in the Everglades , by [author name scrubbed] and [author name scrubbed]. CRS Report RS20702, South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan , by [author name scrubbed] and [author name scrubbed]. The Bush Administration's Competitive Sourcing Initiative would subject diverse commercial activities to public-private competition. The goal of this government-wide effort, first outlined in 2001, is to save money through competition between government and private businesses in areas where private businesses might provide better commercial services, for instance law enforcement, maintenance, and administration. The initiative has been controversial, with concerns including whether it would save the government money and whether the private sector could provide the same quality of service in certain areas. For agencies funded by the Interior appropriations bill, concern has centered on the National Park Service and the Forest Service. The FY2006 appropriations law placed a cap of $3.45 million on DOI competitive sourcing studies during FY2006. The cap applies to FY2006 funds for DOI in the law or any other act. The portion that would be allocated to the NPS was not specified. The law also contained language on reprogramming funds. FS spending for competitive sourcing activities during FY2006 would be limited to no more than $3.0 million. In Statements of Administration Policy, the Administration had urged the House and Senate to remove the funding limitations during initial floor action, on the grounds that they would restrict agencies from improving program management through competitive sourcing. The FY2004 and FY2005 Interior appropriations laws also contained spending limits for competitive sourcing studies of agencies, as well as other provisions on competitive sourcing. The FY2006 law also specified that agencies include, in any reports to the Appropriations Committees on competitive sourcing, information on the costs associated with sourcing studies and related activities. The language had been included in the original Senate-passed bill. During initial House floor consideration, similar language was removed on a point of order that it constituted legislation on an appropriations bill. Further, the FY2006 law contained Senate-passed language related to the effect of Forest Service competitive sourcing on wildland fire management activities. The language directed the Secretary of Agriculture to determine whether FS employees affected by competitive sourcing studies are qualified to participate in wildland fire management, and to consider the effect that contracting out would have on the FS's ability to suppress and manage wildfires. For FY2006, the FS budget justification stated that the agency will conduct its FY2005 studies within the $2.0 million cap for FY2005. The agency did not request funds for competitive sourcing studies during FY2006, to focus on implementing completed studies and analyzing study results. The FS did ask that the limitation on funding for competitive sourcing be removed. For FY2006, the NPS requested $956,000 for competitive sourcing activities, nearly the same as the agency received for FY2005 ($957,000). The agency plans to examine a total of 955 full-time equivalent positions (FTEs), through a preliminary planning effort for 150 FTEs, four standard studies for 549.5 FTEs, and six streamlined studies for 255.5 FTEs. (For more information on competitive sourcing generally, see CRS Report RL32017, Office of Management and Budget Circular A-76: Selected Issues , by [author name scrubbed], and CRS Report RL32079, Federal Contracting of Commercial Activities: Competitive Sourcing Targets , by [author name scrubbed].) CRS Report RL32373, Abandoned Mine Land Fund Reauthorization: Selected Issues , by [author name scrubbed] (pdf). CRS Issue Brief IB10136. Arctic National Wildlife Refuge (ANWR): Controversies for the 109 th Congress , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL30444, Conservation and Reinvestment Act (CARA) (H.R. 701) and a Related Initiative in the 106 th Congress , by [author name scrubbed] and [author name scrubbed] (pdf). CRS Issue Brief IB10144. The Endangered Species Act (ESA) in the 109 th Congress: Conflicting Values and Difficult Choices , by [author name scrubbed], [author name scrubbed], [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RS22048, Everglades Restoration: The Federal Role in Funding , by [author name scrubbed] and [author name scrubbed]. CRS Report RS21331, E verglades Restoration: Modified Water Deliveries Project , by [author name scrubbed]. CRS Report RL32244, Grazi ng Regulations: Changes by the Bureau of Land Management , by [author name scrubbed]. CRS Report 96-123. Historic Preservation: Background and Funding , by [author name scrubbed]. CRS Report RS21738. The Indian Trust Fund Litigation: An Overview of Cobell v . Norton, by [author name scrubbed]. CRS Report RL33531, Land and Water Conservation Fund: Overview, Funding History, and Current Issues , by [author name scrubbed]. CRS Report RS22056, Native American Issues in the 109 th Congress , by [author name scrubbed]. CRS Report RS21157, Multinational Species Conservation Fund , by [author name scrubbed] and [author name scrubbed]. CRS Issue Brief IB10145. National Park Management , coordinated by [author name scrubbed]. CRS Report RL33806, Natural Resources Policy: Management, Institutions, and Issues , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL32315, Oil and Gas Exploration and Development on Public Lands , by [author name scrubbed]. CRS Report RL31521. Outer Continental Shelf Oil and Gas: Energy Security and Other Major Issues , by [author name scrubbed]. CRS Report RS20702, South Florida Ecosystem Restoration and the Comprehensive Everglades Restoration Plan , by [author name scrubbed] and [author name scrubbed]. CRS Issue Brief IB10076. Bureau of Land Management (BLM) Lands and National Forests , by [author name scrubbed] and [author name scrubbed], coordinators. CRS Report RS20471. The Conservation Spending Category: Funding for Natural Resource Protection , by [author name scrubbed]. CRS Report RS20002, Federal Land and Resource Management: A Primer , by [author name scrubbed] (pdf). CRS Report R40225, Federal Land Management Agencies: Background on Land and Resources Management , coordinated by [author name scrubbed]. CRS Report RL30335, Federal Land Management Agencies ' Permanently Appropriated Accounts , by [author name scrubbed], [author name scrubbed], and [author name scrubbed]. CRS Report RL34273, Federal Land Ownership: Current Acquisition and Disposal Authorities , by [author name scrubbed] and [author name scrubbed]. CRS Report RL32131, Phosphorus Mitigation in the Everglades , by [author name scrubbed] and [author name scrubbed]. CRS Report RL31392, PILT (Payme nts in Lieu of Taxes): Somewhat Simplified , by [author name scrubbed]. CRS Issue Brief IB10141. Recreation on Federal Lands , coordinated by Kori Calvert and [author name scrubbed]. CRS Report RL30798, Environmental Laws: Summaries of Major Statutes Administered by the Environmental Protection Agency (EPA) , by [author name scrubbed] et al. CRS Report RL32856, Environmental Protection Agency: Appropriations for FY2006 , by [author name scrubbed] and [author name scrubbed]. CRS Report RS22064, Environmental Protection Agency: FY2006 Appropriations Highlights , by [author name scrubbed] and [author name scrubbed]. CRS Issue Brief IB10146. Environmental Protection Issues in the 109 th Congress , coordinated by [author name scrubbed] and Margaret Isler. CRS Report RS20287, Arts and Humanities: Background on Funding , by [author name scrubbed]. CRS Report RL30755, Forest Fire/Wildfire Protection , by [author name scrubbed]. CRS Report RS22056, Native American Issues in the 109 th Congress , by [author name scrubbed]. CRS Report RL30647, National Forest System Roadless Area Initiatives , by [author name scrubbed] and [author name scrubbed]. CRS Report RL33990, Wildfire Funding , by [author name scrubbed]. CRS Report RS22024, Wildfire Protection in the 108 th Congress , by [author name scrubbed].
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The FY2006 Interior, Environment, and Related Agencies appropriations bill includes funding for the Department of the Interior (DOI), except for the Bureau of Reclamation, and for two agencies within other departments—the Forest Service within the Department of Agriculture and the Indian Health Service within the Department of Health and Human Services. It also includes funding for arts and cultural agencies; the Environmental Protection Agency, which was newly-transferred to the Appropriations subcommittees that deal with Interior and Related Agencies; and numerous other entities and agencies. On August 2, 2005, H.R. 2361 was signed into law as P.L. 109-54, containing approximately $26.20 billion in FY2006 appropriations for Interior, Environment, and Related Agencies. Congress also included in this law $1.50 billion in supplemental funds to cover a shortfall in veterans' health care resources. On July 28, 2005, the House approved the conference agreement (410-10), and on July 29, 2005, the Senate agreed to the conference report (99-1). The FY2006 appropriations law provided an increase of 2% over the President's request for FY2006 of $25.72 billion, but a decrease of 3% below the FY2005 enacted level of $27.02 billion. The FY2006 total appropriation reflects an across-the-board rescission of 0.476% ($126.0 million) to be applied across accounts. However, it does not reflect rescissions and emergency supplemental appropriations contained in P.L. 109-148. Further, the figures used throughout this report do not reflect the supplemental appropriations or the rescissions in either law because their effect on individual agencies, programs, and activities has not yet been calculated. The FY2006 appropriation reflected lower funding than the FY2005 enacted level in areas including $-507.1 million for the Forest Service (FS); $-294.1 million for the Environmental Protection Agency (EPA); $-75.8 million for the National Park Service (NPS); and $-36.4 million for the Bureau of Land Management (BLM). The FY2006 appropriation reflected higher funding than the FY2005 enacted level in areas including $105.7 million for the Indian Health Service (IHS); $31.5 million for the United States Geological Survey (USGS); $12.5 million for the Bureau of Indian Affairs (BIA); and $9.2 million for Payments in Lieu of Taxes (PILT). During consideration of FY2006 funding, Congress debated many issues including appropriate funding for wildland fire fighting, land acquisition, NEA, select FWS programs, BIA schools, IHS hospitals, the Superfund, wastewater/drinking water needs, agency competitive sourcing activities, maintenance backlogs, Indian trust fund management, Outer Continental Shelf leasing, the Abandoned Mine Lands fund, and EPA's human dosing studies. This report is not expected to be updated.
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Advocates of cutting corporate tax rates frequently make their argument based on the higher statutory rate observed in the United States as compared with the rest of the world. Sometimes the higher rate alone is used as an argument, and in other cases the arguments include claims that cutting corporate taxes would induce large investment flows into the United States, which would create jobs or expand the base enough to raise revenue. President Barack Obama has supported a rate cut if the revenue loss can be offset with corporate base broadening, while the Citizens for Tax Justice has urged a revenue raising reform and business leaders have urged setting deficit concerns aside. House Majority Leader Eric Cantor has also proposed a 25% corporate rate in the context of tax reform and Ways and Means Chairman Dave Camp has proposed a 25% combined with a move to a territorial tax system. Many issues arise regarding the corporate tax outside of the global perspective addressed in other reports. This report focuses on the global issue relating to tax rate differentials between the United States and other countries. The first section provides tax rate comparisons. The second section discusses policy implications, including the effect of a corporate rate cut on revenue, output, and national welfare; the possibility that a rate cut may induce reactions from other countries; and the outlook for and consequences of a revenue-neutral corporate tax reform. Several important features affect the interpretation of the comparative tax rates: the type of rate, what taxes are included, and the use of weighted measures to adjust for size differences. A number of tax rate comparisons follow the discussion of these features. Three basic types of tax rates are reported: the statutory rate, the effective rate, and the marginal effective rate. The statutory rate is the rate in the tax statute; in the case of the United States, it is the top marginal corporate tax rate of 35%. The effective rate is determined by the ratio of taxes paid divided by profits. The effective rate captures the tax benefits that reduce the taxable income base relative to financial profits. The marginal tax rate is calculated from a projected investment project: it estimates the share of the pre-tax return that is paid in taxes. Each type of tax rate has its advantages and disadvantages, and is useful for considering certain types of behavior. For example, the statutory rate would potentially affect firms' attempts to shift profits by altering the source of borrowing or transferring assets or products at prices that are not arm's length. Even the statutory rate, however, needs some adjustments for this purpose. For example, most multinational firms in the United States are eligible for the production activities deduction, which reduces the U.S. statutory tax rate by 9%, from 35% to 31.85%. The effective tax rate is taxes paid divided by profits. The effective tax rate captures some of the tax benefits and subsidies, reducing the tax paid per dollar of profit. This measure can make a country with a high statutory rate but narrow base more comparable to a country with a low tax rate and broad base. It is probably more suited to assessing the true relative burdens on investment than the statutory tax rate. However, these types of tax rates may not capture timing effects (such as accelerated depreciation) very well and generally depend on accounting measures of profit that may vary across countries. The marginal effective tax rate is, in theory, the appropriate measure for determining the effects of tax rate differentials on investment. However, in some cases marginal tax rates do not include all of the components of investment; frequently, they are restricted to investment in fixed assets or fixed assets and inventory. This report estimates an overall marginal effective tax rate that includes inventories and intangibles as well as buildings and equipment. Marginal tax rates also depend on estimates of economic depreciation, expected inflation, and rates of return. Also briefly discussed is a measure referred to as the effective average tax rate. The implications of this tax rate, which combines statutory and marginal effective rates, are not clear. Most tax measures reflect the effect of both national and sub-national corporate income taxes. Of the 31 Organisation for Economic Co-operation and Development (OECD) countries, 8 countries (Canada, Germany, Japan, South Korea, Luxembourg, Portugal, Switzerland, and the United States) have sub-national corporate taxes. In some cases, these sub-national taxes are more significant than those in the United States. In the case of the United States, these corporate income taxes imposed by the state increase the statutory rate (without the production activities deduction) to 39.2%. With the production activities deduction, the combined rate is 36.3%. Countries can also have other taxes that impose a burden on capital. In the United States, these taxes are imposed by the states and localities, and they include property taxes, franchise taxes, and retail sales taxes that apply to capital goods. These taxes are much more difficult to measure and are generally not included in comparative tax rate measures, although one study (discussed below) includes franchise, and transfer and sales taxes, but not property or wealth taxes. Another issue that affects the comparisons between U.S. and worldwide tax rates is whether tax rates are simple (unweighted) averages or whether they are weighted in some fashion to indicate their relative importance. If tax rates are not weighted, then a small economy, such as Iceland, can have the same effect on the average of international rates as a large economy, such as Germany or Japan. In general, smaller countries tend to have lower tax rates and thus unweighted averages are lower than weighted averages in most cases. In the results presented in this report, both weighted and unweighted averages are reported, but weighted averages are more relevant to making comparisons of measures of the tax burden on capital deployed around the world. Table 1 reports the three measures of effective tax rates, with marginal rates restricted to equipment and structures separately, for the United States and the OECD excluding the United States. The statutory rate is reported with and without the production activities deduction. The overall statutory rates in the OECD are slightly lower for 2013, with the rate in the OECD excluding the United States falling a little over a half to one percentage point. The U.S. rate is estimated at 39.1%, whereas the OECD weighted average is 28.4% and the unweighted average is 25.1%. The weighted rate was influenced by rate reductions in Japan and the United Kingdom. The marginal tax rates do not reflect the effect of the production activities deduction that likely applies to most multinational corporations and would decrease these tax rates by 2-3 percentage points as of 2010. (The deduction was 3% in 2005-2006 and 6% for 2007-2009.) Thus while the difference between the statutory rate and the simple average—a difference of 13.7 percentage points—is frequently reported, a difference of about half that much—or 6.6 percentage points—occurs when the adjusted statutory rate of 36.2% is compared with the weighted average of 29.6%. The effective tax rate (which would automatically capture the production activities deduction and other provisions) is about the same. The marginal effective rate rates are also about the same when adjusted. Thus the tax rate most relevant for the purpose of incentives to invest is similar for the United States and the rest of the OECD with respect to equipment and structures investment. The marginal tax rates do not reflect the temporary bonus depreciation in effect for 2008-2010 in the United States, which allowed 50% of the cost of equipment to be deducted. A provision allowing 100% of the cost to be deducted is in place for 2011. Because these are temporary provisions, it seems appropriate to exclude them. Whether these measures are captured in the effective tax rate depends on the treatment of deferred taxes, but measures from different years appear similar. The OECD excludes some large countries, such as China and Brazil. Table 2 provides the statutory and effective tax rate comparisons for the 15 largest countries, which account for three-quarters of world gross domestic product (GDP). The results are similar to those in Table 1 with the weighted average about 1 percentage point higher. With the production activities deduction the rates differ by 5.6 percentage points. The effective rate is the same. Tax rates have declined slightly, to a weighted average of 30 and an unweighted average of 29.2. Table 3 , Table 4 , and Table 5 provide results for effective tax rates from other studies. Table 3 reports the Markle and Shackleford study that estimates the effective tax rate of domestic firms in different countries. Because a smaller number of countries are examined, Table 3 compares the U.S. rate with that of the six large countries. Table 4 and Table 5 report the Swenson and Lee study that estimated effective rates for firms headquartered in various countries for 2006 and 2007. The tables report for 2006 pre-dated the start of the recession and do not include years with bonus depreciation. Both results confirm the findings of other studies: effective tax rates in the United States and in other countries are similar. Table 6 returns to the estimates of marginal effective tax rates, and expands the marginal rate analysis to reflect the other categories of assets, inventories, and intangibles. It provides a weighted average of these tax rates, using data on capital stock shares from the United States but applying the same shares to other countries. Note that intangibles are generally taxed at negative tax rates both in the United States and abroad. Expenditures on research, advertising, and human capital investment are generally deducted when incurred, which leads to a zero effective tax rate, and most countries (including the United States) have additional subsidies or credits for research expenditures. As Table 6 indicates, the overall marginal effective tax rates for the United States accounting for the production activities deduction and for the OECD countries weighted by GDP are similar, 20% and 18%. The differences are larger if the OECD rate is adjusted by average statutory rate changes that have occurred in these OECD countries since 2005, although base broadening could offset that reduction. Marginal tax rates are also significantly lower than the statutory rates: the U.S. rate is about half the statutory rate and the weighted OECD rate is about 60% of the statutory rate. The next measure is another marginal tax rate measure (Chen and Mintz). This measure has a number of differences from those in Table 1 and Table 4 . It includes equipment, structures, inventories, and land, but not intangibles. It also includes the effects of transfer taxes that fall on capital and debt finance. In the United States, these taxes are primarily state and local retail sales taxes that apply to capital goods purchases or inputs into construction and are quite large. It also includes franchise taxes. It does not, however, include wealth, capital stock, or property taxes. The measure also allows for debt finance and uses capital stock weights for Canada. Table 7 reports these estimates for the OECD. Based on comments made in a previous analysis, indicating the size of these additional state and local taxes, the table reports a number with these additional taxes subtracted out to allow more comparability to other results. As compared with the numbers in Table 6 , the discrepancy in the weighted OECD and the United States is larger. If the adjusted rates in Table 6 are recomputed to exclude intangibles, they would be 28.7% for the United States and 23% for the OECD (weighted). This differential of 5.7 points shrinks to 3.8 points when intangibles are included. The only other differential is that these rates should be lowered to reflect the effects of debt finance. Normally, higher statutory tax rates result in a larger negative tax rate on debt, so the United States rate should fall more for this reason (although this effect can vary with inflation). The differential between the United State and the OECD as reported in the original study is 16.2 percentage points (34.6% minus 18.4%). Out of that differential, 5.2 points are due to using an unweighted average, 5.0 points are due to including transfer taxes, 1.9 points are due to excluding intangibles, and the remaining 4.1 points are similar to the difference found in Table 6 . An updated study for 2012 shows similar relationships. The United States tax rate was 35.6%, the OECD excluding the United States was 24.0% weighted and 19.6% unweighted. Table 8 reports the comparative rates for the 15 largest countries. These rates are closer together, and quite close when adjusted for transfer taxes. The Chen and Mintz study makes an important point, namely that other taxes outside of the corporate tax can affect the relative burden of tax in a way that could affect investment. (These types of taxes would not be relevant for profit shifting.) The main reservation about this finding is that the inclusion of these other capital taxes is partial. The other main capital tax in the United States is the property tax, which probably adds another 3 percentage points to the rate, but other countries also have property taxes as well as wealth taxes. Table 9 reports a fourth type of tax rate measure, which is named by its developers the "effective average tax rate." Estimates using this method differentiate between a normal (or riskless) return, which is taxed at an effective rate that reflects the various tax benefits such as accelerated depreciation, and the excess return, which is taxed at the statutory rate. Thus, it is a mix of marginal tax rates and statutory tax rates. This measure is reported because it is available and cited by some researchers. Some evidence suggests that it is a better predictor of location than other measures. It shows U.S. taxes to be significantly higher than OECD rates, but the implications of such a measure for economic behavior are not clear. Economists sometimes, when examining investment subsidies, differentiate between the normal and excess return. The normal return's tax burden is affected by items such as accelerated depreciation and investment subsidies, whereas the excess profit is subject to the statutory rate. In these views, however, it is the tax on normal return that would, in any case, affect economic behavior. The excess return is generally seen as bearing little or no tax burden because the reduction in expected return due to tax is offset by the reduction in variance of after tax return (i.e., the tax reduces gains and losses). One reason that a combination of statutory and effective marginal rates might have an effect on location is that firms may locate some physical activity in a country to facilitate profit shifting associated with setting up subsidiaries to exploit developed intangibles. This comparison suggests some important precautions in comparing tax rates. First, it is important when forming a composite rate for the rest of the world to weight the tax rates by output or some other measure of economic importance. Because small countries tend to have lower rates than large ones, comparing rates using simple averages across countries exaggerates the differential between the United States and tax burdens elsewhere in the world. Second, weighted statutory tax rates differ but effective tax rates do not. Marginal effective tax rates have small differences. Third, in comparing the differences in statutory rates, the effect of the production activities deduction narrows the differential by close to half. Finally, although the role of subnational taxes outside of the corporate tax appears to be important for investment decisions, a full comparison has yet to be made. This analysis suggests that reform of state and local sales taxes could contribute to a more efficient system. The previous analysis has shown that U.S. statutory corporate tax rates are about 10 percentage points higher than a weighted average of the OECD or the large countries that account for most of output (7 percentage points when including the production activities deduction). Effective tax rates are about the same, and marginal effective tax rates are only slightly larger in the United States. The effects of including other capital taxes have not yet been explored on a comprehensive basis, although U.S. retail sales taxes on capital goods and franchise taxes are estimated to create an additional 5 percentage point differential. This section explores the effects of a U.S. rate cut on the United States. The first subsection examines the effects on revenue, output, and national income for a corporate rate cut in isolation, only looking at capital flows. The second subsection discusses potential implications for profit shifting. The third subsection considers the possibility that other countries would react to a U.S. rate cut by cutting their rates as well. Finally, discussions of outlook for and consequences of a revenue neutral corporate tax reform are presented. This section examines the effects of a corporate rate cut from 35% to 25% on revenues and international capital flows, and their effects on the U.S. economy (including feedback effects on revenues and effects on national welfare). It focuses on issues specific to global economy considerations of the corporate tax, not the traditional corporate tax issues that would also occur in a closed economy. The Congressional Budget Office (CBO) projected a 10-year corporate revenue of $4,360 billion from FY2013 to FY20221. If this number were multiplied by 10/35 to estimate the revenue loss, the result would be $1,245 billion per year, on average. The loss, however, is likely to be larger because net tax liability is the tax rate times taxable income, minus credits. Rate changes would not normally affect credits, and, if not, the revenue loss would be projected based on tax liability before credits. According to Internal Revenue Service (IRS) data, corporate tax before credits is 134% of corporate tax after credits. One of the major credits, the foreign tax credit, would be affected, in some cases, by a rate cut. The foreign tax credit is limited to the U.S. tax because of foreign source income, so as the U.S. rate falls, the limit on credits also falls. In some cases, the credit would not be affected, or not affected proportionally, because the foreign tax credits are less than the limit and a change in the limit would not necessarily change foreign tax credits. (These firms are termed excess limit firms.) In other cases, firms have creditable taxes above the limit; with credits equal to the limit, a reduction in the limit would reduce foreign tax credits proportionally. (These firms are termed excess credit firms.) Tax liability after the foreign tax credit but before other credits (general business credits and the alternative minimum tax credit) is 105.7% of tax liability after all credits. If foreign tax credits are reduced proportionally, the average loss is almost $132 billion. If foreign tax credits are not affected at all, the average loss per year is $168 billion. These estimates suggest that over the 10-year period, $1.3 trillion to $1.7 trillion would be lost in revenues due to the proposed rate cut. This number does not include any behavioral feedback effects, which could reduce the cost, but also does not include debt service or crowding out of private capital, which would increase the cost. Estimates implied by this calculation are larger than projections based on a percentage point rate increase contained in CBO's Budget Options which, applying the percentage loss to the new baseline suggests revenue losses of about $1,113 trillion. Some part of the discrepancy may reflect the fact that liabilities lag collections and that the first full year does not apply because estimates are based on fiscal years. In addition, to the extent that firms have unused foreign credits, a rate increase would raise less than reduction of the same size would cost. Other behavioral effects may occur as well. Regardless of the precise estimate, a revenue loss in excess of $1 trillion and in excess of $100 billion a year would be expected over the next 10 years. What about the effects on the U.S. economy? The discussion sometimes focuses on job creation. Job creation is an important issue for the government to address during cyclical downturns. Standard economic theory suggests such policies should be temporary; in contrast, advocates of corporate rate cuts are proposing permanent cuts. In any case, temporary or permanent corporate rate cuts are unlikely to be very effective stimulus policies. Economic theory suggests that there is no reason to view general job creation as a long-run objective of government policies. The economy can generate the jobs needed by the natural process of growth and market adjustment. In 1961 and 1991, the unemployment rate was the same, 6.7%. Employment, however, rose from 66 million to 117 million. Employment tends to grow steadily; the unemployment rate fluctuates. Long-term jobs policies, according to economic theory, therefore, should not be aimed at increasing jobs, although they can be designed to reduce structural or frictional unemployment (such as improving the skills of disadvantaged workers). Rather, the capital flows induced by a corporate rate cut generally have effects on the level of output and on wage levels, rather than the number of workers. Despite the claimed effects of cutting the corporate tax on encouraging the flow of foreign-owned capital into the country from abroad (inbound capital) or discouraging the flow of U.S. capital to other countries (outbound capital), there are many forces that constrain the movement of capital. As capital flows into a country, its greater abundance coupled with a fixed amount of labor drives the wage rate up and the rate of return down, so that the pre-tax return to capital falls. If the economy is large enough to affect the rest of the world's returns, the proportional flow of capital is lessened further, because shift of capital from abroad (with no change in taxes) raises the after tax return abroad and draws some of the capital back. Capital flows are further reduced if there are significant non-corporate sectors (because a rate cut would draw capital from the unincorporated sectors of the economy as well as from abroad). Finally, the flow of capital would be further limited if capital is not perfectly mobile or products are not perfect substitutes. A study by Gravelle and Smetters used a general equilibrium model to capture the effects of imposing a 35% tax, allowing for four sectors in the U.S. economy and a mirror foreign economy. The estimated change in the capital stock, assuming the conditions most conducive to capital inflows, was 4.5%. (This scenario assumes that individuals and firms view investments in different locations as perfect substitutes and consumers view foreign and domestic products as perfect substitutes; these are referred to as the portfolio and product substitution elasticities and are set, effectively, at infinity.) This effect implies a 4.7% increase from eliminating the tax (4.5/(1-4.5)). To convert a percentage change in the capital stock to a percentage change in output, multiply by the capital share of income, which was 0.29, to get a 1.36% increase in output. Because a partial change is proposed, multiply by 10/35 to obtain an estimated percentage change in output of 0.39%. With constant factor shares, which are assumed in this model, wages will also increase by this percentage. A similar magnitude of effects can be obtained by examining revenue reductions and incidence estimates for this same perfectly mobile case. CBO projects the corporate tax at 2% of GDP. This revenue is as a percentage of gross output (which includes output that replaces capital and thus is not a part of an income concept). To convert it to a percentage of net of depreciation output (which is 82% of gross output ), divide by 0.82, for corporate revenues that are 2.27% of domestically generated income. To capture the effect of reducing the tax by 10 percentage points, multiply by 10/35, to obtain a tax cut of 0.65% of income. Incidence studies indicate that about 73% of the burden of the corporate tax falls on labor under this perfectly mobile assumption, so this number is multiplied by 0.73 to obtain an increase in labor income of 0.47% of total income. Based on national income accounts, the share of labor income is 76%, so dividing 0.47 by 0.76 yields a 0.62% increase in output and in wages. Both estimates suggest a relatively small effect on output, of around 0.5%, but this estimate is too large. Perfect product substitution is not possible in a multi-good economy. Moreover, empirical evidence suggests elasticities that are smaller. Gravelle and Smetters propose as a more reasonable case a model with portfolio and product substitution elasticities of 3. This assumption yields a 1.6% change in the capital stock. Following the methodology outlined above, the effect on output and wages is 0.13%, rather than 0.4%. These elasticities reduce the share of the burden borne by labor to 21% and, again, following the same methodology would cause an output and wage effect of about 0.18% rather than 0.62%. Two other aspects might make these effects even lower or perhaps reverse the sign. First, the effect of debt capital is not incorporated into any of these models. Because about a third of the capital stock is financed by debt, the magnitude of the first set of estimates (using capital stock estimates) should be reduced by about one-third to account for the presence of debt. This would be the expected outcome if returns to debt-financed investment were taxed at a zero rate, as would be the case if there were no inflation and no accelerated depreciation. However, since both of these conditions exist in the U.S. tax code, debt is subsidized at the corporate level because inflation is generally positive and the effective marginal tax rate is below the statutory rate. Lowering the statutory rate reduces these subsidies and discourages debt. This effect may be desirable for issues such as the debt-equity distortion, but can actually discourage capital inflows, as suggested in one study. Second, the estimates of capital stock assume that the United States has a territorial tax (i.e., the only tax due is on domestic profits). Although a relatively small share of foreign source income is taxed, the U.S. system is not fully territorial, but rather defers the tax until income is repatriated (except for branch income and some passive income that is easily shifted). Under the U.S. system, the tax on income that is repatriated or currently taxed can be partially or fully offset by credits for foreign taxes paid. Most foreign source income is not taxed either because it is not repatriated or because credits are used to offset the tax; in addition to credits for tax paid in a country, unused credits from countries with higher taxes than the United States can be used to offset tax on income repatriated from low tax countries (called cross crediting). Even though output (or domestically generated income) increases by small amounts, that output gain does not represent a gain in U.S.-worldwide income. The gains that labor experiences are offset by the losses in the pre-tax return by the existing domestic capital, reducing the benefits of these firms. For example, in the case where labor income increases by 21% of the tax, existing capital, which absent capital flows would have had income increase by 100% of the tax cut, now has that increase offset roughly by 21% of the tax due to the lower pretax return. Although both labor and capital have higher after tax income, there is a transfer between the government and individuals, which must be offset by other tax increases or reduced spending either now or in the future. Although there will be some gains in national welfare, they are likely to be only a small fraction of the revenue change. They would arise from income that transfers from foreigners to U.S. persons. For thinking about this effect, consider separately inbound capital (capital owned by foreigners and invested in the United States) and outbound capital (capital owned by U.S. persons and invested abroad). The increase in inbound capital generates returns, but those returns are the income of the foreign investors. Thus, the only gain for the United States is the change in taxes, and the lower pre-tax rate of return on inbound investment. For outbound capital, the returns already belong to U.S. firms, and the gain is from moving capital back into the United States where taxes formerly paid to foreign governments are paid to the United States. A recent study examined these effects, using data on foreign and domestic tax rates from a 2008 GAO study and estimates of inbound and outbound capital from the National Income and Product Accounts and found modest effects. The estimated output effects in this study were larger than those calculated above because the study used a partial equilibrium framework with a simplified single sector model designed to distinguish between outbound and inbound capital flows. The purpose, however, was to consider the general magnitude of welfare effects. The estimates found that there was a slight loss (3% of the additional output) for inbound capital because the reduction in the tax rate on existing capital inflows was less than fully offset by taxes on induced capital flows and the small reduction in pre-tax returns. For outbound capital, the main source of increased capital, there was a gain of 12% of output because taxes on this capital were paid to the United States rather than foreign governments. Overall, only about 9% of the output increase was a benefit to the United States which, for the magnitude of effects calculated, is less than two-hundredth of 1% of output and less than 3% of revenue. These findings are quite consistent with optimal tax theories. For inbound capital, the optimal tax rate should be 1/(1+e) where e is the elasticity of the flow of inbound capital. Because the study used an estimated effective tax rate of 25% and the optimal tax rate is 25% when e is 3, a negligible effect on welfare would be expected. For outbound capital, the optimality rule is to tax foreign source income net of foreign taxes for a small country, with a slightly higher rate on outbound capital returns for a large country. Because current tax rules impose taxes much smaller than this rate and cause too much capital to be allocated abroad, cutting the U.S. tax rate improves welfare. However, the effects are small compared with either the U.S. economy or revenue. A final issue is the magnitude of revenue feedbacks from the output increase. Recall that the corporate tax cut discussed is about 0.65% of net output. This increase in output is taxed with a mix of both labor and capital taxes. The marginal tax rate on labor income is estimated by CBO at 28.4% and the capital income tax rate is estimated at 11.5%. The 11.5% is further reduced by 2 percentage points to account for the reduction in the corporate rate, to 9.5%. The overall marginal tax rate is 23.7%. Multiplying the 0.13% and the 0.18% increases in output by 23.7% yields an offset of 4.7% to 6.6%. (If infinite elasticities were assumed and the output effects of 0.4% and 0.62% were considered the feedback effects would be from 14% to 23% of revenue.) There are three reasons this feedback effect is probably too large (aside from the reservations about output effects due to debt finance discussed above). First, this tax on labor income does not account for the expectation that increases in labor income might be partially received through tax exempt employee fringe benefits or partially spent on tax favored purchases (such as charitable contributions). Second, absent other changes the share of individual taxes collected as payroll taxes would eventually lead to increased outlays for Social Security. Finally, the transition to the new capital stock will not be immediate. In all the scenarios, these revenue offsets from behavioral changes would likely be smaller than the increase in revenue due to debt service, which is estimated at 25% on average over the 10-year period. In addition, if the increase in the debt displaces the capital stock, output would be reduced by 2021 enough to reduce revenues by 15% to 23% of the static cost. If revenues are not offset, and the increased debt crowds out the U.S. capital stock, output would be reduced about, 0.4% by 2021, an effect more than twice as large as the effects estimated from international capital inflows. Another aspect of behavior that is of concern for revenue is the possibility of profit shifting. It is more difficult to judge this effect. Because the evidence discussed above suggests that the revenue offset from corporate rate changes due to investment flows is likely in the neighborhood of 5%, real output effects do not appear large enough to make a corporate rate cut pay for itself in increased revenues, as some advocates claim. Before examining profit shifting directly, consider the evidence cited to support the argument that there is a significant revenue shift. First, proponents point to studies that indicate a "Laffer curve" with a revenue maximizing tax rate of around 30%, using cross country panel data. These four studies were reviewed in a CRS report that found, due to both interpretation of the studies by proponents and statistical problems, these studies did not appear to support a gain in revenue from a cut in the U.S. tax rate. Proponents also make the general argument that the United States collects a smaller share of revenue relative to GDP than other countries, even though its rate is higher. For example, Hassett points out that the U.S. corporate revenue is 2% of GDP whereas the revenue of most other countries is 3%, and that the share has grown in some countries as rates have decreased. Two factors other than profit shifting affect corporate revenues and their changes as a percent of GDP, the size of the base and the share of business income (and income in general) that is corporate source. Data shown earlier indicates that although the statutory rate is higher in the United States, the effective rate is not. Revenues patterns over time will reflect a combination of rate changes and base changes, and some countries financed some or all of their recent rate reductions with base broadening. In addition, the size of the corporate sector will be affected by the ability of firms to operate in noncorporate form. A 2007 study by the U.S. Department of Treasury indicates that the U.S. rules allowing large firms to operate in noncorporate form are more generous than those of other countries. It also documented that the share of business income received by corporations in the United States had declined from 80% to 50% as more generous limits of the number of shareholders small corporations could have to elect taxation as unincorporated businesses were adopted and special forms of business such a limited liability corporations, taxed as partnerships, grew. A recent OECD study indicated that corporate tax revenues, in addition to offsetting base changes, were increased by incentives to operate firms in corporate form and additional compliance measures. It is possible to consider the effect of profit shifting by examining direct estimates of the cost of profit shifting. These estimates of profit shifting suggest that they amount to 14% to 20% of total corporate tax revenue, which would not be enough to offset the revenue loss even if profit shifting disappeared entirely. How much of a reduction in profit shifting might reasonably be expected? Because the profit shifting clearly occurs to the very low tax rate countries, even a cut to 25% would leave a large benefit to profit shifting (it would lead to a combined federal and state rate of 29.8%, and 27.7% for eligible firms if the production activities deduction were retained). Recent discussions of a plan referred to as the double-Irish, Dutch sandwich showed two companies that, having moved profits to Ireland (with a 12.5% rate), took further steps to shift profits to Bermuda (with a 0% rate). Because the cost in most cases is small, most firms would probably continue to shift profits to the limit currently allowed by law as interpreted by the courts, and probably considerably less than proportionally to the tax rate change. As discussed below, reforms to the tax treatment of foreign source income, by eliminating deferral and by restricting the foreign tax credit, or by focusing on limiting profit shifting techniques, might reduce the ability or benefits of profit-shifting and raise revenues. An important policy issue for the United States is whether other countries might react to a U.S. rate reduction. Evidence shows that the initial cut in corporate tax rates around the world may have been triggered by the cut in the U.S. corporate tax rate from 48% to 35% from 1986 to 1988 as a result of the Tax Reform Act of 1986. Figure 1 shows the statutory tax rates, beginning in 1981, for the United States and for the remainder of the OECD. The U.S. combined state and federal tax rate was about 50% and fell to just below 40% over those two years. Except for a slight rise in 1993, the tax rate has remained constant ever since. Two OECD numbers are provided: the unweighted numbers varying with the admission of new OECD members as well as tax rates and the GDP weighted tax rates of the OECD nations (outside the United States) in 1981. (Tax rates are shown in the Appendix , and they also indicate that the weighted average holding member country constant is about a percentage point higher.) The tax rates for 2012 are similar to those for 2010: the unweighted average fell slightly from 25.5 to 24.9, but the weighted average was slightly higher, 29.8 compared to 29.6. The U.S. rate fell from 39.2% to 39.1%. While the simple (unweighted) average, which includes new entrants to the OECD, suggests a relatively continuous decline in rates, the weighted average indicates a more discrete pattern of tax cuts. As indicated by the graph, tax rates on average were close together before 1987 but rates of other countries began dropping in the next few years. For the weighted OECD average, the first drop followed the U.S. tax cut, but subsequently, rates were relatively constant over the next several years (and still slightly above U.S. rates). Tax rates then fell again, but stabilized around 2002 and were relatively unchanged until 2007, when Germany began cutting its tax rate. The fall beginning in the late 1990s may have been associated with the lower tax rates of the emerging former eastern bloc countries. If one country cuts its tax rate, it attracts capital from other countries, which benefits labor and possibly overall national welfare, at the expense of other countries, as discussed above. However, if all countries cut their tax rates, none will gain capital but all will lose revenue. The observation of rate cuts in the rest of the world in the wake of the U.S. tax cut is not proof that countries will cut their rates again if the United States does, but it does provide some support for that expectation. It is also possible that a smaller rate cut that does not move the United States to rates below those of other large countries would be less likely to trigger a response. For 2010, statutory tax rates for the next two largest countries in the remaining OECD, Japan and Germany, were 39.54% and 30.18% respectively, although Japan is proposing a 5 percentage point rate cut. The United Kingdom and France are respectively 28% and 34.4%, although the United Kingdom is planning further cuts to 24%. If the United States cut its federal rate to 25% its rate would be 29.8%; with the production activities deduction it would be 27.7%. A rate cut to 30% would result in a 34.5% rate (32% with the production activities deduction). That rate would be similar to the rates in France, Japan, and Germany. If revenue concerns require offsetting corporate base broadening, what changes might be made and what are the consequences for international capital flows and profit shifting? This section discusses base broadening options, focusing on the largest corporate tax expenditures. The base broadening provisions are listed in Table 10 , along with the reduction in the corporate rate the revenue change would allow for. Note that while each proposal is stated in terms of the rate reduction its revision would permit, the rate reductions for several provisions taken together are slightly smaller than the sum of their individual rate reductions because the progressively lower rates make base broadening less valuable. Of the items listed among corporate tax expenditures, the single largest provision outside of deferral, is accelerated depreciation for equipment which, abstracting from the effect of temporary bonus depreciation, would allow a rate reduction of about 2 percentage points. This measure is based on an alternative depreciation system. (Much more revenue would be raised in the short run, but revenue neutrality based on a 10-year budget window would lead to a long-run loss, because slowing depreciation leads to much larger revenue gains in the short run compared with the long run.) Equipment, in particular, is taxed at rates well below the statutory rate, at least at current inflation rates. Nevertheless, the desirability of restricting depreciation is unclear. A revenue neutral revision that cuts the rate in exchange for higher taxation of new investment would raise the marginal effective tax rate, because the rate reduction would apply to the return to existing capital. Moreover, estimates suggest that the value of depreciation under the alternative system would be too small and would tax investments at effective rates in excess of the statutory rates. This provision would also raise revenues on unincorporated businesses, equivalent to about 30% of the corporate loss, which would permit a larger corporate rate reduction, by 3.3 percentage points. In addition, there is some accelerated depreciation for buildings, primarily rental housing, but the revenue losses are largely for unincorporated businesses. The Senate Finance Committee has released discussion drafts on cost recovery and accounting that relate to corporate taxation as well as a draft on international corporate tax issues. These proposals have not been scored. The cost recovery provisions would introduce a new depreciation system that would slow depreciation and approximate the present value of economic depreciation. Assets would be added to general pools rather than each vintage of investments being depreciated separately. Real property would be depreciated over 43 years. Research and development expenses would be deducted in equal increments over five years, as would half of advertising expenditures (the remainder would continue to be deducted when incurred). Oil extraction expenses would be recovered over five years and percentage depletion would be repealed. LIFO and lower of cost of market inventory would be repealed (see discussion of LIFO below). One of the larger tax expenditures outside of deferral is the production activities deduction, which allows a deduction of 9% of taxable income for domestic production for certain industries, primarily manufacturing, electricity and natural gas production, and construction. This provision would allow a corporate tax rate reduction of 0.7 percentage points. This provision has been criticized as distorting the tax treatment of different industries by granting differential tax rates. In addition, it creates administrative and compliance problems in both distinguishing domestic content and identifying eligible activities. About a quarter of the cost benefits unincorporated businesses and these revenues are included in the above estimate; without those revenues the reduction would be under a percentage point. The only reservation about this deduction is that it is more likely to apply to multinationals because of the industry restrictions and a revenue neutral substitution could raise the true statutory rate. For example, a 0.7 percentage point reduction in the federal rate would allow, after interacting with state taxes, a reduction from 39.2% to 38.5%, whereas firms with the production activities deduction have a rate of 36.3%. One option would be to tailor the provision more closely to the characteristics of multinationals, including disallowing the deduction for unincorporated businesses and further restricting the eligible activities (e.g., disallow electricity production as a qualified activity), and use those revenues to cut the rate, while retaining the deduction. If restricted to corporate manufacturing most than half of revenues would be recouped. The largest tax expenditure is the deferral of tax on foreign source income, which would permit a corporate tax rate reduction of 3.1 percentage points. This move toward worldwide tax would also, independently, increase the amount of capital in the United States by discouraging outbound capital and would reduce the benefit of profit shifting mechanisms, perhaps significantly. A larger reduction would be possible, by about 4 percentage points or more if the foreign tax credit were limited to offsetting tax only on income earned in that country as was proposed in S. 3018 , 111 th Congress. This change would eliminate most cross-crediting and raise more revenue; it would also be projected to gain a similar amount in welfare gain to the rate cut itself. Other revenue raising alternatives affecting taxation of foreign source income have been proposed. President Obama has proposed a set of revisions that is estimated to raise $157 billion over 10 years: the major proposals are disallowing interest and certain other deductions of the parent company to the extent income abroad is not taxed currently ($37 billion), limiting foreign tax credits that can offset income to the same share as the share of income repatriated ($66 billion), a provision to tax excess returns of intangibles ($26 billion), and limiting foreign tax credits for certain extractive companies ($10 billion). These provisions would allow a rate cut of about a percentage point. An alternative would be to move to an actual territorial tax that exempts all active income earned abroad but disallows part of overhead expenses of parent companies, which is estimated to raise $76 billion and allow a rate cut of 0.5 percentage points. There are many other revisions to the treatment of foreign source income that would raise varying amounts of revenue. House Ways and Means Chairman Camp has proposed a territorial tax (revenue neutral) that would preclude any revenue gains from the tax treatment of foreign source income. The Senate Finance Committee has released d a discussion draft on international corporate tax issue. All foreign source income would be subject to tax (equivalent to repealing deferral) but some income would be taxed at a lower rate than the statutory rate (i.e., a minimum tax would be imposed). This proposal has not been scored but could raise revenue, depending on the minimum tax rate. Revenue offsets that increase the taxation of foreign source income can be significant and reinforce the capital flow and welfare effects of a rate cut in a global economy. Whether revenue increases from the treatment of foreign source income can be used as revenue offsets is unclear. Most proponents of rate reductions are also strong opponents of increasing the tax on foreign source income, and indeed favor lowering that tax burden, perhaps by moving to a territorial system without cost allocation, which would likely lose a small amount of revenue. Such a change would reduce capital investment in the United States, although probably slightly, and offset the capital flow and welfare gains of a rate cut. The estimate in Table 10 does not include the effect of deferral of active financing income, which is a temporary provision but has been extended for many years. It would increase the cost of deferral by about 10%. Another option is the repeal of LIFO (last in, first out) accounting, which allows firms to treat goods sold as the latest acquired; eliminating this provision would raise $97.5 billion over 10 years and allow a 0.8 percentage point reduction in the corporate rate. Most firms do not use LIFO because they must conform tax and book methods. There is, however, a justification for LIFO, in that, on average, it eliminates the tax on inflationary gains. There are several remaining tax expenditures but most are either small or would be questionable as offsets for a variety of reasons. If every corporate tax expenditure were repealed, including those mentioned previously, the corporate rate could be cut by 7.9 percentage points, to 27.1%, assuming no behavioral responses. (In the category addressing the treatment of foreign source income, only the deferral provision is a tax expenditure.) Larger cuts could occur if the repeal of benefits for unincorporated businesses were used to cut corporate rates. Without revenue from the repeal of deferral, the rate would fall by approximately 5.5 percentage points, or to 29.5% The Joint Committee on Taxation estimates a rate of 28% for repeal of corporate preferences excluding deferral, but this estimate allows for higher gains from depreciation and expensing of research and development during the budget horizon. (They note this rate would not be revenue neutral in the long run). The incentives for research and development are popular provisions that have some economic justification, and, in the case of expensing, would be extremely difficult to administer. Only the expensing provision is reflected in Table 10 , but the research credit, which is temporary (and which the President proposes to make permanent, is actually larger. Special provisions for insurance companies are almost the size of the title passage rule, and would be an option as would the relatively smaller provisions for fossil fuels. The President's budget proposals would restrict insurance company provisions for a $14 billion gain (0.1 percentage point) and benefits for fossil fuels for a $43.6 billion gain (0.3 percentage points). Provisions such as tax-exempt bonds or the low-income housing credit are, however, designed to benefit others (state and local governments or low-income tenants) and if the corporate benefit were removed, these activities would largely migrate to the unincorporated sector. Lower rates for small corporations would allow a 0.3 percentage point reduction. Taxing income of credit unions would allow less than 0.1 percentage points. There are a number of energy subsidies that are directed at conservation whose repeal is not generally considered, as is the case for corporate charitable deductions. In addition, there are also some tax reform possibilities that are not in the tax expenditure budget. For example, a tax reform bill introduced by then-Chairman of the Ways and Means Committee Rangel in the 110 th Congress ( H.R. 3970 ) included a provision extending the write period for acquired intangibles that raised $20 billion over 10 years. Restricting the deduction of interest would permit a significant reduction in rates. Although the benefits vary with expected inflation, disallowing the deduction for the inflation portion of interest is estimated to allow a reduction of the tax rate in the neighborhood of 2.5 percentage points and, in a closed economy, would be an efficient reform. It might also reduce the use of debt as a method of profit shifting (by borrowing in high tax countries). There is, however, a reservation about this change when considering international capital flows: a revenue neutral change could decrease the net inflow of capital if debt is more mobile than equity. According to a Treasury study, the share of business income that is in corporate form has declined from 80% to 50% since the early 1980s, primarily through the increase in the number of shareholders for small corporations that are allowed to elect partnership treatment (Subchapter S corporations) and the growth in new organizational forms such as limited liability corporations that are taxed as partnerships. Using the tax rates currently in effect, if all business owners moving to this form are in the top 35% tax bracket, and if dividends and capital gains are distributed and realized based on economy wide averages as well as being subject to the current 15% rate, returning to the early 1980s share would allow a rate cut of 3 percentage points without altering overall individual and corporate revenue. Note, however, that the contribution to rate reduction declines rapidly as the corporate rate is cut. For example, a base broadening provision, such as those discussed above, that allowed a 3 percentage point rate cut starting at a 35% rate would allow a 2.6 percentage point reduction applying to a 30% rate and a 2.3 percentage point reduction starting at a 25% rate. The effect of moving operations to corporate form depends on the differential between the individual and corporate tax, and would reduce the rate by 1.3 percentage points starting at a 30% corporate rate, and actually raise the corporate rate if starting at a 25% rate. This potential rate reduction is larger, however, if the individual rate is lower. According to estimates, the average tax rate for all partnership and Subchapter S income is 30%. In that case, the percentage point reductions are 5, 2.3, and 1.5, respectively, beginning at a 35%, 30%, and 25% corporate tax rate. Because these shifts into the noncorporate sector are driven by new forms of large companies, it is likely that the tax rate is higher than average for partnership and Subchapter S income (many partnerships, for example, are no different from proprietorships except they have two owners instead of one), but probably lower than the top rate. In a global economy, it is better to allow tax cuts within the corporate sector at the corporate rather than the individual level. One option is rolling back the 2003 cuts in dividends and capital gains, which would allow a rate cut of about 2.5 percentage points, and perhaps as much as 4 percentage points. These increases in rates are scheduled to occur after 2012 when the Bush tax cuts expire, however, and whether they can be counted as revenue raisers depends on scoring options. The last two options interact, however. The more taxes are collected at the individual level by raising taxes on dividends and capital gains, the larger a rate reduction from shifting income into the corporate sectors. If dividends were taxed at full rates and capital gains at 20%, then at a 30% individual tax rate and a 35% corporate rate, the reduction is 6.5 percentage points. These effects depend as well, of course, on how the individual tax rate on ordinary income develops, which is currently scheduled to rise. This section has identified enough provisions to allow the corporate tax rate to be reduced to 25% without losing revenue over the long run (i.e., that do not depend on large short-run gains, such as those from reducing accelerated depreciation), but that would require going beyond corporate tax expenditures (which would account for only 5 percentage points) to business preferences associated with unincorporated businesses, foreign tax credit restrictions, or more fundamental reforms.
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Advocates of cutting corporate tax rates frequently make their argument based on the higher statutory rate in the United States as compared with the rest of the world; they argue that cutting corporate taxes would induce large investment flows into the United States, which would create jobs or expand the taxable income base enough to raise revenue. President Barack Obama has supported a rate cut if the revenue loss can be offset with corporate base broadening. Others have urged on one hand, a revenue raising reform, and, on the other, setting deficit concerns aside. Is the U.S. tax rate higher than the rest of the world, and what does that difference imply for tax policy? The answer depends, in part, on which tax rates are being compared. Although the U.S. statutory tax rate is higher, the average effective rate is about the same, and the marginal rate on new investment is only slightly higher. The statutory rate differential is relevant for international profit shifting; effective rates are more relevant for firms' investment levels. The 13.7 percentage point differential in statutory rates (a 39.2% rate for the United States compared with 25.5% in other countries), narrows to about 9 percentage points when tax rates in the rest of the world are weighted to reflect the size of countries' economies. (The OECD rates fell by slightly over one-half of a percentage point between 2010 and 2012.) Regardless of tax differentials, could a U.S. rate cut lead to significant economic gains and revenue feedbacks? Because of the factors that constrain capital flows, estimates for a rate cut from 35% to 25% suggest a modest positive effect on wages and output: an eventual one-time increase of less than two-tenths of 1% of output. Most of this output gain is not an increase in national income because returns to capital imported from abroad belong to foreigners and the returns to U.S. investment abroad that comes back to the United States are already owned by U.S. firms. The revenue cost of such a rate cut is estimated at between $1.2 trillion and $1.5 trillion over the next 10 years. Revenue feedback effects from increased investment inflows are estimated to reduce those revenue costs by 5%-6%. Reductions in profit shifting could have larger effects, but even if profit shifting disappeared entirely, it would not likely offset revenue losses. It seems unlikely that a rate cut to 25% would significantly reduce profit shifting given these transactions are relatively costless and largely constrained by laws, enforcement, and court decisions. Both output gains and revenue offsets would be reduced if other countries responded to a U.S. rate cut by reducing their own taxes. Evidence suggests that the U.S. rate cut in the Tax Reform Act of 1986 triggered rate cuts in other countries. It is difficult, although not impossible, to design a reform to lower the corporate tax rate by 10 percentage points that is revenue neutral in the long run. Standard tax expenditures do not appear adequate for this purpose. Eliminating one of the largest provisions, accelerated depreciation, gains much more revenue in the short run than in the long run, and a long-run revenue-neutral change would increase the cost of capital. Other revisions, such as restricting foreign tax credits and interest deductibility or increasing shareholder level taxes, may be required. This report focuses on the global issues relating to tax rate differentials between the United States and other countries. It provides tax rate comparisons; discusses policy implications, including the effect of a corporate rate cut on revenue, output, and national welfare; and discusses the outlook for and consequences of a revenue neutral corporate tax reform.
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A stable, democratic, prosperous Pakistan is considered vital to U.S. interests. U.S. concerns regarding Pakistan include regional and global terrorism; stability in neighboring Afghanistan; democratization and human rights protection; the ongoing Kashmir problem and Pakistan-India tensions; and economic development in the region. Progress on these issues was severely threatened in 2008 by a sharp decline in Pakistan's economic stability, culminating in an immediate need for capital assistance. U.S. officials and independent analysts are increasingly concerned that a failing Pakistani economy could undermine multilateral efforts to stabilize South Asia and curtail the incidence of Islamist radicalism. Since his ascension to the presidency in September 2008, President Asif Ali Zardari has attempted to address Pakistan's economic problems, with the support of his chief economic advisor, Shaukat Tarin. On September 19, 2008, acting finance minister Naveed Qamar released new economic policies designed to bring about macroeconomic stability and avoid seeking IMF assistance that included the elimination of fuel, electricity and food subsidies, and a reduction in the government deficit. On November 3, 2008, Tarin announced reforms of Pakistan's tax system, including the politically sensitive taxation of large landowners, to reduce the incidence of tax evasion. President Zardari has emphasized the importance of his nation's economic problems, stating, "The greatest challenge this government faces is an economic one." Despite the September announcement of new economic policies, Pakistan's foreign exchange reserves declined markedly throughout 2008. The State Bank of Pakistan's holdings of foreign exchange reserves fell from $14.2 billion at the end of October 2007 to $3.4 billion at the end of October 2008—barely enough to cover one month of imports. Pakistan needed $4 billion to $5 billion in assistance by the end of November in order to avoid defaulting on maturing sovereign debt obligations. During the autumn of 2008, Pakistan sought the needed capital from a variety of sources, including the International Monetary Fund (IMF), China, Saudi Arabia, the United States, and an informal group of nations known as the "Friends of Pakistan." Although some assistance was provided by international organizations such as the Asian Development Bank (ADB) and Islamic Development Bank (IDB), as well as $500 million from China, most of the capital Pakistan required to avoid the impending capital crisis came in the form of a $7.6 billion "stand-by arrangement" with the IMF, finalized on November 24, 2008. The IMF stand-by arrangement provided for $3.1 billion in immediate assistance, with the remainder to be distributed over the next two years, following quarterly reviews of Pakistan's economic progress. Access to the IMF assistance was subject to a number of "conditionalities," including a significant reduction in Pakistan's fiscal and current account deficits; a tightening of Pakistan's monetary policy (via higher interest rates); and "a strengthening and better targeting of social assistance." Even though the autumnal capital crisis was averted, Pakistan claimed it needed $10 billion to $15 billion over the next two to three years to continue to service its capital account deficits and its outstanding debt. As a result, it continues to seek assistance from various sources. Pakistan reportedly requested an additional $4.5 billion in assistance from the IMF during bilateral talks in Dubai in mid-February 2009. A few days later, President Zardari traveled to China, where he reportedly requested aid. In addition, there are signs that Pakistan's economic problems are growing worse. The global economic recession has apparently contributed to a slowdown in Pakistan's merchandise trade. Despite the decline in global food and energy prices, inflation remains high in Pakistan, causing economic hardship for Pakistan's urban and rural poor. Pakistan reportedly requested an easing of the IMF conditionalities during the meetings in Dubai. There is rising concern that the economic conditions are contributing to a growth in support for Pakistan's Islamist extremists, including al Qaeda and the Taliban. In his testimony before the Senate Select Committee on Intelligence, Director of National Intelligence Dennis Blair stated: The [Pakistan] government is losing authority in parts of the North-West Frontier Province and has less control of its semi-autonomous tribal areas: even in the more developed parts of the country, mounting economic hardships and frustration over poor governance have given rise to greater radicalization. In a February 2009 report, the Atlantic Council stated, "Pakistan faces dire economic and security threats that threaten both the existence of Pakistan as a democratic and stable state and the region as a whole." The Atlantic Council called for an additional $4 billion - 5 billion of immediate financial aid for Pakistan to avert "an economic meltdown." The report's honorary co-chair Senator John Kerry has indicated that he and Senator Richard Lugar "will soon introduce our Enhanced Partnership with Pakistan legislation." The legislation is expected to be very similar to the "Enhanced Partnership with Pakistan Act of 2008" ( S. 3263 ), introduced in the 110 th Congress by then-Senator and currently Vice President Joseph Biden. Other legislation has been introduced during the 111 th Congress designed to help improve the economic situation in Pakistan. After seven years of generally strong economic growth, Pakistan's economy ran into problems in 2008. Real GDP growth, which had been averaging above 7% per year since fiscal year 2000/2001, declined to 5.8% in fiscal year 2007/2008 and is expected to decline to 2.5% in fiscal year 2008/2009. Pakistan's consumer price index (CPI), which had fluctuated around 7%-9% for several years, jumped to over 25% during the summer of 2008, primarily due to a sharp increase in global food and energy prices. More alarming, however, was the dramatic decline in Pakistan's foreign exchange reserves, which plummeted from over $14 billion in June 2007 to $3.4 billion in October 2008, driven by a rapidly deteriorating current account balance. In the autumn of 2008, Pakistan was in danger of defaulting on its sovereign debt. During September and October 2008, Pakistan sought assistance with its capital crisis from a number of sources, including the ADB, China, the IMF, Saudi Arabia, the United States, and the World Bank. At first, Pakistan was unable to secure a firm commitment for support from most of these sources. There was speculation that the individual nations were waiting to see if the IMF would provide assistance, and what conditions the IMF would place on this aid. Pakistan, however, was initially reluctant to accept IMF support, for fear that its "conditionalities" would generate unacceptable hardship for Pakistan's poor and possibly threaten the stability of the Pakistan government. For a time, Pakistan sought other sources of support than the IMF. Pakistan's initial approach, termed "Plan A," was to obtain loans from selected sources, such as the ADB, the World Bank, the United Kingdom's Department for International Development (DFID), and the Islamic Development Bank (IDB). The ADB did agree to provide Pakistan with a $500 million loan "to address harm done to poor families and the country's economy by unprecedented international food and fuel price hikes." In addition, the World Bank originally offered $1.4 billion in assistance. However, the combined ADB and World Bank loans were insufficient to address Pakistan's current capital shortfall. When Plan A proved unworkable, Pakistan shifted to Plan B, which was to secure commitments for support from an informal group of nations known as the "Friends of Pakistan." On September 26, 2008, a group of nations met President Zardari in New York City to discuss ways to support Pakistan with its political, economic, and security problems. Zardari reportedly sought $100 billion in aid from the group. Calling themselves the "Friends of Pakistan," the informal coalition includes representatives from 11 nations (including China, Saudi Arabia, and the United States), as well as the European Union, the United Nations, and the IMF. The group did not, however, offer Pakistan any financial support following their September meeting. At the second meeting of the Friends of Pakistan held on November 17, 2008, in Abu Dhabi, Pakistan again requested assistance, but no commitment to aid was forthcoming. As part of the Plan B initiative, President Zardari traveled to Beijing in mid-October 2008 to strengthen ties between the two nations, as well to ask for financial assistance. Following a meeting between President Zardari and China's Premier Wen Jiabao, a spokesperson for China's foreign ministry stated, "As a long-time friend of Pakistan, China understands it is facing some financial difficulties. We are ready to support and help Pakistan within our capability." Although China provided no further details on the form and extent of its intended support to Pakistan, they did agree to foster closer economic relations between China and Pakistan, setting the goal of increasing bilateral trade from $7 billion in 2007 to $15 billion in 2011. On November 14, 2008—after Pakistan had formally requested the IMF loan, but before the terms of the loan were settled—China pledged to provide Pakistan with $500 million in financial assistance. President Zardari and Tarin left for Riyadh on November 4, 2008, to reportedly ask for Saudi support for Plan B and up to $6 billion in deferred payments for petroleum imports. The deferred oil payments would free up capital that Pakistan could then use to pay its other international obligations. In an interview prior to his departure, Tarin stated, "We will not require IMF support in case we succeed in getting money from Saudi Arabia." Saudi relations with Pakistan, however, have been cool lately for several reasons, including Pakistan's quest for an oil facility from Iran. There was no public announcement of support at the end of President Zardari's Saudi Arabia trip. With the apparent failure of both Plans A and B, Pakistan moved on to Plan C—formally requesting IMF assistance. On October 22, 2008, the IMF released a statement announcing that "The Pakistani authorities have requested discussions with the IMF on an economic program supported by financial assistance from the Fund to meet the balance of payments difficulties the country is experiencing.... " The Pakistani government, however, denied at that time making a formal request to the IMF. According to various reports, informal talks between Pakistan and the IMF had been going on for some time in Dubai. The Pakistani government was reluctant to accept formal IMF assistance for several reasons. First, there is a history of poor relations between Pakistan and the IMF. Second, relations between the Pakistani government and the IMF may have been further strained by recent reports that the IMF applied pressure on the World Bank to cancel $300 million in aid to Pakistan. Third, Pakistan was concerned that the changes in Pakistan's economic policy the IMF would require as conditions for providing assistance would have undesirable political and/or economic consequences. In the words of one Pakistani economist, "Given our current political scenario, the standard IMF program would be disastrous." On November 15, 2008, Tarin announced that Pakistan had reached a tentative agreement with the IMF to borrow $7.6 billion over the next 23 months. The first installment of the loan—$4 billion—was expected by the end of November; Pakistan is to repay the loan by 2016. According to Tarin, the only condition set by the IMF was that Pakistan had to raise its interest rates to counteract its inflation problem. President Zardari reportedly commented on the IMF loan, "I think it's a difficult pill, but one has to take medicine to get better." News of the tentative IMF loan agreement was quickly met with strongly worded opposition inside Pakistan. Several members of Pakistan's parliament stated that the loan would lead Pakistan into a debt trap, worsen the national economy, and harm the living standards of the Pakistani people. Pakistan formally requested financial assistance from the IMF—technically known as a "stand-by arrangement"—on November 20, 2008. The IMF's Executive Board approved a $7.6 billion stand-by arrangement for Pakistan on November 24, 2008, and provided $3.1 billion in immediate aid, thereby temporarily averting Pakistan's capital crisis. The IMF assistance, however, was subject to several "conditionalities." Although the conditionalities were not as severe and widespread as those previously reported, they were still strict enough to raise concerns about the potential effect on that nation's economic growth, as well as the living conditions for Pakistan's urban and rural poor. Under the agreement with the IMF, Pakistan is to be provided up to $7.6 billion over 23 months. The first tranche for $3.1 billion was made immediately available to Pakistan. Subsequent tranches will be made available quarterly (see Table 1 ), subject to the achievement of selected economic performance criteria and the successful completion of the agreed upon conditionalities. Repayment of the IMF loan is to begin in 2011 and continue until 2015. The performance criteria to be used to evaluate Pakistan's progress include the State Bank of Pakistan's (SBP) net holdings of foreign and domestic assets, the government's fiscal deficit, SBP's holdings of government debt, as well as an IMF assessment of Pakistan's achievement of structural economic changes (such as tax reform, monetary and exchange rate policies, and reform of the nation's social safety net). Failure to meet the performance criteria may result in the withholding of IMF assistance. In assessing Pakistan's request for a stand-by arrangement, the IMF projected Pakistan's economic performance through fiscal year 2009/2010. Table 2 provides selected figures from the IMF's projection for fiscal years 2006/2007 to 2009/2010 as reported in the stand-by agreement. The IMF is requiring Pakistan implement a variety of changes in economic policy in order to receive assistance. The IMF conditions include changes in fiscal policy, monetary policy, and exchange rate policy. It also requires an expansion of Pakistan's social safety net to mitigate some of the anticipated adverse effects of the other conditions. As part of the agreement, Pakistan will have to lower its fiscal deficit as a percentage of GDP (as forecasted by the IMF) through a combination of tax increases and the elimination of various subsidies. According to an Atlantic Council report, Pakistan has the lowest tax-to-GDP ratio in South Asia, with less than 1% of its population paying income tax. Pakistan's Federal Board of Revenue (FBR) is to integrate the nation's income and general sales tax (GST) to broaden the tax base and reduce tax evasion. Pakistan already increased the GST rate to 16% for fiscal year 2008/2009. The FBR is also to develop a plan for the adoption of a comprehensive value-added tax (VAT). These combined measures are supposed to raise revenues by 0.5% of GDP. Pakistan is to reduce its federal expenditures by 2.75% of GDP primarily by eliminating a number of subsidies. Prior to the finalization of the stand-by agreement, Pakistan raised petroleum prices three times to eliminate its petroleum subsidies. It has also begun the process of eliminating electricity subsidies by the end of June 2009. In addition, a research and development subsidy for the textile industry has been eliminated. The IMF is requiring two key changes in Pakistan's monetary policy. First, the SBP had to raise its discount rate by 2% to 15% in an effort to stave off inflation. Second, the SBP was to refrain from financing the federal deficit by the purchase of Pakistani treasury bills and other government securities. Pakistan has operated a de-facto managed float of its exchange rate for a number of years. Under the terms of the stand-by agreement, Pakistan is to reduce its intervention in foreign exchange markets, including the provision of foreign exchange for petroleum imports. However, the SBP is allowed to intervene in order to meet the agreed foreign reserve targets. Finally, to offset the adverse effects of inflation and the economic slowdown, Pakistan is to increase its expenditures on social safety net programs from 0.6% to 0.9% of GDP. It recently established the Benazir Income Support Program (BISP), which provides cash to low-income households, and plans on expanding the Bait-ul-Mal program. Less than three months after finalizing its stand-by agreement, Pakistan returned to the IMF, requesting an additional $4.5 billion in assistance. In addition, Pakistan asked the IMF to revise some of the performance goals. Around the same time Pakistan was approaching the IMF, Prime Minister Zardari traveled to China to foster better ties between the two nations and to seek financial support. It was apparent that the November 2008 stand-by agreement and the $3.1 billion in support from other sources were not sufficient to prevent the return of Pakistan's capital crisis. By March 2009, economic data from Pakistan were indicating that the combined effects of the global economic recession and the IMF conditionalities were slowing Pakistan's economy more quickly than had been projected by the IMF, making it less likely that Pakistan would be able to meet the required performance criteria. After consultation, Pakistan and the IMF lowered the target GDP growth rate for fiscal year 2008/2009 from 3.4% to 2.5%. Despite the economic slowdown, Pakistan's current account deficit for July 2008 to January 2009 was up 1.6% over the previous fiscal year. An anonymous analyst predicted that Pakistan's current account deficit for fiscal year 2008/2009 would be around $12.1 billion—about $1.5 billion above the IMF performance goal. Another analyst, however, predicted that Pakistan's current account deficit for the current fiscal year would be between $9.2 and $9.5 billion. Similarly, merchandise trade figures for January 2009 showed a 7.1% decline in exports and a 28.4% decline in imports, raising doubts about Pakistan's ability to reach the merchandise trade projections for fiscal year 2008/2009. President Zardari and his chief economic advisor Tarin also attributed Pakistan's economic problems to higher than expected costs of military operations against the Taliban and al-Qaeda fighters. According to Tarin, "All the revenue shortfall and other problems are because of the war on terror." Tarin also pointed to a decline in U.S. support as a contributing factor, saying the United States "stopped paying our bills" in May 2008, which has allegedly cost Pakistan about $1.25 billion. Zardari said that Pakistan was in need of a modern day "Marshall Plan." Estimating the size of Pakistan's capital shortfall for the rest of the fiscal year is complicated. Based on its additional request from the IMF, Pakistan thinks it needs $4.5 billion. This figure is consistent with the difference between Pakistan's initial estimate of its capital shortfall and the level of aid already provided, and with the Atlantic Council's estimate. However, given Pakistan's recent economic performance—including current account deficit of about $1 billion over the last two months—there is reason to believe Pakistan needs in excess of $5 billion over the next four months to avoid another default risk. Assuming Pakistan is able to secure the additional capital assistance it needs, it will not end the nation's economic problems. Pakistan's recent period of economic growth was based on a combination of export expansion and inward foreign direct investment (FDI). Pakistan was able to finance its modest trade and capital account deficits in part due to the inward FDI and in part due to remittances from overseas Pakistanis. In 2007 and 2008, a rise in fuel and food prices, combined with political instability, led to a rapid rise in inflation, a spike in the trade and current account deficits, and a devaluation of the Pakistani rupee. Although global fuel and food prices are on the decline, the U.S. financial crisis has precipitated a possibly extended global recession. For Pakistan, a global recession will likely reduce demand for its exports, inward FDI flows and overseas remittances. Official Pakistan estimates for inward foreign direct investment in 2009 reportedly show a decline of over 32% when compared to last year. When he announced the previously mentioned economic policies in September 2008, acting Finance Minister Qamar said that the economic stabilization package would create jobs, promote agriculture and manufacturing, and reduce poverty. There is concern in Pakistan, however, that the higher interest rates required by the IMF will force smaller businesses into bankruptcy and the repayment of the IMF loan will stunt future economic growth. For now, the focus of the government appears to be on the current economic problems. The combination of high inflation and high unemployment apparently has contributed to a rise in poverty and hunger in Pakistan. According to one estimate, Pakistan's unemployment rate in urban areas is nearly 40% and in rural areas over 60%. A recent United Nations study reportedly determined 10 million Pakistanis are undernourished and over half of Pakistan's population can be considered "food insecure." According to a recent news report, the price of wheat—a staple food in Pakistan—has more than doubled since April 2007, while the price of palm oil—which is used in cooking—has more than tripled. The cost of food has reportedly also affected the ability of people to obtain medical care, "In this era of high inflation, poor people can't afford to seek medical treatment, even for kids." There is also evidence that the recent growth in poverty and hunger is exacerbating Pakistan's political problems. Anecdotal accounts of popular dissatisfaction are collaborated by a recent popular opinion poll conducted by the International Republican Institute (IRI) in October 2008. When asked if Pakistan was heading in the right or wrong direction, 88% of the people surveyed said it was heading in the wrong direction, compared to 44% in February 2007. In response to a question about the change in their personal economic situation over the past year, 73% said their situation had worsened, compared to 30% in February 2007. In addition, 59% of the respondents said they expected the economic situation to get worse over the next year; in February 2007, only 14% expected things to get worse. More than three-quarters of the people surveyed agreed that "the shortages of wheat, petrol, natural gas and electricity are a serious problem." Perhaps most telling were the responses to a question about "the most important issue" facing Pakistan. The most common answer—selected by 58% of the respondents—was inflation. The second most common answer (12%) was unemployment. Suicide bombings was third (10%), even though the bombing of the Islamabad Marriott Hotel—which resulted in the death of 53 people—had occurred less than a month before the survey was conducted. The next three answers, in order, were: poverty (7%), electricity and water (7%), and law and order (3%). As previously mentioned, the U.S. government considers a stable Pakistan important for several reasons. During her February 2009 trip to Asia, Secretary of State Hillary Clinton asserted that the current economic crisis, if left unresolved, could "breed instability." In reference to the situation in Pakistan, Secretary Clinton said, "If Pakistan becomes more financially unstable, that increases the danger that we will face from the threat by the extremists to the Pakistan Government." Several recent events and trends may have harmed U.S. relations with Pakistan. Although the United States provides both military and humanitarian assistance ($968 million in FY2008), Pakistan is increasingly turning to other friendly nations—such as China and Saudi Arabia—for support. Pakistan's trade relations have shifted so that China is its largest trading partner, followed by Saudi Arabia and the United States. However, the United States remains Pakistan's largest export market. In addition, U.S. military incursions into Pakistani territory and the signing of nuclear cooperation agreement with India have created tension in U.S.-Pakistan relations. Also, some Pakistani analysts think the United States orchestrated the negotiations with the IMF and the Friends of Pakistan to force Pakistan to accept the tougher IMF conditions. Even before Pakistan's capital crisis began, some analysts maintained that there was a need for the United States to demonstrate its commitment to a stable and democratic Pakistan with an increase in non-military assistance. In their view, with the IMF loan settled, there is an opportunity for the United States to demonstrate its support for Pakistan by providing a portion of the $2 billion - $7 billion Pakistan will likely still need to cover its capital shortfall. Others think that the United States should condition additional aid on Pakistan increasing its commitment to combat Islamist militancy along its border with Afghanistan. With regard to Pakistan's current capital crisis and its ongoing economic problems, there are several approaches available to Congress—if it opts to take action. These approaches range from the provision of short-term assistance to a longer term commitment to economic support to alterations in current trade policies designed to bolster trade with Pakistan. To assist Pakistan with its current capital crisis, Congress could pass legislation providing some or all of its estimated $2 billion - $7 billion shortfall. There have been press reports that Senator Kerry will introduce legislation providing Pakistan with $4 billion - $5 billion in emergency assistance. However, these reports may have conflated the recommendations of the Atlantic Council report—which Senator Kerry co-chaired with ex-Senator Chuck Hagel—with expectations that Senator Kerry and Senator Richard Lugar will reintroduce the ''Enhanced Partnership with Pakistan Act of 2008" ( S. 3263 in the 110 th Congress). In the longer run, Congress could continue to provide economic assistance to Pakistan. Since 2001, the United States has provided Pakistan with over $12 billion in assistance of which more than two-thirds was military aid. The ''Enhanced Partnership with Pakistan Act of 2008" was introduced by then-Senator and now Vice President Joe Biden and Senator Lugar on July 15, 2008. If enacted, the act would have tripled non-military assistance to Pakistan to up to $1.5 billion each year for fiscal years 2009 to 2013. The funds were to be principally used to promote just and democratic governance, economic freedom, and investments in people. The act would also have required the Secretary of State—in consultation with the Secretary of Defense, the Director of National Intelligence, and such other government officials as may be appropriate—develop a comprehensive strategy for the Afghanistan-Pakistan border region, and report the findings to Congress. It has been reported that Senator Kerry and Senator Lugar will reintroduce S. 3263 —or a very similar bill—in the near future. Besides direct assistance, Congress could help Pakistan's economic recovery by altering current U.S. trade policies in ways that would increase bilateral trade and investment. For example, legislation has been introduced to create "reconstruction opportunity zones" (ROZs) in Afghanistan and Pakistan. The "Afghanistan and Pakistan Reconstruction Opportunity Zones Act of 2009" ( S. 496 ) and the ''Afghanistan-Pakistan Security and Prosperity Enhancement Act' ( H.R. 1318 ) were introduced by Senator Maria Cantwell and Representative Chris Van Hollen, respectively. Both bills seek to promote economic growth and development along the border regions of Afghanistan and Pakistan by creating ROZs. Under the terms of the legislation, the President would have the authority to proclaim duty-free treatment for articles manufactured within the ROZs and imported into the United States, subject to certain conditions in existing U.S. trade law. Beyond the past and pending legislation proposals, other suggestions have been made on how Congress could stimulate Pakistan's economic recovery. For example, the Atlantic Council has recommended the United States should conduct a geological survey of Pakistan to identify potential mineral resources to develop. If adopted, these suggestions might require Congress to appropriate additional funds. Finally, Congress could encourage the Obama Administration to take actions that do not require appropriations or changes in federal law. For example, Congress could recommend that the Obama Administration press other nations to provide greater assistance to Pakistan, via such mechanisms as the next meeting of the Friends of Pakistan—scheduled to be held in Tokyo on March 27, 2009. In addition, Congress could support the negotiation of a bilateral investment treaty (BIT) with Pakistan, in the expectation that it would increase U.S. foreign direct investments in Pakistan.
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Pakistan, a key U.S. ally in global efforts to combat Islamist militancy, is facing a serious capital crisis. In the autumn of 2008, Pakistan was in urgent need of an estimated $4 billion in capital to avoid defaulting on its sovereign debt. The elected government of President Asif Ali Zardari and Prime Minister Yousaf Raza Gillani sought short-term financial assistance from a number of sources, including the International Monetary Fund (IMF), China, and an informal group of nations (including the United States) known as the "Friends of Pakistan." The Pakistani government reached an agreement with the IMF for $7.6 billion in loans, but their capital crisis continues. In February 2009, Pakistan requested an additional $4.5 billion in assistance from the IMF and Prime Minister Gillani traveled to Beijing seeking financial support. According to a recent study by the Atlantic Council, Pakistan needs $4 billion - $5 billion in the next 6 to 12 months to avoid another possible default. Pakistan's continuing capital crisis is affecting the nation's overall economic performance and raising concerns about its political stability. During her Asia trip in February 2009, Secretary of State Hillary Clinton made several references to the importance of solving Pakistan's economic problems in the continued campaign to combat Islamic militants in the region. The Atlantic Council has called for an increase in U.S. assistance "to avert an economic meltdown." The severity of Pakistan's economic situation has also been raised by several members of Congress. Several different research groups have recently issued reports on the situation in Pakistan that contain recommendations on what the United States could do to help alleviate Pakistan's economic problems. There are indications that Congress may consider some of these recommended actions, including an increase in U.S. non-military assistance and the creation of "reconstruction opportunity zones" in Pakistan. This report will be updated as circumstances warrant.
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The nation's energy choices embody many tradeoffs. Water use is one of those tradeoffs. The energy sector is the fastest-growing water consumer in the United States. Projections attribute to the energy sector 85% of the growth in domestic water consumption between 2005 and 2030. This projected growth derives from anticipated demand for more energy, increased development of domestic energy sources, and greater use of water-intense energy alternatives. Much of the energy sector's growing water demand is concentrated in water-constrained regions. Affordable water supplies are limited, and competition for water is becoming more intense. Whether the energy sector helps exacerbate or alleviate future water tensions is influenced by current energy policy and investment choices. These choices also may determine whether water limits or harms the nation's ability to reliably meet energy demand. Water limitations may hinder some water-dependent energy activities in specific locations. Water already plays a significant role in the energy sector, and water use by the energy sector already shapes national water use. For example, more than 80% of U.S. electricity is generated at thermoelectric facilities. With few exceptions, these thermoelectric power plants are cooled with water. In 2005, withdrawal of water for cooling represented 41% of water withdrawn nationally, and 6% of the water consumed nationally. The more water used by the energy sector, the more vulnerable energy production and reliability are to competition with other water uses and water constraints such as droughts. Climate change impacts on water supplies in some regions may exacerbate this vulnerability. Water availability can affect both existing and new energy activities, as well as all those economic activities that depend on the fuels and electricity produced. The energy sector is changing. Paths chosen and capital investments made in the near term are likely to establish long-term trajectories for energy's water use. Trends indicate that energy's changing water use has national and regional significance for water consumption. A question for Congress is: what is the appropriate federal role in responding to energy's water demand? In the aggregate, current federal energy policies contribute to energy's rising water demand, while energy interests and the state and local governments are responsible for managing and meeting water demands and resolving competition over water resources. Questions for Congress include who is the most appropriate entity to respond to energy's growing water demand and water vulnerability and how to respond. At present, little direct federal action is aimed at managing the energy sector's water demand; instead, the current division of responsibilities relies on energy interests and state and local governments to meet and manage energy's water demand and resolve energy-water conflicts. The role of federal policies in contributing to rising water demand is bringing into question the future federal role in this policy arena. Local or regional competition for water with existing users is often what makes energy's water demand significant; at the same time, the regional and local scales of water resources availability and management complicate many federal water-related actions. Options for managing and meeting energy's water demand range from maintaining the current approach, with little federal action targeted at managing energy's water demand, to taking a variety of federal actions. One option is to minimize growth in energy's freshwater use. This could be accomplished through changes to broad policies (e.g., energy demand management) or legislation specifically targeted at water use (e.g., promotion of water-efficient energy alternatives). Another option is to improve the energy sector's access to water. Access is generally a responsibility of the state, but some limited federal actions are possible. An additional option is investing in data and research to inform decision-making and expand water-efficient energy technologies. These alternative policy approaches, which are not mutually exclusive, represent different potential roles and costs for the energy sector; energy consumers; and federal, state, and local governments. Legislation in the 111 th Congress proposed many of the above options; examples include H.R. 469 , H.R. 2454 , H.R. 3598 , H.R. 1145 , S. 1462 , S. 1733 , S. 3396 , and Subtitle IV of P.L. 111-11 ( H.R. 146 ), the Secure Water Act of 2009. During the 112 th Congress, energy's water use may arise in a variety of contexts, including during consideration of energy, agriculture, public land, and water legislation and oversight. While the water tradeoffs of energy choices may be raised in a variety of contexts, they are unlikely to be the focus of energy debates. Instead, the priority on and investments toward different policy goals—low-cost reliable energy, energy independence and security, climate change mitigation, and job creation—are likely to be more significant drivers in congressional energy deliberations. This report focuses on the factors shaping the energy sector's water demand, how that demand fits into national water consumption, and options for managing and meeting water demand. The report first lays out the trends shaping energy's water use; second, it discusses energy's vulnerability to water constraints; and third, it discusses projections of energy's water use. It then explores three regional examples of energy's water use: shale gas in Texas, solar energy in the Southwest, and biofuels in the High Plains. Finally, it discusses policy options and legislative approaches for managing energy's water use. Several appendixes provide more detailed information on specific technologies, fuels, and trends. The report does not discuss in detail the energy sector's water quality impacts, although they represent their own challenges, as shown by concerns over the water quality effects of hydraulic fracturing, mountaintop mining, and the Deepwater Horizon oil spill. Energy use by the water sector also is not discussed in this report, although water conservation is one of many available means for reducing energy demand. Trends in national energy investments, domestic energy use, population, and climate change impacts and responses can affect how much and where the energy sector uses water. Increased emphasis on domestic energy production and efforts to meet increasing energy demand are expected to increase freshwater use by the energy sector. A shift in the electricity sector away from traditional coal power plants may result in either more or less water consumption, depending on alternative fuels or electricity technologies. Carbon capture and sequestration (CCS) by electric utilities has the potential to consume significant quantities of water. Actions such as substituting wind for thermoelectric electricity generation could potentially reduce energy's water demand, but may raise other challenges for energy reliability, dispatchability, and transmission. Other impacts, such as the movement of irrigated agriculture from food crops to energy crops, raise other concerns. These and other examples of energy trends and their effects on energy's water use are summarized in Table 1 . Appendix A has a more extensive list of trends. Whether and how much the energy sector's water demand grows in the next decades will be significantly influenced by whether energy demand increases. Projections of the size and mix of the future energy portfolio vary widely. These projections are highly uncertain and are sensitive to many factors, including market and economic conditions, energy and agricultural policies, resource availability, technology developments, and environmental regulations. By association, projections of energy's water demand also are highly uncertain. The Energy Information Administration (EIA) in the Department of Energy (DOE) projects that the United States will consume 22% more electricity and 12% more liquid fuel in 2030 than in 2010. Population growth and increased electricity use per capita are some drivers of increasing demand. Significant shifts to more water-intense electricity generation (e.g., concentrating solar power facilities using evaporative cooling) or more water-intense fuels (e.g., oil shale) could increase energy's water demand in locations with these energy resources. The significance of energy's water demand depends in part on local conditions—how much water is locally available and what its alternative uses would be. The most growth in freshwater consumption by the energy sector is expected in the Southwest, the Northwest, and the High Plains—that is, regions already experiencing intense competition over water and disputes over river and aquifer management. The more freshwater used by the energy sector, the more the sector is vulnerable to water constraints. However, as described above and in Appendix A , major energy trends are pushing the sector to become more water-intensive. Water availability problems, especially regional drought and low streamflow, can pose a risk to energy production and reliability. Electricity generation is particularly sensitive to low-flow conditions. More than 80% of U.S. electricity is generated at thermoelectric facilities that depend on access to cooling water. Low-flow conditions and water scarcity may constrain water-intense alternatives for thermoelectric cooling in counties across the country. Additional ways that water can constrain energy include a possible decrease in hydroelectric generation during drought. Bioenergy yields may be reduced by low precipitation, droughts, heat waves, or floods. Energy extraction, like coal mining, may be scaled back to avoid water quality impairments exacerbated by low water conditions. While water constraints are often perceived as an issue for the western United States, an increasing number of water bodies in the East are experiencing diminished stream flows. While multiple examples exist of water availability affecting siting and operations of thermoelectric facilities from New York to Arizona, generally there are ways to reduce the use of water and the risk posed by water constraints. Water supplies often are most constrained during summer, when the energy sector's water use is at its height in many regions. Approximately 24 of the nation's 104 nuclear reactors are situated in drought-prone regions. The Nuclear Regulatory Commission sets minimum source water elevation levels for each plant, so that a plant does not operate when source water levels drop below plant cooling water intakes. If cooling water sources fall below the established minimum water level, or if the maximum thermal threshold for the discharge of cooling water cannot be met, a facility is required to power down or go offline. A commonly cited example of this occurred on August 16, 2007, when a nuclear reactor owned by the Tennessee Valley Authority (TVA) at the Browns Ferry Nuclear Power Plant in Alabama shut down for a day. Its cooling water discharge exceeded temperature regulations that protect the environment and wildlife of the Tennessee River. In the summer of 2010, the same plant cut its electricity production to 45% of capacity when the cooling water temperature again exceeded discharge regulations. The reduced generation resulted in $50 million in higher cost to customers. TVA subsequently initiated a $160 million upgrade and expansion of its cooling system to avoid similar cooling constraints in the future. Snowpack, precipitation, and runoff are strongly related to climate. Climate change researchers predict both water quantity and timing changes. That is, the research indicates more precipitation in the form of rain and less in the form of snow, and changes to seasonal water availability in some areas (e.g., low-flows during dry seasons). Additionally, climate models predict more frequent floods and droughts. These changes present challenges for hydroelectric dam operation. Changes in the availability and temperature of water resources also may affect operations of power plants that require water for cooling and that have thermal discharge limitations for cooling water. Climate change also may increase the demand for air conditioning, the electricity it consumes, and the water used to produce the electricity. The decreased runoff anticipated in the West, Southwest, California, and Pacific Northwest would decrease the amount of water available for all uses, including the energy sector. That is, the water resource impacts of a changing climate would likely exacerbate already projected thermoelectric cooling constraints. The energy sector also is vulnerable to potential increased flood and storm hazards associated with climate change. An example is the disrupting effects of floods on fuel transport. How much water will the energy sector use in the future? In part, interest in answering this question is rooted in other questions of national significance, such as: Will water limit U.S. capacity to meet the nation's energy demand? Will water constrain the transition to greater energy independence? Will water hamper adoption of some renewable energy alternatives? Quantification of energy's water demand and its significance is limited by significant gaps in available data and analyses. Water has no federal data agency comparable to the Energy Information Administration that projects alternative demand scenarios. There is no authoritative government source to cite for the level of water use by the energy sector or for projections of how that use may change in future decades. For example, there are no forecasts that use multiple scenarios to identify sensitivity of water demand to multiple factors and policies, or that analyze energy's water use and water vulnerability in the context of factors significant to energy choices and policies, such as energy and transmission costs, emissions, and reliability. For over 50 years, the U.S. Geological Survey (USGS) of the Department of the Interior has collected and published water use data every five years; however, the agency stopped collecting water consumption data after its 1995 survey due to funding constraints and data reliability problems. (USGS continues to collect water withdrawal data.) The 1995 USGS data are the basis of most projections of future water consumption in the United States. In the Secure Water Act of 2009, Congress authorized the USGS to perform a water use and availability assessment that includes water use trends in the energy sector; however, to date the agency had received no congressional appropriations for this program. Every 10 years the Forest Service forecasts water resources trends based largely on extrapolations of the USGS data and using the USGS data categories. The energy sector falls into a number of USGS water use categories, and it is impossible to disaggregate the categories to determine a value for the energy sector's water use. (Except for thermoelectric water withdrawals, the USGS water use data and Forest Service projections do not break out energy water use from other agricultural and industrial water uses.) Because of these limitations, the analysis herein relies on the most comprehensive projections available on the energy sector's water consumption, with the main source being a 2010 article by Deborah Elcock, an Argonne National Laboratory researcher, based on an updated and refined analysis from a report published by the lab in 2008. Although currently available data are limited, there are prospects for improved data and analysis in the future. The Secretary of the Interior announced in October 2010 that the USGS is undertaking a Colorado River Basin Geographic focus study as part of the department's WaterSMART Water Availability and Use Assessments initiative; this focus study may eventually comprise a component of the USGS water use and availability assessment Congress authorized in 2009, which would represent the first national water census since 1978. Additionally, regional efforts may inform future decision-making. For instance, the Western Governors' Association initiated in 2010 an energy-water nexus project, as part of its renewable energy transmission expansion effort, which includes a water availability assessment. The assessment is looking into projected water demands for large river basins and aquifer systems in the West and is expected to consider drought and potential climate change implications on the availability of river flows and water supply for energy development in the West. The effort is anticipated to conclude with policy recommendations available in late 2012, and is funded primarily by DOE. During the 1980s and 1990s, as a result of improved water efficiencies, U.S. water consumption remained below the historic high level of 101 billion gallons per day (bgd) estimated for 1980. Estimates of recent consumption, however, put U.S. freshwater consumption above the previous high and predict it will increase further in the next decades. (See Figure 1 .) The projected rise is dominated by energy's water use. Nationally, energy's water consumption exceeds municipal and industrial use; it is currently second only to agriculture. By modeling current energy and water trends, available projections predict that water consumption by 2030 will increase by 7% above the level consumed in 2005, as shown in Figure 1 . Eighty-five percent of this growth is attributed to the energy sector, and an increase has already been observed between 2005 and 2010, with greater energy sector water use for irrigated biofuels. (See Appendix B .) Energy's water consumption (excluding hydropower) in 2005 was roughly 12 bgd, as shown in Figure 2 ; it is estimated to increase to 18 bgd by 2030. As shown by the data summarized in Figure 2 , roughly 60% of the anticipated expansion is associated with bioenergy, and 40% is associated with thermoelectric cooling and fossil fuel mining, production, and processing. The analyses behind these projections do not capture the effects on water consumption of various fuel and generation technology changes in the electricity sector and potential adoption of CCS, nor do they include hydropower's water consumption. Although the total national increase in Figure 1 may not appear large (7% over 25 years), multiple factors make this a significant increase for the water sector. First, growth in water consumption between 2005 and 2010 has put current water consumption above the previous high set in 1980. Second, water in many basins is largely allocated (or even over-allocated), with the water being delivered under legally binding agreements or withdrawn under issued permits. This means that making water available to the energy sector would likely decrease water use in another sector, such as agriculture. Third, Figure 1 represents national freshwater use; local proportions and increases in water demand from energy may be significantly higher. To illustrate the role that energy's water demand plays at the state level, roughly 16% of the water diverted in Kansas in 2008 went to biofuels; another 16% was used for electric power generation, while roughly 9% was used for municipal purposes. Fourth, in some regions, climate change is anticipated to decrease the quantity and reliability of water supplies. In particular, lower-altitude and drier areas are anticipated to become drier; some regions (e.g., the West) may experience more frequent or intense drought years punctuated by wet years. Lower precipitation in a portion of the Great Plains, and reduction in temperature-vulnerable snowpack in the western near-coastal mountains, are some of the anticipated changes to water supply. Therefore, energy's demand for more water use may coincide with a decreasing and less predictable water supply. Projections are based on assumptions that are subject to change; in particular, management of energy demand and wide deployment of water-efficient energy options may significantly lower water use below projected levels. A DOE Energy Efficiency and Renewable Energy (EERE) study found that expanding the nation's electricity portfolio to 20% wind by 2030 would reduce water consumption by 1.2 bgd compared to expanding the current electricity mix. The saved water would be 41% from the Midwest/Great Plains, 29% from the West, 16% from the Southeast, and 14% from the Northeast. Alternatively, the projections in Figure 1 could be underestimates. Some factors that may augment energy's water consumption are not accounted for in these projections. More water could be consumed if carbon capture and sequestration is widely employed (see discussion below), or if more water-intense energy is produced. For example, significant expansion of electricity from evaporative-cooled concentrating solar power (CSP), or new hydropower reservoirs in areas with high evaporation rates, could drive up energy's water consumption. Similarly, a significant increase in oil shale development could increase energy's water use in regions with those deposits. In summary, projections based on extrapolations of current trends can illustrate one potential path for water consumption, but many factors, such as the role of changing technologies and policies, can result in actual water consumption varying significantly from projections. The majority of current U.S. electric generation is from fossil fuels. The electric generation mix in 2009 was 45% coal, 23% natural gas, 20% nuclear, and 7% hydroelectric, less than 4% non-hydroelectric renewable generation, and less than 2% other sources. Carbon capture technologies in the fossil fuel industry may reduce carbon dioxide emission, but they come with investment and resource costs to manufacture and operate. Current carbon capture technologies consume energy and water. Water is used at two points in the carbon capture cycle: cooling water is required for capture and compression processes, and water generally is consumed for power plant cooling when generating power needed to perform CCS. A 2009 study by the National Energy Technology Laboratory found that by 2030, carbon capture and sequestration could increase water consumption for electric generation by anywhere from 0.9 bgd to 2.3 bgd, depending on the scenarios used for plant additions and for deploying carbon capture technologies. Although most hydropower generation represents an in-stream water use, dams built to generate hydropower and for other purposes consume water by increasing evaporation above free-flowing river conditions. That is, more evaporation occurs at the reservoir behind the dam than at the river without the dam. How much evaporation occurs at a reservoir with a hydroelectric generation depends on site, climate, and water conditions. CRS was unable to locate national data on existing or future projections for water consumption for hydroelectric generation. The currently available water consumption data from the USGS do not include hydropower evaporation. The agency states: "Although the quantity of water evaporated in the actual generation of hydropower (consumptive use) is small, considerable depletion of the available water supply for hydroelectric power generation occurs as an indirect result of evaporation from reservoirs and repeated reuse of water within pumped-storage power facilities." As noted in Figure 2 , a 2003 NREL report estimated evaporation at 120 reservoirs with hydroelectric facilities at 9 bgd. Because these reservoirs generally serve multiple purposes, this evaporation cannot be attributed to hydropower alone and is not shown in the figure. Moreover, many reservoirs enhance water availability for multiple functions by providing storage that regulates streamflow, at times minimizing the occurrence of naturally occurring low-flow levels. These benefits, however, often come with harm to aquatic ecosystems, species, and floodplains. The NREL data illustrate that evaporation at facilities with hydropower can vary widely based on geography and climate. Site-specific estimates of water consumption for new hydroelectric generation using new reservoirs (e.g., some pumped storage proposals), therefore, would be required to understand hydroelectric generation's impacts on water resources. That is, new hydropower reservoirs cannot be assumed to have minimal effect on water consumption. Efficiency improvements or additions of hydropower generation at existing facilities, however, have the potential to increase electricity generation without increasing water consumption from evaporation. Much of the anticipated growth in the energy sector's water demand is in water-constrained areas, potentially exacerbating competition and low flow condition for water during summer and droughts. That is, while energy's water demand is anticipated to rise across the United States, the West is likely to experience some of the more significant constraints and conflicts in meeting this demand. While local or regional competition for water is often what makes energy's water demand significant, the regional and local scales of water resources and how they are managed often complicate federal water-related actions. To illustrate one aspect of how energy's growing water demand varies across the country, Figure 3 shows projections for expanded electricity generation in many water-constrained states (e.g., California, Texas, Arizona), primarily owing to rising electricity demand. The following examples of regional water consumption concerns are discussed in more detail: shale gas production in Texas using hydraulic fracturing, solar electricity generation in the Southwest; and biofuel production in the High Plains. Technologies and management practices exist for reducing water use in each of these energy activities; however, these options generally come with energy cost, generation, and reliability penalties. Whether the benefits from the water savings of adopting these technologies and practices are viewed as outweighing these penalties often is a matter of perspective and is site specific. Moreover, little reliable and systematic data is available on the costs and benefits of adopting these measures in a variety of circumstances to better inform decision-making. Shale gas development has expanded in the last decade, in part because of technological advances in horizontal drilling and hydraulic fracturing. Fracturing involves the pressurized injection of water-based fluids (water, sand, and chemical mixtures) into a well to fracture a rock formation so that natural gas is released. (For more information on shale gas development, see CRS Report R40894, Unconventional Gas Shales: Development, Technology, and Policy Issues , coordinated by [author name scrubbed].) Shale gas formations occur in many areas of the United States. Exploiting this resource is bringing the oil and gas industry into communities unaccustomed to energy development. Water use is one of a number of issues being raised with the expansion of unconventional gas development. While technological developments allow for greater extraction of gas, these technologies result in an increasing average amount of water used per well. That is, the longer the well, the more water is needed to drill and stimulate gas production. Freshwater, rather than saline water, is preferred for drilling and fracturing. Water use is concentrated in the early stages of well development, usually in the first few months. Once the well is producing, little or no water is required, unless refracturing is necessary. Much shale gas development is on private lands, and no government agency requires operators to report water use. Some data on water use per well are available, such as data from a DOE report in 2009 for four shale gas formations, which show water use ranging from 2.7 million gallons to 3.9 million gallons of freshwater per well. Some limited data are available on the amount of water per unit of energy produced. Data from Chesapeake Energy shale gas wells indicate that drilling, fracturing, extraction, and processing use between 0.6 and 3.8 gallons of water per million British thermal units (MMBtu) produced, or 5 to 29 gallons per megawatt-hour (MWh), as fuel for a combined cycle natural gas facility (not including the power plant water use). This puts shale gas at the lower end of water use for transportation fuels such as domestic onshore oil and irrigated biofuels, and below the water use for most coal and nuclear fuel production for electricity, according to a 2006 DOE report. The water use issue for natural gas is often one of concentration. That is, if many wells are being developed in a limited geographic area, the cumulative water needs of multiple drilling and fracturing operations may be locally significant and constraining to expansion of energy development. This may be particularly the case in areas with water constraints and competing water demands for domestic, agricultural, and thermoelectric use or areas where water for new gas operations represents a substantial expansion in water use. Water quantity concerns have been raised for the Texas Barnett formation, particularly when drilling was using primarily fresh groundwater supplies and reached a peak of more than 3,000 new wells in 2008. With the subsequent decline in gas prices, the number of new wells drilled annually has dropped to 1,000, and increasingly the water is coming from surface supplies purchased from municipal water utilities where available, such as in the Fort Worth area. Based on available projections, the maximum use for natural gas production annually in the affected Texas counties may reach 7.5 billion gallons (0.021 bgd) under a high drilling scenario; this would represent 1.15% of local water consumption. While this shale gas use represents a modest share of local consumption, communities in this region of Texas have faced significant concerns about the sufficiency of available supplies during drought conditions for the region's growing population. This concern has brought scrutiny to all water uses, including shale gas. For most wells, the majority of the fluids injected into formation are not returned to the surface. In the Barnett formation, the water that is returned to the surface, known as flowback or produced water, is typically reinjected deep underground in a permitted disposal well. Texas A&M researcher C. J. Vavra estimates that more than half of the produced water could be reused in subsequent fracturing operations, and a quarter could be put to beneficial use. These actions could reduce the impact of shale gas development on local water supplies but could raise other concerns. Legislation was considered by the 111 th Congress to support research on this subject. For example, H.R. 469 , the Produced Water Utilization Act of 2009, would have directed the Secretary of Energy to carry out a program to demonstrate technologies for environmentally sustainable use of energy-related produced waters from underground sources. Water quantity concerns related to shale gas development are often overshadowed by interest in the economic benefits of the gas development and other local concerns with development. These other concerns include the risk that fracturing-related activities may contaminate freshwater supplies, community disruption and air pollution from truck traffic related to gas development (e.g., truck transport of drilling equipment and materials and fracturing additives and freshwater on and wastewater off the well site), and short-term and long-term changes to the local landscape and community. Although shale gas in Texas is discussed above, rising water demand for natural gas development is occurring or is anticipated in many other states and regions, such as the Northeast (Pennsylvania, New York), the South (e.g., Arkansas), and the upper Missouri River basin (Wyoming, South Dakota, North Dakota). Another example of energy's regional water demand is concentrating solar power (CSP) in the Southwest. The region has abundant solar resources, but the region's water constraints can influence the attractiveness and feasibility of different solar technologies and the suitability of specific sites. Most concentrating solar power (CSP) consists of ground-based arrays of mirrors that concentrate the sun's heat, which is used in a thermoelectric process to generate electricity. The two primary technologies are solar troughs and solar towers. Although CSP does not emit greenhouse gases, its use of a thermoelectric process can raise water concerns, particularly if evaporative cooling is employed (that is, if water is evaporated to dissipate waste heat). Similar water concerns would be raised if new fossil-fuel thermoelectric power plants were to be similarly located in the Southwest. For some Southwest counties with relatively low water use, large-scale deployment of CSP or another thermoelectric facility (even with water-efficient cooling technologies) could significantly increase the current demand for water in the county. Some solar developers are using cooling alternatives that require less water (or have been encouraged or required to do so as part of state permitting or federal approval of facilities on federal lands). These alternatives include dry or hybrid cooling or use of impaired waters for cooling (see Appendix C ). These options generally come at a cost premium and with energy and cooling efficacy tradeoffs. Other solar developers have purchased water rights from willing sellers in states with active water markets. Still other solar developers are using solar technologies that require little or no water; these include photovoltaic solar, which uses panels of solar cells to convert sunlight directly into electricity, and dish engine CSP, which uses engines rather than a thermoelectric process to produce electricity. (See Appendix C .) While these technologies are water-efficient, they have other constraints (e.g., cost, land use, dispatchability). In summary, freshwater constraints like those in the Southwest do not preclude solar development, but access to water shapes the technologies and costs of solar development. An additional example of energy's regional water demand is biofuels in the High Plains. The expansion of biofuel use through incentives and consumption mandates is an example of how federal energy policies can affect water use. The water quantity used for (and water quality impacts of) biofuels is particularly sensitive to biofuel feedstock, use of irrigation, and local climate and soil conditions at the growing site. Average water consumption by the dominant U.S. biofuel, corn-based ethanol, significantly exceeds the water intensity of other U.S. transportation fuels if the corn feedstock is irrigated. (See Appendix B .) Irrigation of only a small amount of biofuel feedstock in areas without sufficient rainfall to support feedstock growth without irrigation has the potential to substantially increase national water consumption for transportation fuels. The High Plains—consisting of portions of Texas, New Mexico, Colorado, Kansas, Nebraska, Wyoming, and South Dakota—is one example of a low-rainfall area. Much of the High Plains has faced water supply issues for decades, such as the declining level of portions of the Ogallala aquifer since the mid-1960s. Expansion of biofuels in this area is an additional demand exacerbating already competing water uses. For example, in Colorado in 2008, 16 times the annual quantity of treated water supplied to Fort Collins water customers was used to produce biofuels in the state, with the majority used in eastern Colorado. Of particular concern to the High Plains is expanded biofuels production on new or marginal lands, which could lead to additional irrigation demand and increased fertilizer application, causing both water quantity and quality concerns. Expansion of existing biofuel crops on land in current production raises water quality concerns because of the possible increased application of fertilizers and pesticides necessary to increase yields. Recognition of water, land, and other issues related to biofuels, particularly irrigated corn- and soybean-based biofuels, has led to a search for feedstocks and other organisms that use fewer resources to produce. Recent federal biofuels policies have attempted to assist this search by focusing on the development of a cellulosic biofuels industry. Dedicated biomass crops, such as switchgrass, hybrid poplars, and hybrid willows are considered by many to be more desirable crops because they have a short rotation (regrow quickly after each harvest) and use fewer resources, such as water and fertilizers, than traditional field crop production. Despite potential environmental benefits, concerns persist about the additional use of fertilizers and water resources that could be required to increase the per-acre yields to economically feasible levels; for example, that cellulosic feedstocks may be irrigated to increase yields, even though irrigation may not be required. Also, land use pressure for expanded production also applies to cellulosic biomass feedstock, possibly creating direct competition with current land conservation programs and replicating the concerns of traditional biofuel feedstock stated above. Despite federal incentives, technological and economic hurdles continue to prevent the cellulosic biofuels industry from developing to commercial scale production. The previous sections described how energy's demand for water is increasing and provided some regional examples. This section discusses options for meeting and managing that demand. Historically the energy sector and the states have determined how water is used in the energy sector, but the significant role that current federal policies are playing in driving up energy's water demand is raising questions about the federal role in meeting and managing that demand. These questions include Are states being unfairly burdened with the responsibility of increased water use and competition resulting from federal energy policies, or is this part of the responsibility that comes with state primacy in water allocation? Who is responsible for the vulnerability of the nation's energy system to water availability? Congress is faced with deciding not only whether, and if so how, to alter current policies to respond to energy's water demand, but also who is the most appropriate entity to respond to energy's growing water demand. Currently little direct federal action is aimed at managing the energy sector's water demand, although federal policies at times have significant indirect influence on this demand. Instead, present roles rely on the energy industry and the states and local governments to manage water constraints and to resolve energy-water conflicts. The issue of the energy sector's water use may arise during the 112 th Congress in a variety of contexts. Support or opposition for legislation affecting energy's water demand may be influenced by opinions about the proper federal role in water allocation and planning, as well as concerns about the cost of actions and who is responsible for those costs. Positions on the larger energy and climate debate and other factors may also be important. Federal responses to energy's water use are complicated by the wide-ranging and place-based nature of the issue, the variety of actors involved, the costs and other tradeoffs involved, and the existing institutions and divisions of responsibilities for water and energy. If increased federal action to meet and manage energy's water demand is deemed appropriate, possible actions fall under a few broad options. Attempts can be made to minimize the growth in energy's freshwater use by adopting general energy policies that are less water intense and more sensitive to water constraints, or by specifically promoting activities that reduce energy's water use, such as incentives for adopting less water intense energy generation technologies. Another option is to make freshwater available for the energy sector (e.g., through allocations, permits, or facilitating water trading); however, the majority of water quantity allocation and permitting decisions are up to the states. An additional option is improving data and analysis on energy's water use to better inform decision-making (e.g., resource planning efforts and decision-support tools) and enhancing the availability and dissemination of water-efficient technological alternatives. These approaches are presented in Table 2 , with examples of each from legislation reported by a congressional committee of the 111 th Congress. These options are not mutually exclusive and different options may be more or less appropriate and attractive for different components of the energy sector's water demand. These options also represent different potential roles and costs for federal and state governments, the energy sector, and energy consumers. No entity has performed a comparative analysis of these policy options using multiple criteria (e.g., cost-effectiveness; who bears the cost; risks, reliability, and vulnerability; opportunity costs; role of state entities; role of federal entities). One of the challenges of a federal response to energy's water demand is that the concerns, policy options, and technological options vary greatly by region. Whether these policy alternatives should be pursued at the local, state, or national level depends in part on perspectives on the appropriate role of each level of government. Perspectives on the policy options related to energy's water demand also are influenced by long histories of regulation, management, promotion, and oversight of the nation's energy and water resources and infrastructure. Current and evolving conditions also play a role: providing greater access to water for the energy sector (which is primarily up to the states) may be difficult and controversial in water-scarce, drought-prone, or environmentally sensitive areas, especially with climate change anticipated to affect the availability and reliability of water in some regions. States have traditionally had primacy in water allocation, so decisions about permitting energy's water use largely have been non-federal. State and federal laws and policies can affect the ease or difficulty of, and incentives for, transferring water from existing uses to energy. The federal government can, if it chooses, promote change in state water laws, institutions, and decision-making. Some view this as infringing on states' rights. Similarly, while private entities make many of the decisions on the energy sector's water use, the public sector influences these decisions through numerous routes (e.g., tax incentives, loan guarantees, permits, regulations, planning, education); this influence can come from local, state, or federal policies. The federal role in water resource allocation and management increases as the federal interest increases—for example, when the use occurs on federal lands. Competing water demands, including those from the energy sector, are raising questions for federal agencies about the operations of federal facilities. For instance, can water delivered to Bureau of Reclamation contractors (e.g., water delivered to irrigation districts in California's Central Valley) be used not for agriculture, but for energy development (e.g., evaporative cooling of a concentrating solar power facility)? Can water from an Army Corps of Engineers dam that has multiple purposes (e.g., flood control, navigation, and/or municipal or agricultural water supply) be used for the oil and gas development, and if so, how much water can the Corps provide under existing authorities? The energy sector has long been a major water user, so why the current concern? Major energy trends are pushing the energy sector to become more dependent on, and therefore vulnerable to, freshwater availability. This is occurring at a time of increasing concerns about the adequacy and reliability of freshwater supplies due to population growth and climate change. Energy resource and technology paths chosen and capital investments made in the near term are likely to establish long-term trajectories for energy's water use. Many of the current trends are in part driven by federal policy. The federal government partially shapes the energy sector and at times defines a vision for the nation's energy future (e.g., biofuel production targets). Some stakeholders have raised concerns about the feasibility and consequences of meeting various energy targets and policy proposals, including concerns about physical inputs like water, land, materials, and rare minerals. Because affordable freshwater is a finite resource, commitments of water supplies for the energy sector reduce availability for other sectors and for ecosystems. Local or regional competition for water is often what makes energy's water demand significant; at the same time, it is the regional and local scale of water resources and how they are managed that often complicates many federal water-related actions. The federal role in energy supply and demand raises questions about the policy direction for meeting and managing energy's water needs, among them: If energy security is a national security issue, is energy's water use by association a national security issue? Would this be a justification for federal spending on energy and water efficiency measures? Water supply concerns are not only being raised in the context of energy. There also is growing concern about water availability and aquatic conditions for meeting the demands of the agricultural and municipal sectors and the needs of ecosystems and threatened and endangered species; these concerns are raised particularly in the context of droughts and impacts of climate change on water resources. Given available freshwater resources, a challenge for the nation will be to cost-effectively, sustainably, and reliably meet energy demands while satisfying agricultural, municipal, and industrial water demand, as well as ecosystem needs. This challenge raises fundamental and controversial questions about how U.S. freshwater resources are allocated and used for various purposes, and about the availability and value of water in different sectors of the economy and in the environment. At issue for Congress is the role that the federal government and federal funding plays in shaping, meeting, and managing energy's water demand, while accounting for the significant role of the states and private sector in water use decisions. Appendix A. Energy's Water Consumption Trends Ideally, policy and decision makers should know how energy choices and policies compare across a wide array of parameters (e.g., cost, reliability, dispatchability, emissions, land requirements, water use) under different scenarios. That is, informed decisions would require water use data, analyses of least-cost water and energy conservation and efficiency actions, understanding of other water uses and their costs and benefits, life-cycle assessments of energy's water uses and risks, and more. Such assessments are not available. While not addressing this shortfall, Table A -1 and Table A -2 summarize the freshwater impacts of numerous shifts in transportation fuels and the electricity sector, respectively. Without such multi-variable assessments, it is difficult to understand the full implications of energy decisions. While this report focuses on energy's water use, there are a host of other factors to consider when analyzing energy policy tradeoffs. For example, fuel and technologies for generating electricity are not equally dispatchable; that is, is they are not equally able to increase or decrease generation, or to be brought online or shut down to match demand. Thermoelectric facilities using fossil fuel or geothermal sources are advantageous because they can be operated to produce electricity constantly or dialed up or down with demand. While electricity from hydropower, tidal, and wave energy generally can be produced fairly predictably, often the timing of operations is subject to the intensity of tides and waves, to water conditions such as drought or large storms, and to environmental restrictions regarding potential impacts on marine life and ecosystems. In contrast, until more advanced storage technologies become commercially competitive, photovoltaics and wind, which require very little water, remain intermittent sources that generally cannot be dispatched when the sun is not shining or the wind is not blowing. Appendix B. Water Use by Transportation Fuels D. Elcock's study projects that the energy sector's consumptive water use will increase from 6 billion gallons per day (bgd) in 2005 to 10 bgd in 2030 in the areas of fossil fuel mining, production, and processing and bioenergy. (See Figure B -1 .) The growth is dominated by water consumed for bioenergy. The Elcock study and other sources show that the effect of bioenergy on energy's water use was already felt between 2005 and 2010. The projected water demand by bioenergy could drop, potentially significantly, if less-water intense bioenergy is developed and adopted. This projection covers most of the water used to fuel transportation and the water used for obtaining and preparing fossil fuels for use in either transportation or the electricity sector. Figure B -2 provides data from research on the comparative water intensity of different U.S. transportation fuels. Note that the figure has a logarithmic scale, and that the water consumed traveling on irrigated biofuels is orders of magnitude larger than the water embedded in other fuels. Appendix C. Water Use for Electricity Generation Trends in the electricity sector contributing to increased water consumption currently overwhelm actions that reduce water consumption. As a result, local water challenges presented by electric generation are becoming more common in many water-constrained areas. These challenges may drive action to reduce electricity's freshwater footprint, such as the adoption of water-efficient electricity generation and water-efficient thermoelectric cooling options, or the use of impaired water. This appendix describes the available data on the electricity sector's water consumption and data on the different electricity generation's water use. Then it presents alternative thermoelectric cooling choices that may reduce electricity's water use. Lastly, it discusses the tradeoffs between water use and other characteristics (e.g., environmental impacts, reliability, dispatchability) of electric generation from hydropower facilities, photovoltaic solar and wind installations, and geothermal resources. Data on Electricity's Water Use Available estimates for the electricity sector's water consumption focus primarily on thermoelectric cooling water needs because cooling dominates water use during generation. Other aspects of electric production (e.g., fuel mining and processing) also use water. (See Table C -1 .) Data and projections on the water consumed in the mining, production, and processing of fuels for generating electricity are bundled with the production of fossil fuels used in the transportation sector, like the Elcock study. The projections in Figure 2 for thermoelectric cooling come from the Elcock study, which was based on projections in a 2007 report by NETL. The NETL projections are limited to coal, natural gas, and nuclear-powered facilities; that is, they do not calculate water use changes that would occur from shifts in the electricity sector broadly (e.g., adoption of more wind or photovoltaics) or shifts in thermoelectric generation more specifically (e.g., concentrating solar power or biomass generation). Elcock assumed that biomass generation for electricity production would be based in regions not requiring irrigation. No analyses of electricity's total water consumption or how it may change under different policies exist; this type of analysis is difficult to perform without reliable data on water intensities of different electricity generation technologies and fuels. No authoritative comparison of the various water intensities of electricity generation options exists. Figure C -1 and Figure C -2 illustrate the best available data for average water intensities for various electricity alternatives, with and without carbon mitigation using CCS, respectively. These figures are based on Table C -1 , which represents the best available data on water consumed in producing electricity using various fuels and technologies. The data in Figure C -1 are imperfect and come from multiple sources, raising questions about whether the data can be used to make accurate comparisons across technologies. Thermoelectric Cooling: Emerging Alternatives The withdrawal and water quality impacts of once-through cooling have resulted in newer power plants generally using evaporative cooling. Emerging cooling technologies have the potential to use much less freshwater than once-through or evaporative cooling. These include dry cooling (previously discussed), hybrid dry-wet cooling, cooling with fluids other than freshwater, and more innovative technologies (e.g., wet-surface air coolers, advanced wet cooling). However, these alternatives have their own costs and disadvantages. A DOE report found that dry cooling could reduce water consumption to roughly 80 gal/MWh for solar troughs and 90 gal/MWh for solar towers. While they consume less water, dry and hybrid cooling systems have financial as well as efficiency costs. Total annualized costs for dry cooling tower systems can be four times those of evaporative cooling tower systems. Due to the higher cooling and lower generation efficiency costs, the cost of electricity from a dry cooled solar thermal plant may be 3% to 8% higher than a similar wet cooled plant. Dry cooling uses fans to blow air for steam condensation. While power plants with dry cooling use considerably less water, dry cooling is less effective at cooling the power plant than evaporative cooling, thus reducing electric generation at the facility. The DOE report also found that electricity generation at a dry-cooled facility dropped off at ambient temperatures above 100°F. For a solar parabolic trough facility in the Southwest, the benefit in the reduction in water consumption from dry cooling resulted in cost increases of 2% to 9% and a reduction in energy generation of 4.5% to 5%. The cost and energy generation penalties for dry cooling depend largely on how much time a facility has ambient temperature above 100°F. Dry cooling would reduce generation on the same hot days when summer peak electricity demand is greatest. Hybrid wet-dry cooling attempts to balance water consumption with power generation efficiency; it remains under development for commercial scale applications. To weigh the tradeoffs in energy generation, cost, and water use, DOE researched hybrid cooling processes that combine dry and evaporative cooling. The hybrid system consists of parallel evaporative and dry cooling facilities, with the evaporative cooling operating only on hot days. By using dry cooling generally and evaporative cooling above certain ambient temperatures, losses of thermal efficiency from dry cooling can be reduced. How often the evaporative cooling is used determines how much water is consumed and the effect of hot days on thermal efficiency. DOE found that a hybrid cooling system in the Southwest using 50% of the water of evaporative cooling would maintain 99% of the performance of an evaporative-cooled facility. A hybrid cooling system using 10% of the water of evaporative cooling would maintain 97% of the energy performance. A hybrid system requires greater capital investment and is more complicated to operate; its cost effectiveness over the life of the project depends in part of the cost of water. Another means for decreasing freshwater impacts is employing alternative water sources for evaporative-cooling. These alternative water sources include effluent from wastewater treatment plants or other reclaimed or impaired water, such as brackish or low-quality groundwater and mine pool water. These alternative water sources, however, may lead to additional scaling, corrosion, and fouling of cooling equipment or require pretreatment before cooling use. Additional research may be able to improve the viability of saline water cooling. Availability of alternative water sources in proximity to electricity generation facilities is a potential limitation to their use. Understanding of the opportunities for brackish cooling alternatives is likely to be improved when the assessment of brackish groundwater authorized by Section 9507 of P.L. 111-11 , the Omnibus Public Land Management Act of 2009, becomes available. Tradeoffs of Select Electricity Generation Technologies Hydroelectric Generation Hydroelectric power is produced when water passes through a turbine. Turbines for large-scale hydroelectric generation are located at dams. Electricity at U.S. hydropower facilities is produced with relatively low greenhouse gas emissions. However, hydropower's environmental effects can be significant. Conventional hydropower development through dam building often significantly alters river ecosystems, harming many indigenous species. Drought and changes to hydrology, such as possible reduction in snowpack under a changing climate, can reduce electricity generation at hydropower facilities because of the effects on reservoir operations and levels. Constructing new large dams is contentious; therefore, efforts to identify opportunities for increasing hydropower generation have focused on smaller-scale opportunities or improved efficiency and expansion of hydropower at existing facilities. The Electric Power Research Institute estimates a potential capacity hydropower gain of 10 GW by 2025 as feasible, without the construction of new large dams. Six western states—Alaska, Washington, Oregon, California, Idaho, and Montana—have the highest potentials. Despite this identified potential, little additional hydropower generation has been installed in recent years for a number of reasons (e.g., hydropower and water-related permit and regulatory requirements, and public concerns and perceptions about environmental effects). Similarly, the number of applications for FERC preliminary permits for pumped storage has increased substantially in recent years; however, the proposals have not proceeded to construction. Photovoltaic Solar and Wind Renewable electricity technologies that do not use thermoelectric processes may have minimal water requirements for electricity generation. Wind turbines and solar photovoltaic (PV) panels, for example, require small volumes of water for cleaning, but otherwise use no water. However, the minimal water intensity of wind and PV comes with tradeoffs. Transmission constraints; cost; and regulatory, technical, and operational factors currently restrict the extent to which solar and wind resources can be exploited to meet electricity demand. As previously noted, wind and PV are intermittent electricity sources. Some storage options for these intermittent technologies exist (e.g., wind used in conjunction with a pumped storage hydropower facility); however, their applications are limited and intermittency continues to limit generation from wind and PV. Electricity from PV is also currently more expensive than electricity from CSP, although electricity from wind is less expensive than electricity from CSP. For a discussion of wind technologies and policy issues, see CRS Report RL34546, Wind Power in the United States: Technology, Economic, and Policy Issues , by [author name scrubbed]. Geothermal There are several ways to use geothermal energy: electricity generation (discussed herein) as well as direct-use (recovering water heated by the earth) and heat pumps (using the earth's heat to cool/heat buildings). Traditional geothermal power production uses naturally occurring convective hydrothermal sources in hot rock formations to produce steam to run a thermoelectric power plant's turbines (i.e., a geothermal flash system). Alternatively, for lower temperature geothermal resources, a second working fluid is heated by the geothermal water using a heat exchanger; it is the working fluid that drives the turbines (i.e., a geothermal binary system). Finally, because the majority of hot rock is dry, electricity can also be generated by injecting water into fractured rock to be heated (i.e., an enhanced geothermal system). The water is then injected back into the rock formation to create a relatively closed-loop system. Because the geothermal or injected water is an essential component of geothermal electricity generation and the size of the plants are generally smaller than 50 MW, dry cooling is becoming the standard for new geothermal facilities. Smaller power plants are generally easier to dry-cool than larger plants. A 2008 USGS study estimated that the United States has geothermal resources sufficient to supply half of the nation's electric generation needs, assuming enhanced geothermal systems could be successfully developed and deployed at a commercial scale. That is, much of the geothermal potential shown on maps of geothermal resources requires water to be injected (and therefore consumed) to exploit the geothermal energy. Enhanced geothermal power plants require relatively little land and can be used in coproduction with enhanced oil recovery to lengthen the lifespan of oil fields. These enhanced systems are an emerging technology, so more research and development are needed for large-scale commercial deployment. Current research is investigating the possibility of replacing water with carbon dioxide as the working fluid, which would significantly reduce water usage and would be a means of carbon sequestration.
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The energy choices before Congress represent vastly different demands on domestic freshwater because water is used in varying amounts in most aspects of the energy sector. Transitions in the energy sector, such as the pursuit of greater energy independence and security, produce changes in how much and where the energy sector uses water. The energy sector is the fastest-growing water consumer in the United States, in part because of energy policies. Whether the federal government addresses the energy sector's rising water demand, and if so how, is one of the many energy decisions that may be considered by the 112th Congress. Much of the growth in the energy sector's water demand is concentrated in regions with already intense competition over water. Whether the energy sector exacerbates or alleviates future water tensions is influenced by near-term energy policy and investment decisions. These decisions also may determine whether water will limit or harm U.S. capability to reliably meet the nation's energy demand. Part of the policy issue for Congress is identifying the extent of the federal role in responding to the energy sector's water use. Currently, the energy industry and states have the most responsibility for managing and meeting the energy sector's water demand. The energy sector's water consumption is projected to rise 50% from 2005 to 2030. Projections attribute to the energy sector 85% of the growth in domestic water consumption between 2005 and 2030. The drivers of the energy sector's increasing water use are rising energy demand, greater development of domestic energy, and shifts to more water-intense energy sources and technologies. The more water used by the energy sector, the more vulnerable the energy system is to water availability. Climate change alterations of historic water patterns may exacerbate this vulnerability in some regions. While the energy sector's water demand is anticipated to rise across the United States, the West is likely to experience some of the more significant constraints in meeting this demand. Examples of regional water use concerns related to energy are shale gas production using hydraulic fracturing in many regions across the nation, some solar electricity generation in the Southwest, and current biofuel feedstock production in the High Plains. The 112th Congress may see the issue of energy's water demand in a variety of contexts, including oversight and legislation on energy, infrastructure, environment, agriculture, public lands, climate, research, and water. Approaches for addressing energy's water demand range from maintaining the current approach to taking a range of actions. One set of available actions includes those that attempt to minimize the growth in energy's freshwater use (e.g., through promotion of water-efficient energy alternatives and energy demand management), which could be accomplished through changes to broad policies or legislation targeted at water use. Many of the possible actions to decrease water use come with energy cost, generation, and reliability penalties. Another set of actions includes measures that facilitate access to water for the energy sector. While water allocations and permits generally are a state responsibility, limited federal actions to provide water to the energy sector are possible (e.g., access to surplus water at federal reservoirs). An additional set of actions encompasses investments in data and research to inform decision making and to expand water-efficient energy technology choices. These approaches represent different potential roles and expenses for government, the energy sector, and energy consumers. Legislation in the 111th Congress proposed a variety of actions, including provisions in H.R. 469, H.R. 2454, H.R. 3598, H.R. 1145, S. 1462, S. 1733, S. 3396, and the Secure Water Act of 2009, Subtitle IV of P.L. 111-11 (H.R. 146). A significant challenge to a federal response to the energy sector's water demand is that the available options are not equally needed, attractive, or feasible across the United States.
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The issue of living organ donation is important to Congress because it represents one important set of possibilities for balancing the needs of people seeking organs with one another, and with the needs of potential organ donors. On one side of the balance, the drive to increase the supply of transplantable organs is fueled by people awaiting organ transplants. They are, in a sense, competing with one another on waiting lists for potentially life-saving scarce resources. On the other side of the balance, the drive to ensure that the transplant system is ethical and equitable precludes some mechanisms that would increase the supply of transplantable organs. Some options that have been rejected to date in the United States include paying healthy persons to donate their organs, and mandating that transplantable organs be harvested from all cadavers. To maintain the most ideal balance for the organ transplantation system, Congress may now wish to clarify whether certain new types of living organ donation should be adopted to increase the supply of transplantable organs, or prohibited for ethical and/or equitable reasons. The demand for transplantable organs is outpacing the supply at an increasing rate. In the United States in 1988, there were 16,026 individuals on the waiting list for an organ transplant. By 1995, the waiting list had increased almost 175%, to 43,937. Since then, it has more than doubled again. As of March 12, 2010, the waiting list held 106,131 candidates, including 83,754 people seeking kidneys. Each day, an average of more than 300 people are added to the transplant waiting list, yet less than 80 organ transplants are performed. One patient dies approximately every hour and a quarter awaiting a transplant. In order to help ensure that organs are equitably distributed, Congress passed the National Organ Transplant Act of 1984 (NOTA). NOTA authorized the Secretary of the Department of Health and Human Services (HHS) to establish the Organ Procurement Transplantation Network (OPTN), by contract. Currently, the OPTN is administered by the United Network for Organ Sharing (UNOS) under contract with the Health Resources and Services Administration of HHS. The OPTN and UNOS have established a national system for matching organs and individuals in need of organs. In addition, the OPTN and UNOS set policies for United States transplant centers and organ procurement organizations (OPOs). The 1984 NOTA also prohibited the buying and selling of human organs by making it unlawful to exchange valuable consideration for human organs for use in transplantation. The 1984 Act did, however, allow reasonable payments to be made to living donors for expenses relating to travel, housing, and lost wages in connection with the donation of an organ. Currently, the United States organ procurement system is composed of 58 OPOs, which provide all the deceased and some living donor organs for the nation's 249 transplant centers. Each OPO has a contiguous geographical service area designated by the federal government for recovering organs in all hospitals in that region. Each OPO is required to be a member of and provide transplant candidate information to the OPTN, which maintains the master waiting list of individuals seeking transplants in the United States. OPOs may also implement regional organ allocation systems different from the national OPTN system for the purpose of increasing organ availability and/or organ quality, reducing or addressing an inequity in organ allocation/distribution unique to a local area, and/or examining a policy variation intended to benefit the allocation/distribution system overall. In 1986, in order to help increase the organ supply available for transplantation, Congress passed legislation requiring virtually all hospitals to establish protocols requiring health professionals to make organ donor requests. In 2004 Congress passed the Organ Donation and Recovery Improvement Act, the first federal law directly applicable in part to living donors (i.e., living people who donate either an organ they can survive without, such as one of their two kidneys, or a portion of an organ, such as a liver). Living donation is preferable for transplant recipients, because kidneys recovered from live donors typically outlast those from deceased donors. The law amended the Public Health Service Act to authorize the HHS Secretary to award grants to states, transplant centers, qualified organ procurement organizations or other public or private entities to reimburse travel, subsistence, and incidental nonmedical expenses incurred by individuals toward making living organ donations. The law also authorized the Secretary to establish and maintain mechanisms to evaluate the long-term effects associated with living organ donations by individuals who have served as living donors. For all types of donations, the law created and authorized funding for donor awareness programs. Government oversight of the living donation process is limited, and some OPOs have organized non-traditional programs for living donors. A typical living donor program allows individuals to receive transplants from living spouses, parents, or friends who are willing to donate and are biologically compatible. Questions have been raised about the entire process of living donation and the multitude of health, financial, and social post-operative risks that the living donor faces. (For a detailed discussion of these, see the final section of this report.) In part to help answer some of these questions, in 2007, Congress passed the Charlie W. Norwood Living Organ Donation Act ( H.R. 710 ; P.L. 110 - 144 ). One provision of the law requires the HHS Secretary to submit annually to the appropriate committees of Congress a report that details the progress made toward understanding the long-term health effects of living organ donation. In addition, as discussed in detail below, this law clarified that human paired organ donation does not violate NOTA's prohibition against the exchange of valuable consideration. Over time, Congress has considered a range of legislation aimed at encouraging the practice of living organ donation. Some bills aim to increase donation by providing a tax credit, as proposed in H.R. 218 , the Living Organ Donor Tax Credit Act of 2009. Others, such as H.R. 2776 , the Living Organ Donor Job Security Act, would entitle certain employees to unpaid leave under the Family and Medical Leave Act of 1993 (FMLA) if they provide a living organ donation. A third type would have directed the Secretary of the Treasury to design and strike a bronze medal to be awarded to organ donors and/or their families, as proposed in H.R. 4753 / S. 2283 (109 th ). As described above, in traditional living donation, a specific donor, who is biologically compatible with his or her intended recipient, donates an organ to that person. To accommodate willing living donors who are not biologically compatible with their intended recipients, some other types of directed exchanges—in which a donor specifies who is to receive his or her organ—have emerged. One is paired donation (also known as paired organ donation or human paired organ donation ). In paired donation, two or more donors whose kidneys are incompatible with their own intended recipients, but compatible with each other's, trade donations. Each recipient receives a compatible kidney from a living donor. P.L. 110 - 144 clarified that NOTA's prohibition on the exchange of valuable consideration for organs does not extend to paired donation. Prior to the passage of this law, the exchange element of paired donations triggered questions about whether such arrangements represented the exchange of valuable consideration for an organ. If so, these arrangements would have been illegal. P.L. 110 - 144 contains the following definition of human paired organ donation: (A) An individual (referred to in this paragraph as the 'first donor') desires to make a living donation of a human organ specifically to a particular patient (referred to in this paragraph as the 'first patient'), but such donor is biologically incompatible as a donor for such patient. (B) A second individual (referred to in this paragraph as the 'second donor') desires to make a living donation of a human organ specifically to a second particular patient (referred to in this paragraph as the 'second patient'), but such donor is biologically incompatible as a donor for such patient. (C) Subject to subparagraph (D), the first donor is biologically compatible as a donor of a human organ for the second patient, and the second donor is biologically compatible as a donor of a human organ for the first patient. (D) If there is any additional donor-patient pair as described in subparagraph (A) or (B), each donor in the group of donor-patient pairs is biologically compatible as a donor of a human organ for a patient in such group. (E) All donors and patients in the group of donor-patient pairs (whether 2 pairs or more than 2 pairs) enter into a single agreement to donate and receive such human organs, respectively, according to such biological compatibility in the group. Prior to the passage of the law, OPOs in Washington, D.C., and New England had implemented two types of programs for the exchange of kidneys. One was paired donation, which was addressed in P.L. 110 - 114 , and the other was list donation , which was not addressed in the law. In a list donation exchange, a donor who is incompatible with an intended recipient makes a donation to a stranger on the waiting list. In return, the intended recipient advances on the waiting list for a deceased donor organ. While receiving a kidney from a living donor may be preferable to receiving one from a deceased donor, recipients of organs from deceased donors still have a much greater chance of survival than those who remain on dialysis. (Dialysis is a mechanical process designed to partially perform kidney functions.) List donation is similar to paired donation in that it is a directed living organ donation exchange program that may facilitate increased organ donation. However, it is different in two distinct ways. First, unlike paired donation, list donation disadvantages people seeking transplants who have blood type O. (See the " Ethical and Policy Issues Related Living Organ Donation, and Paired and List Donation " section of this report for details). Second, the effect of the passage of P.L. 110 - 114 on the permissibility of list donation is unclear. As was the case for paired donation prior to the enactment of the law, questions have been raised as to whether the exchange element of list donation violates NOTA's valuable consideration provision. The effect, if any, of the passage of P.L. 110-114 on the legality of list donation is explored in more detail in the " Legal Issues Relating to Valuable Consideration and Living Donation Arrangements " section of this report. Congress has previously considered legislation to clarify that list donation is permissible for kidneys ( S. 2306 , 109 th ). In addition, one version of the Organ Donation and Recovery Improvement Act ( S. 573 IS, 108 th ) proposed an even broader exemption: that the definition of valuable consideration not include familial, emotional, psychological, or physical benefit to an organ donor or recipient. This report first presents information regarding the impact of living donation programs on the organ transplantation system. It presents statistics related to the current system, and estimates the impact that paired and list donation programs would have on the supply of organs for transplantation, waiting lists, and deaths. Next, the report presents a legal analysis of NOTA's prohibition on valuable consideration as it relates to directed living donation exchange programs. The report concludes with a presentation of ethical issues involved in living donation, with a focus on paired and list donation programs. Living donation provides thousands of organs for transplantation each year. In 2009, the most recent year for which complete statistics are available, 6,610 organs were provided by living donors, which accounted for a little more than a fifth of the 30,828 total organs donated. (See Table 1 .) More than 96% of the organs donated by living donors were kidneys. All of the organs collected from kidney and other living donors were transplanted, and just over 85% of organs recovered from deceased donors were transplanted. The annual number of living organ donations has followed a few trends over the past decade, peaking in 2004. (See Table 2 .) The number of living organ donations rose each year from 2000 to 2004, then fell each year from 2004 to 2008. In 2009 there were more living organ donations than in 2008, but still fewer than there were in even 2001. More than 6,000 people have died each year between 2000 and 2009 while awaiting an organ for transplant. (See Table 3 .) More than half of those were awaiting kidneys. The number who have died awaiting a kidney transplant rose each year from 2000 to 2009. The overall effect that mechanisms for expanding the pool of potential living organ donors, such as paired and list donation, will or might have on the available supply of various organs is difficult to measure. This is due largely to the fact that paired and list donation systems have only been implemented and tested for kidney donation, which is discussed below. Since P.L. 110-144 specified that NOTA does not prohibit paired kidney donation, some noteworthy stories have emerged, such as one detailing the pairing of 13 kidneys to 13 patients. Still, the number of additional kidney transplants likely to result from a national paired and/or list kidney donation system depends on a number of things. The number of available kidneys could be increased by numerous factors—not all of which are necessarily desirable. These factors include selecting an optimal transplant system (list, paired, or combination) for the size of the population, lowering the degree of compatibility required for a transplant, increasing donor willingness to participate in list and paired donation programs, and avoiding systemic restrictions used to achieve equitable outcomes among recipients. The studies that have examined these factors are summarized below. One study generated data about the type of transplant system that is optimal for a given population size by comparing paired, list, and combination programs via computer model. The authors estimated that a pool of 3,584 donor/recipient pairs could generate 1,871 successful transplants (52%) using a combination paired/list exchange program, 1,730 (48%) using a paired program alone, and 1,330 (37%) using a list program alone. The same study found that, for small populations of donor/recipient pairs (less than 100), list donation would generate more potential transplants than paired donation because list donation uses the entire deceased donor pool, while paired donation is limited to the incompatible pool. A second study investigated factors that influence donors' willingness to participate in paired and list exchange programs. Willingness to make a paired or list donation appeared to be directly proportional to the likely magnitude of benefit to the intended recipient. Of 174 potential donors who had been found medically incompatible with their intended recipients, 63.8% were willing to participate in paired donation (in which the intended recipient would receive a kidney immediately from a live donor), and 37.9% were willing to participate in list donation (in which the intended recipient would be moved up the list for a kidney from a deceased donor). Willingness to make a list donation was greatest when the intended recipient would be moved to the top rather than the top 20% of the waiting list (37.9% vs. 19.0%). A third study examined the possibility of maximizing paired donations by lowering the donor/recipient compatibility requirements. By doing so, authors were able to increase the percentage of possible exchanges from 57% to 91.7% of patients in their database. A number of specialized centers report success with incompatible kidney transplantation using special techniques to make the kidney more compatible with the intended recipient. The results of these types of transplants are reportedly encouraging, but long-term results are not yet available, and therapy is labor intensive, requires immunosuppressives, and adds an average of $28,000 to the cost of the transplant. A fourth study estimated the impact that ethical restrictions to help ensure that people of all blood types benefit equitably from list donations would have on the number of transplants performed. The authors proposed certain restrictions on list donation (and others have proposed avoiding list donation altogether) because people with blood type O may be disadvantaged by such a system. Donors with blood type O may give compatible kidneys to recipients with any blood type, but recipients with O blood type may only receive compatible kidneys from type O donors. For that reason, type O recipients, who already have the longest mean wait time on the cadaver waiting list, may have to wait an even longer time for a cadaveric kidney in a typical list donation program. The ethical dimensions of this issue are discussed further in the Ethical Issues section of this report. Study results indicated that restrictions to benefit recipients with blood type O would decrease annually the number of additional kidneys available from list exchanges by about one-half (from a range of 844—2,155 additional kidneys, to a range of 414—1,150 additional kidneys). The study also indicated that, unless the restrictions were used, type O recipient candidates in a list exchange program would experience an increased waiting time that would translate into 15.17 deaths per year among the group. As enacted, the National Organ Transplant Act of 1984 (NOTA), § 301(a), prohibited buying or selling human organs "for valuable consideration for use in human transplantation." The original statute also included a criminal provision with fines of up to $50,000 and imprisonment for up to five years, or both. While the statute did not define valuable consideration, it did state that the term "does not include the reasonable payments associated with the removal, transplantation, implantation, processing, preservation, quality control, and storage of a human organ or the expenses of travel, housing, and lost wages incurred by the donor of a human organ in connection with the donation of the organ." The legislative history of the 1984 NOTA did not discuss the meaning of the term valuable consideration. It simply expressed Congress's intent to criminalize the buying and selling of organs for profit. For example, the Senate report accompanying S. 2048 stated that "[i]t is the sense of the Committee that individuals or organizations should not profit by the sale of human organs for transplantation." The House conference report for that bill reiterated that Section 301 was directed toward monetary exchanges: "This title intends to make the buying and selling of human organs unlawful.... " During congressional hearings in 2003 on incentives to increase organ donations, strong objections were proffered against the use of direct monetary incentives to procure organs. Living donations of kidneys from a single biologically compatible living donor to a recipient had taken place before NOTA was enacted in 1984. Since NOTA specifically allowed certain expense payments to be provided to a living donor, it was clear that living donations were not precluded by NOTA and that single living donations did not implicate the § 301 prohibition against the exchange of valuable consideration. At the time NOTA was enacted, living donation arrangements involving multiple donors and recipients, such as paired donation and list donation, had not yet been developed as medical options. Thus, Congress did not consider such practices in enacting the prohibition on giving or receiving valuable consideration in return for human organs. In recent years, some transplantation facilities have implemented living donation programs involving multiple recipients and/or donors, however other transplant facilities have hesitated to implement such multiple living donation programs because of possible legal concerns over whether such practices could be construed as violating the exchange of valuable consideration prohibition in NOTA. Congress, in December, 2007, enacted P.L. 110 - 144 , the Charlie W. Norwood Living Organ Donation Act, which clarifies that "human organ paired donation" is not a human organ transfer for valuable consideration and thus does not violate NOTA. It has always been clear that living donation arrangements such as paired donation and list donation do not involve actual monetary payments to the donor or recipient. The concern that has been raised is whether the donors and recipients in multiple living donation arrangements have received valuable consideration for their promises to get something in return for specific acts. Such arrangements arguably involve some kind of bargain since there are mutual promises on both sides of the arrangement. The argument has been made that where a donor trades his organ for a compatible organ for his intended beneficiary, the donor receives valuable consideration in the exchange of mutual promises to donate organs. Now that Congress has clarified that paired transplants of compatible living donors and recipients do not violate NOTA's prohibition of valuable consideration in return for organ donation, issues may still be raised regarding other kinds of living donation arrangements such as list donation, because Congress clarified only the legality of paired donation arrangements. Two legal opinions issued before Congress's recent amendment of § 301 of NOTA regarding paired donation arrangements continue to be relevant to the question of the legality of other kinds of multiple living donation arrangements, such as list donation. The Associate General Counsel to UNOS, in 2006, provided a legal analysis of the applicability of § 301 of NOTA to both paired donation and list donation arrangements, concluding that "NOTA §301 is legally and historically inapplicable to today's living donation arrangements." Elaborating on the applicability of the § 301 prohibition on the exchange of valuable consideration, the UNOS legal analysis stated as follows: "Valuable consideration" under NOTA § 301 is a monetary transfer or a transfer of valuable property between donor, recipient and/or organ broker in a sale transaction. It is not familial, emotional, psychological or physical benefit to the organ donor or recipient, all of which attach equally to the "living-related kidney transplants" in yesterday's terminology and to the multi-party intended recipient donations, paired donations and similar innovative and highly beneficial living donation arrangements of today and tomorrow. There is no "valuable consideration" under NOTA § 301 in any of these living donation arrangements. The donor receives none, the recipient gives none and none is transferred to a broker. In fact, there is no "consideration" at all in a living organ donation arrangement because the donation is a "gift".... A gift is different from a contract. A contract does not involve donative intent. "Consideration" and the mutual agreement of the parties are required to make the contract legally binding. A gift, on the other hand, involves a gratuitous transfer by the donor and no transfer of money, property or services or agreement not to exercise rights or to suffer material detriment ("consideration") by the beneficiary. For that reason, it is often said that no "consideration" is present in a gift. A promise to make a gift of an organ is not intended to be legally binding. The donation of an organ is properly considered to be a gift, rather than a contractual undertaking. As gifts, living donations may be made conditionally for a specific purpose. The condition can be construed as "consideration" only if the happening of the condition will be a benefit to the person who promises to give an organ. If, on the other hand, the happening of the condition will not benefit the promisor and is merely for the purpose of enabling the promisee to receive a gift, the condition is not "consideration." [footnotes omitted] The Associate General Counsel's analysis concluded that, although list donation and paired donation involve more than a single set of recipients and/or donors, the condition in each case benefits the intended recipient rather than the donor. Thus, these transactions are conditional gifts and do not involve any federally prohibited exchange of valuable consideration. In addition, pursuant to a request by the HHS General Counsel, the U.S. Department of Justice's Office of Legal Counsel (OLC) rendered an opinion in March 2007 on the legality of alternative organ donation practices under § 301 of NOTA. The HHS General Counsel requested the OLC's opinion so that the Secretary of HHS would know whether § 301 imposes a barrier to his engaging in various actions to encourage practices such as paired and list donation. The OLC concluded at that time that paired exchanges and living donor transplants for increased priority in deceased donor allocation do not involve 'valuable consideration' and are therefore not prohibited under NOTA. The OLC opinion examined relevant statutory provisions, the common law of contracts, contemporaneous state laws, and case law. While the opinion acknowledged that the common law understanding of valuable consideration was somewhat vague, the meaning derived from case law and the context of the term in the NOTA statute suggested that consideration, to be "valuable," should be pecuniary. Because § 301 is a criminal provision, "it is therefore appropriate to apply the rule of lenity in favor of a narrower reading, and thus to understand 'valuable consideration' in section 301 of the Act as referring to the buying and selling of organs for monetary gain or to organ exchanges that are otherwise commercial," and not to alternative organ donation practices such as paired and list donation. While Congress has made it clear that paired donation arrangements do not violate NOTA's prohibition against the exchange of valuable consideration for human organs, the legality under § 301 of NOTA of current list donation arrangements and of other, future multiple recipient/donor arrangements remains an open question. The two legal opinions cited above lend credence to the argument that such arrangements may not be found to involve illegal exchanges of valuable consideration for human organs. Further clarification of these issues would be helpful. The central ethical question involved in organ transplantation is how to balance the needs of people seeking organs with one another, and with the needs of potential organ donors. This question has given rise to many issues, discussed below, including those related to evolving transplantation systems, the directive that physicians do no harm, risk-benefit ratios, informed consent, type O recipients, resource allocation, parity, and the possibility of paying for organs. In order to help address the ethical issues, two groups have made recommendations, and a third has held deliberations. First, the ACOT has made a series of recommendations to the Secretary. Second, the Institute of Medicine (IOM) issued a report in 2006, Organ Donation: Opportunities for Action. Third, the President's Council on Bioethics (PCBE), which was created in 2001 to advise the President on bioethical issues, took up the issue of organ transplantation in its June 2006 and February 2007 meetings. Relevant recommendations and discussions from ACOT, IOM, PCBE and a variety of articles are summarized in the following sections. As new transplantation systems test the boundaries of old regulations, the primary question arises—does Congress want to maintain direct control over key components of the system to help ensure that ethical boundaries are not breached, or does Congress want to delegate more of its authority in order to make the system more flexible? Current law permits and defines paired organ donation ( P.L. 110 - 144 ) and is, in various instances, both more and less broad than earlier proposals that were made. It is broader in that it allows paired donations for many types of organs, while many earlier proposals were restricted to kidneys ( H.R. 710 EH and S. 487 , 110 th ). It is less broad in that it exempts paired but not list donation from the prohibition of exchange of valuable consideration ( S. 2306 , 109 th ), it does not specifically enable the Secretary to determine that other similar practices are also exempt ( H.R. 710 EAS, 110 th ), and it does not exempt the broader categories of familial, emotional, psychological, or physical benefits ( S. 573 IS, 108 th ), or tax credits ( H.R. 218 ). ACOT proposed one possible alternative that would enable more flexibility for developing transplantation systems. The Committee recommended that the HHS Secretary seek the authority from Congress to promulgate regulations clarifying the scope of the term valuable consideration, thus allowing for the regulations' revision as transplantation technologies and methods evolve. This would allow the Secretary to make modifications as new systems are developed and to develop any definitions necessary to interpret the regulations. In medical practice generally, three primary guiding principles are that a physician should, above all, do no harm to a patient, that a procedure's benefits to a patient should outweigh its risks, and that one must obtain informed consent prior to medical procedures. The practice of obtaining organs from living donors challenges all three of these principles. Because P.L. 110 - 114 will presumably expand the practice of living organ donation, it raises issues with respect to these three principles, but not to a greater extent than such issues already raised by the current practice of living organ donation. The traditional first rule of medicine—above all, do no harm—would seem on its face to proscribe the practice of removing a healthy organ from a healthy person, making one a patient solely to benefit another person who is already a patient. Indeed, one survey of 100 liver transplant surgeons found that 77% experienced a moral dilemma in placing a living donor at risk. Still, 72% also agreed that transplant centers had a duty to offer their patients the possibility of transplantation using living donors. IOM considered this point in its report, and suggested that the Health Resources and Services Administration (HRSA) conduct a long and full review of living donation. The IOM also noted difficulties with living donation and the principle that a doctor should not perform a procedure unless the potential benefits outweigh the risks. This calculation is generally made for each patient independently—it is not ethically acceptable for one patient to bear all of the risks and another to reap all of the benefits. On this point, IOM noted that a living donor may gain psychosocial benefits from donating an organ to one in need, which could arguably outweigh the risks to the donor's physical health. However, in order to help ensure that the risk is not too great for a particular donor due to a preexisting medical condition or the like, IOM recommended that an independent donor advocate be appointed to assess the risk-benefit ratio. Even with a donor advocate to make the risk-benefit assessments, one major factor complicates the assessment of the ratio: little is known about the long term health and quality-of-life effects of being a living organ donor. This lack of information makes it difficult for professionals to ensure that they consider the full spectrum of risks to be outweighed by benefits. Therefore, IOM recommended (as ACOT had before ) that living donor registries be established to enable follow-up research on the long-term effects of living donation. In addition, in June 2006, HHS solicited public comments from the organ transplant community for living donation after "several widely publicized living donor deaths" and an increasing trend in the number of living donations. Ethically justifiable living organ donation presupposes the competent donor's voluntary informed consent. ACOT specified that living donors' informed consent must be competent, free from coercion, and fully informed of the risks and benefits as a donor, among other things. As IOM noted, obtaining informed consent is confounded by the same lack of long-term health data that makes assessing the risk-benefit ratios difficult. It is not possible to fully inform potential living donors (a necessary component of informed consent) without information about the likely impact of the procedure on long-term health. IOM suggested that creating a living donor registry would enhance informed consent as well as inform the risk-benefit analysis. Further problems in obtaining informed consent are related to the requirement that it be given voluntarily. Establishing a voluntary process may be complicated if donors are not legally competent to consent (e.g., children), or if situations are coercive (e.g., loved ones feel pressured to become living donors). Some potential donors have expressed relief at discovering that they were incompatible with their intended recipients. Expanded use of paired exchanges, and the prospect of list exchanges, may eliminate the incompatibility excuse for potential donors, and may thus create a coercive situation. IOM's recommendation that each living donor receive an advocate is aimed at protecting voluntary informed consent as well as evaluating the risk-benefit ratio. In addition, IOM recommends that the advocates address gender disparities in living donation. Women represent 56% to 59% of living kidney donors each year, and one study suggests that this is due primarily to the fact that women are asked to donate more often than men. Approximately 46% of the population has the blood type O, yet they represent 51.9% of people awaiting organ transplants, and 52.5% of people awaiting kidney transplants. More than half have to wait more than five years for an organ (53.2%) or kidney (54.8%). No other blood type comes close to rivaling these waiting times. The percentage of people who have to wait more than five years is as follows: for blood type A—28.3% for organs, and 22.8% for kidneys, for blood type B—16.1% for organs, and 20.2% for kidneys, and for blood type AB—no recipients have to wait more than five years. As noted previously, several authors have expressed concern that individuals with the blood type O, an already disadvantaged population in the transplantation system, may be further disadvantaged by a list donation system. Implementing a system with a disparate impact, particularly one that falls on an already disadvantaged group, has caused some authors to recommend that list paired donation have a minimal role on a national level. It has caused others to recommend that the system be modified to protect type O recipients. A different set of authors has come out in favor of the list exchange program despite the impact on people with type O blood. They claim that the impact on type O recipients would be transient. Though some people would be bumped to the top of the transplant list, their absence from that list when they would have come to its top (four to five years later) would eventually balance out the impact of the system. Current law avoids the type O issue by focusing only on paired, and not list, donation. Earlier proposals would have raised this issue by explicitly permitting list donation (e.g., S. 2306 , 109 th , and S. 573 IS, 108 th ), or potentially allowing the practice ( H.R. 710 EAS, 110 th ). Directed donation, which allows an organ donor to specify the recipient, creates issues related to the equitable allocation of organs. Paired and list donation (both of which are types of directed donation) create parity issues regarding what the intended recipient should be entitled to receive in lieu of the donation. Current law allows a form of directed donation (paired donation), and thus raise the issues discussed below. People on waiting lists for organs may wait years for a transplant, and may die before an organ becomes available. The rules governing who gets an organ are, therefore, quite important. In general, the ranking on the waiting list depends on biological matching, medical status, patient location, age of the patient, and length of time the patient has been on the waiting list for a transplant. By contrast, directed donation allows the donor to choose who receives their organ (or, in the case of list donation, who is to advance on the waiting list). The PCBE noted that this raises the question of whether it is ethical for one person to receive an organ before another more needy person, simply because someone cares for them enough to make a donation. PCBE also noted that prohibiting such acts of love as living donation in the name of justice would be perverse. Some have suggested that in paired and list donations, the donated and received organs must be of equal value to ensure an equitable exchange. While this might be possible with a paired exchange, it is almost certainly not the case with a list donation, because the intended recipient will receive a kidney from a deceased donor instead of a living one. (Deceased donor organs do not typically last as long as living donor organs). Other issues related to parity have been raised, such as whether one donor in a paired exchange may change his or her mind if the other donor has already undergone surgery. To prevent these scenarios, it has been suggested that both donors should undergo surgery at the same time. Other authors have suggested that outcome parity cannot be guaranteed in list and paired exchange programs. If one organ fails, the recipient is not necessarily entitled to receive another. The demand for transplantable organs has inspired a wide variety of proposals to increase the supply, including some that would allow or encourage forms of payment for organs. Congress has considered several proposals to give donors honorific or tax incentives for donating organs. The use of financial incentives has been studied, proposed and debated in the general literature. Various organizations, including the American Medical Association and UNOS have supported the study of financial options to encourage organ donations. Arguments have been made that donors of organs should be treated no differently than donors of tissues (such as human hair, blood plasma, sperm, and eggs). It has also been argued that because the practice of transplanting organs is profitable for the professional parties involved, those from whose bodies the organs are harvested should be able to share in some of the profits. There has been resistance to proposals that encourage commodification of human organs. The IOM conducted an extensive analysis of various types of financial incentives to encourage donation, such as payment through regulated futures markets, payment of funeral expenses, providing bereavement counseling, tax incentives, and providing health insurance. IOM concluded that none should be promoted at this time because of a lack of evidence that these incentives would improve donation rates, because once put in motion a system of financial incentives would be difficult to reverse, and because of fears that such systems might disproportionately affect the poor. This recommendation came as a disappointment to some who seek to increase the supply of transplantable organs. While current law clarifies that paired donation does not violate NOTA's prohibition on the exchange of human organs for valuable consideration, it does not permit the payment of money in exchange for organ donation. To date, Congress has not considered legislation that would do so.
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The central issue before Congress with respect to living organ donation is how to balance the needs of people seeking organs with one another, and with the needs of potential organ donors. While the majority of organs are harvested from deceased donors, an increasing number of donations are made by living donors each year. As new types of programs are developed to help encourage the practice of living donation, both legal and ethical issues may arise. The primary federal law governing organ donation in the United States is the National Organ Transplantation Act (NOTA, P.L. 98-507). It permits living and deceased organ donation, and prohibits the sale of organs. Specifically, section 301 of NOTA prohibits the exchange of valuable consideration (money or the equivalent) for organs. Congress specified in the Charlie W. Norwood Living Organ Donation Act (H.R. 710; S. 487; P.L. 110-144) that NOTA's prohibition on the exchange of valuable consideration for organs does not extend to paired organ donation (also known as paired donation, or human organ paired donation). Paired organ donation arises when two or more willing living donors are incompatible with their intended recipients, but compatible with one another's recipients. The donors give their organs to one another's intended recipients so that each recipient receives a compatible organ. Living organ donation generally, and paired and other similar types of organ donation arrangements specifically, raise or at least touch upon a range of issues. These include some related to evolving transplantation systems, the directive that physicians do no harm, risk-benefit ratios, informed consent, type O recipients, resource allocation, parity, and the possibility of paying for organs. Over time, Congress has considered several other types of measures intended to increase organ donation by amending NOTA's prohibition on the exchange of organs for valuable consideration. These would have specified that some combination of familial, emotional, psychological, and physical benefit, and another type of organ exchange known as list donation, were exempt from the prohibition. The impact, if any, of P.L. 110-144 on the legality of these exchanges is unclear. This report contains background regarding how living donation is included within the larger organ donation construct, the likely impact that paired organ donation will have, and that list donation programs would have, on organ supply, the legislative history and legal interpretation of the term valuable consideration as it is defined by NOTA, and the various ethical and policy issues related to living donation, paired donation and list donation. This report will be updated as needed.
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T he information technology (IT) industry has evolved greatly over the last half century. Continued, exponential progress in processing power and memory capacity has made IT hardware not only faster but also smaller, lighter, cheaper, and easier to use. The original IT industry has also increasingly converged with the communications industry into a combined sector commonly called information and communications technology (ICT). This technology is ubiquitous and increasingly integral to almost every facet of modern society. ICT devices and components are generally interdependent, and disruption of one may affect many others. Over the past several years, experts and policymakers have expressed increasing concerns about protecting ICT systems from cyberattacks —deliberate attempts by unauthorized persons to access ICT systems, usually with the goal of theft, disruption, damage, or other unlawful actions. Many experts expect the number and severity of cyberattacks to increase over the next several years. The act of protecting ICT systems and their contents has come to be known as cybersecurity . A broad and arguably somewhat fuzzy concept, cybersecurity can be a useful term but tends to defy precise definition. It usually refers to one or more of three things: A set of activities and other measures intended to protect—from attack, disruption, or other threats—computers, computer networks, related hardware and devices, software, and the information they contain and communicate, including software and data, as well as other elements of cyberspace. The state or quality of being protected from such threats. The broad field of endeavor aimed at implementing and improving those activities and quality. It is related to but not generally regarded as identical to the concept of information security , which is defined in federal law (44 U.S.C. §3552(b)(3)) as protecting information and information systems from unauthorized access, use, disclosure, disruption, modification, or destruction in order to provide- (A) integrity, which means guarding against improper information modification or destruction, and includes ensuring information nonrepudiation and authenticity; (B) confidentiality, which means preserving authorized restrictions on access and disclosure, including means for protecting personal privacy and proprietary information; and (C) availability, which means ensuring timely and reliable access to and use of information. Cybersecurity is also sometimes conflated inappropriately in public discussion with other concepts such as privacy, information sharing, intelligence gathering, and surveillance. Privacy is associated with the ability of an individual person to control access by others to information about that person. Thus, good cybersecurity can help protect privacy in an electronic environment, but information that is shared to assist in cybersecurity efforts might sometimes contain personal information that at least some observers would regard as private. Cybersecurity can be a means of protecting against undesired surveillance of and gathering of intelligence from an information system. However, when aimed at potential sources of cyberattacks, such activities can also be useful to help effect cybersecurity. In addition, surveillance in the form of monitoring of information flow within a system can be an important component of cybersecurity. The risks associated with any attack depend on three factors: threats (who is attacking), vulnerabilities (the weaknesses they are attacking), and impacts (what the attack does). The management of risk to information systems is considered fundamental to effective cybersecurity. People who actually or potentially perform cyberattacks are widely cited as falling into one or more of five categories: criminals intent on monetary gain from crimes such as theft or extortion; spies intent on stealing classified or proprietary information used by government or private entities; nation-state warriors who develop capabilities and undertake cyberattacks in support of a country's strategic objectives; " hacktivists " who perform cyberattacks for nonmonetary reasons; and terrorists who engage in cyberattacks as a form of non-state or state-sponsored warfare. Cybersecurity is in many ways an arms race between attackers and defenders. ICT systems are very complex, and attackers are constantly probing for weaknesses, which can occur at many points. Defenders can often protect against weaknesses, but three are particularly challenging: inadvertent or intentional acts by insiders with access to a system; supply chain vulnerabilities, which can permit the insertion of malicious software or hardware during the acquisition process; and previously unknown, or zero-day , vulnerabilities with no established fix. Even for vulnerabilities where remedies are known, they may not be implemented in many cases because of budgetary or operational constraints. A successful attack can compromise the confidentiality, integrity, and availability of an ICT system and the information it handles. Cybertheft or cyberespionage can result in exfiltration of financial, proprietary, or personal information from which the attacker can benefit, often without the knowledge of the victim. Denial-of-service attacks can slow or prevent legitimate users from accessing a system. Botnet malware can give an attacker command of a system for use in cyberattacks on other systems. Attacks on industrial control systems can result in the destruction or disruption of the equipment they control, such as generators, pumps, and centrifuges. Most cyberattacks have limited impacts, but a successful attack on some components of critical infrastructure (CI)—most of which is held by the private sector—could have significant effects on national security, the economy, and the livelihood and safety of individual citizens. Thus, a rare successful attack with high impact can pose a larger risk than a common successful attack with low impact. While it is widely recognized that cyberattacks can be costly to individuals and organizations, economic impacts can be difficult to measure, and estimates of those impacts vary widely. An often cited figure for annual cost to the global economy from cybercrime is $400 billion, with some observers arguing that costs are increasing substantially, especially with the continued expansion of ICT infrastructure through the Internet of Things and other new and emerging platforms. The costs of cyberespionage can be even more difficult to quantify but are considered to be substantial. Managing the risks from cyberattacks usually involves (1) removing the threat source (e.g., by closing down botnets or reducing incentives for cybercriminals); (2) addressing vulnerabilities by hardening ICT assets (e.g., by patching software and training employees); and (3) lessening impacts by mitigating damage and restoring functions (e.g., by having back-up resources available for continuity of operations in response to an attack). The optimal level of risk reduction will vary among sectors and organizations. For example, the level of cybersecurity that customers expect may be lower for a company in the entertainment sector than for a bank, a hospital, or a government agency. The federal role in cybersecurity involves both securing federal systems and assisting in protecting nonfederal systems. Under current law, all federal agencies have cybersecurity responsibilities relating to their own systems, and many have sector-specific responsibilities for CI. More than 50 statutes address various aspects of cybersecurity. Figure 1 is a simplified schematic diagram of major agency responsibilities in cybersecurity. In general, the National Institute of Standards and Technology (NIST) develops standards that apply to federal civilian ICT under the Federal Information Security Modernization Act (FISMA), and the Office of Management and Budget (OMB) is responsible for overseeing their implementation. The Department of Defense (DOD) is responsible for military ICT, defense of the nation in cyberspace, and, through the National Security Agency (NSA), security of national security systems (NSS), which handle classified information. NSA is also part of the Intelligence Community (IC). The Department of Homeland Security (DHS) has operational responsibility for protection of federal civilian systems and is the lead agency coordinating federal efforts assisting the private sector in protecting CI assets. It is also the main federal focus of information sharing for civilian systems through its National Cybersecurity and Communications Integration Center (NCCIC). The Department of Justice (DOJ) is the lead agency for enforcement of relevant laws. In February 2015, the Obama Administration also established, via presidential memorandum, the Cyber Threat Intelligence Integration Center (CTIIC) under the Director of National Intelligence (DNI). Its purposes are to provide integrated analysis on cybersecurity threats and incidents affecting national interests across the federal government and to support relevant government entities, including the NCCIC and others at DOD and DOJ. Federal agencies spend a significant part of their annual IT funding on cybersecurity, which currently constitutes 16-17% (about one in every seven dollars) of agency IT budgets overall ( Table 1 ). However, DOD spending accounts for a large proportion of that expenditure, ranging from 22% to 30% of the DOD IT budget from FY2010 to FY2015. The median proportion for other agencies has been 6%-7% during that period. That is roughly equivalent to spending patterns for businesses of 4%-9% reported in a recent survey. The FY2017 budget request includes over $19 billion altogether for cybersecurity. With a total requested IT investment of $81.6 billion, that would amount to a proportion of 23.3%, or about one in every four dollars, to be spent on cybersecurity. For more information on federal cybersecurity spending, see CRS Report R44404, Perspectives on Federal Cybersecurity Spending , by [author name scrubbed] and [author name scrubbed]. Since at least the 111 th Congress, many bills have been introduced that would address a range of cybersecurity issues: Cybercrime Laws —updating criminal statutes and law-enforcement authorities relating to cybersecurity. Data-Breach Notification —requiring notification to victims and other responses after data breaches involving personal or financial information of individuals. FISMA Reform —updating the law to reflect changes in ICT and the threat landscape. Information Sharing —easing access of the private sector to classified and unclassified threat information and removing barriers to sharing within the private sector and with the federal government. Internet of Things —addressing a range of cybersecurity issues arising from the proliferation of devices and objects (such as home appliances, automobiles, medical devices, factories, and infrastructure) connected to the Internet. Privately Held CI —improving protection of private sector CI from attacks with major impacts. R&D —updating agency authorizations and strategic planning requirements. Workforce —improving the size, skills, and preparation of the federal and private sector cybersecurity workforce. Laws enacted in the 113 th and 114 th Congresses ( Table 2 ) have focused on all of those issues to varying degrees: Critical Infrastructure P.L. 113-274 established a process led by the National Institute of Standards and Technology (NIST) similar to one created in Executive Order 13636 to develop a cybersecurity framework, a common set of practices for protection of CI. P.L. 113-282 requires DHS to develop and exercise incident-response plans for cybersecurity risks to CI. P.L. 114-113 , Title IV, requires DHS and NIST to assist states in improving cybersecurity for emergency response networks. It also requires the Department of Health and Human Services to establish a task force and collaboration mechanisms to assist the healthcare sector in reducing cybersecurity risks. Data-Breach Notification P.L. 113-283 requires OMB to establish procedures for notification and other responses to federal agency data breaches of personal information. Federal Information System s P.L. 113-283 retains, with some amendments, most provisions of FISMA, which was originally enacted in 2002. Changes include providing statutory authority to DHS for overseeing operational cybersecurity of federal civilian information systems, and requiring agencies to implement DHS directives. P.L. 114-113 , Title II, Subtitle B establishes in statute the DHS intrusion-protection program known as EINSTEIN; requires agencies to adopt it and implement additional cybersecurity measures; gives DHS additional authority in the event of an imminent threat or emergency; and establishes additional reporting requirements. P.L. 114-113 , Title IV, also requires reports to Congress: from DHS on the security of mobile devices used by federal agencies, and from agency inspectors general on the cybersecurity of NSS and systems providing access to personally identifiable information. Information Sharing P.L. 113-282 provided statutory authority for NCCIC, which had been created by DHS in 2009 under existing statutory authority to provide and facilitate information sharing and incident response among public and private-sector CI entities. P.L. 114-113 , Title I, facilitates public- and private-sector sharing of information on cyberthreats and defensive measures and permits private-sector entities to monitor and operate defenses on their information systems. P.L. 114-113 , Title II, Subtitle A, expands the functions and modifies the responsibilities of the NCCIC and establishes additional reporting requirements. International and Cybercrime P.L. 114-113 , Title IV, requires, from the Department of State, an international cyberspace policy and international consultations on measures against cybercriminals. It also broadens cybercrime penalties to cover specified offenses occurring outside U.S. territory. R&D P.L. 113-274 requires a multiagency strategic plan for cybersecurity R&D and specifies areas of research for NSF. Workforce P.L. 113-246 requires an assessment by DHS of its cybersecurity workforce and development of a workforce strategy; P.L. 113-274 provides statutory authority for an existing NSF scholarship and recruitment program to build the federal cybersecurity workforce, as well as competitions and a study of existing education and certification programs; P.L. 113-277 provides additional DHS hiring and compensation authorities and requires a DHS assessment of workforce needs. P.L. 114-113 , Title III, requires the Office of Personnel Management (OPM) to establish and implement an employment-code structure for federal cybersecurity personnel, and it sets reporting requirements. With respect to cybercrime and data-breach notification, more comprehensive legislation has been introduced in recent Congresses but has not been enacted. Ongoing controversies relating to cybercrime include the balance between providing adequate penalties and authorities, on the one hand, and ensuring protection of privacy and civil liberties, on the other (for more information, see CRS Report R44481, Encryption and the "Going Dark" Debate , by [author name scrubbed]; CRS Report R44036, Stored Communications Act: Reform of the Electronic Communications Privacy Act (ECPA) , by [author name scrubbed] and [author name scrubbed]). With respect to data-breach notification, much of the debate involves how best to harmonize federal and state standards, and what precautions and responses should be required from organizations holding sensitive information such as financial or personal data of customers (see CRS Report R44326, Data Security and Breach Notification Legislation: Selected Legal Issues , by [author name scrubbed]). Debate about the cybersecurity of the Internet of Things involves a broad range of issues that vary among sectors and applications (see CRS Report R44227, The Internet of Things: Frequently Asked Questions , by [author name scrubbed]). Other legislation with more limited cybersecurity provisions has also been enacted in the 114 th Congress. Notably, the annual defense reauthorization act, P.L. 114-92 , contains cybersecurity provisions relating to DOD. Altogether, more than 150 bills have been introduced in the 114 th Congress that would address various cybersecurity issues, with more than a dozen receiving committee or floor action. For two of the issues discussed above—data-breach notification and revision of cybercrime laws—in addition to the bills that have been introduced, the Obama Administration has also released legislative proposals. Some notable actions have been taken by the Obama Administration during the 114 th Congress. Some of the provisions in the enacted legislation provided statutory authority for programs or activities previously established through executive action. In addition to the NCCIC ( P.L. 113-282 ), examples include the Scholarship for Service program and the NIST cybersecurity framework process ( P.L. 113-274 ), as well as the EINSTEIN intrusion-protection program for federal agencies ( P.L. 114-113 ). The Administration has also taken steps to implement enacted provisions. Additional actions include the following: Executive Order 13691 set up mechanisms to promote the widespread use of information sharing and analysis organizations and the development of standards for their establishment and operation. Subsequent to significant data breaches, such as the 2015 exfiltration of records from the Office of Personnel Management (see CRS Report R44111, Cyber Intrusion into U.S. Office of Personnel Management: In Brief , coordinated by [author name scrubbed]), and other concerns, the Administration announced a cybersecurity national action plan to implement strategies to enhance U.S. cybersecurity nationwide. Initiatives in the plan include a proposed revolving fund for modernizing federal IT (see H.R. 4897 and H.R. 5792 ) and the appointment of a federal chief information security officer, among other actions. Presidential Policy Directive 41 describes how the federal government will respond to cybersecurity incidents affecting government and private-sector entities, including principles, kinds of response, a framework of roles and responsibilities, and coordination. The legislative and executive-branch actions discussed above are largely designed to address several well-established near-term needs in cybersecurity: preventing cyber-based disasters and espionage, reducing impacts of successful attacks, improving inter- and intrasector collaboration, clarifying federal agency roles and responsibilities, and fighting cybercrime. However, those needs exist in the context of more difficult long-term challenges relating to design, incentives, consensus, and environment (DICE): Design: Experts often say that effective security needs to be an integral part of ICT design. Yet, developers have traditionally focused more on features than security, for economic reasons. Also, many future security needs cannot be predicted, posing a difficult challenge for designers. Incentives: The structure of economic incentives for cybersecurity has been called distorted or even perverse. Cybercrime is regarded as cheap, profitable, and comparatively safe for the criminals. In contrast, cybersecurity can be expensive, is by its nature imperfect, and the economic returns on investments are often unsure. Consensus: Cybersecurity means different things to different stakeholders, often with little common agreement on meaning, implementation, and risks. Substantial cultural impediments to consensus also exist, not only between sectors but within sectors and even within organizations. Traditional approaches to security may be insufficient in the hyperconnected environment of cyberspace, but consensus on alternatives has proven elusive. Environment: Cyberspace has been called the fastest evolving technology space in human history, both in scale and properties. New and emerging properties and applications—especially social media, mobile computing, big data, cloud computing, and the Internet of Things—further complicate the evolving threat environment, but they can also pose potential opportunities for improving cybersecurity, for example through the economies of scale provided by cloud computing and big data analytics. Legislation and executive actions in the 114 th and future Congresses could have significant impacts on those challenges. For example, cybersecurity R&D may affect the design of ICT, cybercrime penalties may influence the structure of incentives, the NIST framework may facilitate achievement of a consensus on cybersecurity, and federal initiatives in cloud computing and other new components of cyberspace may help shape the evolution of cybersecurity.
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The information and communications technology (ICT) industry has evolved greatly over the last half century. The technology is ubiquitous and increasingly integral to almost every facet of modern society. ICT devices and components are generally interdependent, and disruption of one may affect many others. Over the past several years, experts and policymakers have expressed increasing concerns about protecting ICT systems from cyberattacks, which many experts expect to increase in frequency and severity over the next several years. The act of protecting ICT systems and their contents has come to be known as cybersecurity. A broad and arguably somewhat fuzzy concept, cybersecurity can be a useful term but tends to defy precise definition. It is also sometimes inappropriately conflated with other concepts such as privacy, information sharing, intelligence gathering, and surveillance. However, cybersecurity can be an important tool in protecting privacy and preventing unauthorized surveillance, and information sharing and intelligence gathering can be useful tools for effecting cybersecurity. The management of risk to information systems is considered fundamental to effective cybersecurity. The risks associated with any attack depend on three factors: threats (who is attacking), vulnerabilities (the weaknesses they are attacking), and impacts (what the attack does). Most cyberattacks have limited impacts, but a successful attack on some components of critical infrastructure (CI)—most of which is held by the private sector—could have significant effects on national security, the economy, and the livelihood and safety of individual citizens. Reducing such risks usually involves removing threat sources, addressing vulnerabilities, and lessening impacts. The federal role in cybersecurity involves both securing federal systems and assisting in protecting nonfederal systems. Under current law, all federal agencies have cybersecurity responsibilities relating to their own systems, and many have sector-specific responsibilities for CI. On average, federal agencies spend more than 10% of their annual ICT budgets on cybersecurity. More than 50 statutes address various aspects of cybersecurity. Five bills enacted in the 113th Congress and another in the 114th address the security of federal ICT and U.S. CI, the federal cybersecurity workforce, cybersecurity research and development, information sharing in both the public and private sectors, and international aspects of cybersecurity. Other bills considered by Congress have addressed a range of additional issues, including data breach prevention and response, cybercrime and law enforcement, and the Internet of Things, among others. Among actions taken by the Obama Administration during the 114th Congress are promotion and expansion of nonfederal information sharing and analysis organizations; announcement of an action plan to improve cybersecurity nationwide; proposed increases in cybersecurity funding for federal agencies of more than 30%, including establishment of a revolving fund for modernizing federal ICT; and a directive laying out how the federal government will respond to both government and private-sector cybersecurity incidents. Those recent legislative and executive-branch actions are largely designed to address several well-established needs in cybersecurity. However, those needs exist in the context of difficult long-term challenges relating to design, incentives, consensus, and environment. Legislation and executive actions in the 114th and future Congresses could have significant impacts on those challenges.
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Section 504 of the Rehabilitation Act of 1973 prohibits discrimination against an otherwise qualified individual with a disability solely by reason of disability in any program or activity receiving federal financial assistance or under any program or activity conducted by an executive agency or the U.S. Postal Service. Section 504 was the first federal civil rights law generally prohibiting discrimination against individuals with disabilities. The concepts of Section 504 and its implementing regulations were used in crafting the Americans with Disabilities Act (ADA) in 1990. The ADA and Section 504 are, therefore, very similar and have some overlapping coverage but also have several important distinctions. For example, Section 504 is limited to programs receiving federal funds or the executive agencies and the Postal Service while the ADA broadly covers the private sector regardless of whether federal funds are involved and does not cover the executive agencies or the Postal Service. The ADA Amendments Act of 2008, P.L. 110-325 , amended the definition of disability in the ADA and the definition of disability applicable to Section 504. This report examines Section 504, the recent amendments to the definition of disability, Section 504's regulations, and Supreme Court interpretations. Section 504's differences with the ADA, and its relationship to the Individuals with Disabilities Education Act (IDEA), are also discussed. Although Section 504 was the first federal statute that provided broad civil rights protections for individuals with disabilities, there was very little discussion of its meaning or importance during its enactment in 1973. The most detailed discussion was during congressional debate when Senator Humphrey observed, I am deeply gratified at the inclusion of these provisions which carry through the intent of original bills which I introduced, jointly with the Senator from Illinois (Mr. Percy), earlier this year, S. 3044 and S. 3458, to amend, respectively, Titles VI and VII of the Civil Rights Act of 1964, to guarantee the right of persons with a mental or physical handicap to participate in programs receiving Federal assistance, and to make discrimination in employment because of these handicaps, and in the absence of a bona fide occupational qualification, an unlawful employment practice. The time has come to firmly establish the right of these Americans to dignity and self-respect as equal and contributing members of society, and to end the virtual isolation of millions of children and adults from society. The implementation of Section 504 was not performed expeditiously. The then Department of Health, Education, and Welfare (HEW) published regulations in 1978 only after a federal court held that HEW was required to promulgate regulations and after demonstrations at HEW offices. The year 1978 also saw major amendments to Section 504. These amendments expanded Section 504 nondiscrimination requirements to programs or activities conducted by executive agencies, and added a new section 505 which applied the remedies, procedures and rights of Title VI of the Civil Rights Act of 1964 to Section 504 actions. Section 504 has been amended numerous times since its original enactment in 1973. The core requirement of the section is found in subsection (a). This subsection was amended by P.L. 95-602 which added the provisions regarding the regulations. Section 504(a) currently states the following: (a) No otherwise qualified individual with a disability in the United States, as defined in section 705(20), shall, solely by reason of her or his disability, be excluded from the participation in, be denied the benefits of, or be subjected to discrimination under any program or activity receiving Federal financial assistance or under any program or activity conducted by any Executive agency or by the United States Postal Service. The head of each such agency shall promulgate such regulations as may be necessary to carry out the amendments to this section made by the Rehabilitation, Comprehensive Services, and Developmental Disabilities Act of 1978. Copies of any proposed regulation shall be submitted to appropriate authorizing committees of Congress, and such regulations may take effect no earlier than the thirtieth day after the date on which such regulation is so submitted to such committees. Subsection (b) of Section 504 defines the term "program or activity." This subsection was added by P.L. 100-259 in 1988 in response to the Supreme Court's narrow interpretation of the phrase "program or activity" in Title IX of the Education Amendments of 1972. The amendment clarified that discrimination is prohibited throughout the entire institution if any part of the institution receives federal financial assistance. Subsection (c) of Section 504 was also added by P.L. 100-259 in 1988. It contains an exception for small providers so they are not required to make significant structural alterations to their existing facilities to render them accessible if alternative means of providing the services are available. This subsection was added to clarify that P.L. 100-259 does not add new requirements for architectural modification. Subsection (d) of Section 504 requires that the standards used to determine whether there has been a violation of Section 504 regarding employment discrimination complaints are the same as those in the Americans with Disabilities Act. This subsection was added by P.L. 102-569 in 1992. P.L. 102-569 also substituted the term "disability" for the term "handicap." The definition of disability applicable to Section 504 was amended by the ADA Amendments Act of 2008 to conform with the new definition of disability for the ADA. The Senate Statement of Managers noted the importance of maintaining uniform definitions in the two statutes so covered entities "will generally operate under one consistent standard, and the civil rights of individuals with disabilities will be protected in all settings." The ADA definition defines the term disability with respect to an individual as "(A) a physical or mental impairment that substantially limits one or more of the major life activities of such individual; (B) a record of such an impairment; or (C) being regarded as having such an impairment (as described in paragraph (3))." Although this is essentially the same statutory language as was in the original ADA, P.L. 110-325 contains new rules of construction regarding the definition of disability, which provide that the definition of disability shall be construed in favor of broad coverage to the maximum extent permitted by the terms of the act; the term "substantially limits" shall be interpreted consistently with the findings and purposes of the ADA Amendments Act; an impairment that substantially limits one major life activity need not limit other major life activities to be considered a disability; an impairment that is episodic or in remission is a disability if it would have substantially limited a major life activity when active; and the determination of whether an impairment substantially limits a major life activity shall be made without regard to the ameliorative effects of mitigating measures, except that the ameliorative effects of ordinary eyeglasses or contact lenses shall be considered. The ADA Amendments Act specifically lists examples of major life activities including caring for oneself, performing manual tasks, seeing, hearing, eating, sleeping, walking, standing, lifting, bending, speaking, breathing, learning, reading, concentrating, thinking, communicating, and working. The act also states that a major life activity includes the operation of a major bodily function. The first Section 504 regulations were promulgated by the then department of Health, Education, and Welfare (HEW) in January of 1978. Soon after this, the 1978 amendments to Section 504 were passed which applied Section 504 nondiscrimination requirements to programs or activities conducted by executive agencies, and added language requiring the promulgation of regulations. Each executive agency and the Postal Service now has its own Section 504 regulations which are tailored to the particular recipients of that agency's programs. In addition, each executive agency and the Postal Service have regulations which delineate the coverage of Section 504 with regard to that agency's own programs. In 1980, President Carter issued Executive Order 12250 which provided that the Department of Justice shall coordinate the implementation and enforcement of certain nondiscrimination provisions, including those of Section 504. The Supreme Court has examined Section 504 in numerous contexts and, since the enactment of the ADA in 1990, has often referenced Section 504 in its analysis of ADA cases. The first Section 504 case to reach the Supreme Court was Southeastern Community College v. Davis. In Southeastern , the plaintiff was a student with a serious hearing disability and who sought to be trained as a registered nurse. The college argued that she was not "otherwise qualified" as she could not understand speech except through lip reading and that this limitation made it unsafe for her to participate in the normal clinical program. The Supreme Court agreed with the college, noting that it was unlikely that she "could benefit from any affirmative action that the regulations reasonably could be interpreted as requiring." The Court concluded that there was no violation of §504 when Southeastern concluded that respondent did not qualify for admission to its program. Nothing in the language or history of §504 reflects an intention to limit the freedom of an educational institution to require reasonable physical qualifications for admission to a clinical training program. Nor has there been any showing in this case that any action short of a substantial change in Southeastern's program would render unreasonable the qualifications it imposed. Similarly, in Alexander v. Choate the Supreme Court found no violation of Section 504 where Medicaid recipients with disabilities claimed that a proposed 14-day limitation on in-patient coverage had a discriminatory effect on individuals with disabilities. The Court found that the limitation was neutral on its face as it would provide Medicaid users with or without disabilities with "identical and effective hospital services." Section 504 did not require the state to alter its definition of the Medicaid benefit because individuals with disabilities have greater medical needs. Citing Southeastern , the Court observed that Section 504 requires even-handed treatment and an opportunity for individuals with disabilities to participate and benefit from programs receiving federal funds. "The Act does not, however, guarantee the handicapped equal results from the provision of state Medicaid, even assuming some measure of equality of health could be constructed." Consolidated Rail Corporation v. Darrone raised the issue of whether an employment discrimination action under Section 504 was limited to situations where the primary objective of the federal financial assistance was to provide employment. The Supreme Court held that such actions were not limited since the primary goal of the Rehabilitation Act is to increase employment of individuals with disabilities. The fact that Congress chose to ban such employment discrimination only by the federal government and recipients of federal funds did not require that Section 504 be further limited. In Bowen v. American Hospital Association the Supreme Court addressed the issue of whether Section 504 regulations requiring the provision of health care to infants with disabilities were authorized by Section 504. This case began when the parents of a child with Down Syndrome requested that life-saving surgery not be performed. In response to the death of the child, HHS promulgated a regulation under Section 504 stating that Section 504 required that nourishment and medically beneficial treatment should not be withheld from infants with disabilities. Striking down these regulations, the Court noted that the legislative history of the Rehabilitation Act did not support the argument that federal officials can intervene in treatment decisions traditionally left by state law to the parents and attending physicians. School Board of Nassau County v. Arline examined the issue of when an individual with a disability is "otherwise qualified" for a job if the individual has a contagious disease. Gene Arline taught elementary school until her employment was terminated after she suffered a third relapse of tuberculosis within two years. The Supreme Court held that an individual with a contagious disease may be a person with a disability under Section 504 but that a person who poses a significant risk of communicating an infectious disease to others that cannot be alleviated by reasonable accommodation will not be otherwise qualified for a job. This should be determined by findings of fact based on reasonable medical judgments about the nature of the risk, the duration of the risk, the severity of the risk, and the probabilities the disease will be transmitted and will cause harm. In Traynor v. Turnage the Supreme Court examined the application of Section 504 to an executive agency, more specifically to the Veterans' Administration (VA). The veterans who brought the suit had been denied an extension of the time limit for the use of educational benefits due to disability on the ground that their alleged disability was due to alcoholism unrelated to a psychiatric condition. VA regulations prohibited the granting of a time extension because alcoholism unrelated to a psychiatric condition was considered willful misconduct. 38 U.S.C. §211(a) bars judicial review of the Veterans' Administrators' decision "on any question of law or fact under any law administered by the Veterans' Administration providing benefits for veterans." The first question the Court addressed, then, was whether 38 U.S.C. §211(a) foreclosed the Court from considering whether the VA regulation violated Section 504. Holding that such suits were not precluded, the Supreme Court noted that Section 211(a) insulates from review decision of law and fact 'under any law administered by the Veterans' Administration,' that is, decisions made in interpreting or applying a particular provision of that statute to a particular set of facts... But the cases now before us involve the issue whether the law sought to be administered is valid in light of a subsequent statute whose enforcement is not the exclusive domain of the Veterans' Administration. The Court then examined the second issue in Traynor : whether the regulation was inconsistent with the requirements of Section 504. Finding that the regulation did not violate Section 504, the Court observed, "There is nothing in the Rehabilitation Act that requires that any benefit extended to one category of handicapped persons also be extended to all other categories of handicapped persons." The Court also noted that "Congress is entitled to establish priorities for the allocation of the limited resources available for veterans' benefits, ... and thereby to conclude that veterans who bear some responsibility for their disabilities have no stronger claim to an extended eligibility period than do able-bodied veterans." The Supreme Court in Barnes v. Gorman held in a unanimous decision that punitive damages may not be awarded under Section 202 of the ADA and Section 504 of the Rehabilitation Act. Jeffrey Gorman uses a wheelchair and lacks voluntary control over his lower torso which necessitates the use of a catheter attached to a urine bag. He was arrested in 1992 after fighting with a bouncer at a nightclub and during his transport to the police station suffered significant injuries due to the manner in which he was transported. He sued the Kansas City police and was awarded over $1 million in compensatory damages and $1.2 million in punitive damages. The eighth circuit court of appeals upheld the award of punitive damages but the Supreme Court reversed. Although the Court was unanimous in the result, there were two concurring opinions, and the concurring opinion by Justice Stevens, joined by Justices Ginsburg and Breyer, disagreed with the reasoning used in Justice Scalia's opinion for the Court. Justice Scalia observed that the remedies for violations of both Section 202 of the ADA and Section 504 of the Rehabilitation Act are "coextensive with the remedies available in a private cause of action brought under Title VI of the Civil Rights Act of 1964." Neither Section 504 nor Title II of the ADA specifically mention punitive damages, rather they reference the remedies of Title VI of the Civil Rights Act. Title VI is based on the congressional power under the Spending Clause to place conditions on grants. Justice Scalia noted that Spending Clause legislation is "much in the nature of a contract" and, in order to be a legitimate use of this power, the recipient must voluntarily and knowingly accept the terms of the "contract." "If Congress intends to impose a condition on the grant of federal moneys, it must do so unambiguously." This contract law analogy was also found to be applicable to determining the scope of the damages remedies and, since punitive damages are generally not found to be available for a breach of contract, Justice Scalia found that they were not available under Title VI, Section 504, or the ADA. The Americans with Disabilities Act was modeled on the statutory language, regulations, and case law of Section 504. The ADA and Section 504 are, therefore, very similar and have some overlapping coverage but also have several important distinctions. Most significantly, Section 504 is limited to programs receiving federal funds or the executive agencies and the Postal Service while the ADA broadly covers the private sector regardless of whether federal funds are involved and does not cover the executive agencies or the Postal Service. There are several other distinctions between the ADA and Section 504. For example, the ADA contains specific exemptions for religious entities. There are no corresponding provisions in Section 504. Therefore, if a faith-based organization receives federal funds, it is prohibited from discriminating against an individual with a disability. Title I of the ADA prohibits employment discrimination which is also prohibited with regard to the entities covered by Section 504. However, the enforcement procedures for the two statutes are somewhat different. Enforcement of Title I of the ADA parallels that of Title VII of the Civil Rights Act of 1964 and includes the requirement that persons alleging discrimination file a charge with the EEOC. However, under Section 504 an employment discrimination complaint may be filed with the Office of Civil Rights for the agency that provided the federal financial assistance or the Department of Justice. Administrative procedures do not have to be exhausted prior to filing suit in federal court. Several federal statutes, notably the Individuals with Disabilities Education Act (IDEA), Section 504, and the ADA, address the rights of individuals with disabilities to education. Although there is overlap, particularly with Section 504 and the ADA, each statute plays a significant part in the education of individuals with disabilities. Generally, although there are some differences regarding K-12 schools, the Department of Education (ED) has interpreted the Section 504 compliance standards for schools to be the same as the basic requirements of IDEA. As discussed previously, the Rehabilitation Act is amended by the ADA Amendments Act to reference the definition of disability in the ADA. Section 504's coverage of education was a subject of discussion during the passage of the ADA Amendments Act, and the Senate Statement of Managers observed: We expect that the Secretary of Education will promulgate new regulations related to the definition of disability to be consistent with those issued by the Attorney General under this Act. We believe that other current regulations issued by the Department of Education Office of Civil Rights under Section 504 of the Rehabilitation Act are currently harmonious with Congressional intent under both the ADA and the Rehabilitation Act. The implications of the changes in the definition of disability under Section 504 and the ADA for the coverage of children in K-12 schools is not entirely clear. Perry Zirkel, a Lehigh University education and law professor, argues that the ADAAA would result in more students in K-12 education being given Section 504 plans, especially students with diabetes, asthma, food allergies, dyslexia, and attention deficit disorder (ADD). Another commentator noted that the addition of "reading" in the list of major life activities may be problematic since "there is no easy way to distinguish children who are unable to read because they have a disability from those who have simply received poor instruction."
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Section 504 of the Rehabilitation Act of 1973 prohibits discrimination against an otherwise qualified individual with a disability solely by reason of disability in any program or activity receiving federal financial assistance or under any program or activity conducted by an executive agency or the U.S. Postal Service. Section 504 was the first federal civil rights law generally prohibiting discrimination against individuals with disabilities. This report examines Section 504, recent amendments to the definition of disability, Section 504's regulations, and Supreme Court interpretations. Section 504's differences with the ADA, and its relationship to the Individuals with Disabilities Education Act (IDEA), are also discussed.
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The combined efforts of the food industry and the regulatory agencies often are credited with making the U.S. food supply among the safest in the world. Nonetheless, public health officials have estimated that each year in the United States, 76 million people become sick, 325,000 are hospitalized, and 5,000 die from foodborne illnesses caused by contamination from any one of a number of microbial pathogens. Food safety-related incidents frequently heighten public and media scrutiny of the U.S. food safety system in general, as a number of developments in 2006 and 2007 have illustrated. For example, more than 200 confirmed illnesses and three deaths were linked in the autumn of 2006 to the consumption of bagged fresh spinach grown in California and carrying the bacterium E. coli O157:H7. The incident raised public concerns about the safety of all fresh leafy produce and stimulated a number of industry and government initiatives to limit future contamination. Large recalls of various meat and poultry products due to findings of E. coli O157:H7, Listeria , and other problems occurred throughout 2007. In February of that year, the U.S. Food and Drug Administration (FDA) announced a nationwide recall of Peter Pan and Great Value brands peanut butter produced in a Georgia ConAgra plant due to Salmonella contamination, after hundreds of illnesses, dating back to August 2006 and linked to the bacterium, were reported by public health officials. At issue is whether the current food safety system has the resources, authority, and structural organization to safeguard the health of American consumers, who spend more than $1 trillion on food each year. Also at issue is whether federal food safety laws, first enacted in the early 1900s, have kept pace with the significant changes that have occurred in the food production, processing, and marketing sectors since then. Attention shifted to the safety of food imports in early 2007 when pet food ingredients imported from China sickened or killed an unknown number of dogs and cats and subsequently were found in some hog, chicken, and fish feed. In June 2007, FDA announced that it was detaining all imports of certain types of farm-raised seafood from China (specifically, shrimp, catfish, basa, dace, and eel) until the shippers could confirm that they are free of unapproved drug residues. These and other developments made food safety a top issue for a number of lawmakers in the first session of the 110 th Congress. Several of them called for changes in the U.S. food safety system and/or funding increases that they assert are needed to meet current obligations to protect consumers from unsafe food. Perceived gaps in federal safeguards were explored at a number of congressional hearings in 2007. Several reports and studies released in 2007 by the Bush Administration also called for changes or increased resources in the system. Bills addressing various aspects of the issue have been introduced. Many appear to focus on ensuring the safety of imported foods, and/or on strengthening the ability of federal agencies to identify and recall contaminated products. Several call for a more sweeping overhaul of existing statutes, including one that would combine responsibility for all food safety under a single new agency. This report describes many of these bills, both in tabular format (see Appendix A and Appendix B ) and in the text that follows. First, however, the report offers an overview of the current system. The Government Accountability Office (GAO) has identified 15 federal agencies collectively administering at least 30 laws related to food safety. The Food and Drug Administration (FDA), which is part of the U.S. Department of Health and Human Services (HHS), and the Food Safety and Inspection Service (FSIS), which is part of the U.S. Department of Agriculture (USDA), together compose the majority of both the total funding and the total staffing of the government's food regulatory system. FSIS's annual budget is approximately $1 billion, at least 90% of it appropriated funds and the balance industry-paid user fees. FDA's annual budget for human foods is less than $500 million. FDA oversight of animal drugs and feeds totals another approximately $100 million, of which approximately 90% is appropriated and the balance user fees. FDA is responsible for ensuring that all domestic and imported food products—except for most meat and poultry derived from the major animal species—are safe, nutritious, wholesome, and accurately labeled. FDA shares responsibility for the safety of eggs with FSIS. FDA has jurisdiction over establishments that sell or serve eggs or use them as an ingredient in their products (FSIS generally is responsible for processed eggs). FDA is also responsible for ensuring that seafood products, including those from aquaculture, do not endanger public health. The primary statutes governing FDA's activities are the Federal Food, Drug, and Cosmetic Act (FFDCA), as amended (21 U.S.C. 301 et seq.); the Public Health Service Act, as amended (42 U.S.C. 201 et seq.); and the Egg Products Inspection Act, as amended (21 U.S.C. 1031 et seq.). FDA's food safety staff (FY2007) numbers approximately 1,900 in field offices throughout the United States, plus more than 800 in its headquarters offices near Washington, DC. FDA regulates food manufacturers' safety practices by relying on companies' self-interest in producing safe products, by working with the industry to improve production practices, and by making periodic (although infrequent) inspections of the approximately 60,700 active food establishments subject to FDA oversight. According to FDA, unannounced compliance inspections of individual establishments by its officials now occur roughly once every five years. FDA relies on notifications from within the industry or from other federal or state inspection personnel, as well as other sources, to alert it to situations calling for increased inspection. The FDA headquarters offices are the focal point for food safety-related activities. The Center for Food Safety and Applied Nutrition (CFSAN) is responsible for (1) conducting and supporting food safety research; (2) developing and overseeing enforcement of food safety and quality regulations; (3) coordinating and evaluating FDA's food surveillance and compliance programs; (4) coordinating and evaluating cooperating states' food safety activities; and (5) developing and disseminating food safety and regulatory information to consumers and industry. FDA's Center for Veterinary Medicine (CVM) is responsible for ensuring that all animal drugs, feeds (including pet foods), and veterinary devices are safe for animals, are properly labeled, and produce no human health hazards when used in food-producing animals. FDA also cooperates with over 400 state agencies across the nation that carry out a wide range of food safety regulatory activities. The state agencies are primarily responsible for actual inspection. FDA works with the states to set the safety standards for food establishments and commodities and evaluates the states' performance in upholding such standards as well as any federal standards that may apply. FDA also contracts with states to use their food safety agency personnel to carry out certain field inspections in support of FDA's own statutory responsibilities. FSIS regulates the safety, wholesomeness, and proper labeling of most domestic and imported meat and poultry and their products sold for human consumption. Under the Federal Meat Inspection Act (FMIA) of 1906, as amended (21 U.S.C. 601 et seq.), FSIS inspects all cattle, sheep, swine, goats, and equines both before and after they are slaughtered, and maintains oversight during their processing into food products. Under the Poultry Products Inspection Act (PPIA) of 1957, as amended (21 U.S.C. 451 et seq.), FSIS is required to inspect "any domesticated bird" both before and after slaughter and while being processed for human consumption. However, USDA regulations implementing this law limit the definition of domesticated birds to chickens, turkeys, ducks, geese, ratites (emus, ostriches, and rheas), and guineas. FDA has jurisdiction over exotic and alternative meats not inspected by FSIS, and shares responsibility for egg safety with FSIS. FSIS is responsible for the safety of liquid, frozen, and dried egg products, domestic and imported, and for the safe use or disposition of damaged and dirty eggs under the Egg Products Inspection Act, as amended (21 U.S.C. 1031 et seq.). FSIS staff numbers around 9,400; roughly 8,000 of them, including about 1,000 veterinarians, are in about 6,300 meat and poultry slaughtering and/or processing plants nationwide. FSIS personnel inspect all meat and poultry animals at slaughter on a continuous basis, and at least one federal inspector is on the line during all hours the slaughter plant is operating. During processing operations—that is, when meat from animals is being transformed into cuts, ground products, and other consumable items—an FSIS inspector may not be constantly on the production line or inspect every item. Instead, the inspector visits the site on a daily basis to monitor the plant's adherence to the standards for sanitary conditions, ingredient levels, and packaging, and to conduct statistical sampling and testing of products. Because all plants are visited daily, processing inspection also is considered to be continuous. FSIS also is responsible for certifying that foreign meat and poultry plants are operating under an inspection system equivalent to the U.S. system before they can export their products to the United States. FSIS inspectors located at U.S. ports of entry carry out a statistically based sampling program to verify the safety of imported meats from cattle, sheep, swine, goats, and equines and imported poultry meat from chickens, turkeys, ducks, geese, quail, ratites, and guineas before they are released into domestic commerce. FDA is responsible for ensuring the safety of imported meat from any other species. Twenty-seven states operate their own meat and/or poultry inspection programs. FSIS is statutorily responsible for ensuring that the states' programs are at least equal to the federal program. The approximately 2,100 plants that slaughter animals and/or process meat and poultry under state supervision can market their products only within the state. If a state chooses to discontinue its own inspection program, or if FSIS determines that it does not meet the agency's equivalency standards, FSIS must assume the responsibility for inspection if the formerly state-inspected plants are to remain in operation. Under a separate program, FSIS also has cooperative agreements with more than two dozen states under which state inspection personnel are authorized to carry out federal inspection in meat and/or poultry plants. Products from these so-called Talmadge-Aiken plants (named for the sponsors of the law that created the program) may travel in interstate commerce. CDC is responsible for (1) monitoring, identifying, and investigating foodborne disease to determine the contributing factors; (2) working with FDA, FSIS, and other federal agencies, state and local public health departments, universities, and industry to develop control methods; and (3) evaluating the effectiveness of control methods. In 1995, CDC launched "FoodNet," a collaborative project with FDA and USDA to improve data collection on foodborne illnesses. FoodNet includes active surveillance of clinical microbiology laboratories to obtain a more accurate accounting of positive test results for foodborne illness; a physician survey to determine testing and laboratory practices; population surveys to identify illnesses not reported to doctors; and research studies to obtain new and more precise information about which food items or other exposures may cause diseases. FoodNet data allows CDC to have a clearer picture of the incidence and causes of foodborne illness and to establish baseline data against which to measure the success of changes in food safety programs. The Public Health Service Act, as amended (42 U.S.C. 201 et seq.), provides the legislative authority for CDC's food safety related activities. Although FDA is the primary agency responsible for ensuring the safety, wholesomeness, and proper labeling of domestic and imported seafood products, the National Marine Fisheries Service (NMFS) conducts, on a fee-for-service basis, a voluntary seafood inspection and grading program that focuses on marketing and quality attributes of U.S. fish and shellfish. The primary legislative authority for NMFS's inspection program is the Agricultural Marketing Act of 1946, as amended (7 U.S.C. 1621 et seq.). NMFS has approximately 160 seafood safety and quality inspectors, and inspection services are funded with user fees. The Environmental Protection Agency (EPA) has statutory responsibility for ensuring that the chemicals used in the production and processing of food do not endanger public health. EPA's Office of Pesticide Programs (1) registers new pesticides and determines residue levels for regulatory purposes; (2) performs special reviews of pesticides of concern; (3) reviews and evaluates all the health data on pesticides; (4) reviews data on pesticides' effects on the environment and on other species; (5) analyzes the costs and benefits of pesticide use; and (6) interacts with EPA regional offices, state regulatory counterparts, other federal agencies involved in food safety, the public, and others to keep them informed of EPA regulatory actions. The Federal Insecticide, Fungicide, and Rodenticide Act, as amended (7 U.S.C. 136 et seq.), and the Federal Food, Drug, and Cosmetic Act, as amended (21 U.S.C. 301 et seq.), are the primary authorities for EPA's activities in this area. Among the other agencies that play a role in food safety, USDA's Agricultural Research Service (ARS) performs food safety research in support of FSIS's inspection program. ARS has scientists working in animal disease bio-containment laboratories in Plum Island, NY, and Ames, IA. USDA's Animal and Plant Health Inspection Service (APHIS) indirectly protects the nation's food supply through programs to protect plant and animal resources from domestic and foreign pests and diseases, such as brucellosis and bovine spongiform encephalopathy (BSE, or "mad cow" disease). The Department of Homeland Security (DHS), working with other agencies, is responsible for coordinating federal preparedness for and response to a terrorist attack, major disease outbreak, or other disaster affecting the national agriculture or food infrastructure, and has additional routine food safety inspection responsibilities at U.S. borders. Congressional oversight of the diverse federal food safety system is further complicated because of the number of committees that have jurisdiction over one or more aspects. For example, the congressional authorizing committees that direct FDA activities are those with jurisdiction over public health issues: the Senate Committee on Health, Education, Labor, and Pensions and the House Committee on Energy and Commerce. Other committees that exercise oversight roles regarding FDA include the House Committee on Oversight and Government Reform, and the Senate committees on Aging, Homeland Security, and the Judiciary. With regard to FSIS authorization and oversight, the House and Senate Agriculture Committees have primary jurisdiction. Annual funding decisions originate in the House and Senate appropriations subcommittees on Agriculture, Rural Development, FDA, and Related Agencies, which have jurisdiction not only over FSIS, a USDA agency, but also over FDA's appropriations. This latter arrangement reflects, in part, the agency's origin within the Department of Agriculture as the Bureau of Chemistry in 1862. Since 1940, however, FDA has been administratively part of federal public health agencies, specifically HHS and its predecessors. The Administration released, on November 6, 2007, two separate but related reports with an impact on food safety. The broader of the two covers the safety of most imports for consumers, including but not limited to food. This Action Plan for Import Safety was prepared for the President by the Interagency Working Group on Import Safety. The other report is FDA's Food Protection Plan, which focuses on food, whether imported or domestically produced, and which contains recommendations for food imports that generally parallel those in the broader report. Both plans are oriented toward assessing and prioritizing risks regardless of where they occur (starting at a product's point of origin), and preventing rather than waiting for problems to occur. A number of the recommendations—such as mandatory recall authority for FDA-regulated products (but not FSIS), electronic certification of imports, and new user fees if products must be reinspected—would require congressional authorization. Among other recommended statutory changes are more explicit authority to require additional preventive (HACCP-like) controls for high-risk foods (authority some believe FDA already has); and authority for FDA accreditation of qualified third parties to conduct some types of inspections. HACCP is the acronym for hazard analysis and critical control point, whereby a production system is analyzed to determine its potential risks and hazards and where they are most likely to occur. Preventive controls are then instituted at the appropriate points, and continually monitored to ensure they are effective. Each meat and poultry plant must have developed and must continue to follow its own HACCP plan, which FSIS inspectors then review on an ongoing basis to ensure it is in place and effective. Currently, only a few types of FDA-regulated food products must follow HACCP rules. Many other changes are to be implemented through administrative action, or cooperative activities with foreign countries and industry stakeholders. Most cite FDA as the lead agency; few would appear to involve FSIS-regulated products. Many of the changes are expected to necessitate more spending, which neither report quantified. The lack of specific funding requests was among the criticisms leveled against the Administration strategy by some Members of Congress. Administration officials stated that they would seek additional funds to help pay for these initiatives as part of the upcoming FY2009 budget request. Other perceived shortcomings in the strategy were cited by critics, including some Members of Congress, consumer advocacy groups, and several food safety experts. Several observed, for example, that the plan is not comprehensive because it did not propose any specific food safety improvements on farms or at the retail level, where problems often occur; that it relies too much on voluntary cooperation with industry when stronger mandatory controls are called for; and that it fails to emphasize badly needed improvements in information technology. Critics have argued for decades that U.S. food safety activities are dispersed over too many agencies and are poorly coordinated. GAO has been among these critics. In its annual (January 2007) report, GAO designated food safety oversight as one of 29 "high risk" federal program areas. The report concluded that the current federal safety system is "fragmented," resulting in inconsistent oversight, ineffective coordination, and inefficient use of resources. GAO has recommended that Congress consider a fundamental reexamination of the system and other improvements to help ensure the rapid detection of and response to any accidental or deliberate contamination of food before public health and safety is compromised. Opponents of major food safety system changes, including some in the food and agricultural industries, assert that the system already is scientifically based, that the statutes are adequate, and that food companies already produce and distribute safe food, making the U.S. system a model for food safety around the world. The Senate-passed version of the omnibus farm bill ( H.R. 2419 ) would establish a Congressional Bipartisan Food Safety Commission to recommend statutory changes to modernize the food safety system and ways to harmonize food safety requirements across agencies. The language provides extensive guidance on commission membership and on the programs to be examined, sets timelines for completion, and provides $3 million annually in funding. If the commission language is maintained in the final farm bill (the House version lacks it), this initiative could sideline further action in this Congress on companion bills ( H.R. 1148 / S. 654 ) to reorganize the federal agencies responsible for food safety, as well as to overhaul the safeguards themselves. These two comprehensive companion bills would consolidate federal food safety responsibilities under a new Food Safety Administration (FSA). The new FSA would be responsible for administering all the major food safety laws. Agencies and their functions to be transferred include FSIS and APHIS from USDA, as well as the Department's food safety research activities; the FDA's Center for Food Safety and Applied Nutrition (CFSAN) and Center for Veterinary Medicine (CVM), as well as portions of other FDA offices that support these centers; resources of the EPA that regulate pesticide residues in food; NMFS seafood inspection; and any other offices or services designated by the President. H.R. 1148 / S. 654 also would authorize a new food safety system to be based on a comprehensive analysis of food hazards. They would require the registration and regular inspections of all establishments (except farms, fishing vessels that do not process food, and retail establishments), which would have to follow process controls tied to science and health-based regulations, including performance standards. Inspection fundamentals and frequencies also are spelled out in the bills. Among other provisions, the bills specify prohibited acts; provide authority to detain, seize, condemn, and/or recall foods suspected of being unsafe or misbranded (see page 12 for details), and include "whistleblower protection" for public and private employees who report safety problems. They also include a certification system for imports, and a mandatory national system for tracing food and food animals from their point of origin to retail sale, which are described elsewhere in this CRS report. Another comprehensive bill ( H.R. 3624 ) proposes major changes in how the current system is administered by the FDA—although it would not establish a new single food agency. The bill would require establishment of a new "National Food Safety Program" to be based on a comprehensive analysis of food safety hazards throughout the production and marketing chain; the analysis would consider the distinctive characteristics of food production and processing. The proposed bill would mandate process control regulations, require quarterly inspections of processors and importers, except those that have negligible risk or meet exceptional standards, and spell out procedures for detaining and condemning adulterated or misbranded products. The bill also would require, among other things, tolerances for contaminants in food tied to health-based standards, and a comprehensive public health assessment system that includes active foodborne illness surveillance and sampling of food products to test for contaminants. The bill's import inspection and recall provisions are described elsewhere in this CRS report. Some critics argue that—irrespective of the need, if any, to reform food safety statutes and organization—the primary problem is the lack of sufficient funding and staff to carry out congressionally mandated responsibilities to ensure a safe food supply. From time to time in the past, FSIS has had difficulty in adequately staffing its service obligations to the meat and poultry industries. Usually a combination of factors causes these shortages, such as new technologies that increase plant production speeds and volume, or insufficient funds to hire additional inspectors at times of unexpected increases in demand for inspections, for example. According to a report released in early December 2007 by the FDA Science Board, the FDA Commissioner's expert advisory panel, a critical lack of resources has seriously weakened the FDA's scientific basis generally and its mission to protect the food supply particularly, The report, prepared by a board subcommittee, concluded in part, "... the Agency suffers from serious scientific deficiencies and is not positioned to meet current or emerging regulatory responsibilities." The subcommittee report tied these deficiencies to two sources: (1) demands on FDA have soared due in part to major advances in science and in the complexity of new products, and to the globalization of the industries the agency regulates; and (2) resources have not increased in proportion to the demands. Such demands include an accumulation of unfunded legislative mandates imposed by Congress, the report stated. The report singled out the FDA's two food safety centers, CFSAN and CVM, where crisis management has "drawn attention and resources away from FDA's ability to develop the science base and infrastructure needed to efficiently support innovation in the food industry, provide effective routine surveillance, and conduct emergency outbreak investigation activities to protect the food supply." Also, it noted that "[a]n appallingly low inspection rate" leaves FDA unable to sufficiently monitor either the tremendous volume of products manufactured domestically or the exponential growth of imported products. During the past 35 years, the decrease in FDA funding for inspection of our food supply has forced FDA to impose a 78 percent reduction in food inspections, at a time when the food industry has been rapidly expanding and food importation has exponentially increased. The FDA food safety budget has declined from almost half of the agency's total spending in 1971 to about one-fourth of the budget currently, partly because the drug budget has expanded due to collection of drug approval user fees. FDA staffing in programs not funded by user fees, including but not limited to food safety, has decreased significantly, according to a former high-level official. This has occurred at a time when FDA faces new challenges such as rising food imports due to globalization of the U.S. food supply. Although it requested modest increases for both FDA and FSIS in its FY2008 budget, the Administration stressed that it could meet these challenges by strengthening the scientific basis of its programs, improving risk-based targeting of inspection resources, and developing stronger partnerships with domestic and international stakeholders. At 2007 hearings, some Members of Congress expressed skepticism that these efforts could succeed without additional funds. More recently, the HHS Secretary and FDA officials said that they had asked the White House to include significant increases as part of the President's FY2009 budget request. FSIS and FDA receive most of their funding through the annual Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act. Some funds also are provided through user fees. In FY2007, for example, more than 12% ($130 million) of the FSIS budget of approximately $1 billion was from user fees charged to establishments, mostly for inspections conducted after regularly scheduled shifts. As noted, the $457 million FDA food safety budget (FY2007) was virtually all from appropriated funds. Proposed increases in program spending raise a variety of policy issues. Requests for higher appropriations must compete with other priorities throughout the federal discretionary budget (the programs do not operate, like farm support programs, for example, as mandatory authorizations). Efforts to fill perceived shortfalls through new user fees on the food industry always meet with resistance, both from the companies that would have to absorb such costs, and from consumer advocates, who have long argued that industry funds might "taint" programs that are first and foremost public health programs. Nonetheless, a number of pending food safety bills discussed in this report include proposed user fees to pay for such various new activities as certification of food imports, re-inspection of products initially kept out of commerce, and the auditing of private food testing laboratories. The first session of the 110 th Congress did not clear a freestanding Agriculture, Rural Development, Food and Drug Administration, and Related Agencies Appropriations Act for FY2008 ( H.R. 3161 , S. 1859 ). Rather, the programs operated for nearly the first three months of the fiscal year under a series of continuing resolutions, and are now operating for the balance of FY2008 under the Consolidated Appropriations Act, 2008 ( H.R. 2764 ). Division A of this omnibus measure provides new budget authority in FY2008 of $509.9 million for the FDA foods program area, or $52.8 million more than the FY2007 enacted level of $457.1 million and the Administration FY2008 request of $466.7 million. Of this, $28 million is to be spent from July 1, 2008, through September 30, 2009, for implementation of a detailed plan for a comprehensive overhaul of FDA's food safety operations. Accompanying report language further directs that nearly $327 million of the agency appropriation be spent for food-related field activities; and that FDA make at least $18.3 million available immediately to hire additional domestic and import inspectors, including $8 million "for the deployment of inspectors with rapid response capabilities who will be responsible for immediate attention to outbreaks of food-related disease as well as providing technical assistance to states and others, as appropriate, to support overall practices to increase the safety of food and food products." The report also states that FDA should contract with the National Academy of Sciences for a comprehensive study of gaps in public health protection provided by the food safety system, including a response to the recommendations of the FDA Food Protection Plan released in November 2007. Moreover, both FDA and USDA were separately directed to also submit their own plans addressing the weaknesses that caused GAO to place food safety on its 2007 high-risk list. The FY2008 measure provides new budget authority for FSIS of $930.1 million, or nearly $38 million more than the enacted FY2007 level. (Currently authorized user fees were expected to provide another $135 million for the year.) The increase is in part to be used to hire additional inspectors in FY2008. Concerns about perceived gaps in import safeguards, including what many believe have been insufficient funds, are not new. However, they have gained wider attention in recent years as U.S. food imports log significant increases, fueled by the globalization of production and processing, and by consumers' desire for a wider variety of nutritious and inexpensive foods year-round. The value of total imports of agricultural and seafood products increased from $39 billion in FY1996 to $83.7 billion in FY2007, a 115% increase. At issue is whether U.S. safeguards, which generally were created at a time when most foods were supplied domestically, can protect public health in a global marketplace. The Bush Administration's food safety and import safety strategies (see page 6 ) assert that imported foods generally do not pose a greater food safety risk than domestic foods. However, the increase in import volume, along with the changing makeup—from largely unprocessed bulk ingredients for subsequent processing by domestic establishments, to an increasing variety of ready-to-eat products, fresh produce, and seafood—have taxed FDA's ability to monitor them for safety, the Administration reports said. Among legislative changes recommended in the Administration food safety and import strategies is the authority for FDA to require electronic import certificates for shipments of products deemed to be of high risk. For such products, FDA would have to negotiate and implement government-to-government agreements whereby an importer would obtain certificates from either the appropriate foreign agency or an accredited third party. This new certification system, which appears to be based at least in part on the concept of the FSIS foreign equivalency determinations, presumably would have to be consistent with international trade obligations, and likely would be one of the initiatives requiring additional resources. The strategies also entail new authority for FDA to block entry of foods imported from foreign firms that impede entry by FDA inspectors to their facilities. The imports issue was explored at a number of congressional hearings in 2007, and several bills have been offered to change the current system. Those who oppose major changes assert that imported foods already are subject to the same safety standards as—and/or pose no greater hazards than—domestically produced foods. They also contend that smarter allocation of existing resources, and the food industry's own controls, can and should be capable of addressing any problems that arise. As of late 2007, at least a dozen food safety bills were pending that contain provisions addressing some aspect of food import safety. About half of them— H.R. 2997 , H.R. 3100 , H.R. 3610 , H.R. 3937 , H.R. 3967 , S. 1776 , and S. 2418 —focus almost exclusively on the import issue. A number of the bills would require that importing establishments, and/or the foreign countries in which they are located, first receive formal certification from U.S. authorities that their food safety systems demonstrably provide at least the same level of safety assurances as the U.S. system. Some would direct that certifications be denied or revoked if foreign safeguards are found to be insufficient, unsafe imports are discovered, and/or foodborne illnesses are linked to such products. H.R. 2997 takes a somewhat different tack, by requiring that food imports (both FDA- and FSIS-regulated) be certified by the government of their country of origin. A number of the bills also propose the collection of user fees—for example, up to $20 per shipment in one bill, up to $50 per shipment in another—from importers to cover the costs of inspecting foreign products at the borders. Some of the bills seek to require more physical inspections and testing by FDA at the border or within other countries, to authorize more research into inspection and testing technologies, or to restrict imports to specific ports. A controversial provision in H.R. 3610 (introduced by House Energy and Commerce Committee Chairman Dingell) would restrict imports of all FDA-regulated foods to ports of entry located in metropolitan areas that have one of the 13 FDA laboratories, although waivers could be granted under some circumstances. At a July 17, 2007, hearing before the House Energy and Commerce Subcommittee on Oversight and Investigations, the panel's investigators testified that FDA border inspectors currently had to cover 326 ports of entry, greatly straining the existing workforce. Those opposed to the port restrictions in H.R. 3610 argue that it would result in severe economic dislocation and huge costs for industries and consumers. A separate provision in the Dingell bill would require the HHS Department to establish a voluntary "Safe and Secure Food Importation Program" under which food importing companies could receive expedited movement of their products in exchange for abiding by HHS-developed food safety and security guidelines. Meanwhile, Title X of the Food and Drug Administration Amendments Act of 2007 ( H.R. 3580 ; signed into law as P.L. 110-85 ), requires an annual report to Congress on the number and amount of FDA-regulated food products imported by country and by type of food, the number of inspectors and inspections performed, and aggregated data on inspection findings, including violations and enforcement actions. Currently, neither FDA nor FSIS has explicit statutory authority to order a recall of adulterated foods, require a company to notify them when it has distributed such foods, or impose penalties if recall requirements are violated. (FDA can order such recalls for one food, infant formula, and for unsafe medical devices, such as pacemakers, as can other agencies for unsafe toys or automobiles.) These gaps increase the possibility that unsafe food will not be recovered and will be consumed, GAO has concluded. Defenders of the current system counter that the agencies already have sufficient authorities to keep such products from reaching consumers. FSIS's statutory authority enables it to detain meat and poultry products of concern for up to 20 days, and FDA's authority enables it to detain the foods it regulates for up to 30 days. Both agencies can, with a court's permission, seize, condemn, and destroy unsafe food. Finally, private companies rarely if ever fail to order a voluntary recall when problems arise; these are frequently announced by the government, and become widely publicized, it is argued. Nonetheless, a number of Members of Congress support GAO's recommendation that legislation be considered to strengthen notification and recall authorities. Some argue that improved notification and traceability capabilities would enable either FSIS (in the case of meat and poultry products) or FDA (in the case of other foods) to determine more quickly a product's source and whereabouts, to prevent or contain foodborne illness outbreaks. The traceability issue has also been debated in connection with protecting against agroterrorism, and for verifying the U.S. origin of live animals and their products for marketing, trade, and/or animal health purposes, for example. The Administration's November 2007 strategy for food safety calls for mandatory recall authority in cases where firms (whether foreign or domestic) are unwilling to do so voluntarily or expeditiously. FDA notes that it already has the authority to seize adulterated or misbranded food, but this may not be practical once a product is in wide distribution. The agency also is seeking authority to give it more access to records in cases of food emergencies. Significantly, a major food industry group, the Grocery Manufacturers Association (GMA), endorsed the proposal for mandatory recall authority. The day after the Administration proposed it for FDA, a USDA official asserted that FSIS does not need similar mandatory recall authority for meat and poultry products. Responding to questions, the official stated that USDA already has sufficient enforcement tools and that the voluntary approach now in place works well. Title X of P.L. 110-85 , which was signed into law on September 27, 2007, requires FDA, within one year, to establish a "Reportable Food Registry." Responsible parties and importers will be required to report to this registry detailed information (outlined in the bill) about cases of actual or suspected food adulteration, generally within 24 hours. The measure contains a number of explicit provisions regarding the types of records that must be maintained and the specific data that must be provided. Another recall-related provision, in Title VI of the bill, will require FDA to work with companies, professional associations, and other organizations to collect and communicate information about recalls of human or pet food and to post information regarding the products on an accessible FDA website. Before passing its version of the omnibus farm bill ( H.R. 2419 ) in December 2007, the Senate adopted a managers' amendment that also establishes reportable food registries for FSIS-regulated meat and poultry products. A House-Senate conference committee, anticipated in early 2008, is likely to determine the outcome of these registries, which are not in the House version. Many pending food safety bills introduced during 2007 also contain provisions dealing with notification, recall, and/or traceability: H.R. 1148 / S. 654 , H.R. 2108 / S. 1274 , H.R. 3484 , H.R. 3485 , H.R. 3610 , H.R. 3624 , H.R. 3937 , S. 1292 , S. 2081 , and S. 2418 . Several of these would require any person to immediately notify authorities if he or she has reason to believe that a food entering commerce is in violation of the law; and would provide either FDA and/or FSIS with the authority to mandate recalls if an establishment refused to do so voluntarily or sufficiently. Several bills also would require establishment of a national system to trace food and food animals from point of origin to retail sale. One proposal would newly require all manufacturers of foods (and of other non-food products like auto parts, drugs, and other consumer products) to have "recall responsibility certificates" issued by U.S. Customs and Border Protection (CBP). The document is to certify that the manufacturer, for a five-year period, has the resources to cover the entire cost of any recall of its product, plus compensatory damages and costs that may arise from product liability claims due to defects. Federal law currently prohibits meat and poultry plants that operate under one of the 27 state inspection programs from shipping their products across state lines. Many of the states and small plants want to overturn that ban. Limiting state-inspected products to intrastate commerce is unfair, these states and plants argue, because their programs must be, and are, "at least equal" to the federal system. Foreign plants operating under FSIS-approved foreign programs, which must be "equivalent" to the U.S. program, can export meat and poultry products into and sell them anywhere in the United States. Those who oppose allowing state-inspected products into interstate commerce argue that state programs are not required to have, and do not have, the same level of safety oversight as the federal or even some foreign systems. For example, foreign-processed products are subject to U.S. import reinspection at ports of entry. These opponents of interstate shipment note that a recent FSIS review, which found all but one of the state programs to be at least equal to the U.S. program, was based largely on self-assessments. Both the House- and Senate-passed versions of H.R. 2419 , the omnibus farm bill, would amend the meat and poultry inspection acts to permit interstate shipment of state-inspected products—but under divergent approaches. It would replace the current federal-state cooperative inspection program with a new program that would enable meat and poultry that is not federally inspected to be shipped across state lines, so long as the state programs adopt standards identical to those of FSIS along with any additional changes FSIS required. Moreover, the bill would enable many plants currently under federal inspection to apply for state inspection and continue to ship interstate. The Senate version would supplement rather than replace the current federal-state cooperative inspection program with an alternative whereby state-inspected plants with 25 or fewer employees could opt into a new program that subjects them to federally directed but state-operated inspection, thus allowing them to ship interstate. The Senate version reportedly was developed as a compromise by those on both sides of the issue, suggesting that it would more likely prevail in any upcoming conference on the farm bill. Increased consumption of fresh produce, particularly of leafy vegetables such as spinach and lettuce, is viewed as a positive trend from a nutritional perspective, but it has presented new challenges with regard to food safety. These challenges have been underlined by reports, starting in September 2006, of foodborne illnesses linked to California spinach and lettuce contaminated with the bacterium E. coli O157:H7 , among other recent incidents. There is ongoing debate regarding the extent to which FDA, which oversees the safety of all produce, has the authority to regulate safety on the farm, one of the potential sources of such contamination. The agency and other public officials have been encouraging the industry to develop and follow voluntary guidelines for growing and packing safe products. A a majority of California producers signed, in early 2007, a state Leafy Greens Marketing Agreement. This binds them to implement and maintain safety standards in growing and handling spinach, lettuce, and other leafy greens. Assessments of 2 cents per carton are to fund operations of the agreement, including periodic inspections. Nationally, USDA's Agricultural Marketing Service (AMS) published in the October 4, 2007, Federal Register an advance notice of proposed rulemaking on whether to establish a "marketing program to address the handling of fresh and fresh-cut leafy green vegetables. The program would allow packers, processors, shippers, and marketers (collectively referred to as handlers) to maintain the quality of their products by reducing the risk of pathogenic contamination during the production and handling of leafy greens." Consumer advocates criticized the proposal because it might deter FDA from taking a more aggressive regulatory approach to protecting consumers from unsafe produce, despite AMS assertions that it was not intended to do so. Bills taking a variety of approaches to improving fresh produce safety have been offered in the 110 th Congress. One of the more comprehensive ( S. 2077 ), introduced by Senate Agriculture Committee Chairman Harkin, would require HHS-FDA to promulgate rules on good manufacturing practices (GMPs) for "minimally processed produce" (i.e., fresh-cut produce). The bill also would require FDA, in consultation with USDA, to issue rules on good agricultural practices for growers of fresh produce. Both processing establishments and growers would have to implement written plans detailing controls for limiting contaminants, and submit to periodic FDA inspections. Among other provisions, the bill provides for research and public education on produce safety, and for equivalency procedures for countries exporting produce to the United States. Elsewhere, a provision in Title X of P.L. 110-85 directs FDA to work with states on programs and activities to improve food safety, including the safety of fresh and processed produce with the goal of strengthening state programs. Public health experts have expressed concern about increasing antibiotic resistance among sick patients. Such antimicrobial resistance has been linked to a number of causes such as overuse by medical professionals and their patients, and the wide use of antibiotics for nontherapeutic (essentially nonmedical) purposes in food animals. Farmers administer antibiotics in feed for some types of food-producing animals not only to treat and prevent diseases but also to encourage growth and efficient use of feed rations. Some argue that nontherapeutic uses should be severely constrained and/or limited to drugs not associated with human medical treatments. Others oppose this approach, arguing that many animal production operations would not be commercially viable without the drugs' routine use and/or that the linkage between such use and antimicrobial resistance lacks a strong scientific basis. As of late 2007, one major proposal had been offered affecting agricultural use of antibiotics. Companion bills H.R. 962 / S. 549 would amend the food and drug act to define a nontherapeutic use of a critical antimicrobial animal drug (i.e., a drug that is important in treating human illnesses) as "any use of the drug as a feed or water additive for an animal in the absence of any clinical sign of disease in the animal for growth promotion, feed efficiency, weight gain, routine disease prevention, or other routine purpose." Within two years, FDA would have to withdraw approval of such nontherapeutic drug use unless the drug application holder can demonstrate there is "reasonable certainty that no harm to human health" will occur. The bills also contain data collection and reporting requirements for drug manufacturers. Since genetically engineered (GE, sometimes called genetically modified, or GM) crop varieties first became commercially available in the mid-1990s, U.S. soybean, cotton, and corn farmers have rapidly adopted them to lower production costs and raise crop yields. A number of animal biotechnologies (including cloning) also are becoming available. Members of Congress, particularly from agricultural areas, generally favor the adoption of such technologies, along with publicly supported research and other activities aimed at gaining their acceptance in foreign and domestic markets. Others question the food safety impacts of GE crops and animals, and whether the current U.S. regulatory framework, which is based primarily upon statutory authorities enacted before the rise of agricultural biotechnology, is still adequate. The Senate-passed omnibus farm bill ( H.R. 2419 ) would prohibit FDA from issuing a final risk assessment and from lifting the voluntary moratorium on marketing products of cloned animals until completion of newly mandated studies on the safety and on the market impacts of introducing such products. The outcome of this language could depend upon decisions in a House-Senate conference committee in early 2008. Meanwhile, language accompanying the omnibus appropriation for 2008 ( H.R. 2764 ) also calls on the FDA to continue the voluntary moratorium until more studies can be completed. S. 414 / H.R. 992 would amend the food and drug act and the meat inspection act (but not the poultry inspection act) to require that products from cloned animals or their progeny be so labeled. FSIS and FDA would have to require that anyone who "handles, or distributes a cloned product for retail sale maintain a verifiable recordkeeping audit trail" to verify compliance. A separate proposal ( H.R. 1396 / S. 536 ) would amend the Organic Foods Production Act of 1990 (7 U.S.C. 6504) to prohibit the use of the "organic" label on food products from cloned livestock or their progeny. Appendix A. Overview of Selected Food Safety Bills Appendix B. Selected Food Safety Authorization Bills at a Glance
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A series of widely publicized incidents—from adulterated Chinese seafood imports to bacteria-tainted spinach, meat, and poultry produced domestically—have made food safety an issue in the 110th Congress. Numerous proposals were introduced in 2007 that would alter aspects of the current U.S. food safety system; some of these bills could receive consideration in 2008. This report provides an overview of the current system, highlights major issues in the debate to improve it, and describes the bills. Reorganization of Food Safety Responsibilities. Critics believe that the current system is fragmented and inefficient, threatening food safety; others believe that, while improvements could be made, reorganization is not the most appropriate response. The Senate-passed version of H.R. 2419, the omnibus farm bill, would establish a commission to recommend changes. Food Import Oversight. U.S. food imports have been increasing significantly, raising questions about whether U.S. safeguards, generally established at a time when most Americans obtained their foods domestically, sufficiently protect public health. Pending proposals would variously require foreign countries and establishments to seek U.S. certification before importing into the United States; expand oversight of food imports; and/or charge fees on such imports to cover oversight costs. Notification and Recall Authority; Traceability. Generally, neither the Food and Drug Administration (FDA) nor USDA's Food Safety and Inspection Service (FSIS) has explicit statutory authority to order a recall of adulterated foods, to require a company to notify them when it has distributed such foods, or to impose penalties if recall requirements are violated. P.L. 110-85, which comprises wide-ranging FDA amendments, includes a requirement that FDA establish a registry for reporting potentially adulterated foods. The Senate-passed version of the farm bill contains a similar requirement for FSIS-regulated foods. Still pending are numerous bills containing provisions for mandatory recall authority. Several bills also would require agencies to set up systems for tracing foods from their source of production to final sale. State-Inspected Meat and Poultry. Federally but not state-inspected meat and poultry may be shipped across state lines. Both the Senate- and House-passed versions of the pending farm bill would allow state-inspected products into interstate commerce, but under very different approaches. Other Proposals. Other pending food safety-related measures would curtail the non-medical use of antibiotics in animal feeds; address the labeling of products from cloned animals; and provide incentives aimed at improving the safety of fresh fruits and vegetables.
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Federal efforts to assist members of the Armed Forces date to 1864, when President Abraham Lincoln issued an order to allow members of the military to return home to cast a ballot if they could not vote absentee according to the laws of their respective states. Eighteen states, all in the North, permitted soldiers to vote absentee by establishing remote voting at military encampments where units were usually organized by state. Some other states permitted an absent military voter to designate a proxy, who would cast a ballot, as directed, on the voter's behalf. Little progress occurred concerning absentee voting by members of the military in the following decades, despite an expansion of state absentee voting laws. Such laws generally extended absentee voting rights to those absent from their voting district, but who were permitted to send an absentee ballot by mail from within the state. Even those state laws designed specifically to assist absent military voters either did not apply to overseas soldiers, or were ineffective because of the barriers to delivering and receiving mail in overseas locations. When the issue arose for overseas soldiers in World War I, the War Department announced that "it would not conduct or supervise the taking of the service vote," but pledged cooperation with the states that could establish their own means to do so. A contradictory statement noted that the "soldier vote could not be taken in France or on other foreign soil in the theater of war without serious interference with military efficiency," and, in the end, "no states were allowed to poll the vote of soldiers on foreign soil." Likewise, the first federal legislation to assist military voters was introduced in 1918, but was not acted upon. The issue subsided until World War II, when the challenge of how to facilitate military voting—especially by those stationed overseas—emerged once again. The first federal absentee voting law was the Soldier Voting Act of 1942 (P.L. 77-712) that guaranteed the right to vote in federal elections to members of the Armed Forces who were absent from their places of residence during wartime. The law allowed members of the Armed Forces to vote for presidential electors and candidates for the U.S. Senate and House, whether or not they were previously registered and regardless of poll tax requirements. The law provided for the use of a postage-free, federal post card application to request an absentee ballot; it also instructed secretaries of state to prepare an appropriate number of "official war ballots," which listed federal office candidates, as well as candidates for state and local office if authorized by the state legislature. The law "had almost no impact at all" with respect to assisting Armed Forces voters, or on the outcome of the election itself, because it was enacted on September 16, only weeks before the 1942 November general election. Only 28,000 of 5 million soldiers voted that year. Under congressional war powers, the 1942 law mandated procedures for the states to permit servicemembers to vote, but the law as amended in 1944 recommended that states follow such procedures. Congressional authority to regulate state voting procedures expired once the war ended, because the law noted that its provisions applied "in time of war." The law was amended again in 1946 to include technical changes. In 1951, President Truman asked the American Political Science Association (APSA) to study the military voting problem and make recommendations. APSA completed its study in 1952 and the President endorsed the association's legislative recommendations, which were sent to Congress. The Federal Voting Assistance Act (P.L. 84-296) was subsequently enacted in 1955; it recommended, but did not guarantee, absentee registration and voting for members of the military, federal employees who lived outside the United States, and members of civilian service organizations affiliated with the Armed Forces. The law was amended in 1968 to include a more general provision for U.S. citizens temporarily residing outside the United States, expanding the number of civilians covered under the law. The Overseas Citizens Voting Rights Act of 1975 ( P.L. 94-203 ) guaranteed absentee registration and voting rights for citizens outside the United States, whether or not they maintained a U.S. residence or address and whether or not they intended to return. The current law, the Uniformed and Overseas Citizens Absentee Voting Act ( P.L. 99-410 ), was signed into law by President Reagan on August 28, 1986. It consolidated the provisions of the Federal Voting Assistance Act of 1955 that pertained to military voters and their dependents, and the Overseas Citizens Voting Rights Act of 1975 that pertained to American citizens abroad. The law was amended by the Help America Vote Act ( P.L. 107-252 ) in 2002, the National Defense Authorization Act of 2002 ( P.L. 107-107 ), the Defense Authorization Act for FY2005 ( P.L. 108-375 ), the John Warner National Defense Authorization Act for FY2007 ( P.L. 109-364 ), the National Defense Authorization Act for FY2010 ( P.L. 111-84 ), and the FY2015 National Defense Authorization Act ( P.L. 113-291 ). The main provisions of the law require states to do the following: Permit uniformed services voters, their spouses and dependents, and overseas voters who no longer maintain a residence in the United States to register absentee (overseas voters are eligible to register absentee in the jurisdiction of their last residence) and to vote by absentee ballot in all elections for federal office (including general, primary, special, and runoff elections). The National Defense Authorization Act of 2002 amended UOCAVA to permit a voter to submit a single absentee application in order to receive an absentee ballot for each federal election in the state during the year. The Help America Vote Act subsequently amended that section of the law to extend the period covered by a single absentee ballot application to the next two regularly scheduled general elections for federal office. The section was repealed in 2009 under the National Defense Authorization Act for FY2010. The Help America Vote Act also added a new section that prohibits a state from refusing to accept a valid voter registration application on the grounds that it was submitted prior to the first date on which the state processes applications for the year; this section was retained when the law was amended in 2009. Accept and process any valid voter registration application from an absent uniformed services voter or overseas voter if the application is received not less than 30 days before the election. The Help America Vote Act amended that section of the law to require a state to provide to a voter the reasons for rejecting a registration application or an absentee ballot request. The law recommends that states accept the federal write-in absentee ballot for general elections for federal office (provided the voter is registered, has made a timely request for a state absentee ballot, the absentee ballot has not arrived with sufficient time to return it, and the ballot is submitted from outside the United States or its territories). The law also stipulates that voting materials be carried "expeditiously and free of postage." It recommends that states accept the Federal Post Card Application (FPCA) from uniformed services voters, their spouses and dependents, and overseas voters, to allow for simultaneous absentee registration and to request an absentee ballot. While all states and territories accept the FPCA, some require that a voter submit the state registration form separately in order to be permanently registered. Other recommendations in the law suggest that states: waive registration requirements for military and overseas voters who do not have an opportunity to register because of service or residence; send registration materials, along with an absentee ballot to be returned simultaneously, if the FPCA is not sufficient for absentee registration; expedite the processing of voting materials; permit any required oath to be administered by a commissioned officer in the military or by any official authorized to administer oaths under federal law or the law of the state where the oath is administered; assure mailing absentee ballots to military and overseas voters at the earliest opportunity; and provide for late registration for persons recently separated from the military. In addition to the amendments to UOCAVA mentioned above, the Help America Vote Act of 2002 did the following: required the Secretary of Defense to establish procedures to provide time and resources for voting action officers to perform voting assistance duties; established procedures to ensure a postmark or proof of mailing date on absentee ballots; required secretaries of the Armed Forces to notify members of the last day for which ballots mailed at the facility can be expected to reach state or local officials in a timely fashion; required that members of the military and their dependents have access to information on registration and voting requirements and deadlines; and required that each person who enlists receives the national voter registration form; amended UOCAVA to require each state to designate a single office to provide information to all absent uniformed services voters and overseas voters who wish to register in the state; amended UOCAVA to require states to report the number of ballots sent to uniformed services and overseas voters and the number returned and cast in the election; and amended UOCAVA to require the Secretary of Defense to ensure that state officials are aware of the requirements of the law and to prescribe a standard oath for voting materials to be used in states that require such an oath. The Defense Authorization Act for FY2002 also included provisions that (1) required an annual review of the voting assistance program and a report to Congress; (2) guaranteed state residency for military personnel who are absent because of military duty; (3) continued the online voting pilot project begun for the 2000 elections; and (4) permitted the use of DOD facilities as polling places if they had previously been used for that purpose since 1996 or were designated for use by December 2000. The Ronald W. Reagan National Defense Authorization Act of Fiscal Year 2005 ( P.L. 108-375 ) amended UOCAVA to permit absent military voters in the United States to use the federal write-in ballot, previously intended for use only by overseas voters. It repealed the requirement to continue the electronic voting demonstration project for the November 2004 election by delaying continuation of the program until the Election Assistance Commission has established appropriate guidelines and certifies that it will assist in carrying out the project. Finally, it required a report from the Secretary of Defense within 60 days of enactment on actions taken to ensure effective functioning of Federal Voting Assistance Program with respect to members of the Armed Forces deployed in support of Operation Iraqi Freedom, Operation Enduring Freedom, and other contingency operations. The John Warner National Defense Authorization Act for Fiscal Year 2007 ( P.L. 109-364 ) extended the Interim Voting Assistance System (IVAS) ballot request program through the end of 2006 and required the Comptroller General to assess DOD programs to facilitate UOCAVA voting, including progress on an Internet-based voting system. The latest revision of UOCAVA, the Military and Overseas Voter Empowerment Act (MOVE Act), was signed into law by President Obama on October 28, 2009, as part of the National Defense Authorization Act for FY2010 ( P.L. 111-84 ). The Senate had approved the conference committee report ( H.Rept. 111-288 ) on the defense authorization act ( H.R. 2647 ) on October 22 and the House had done so on October 8. The law's provisions included the following: States are required to establish procedures to permit absent uniformed services voters and overseas voters to request voter registration and absentee ballot applications by mail and electronically for all federal elections. States are required to establish procedures to transmit, by mail and electronically, blank absentee ballots to absent uniformed services voters and overseas voters for federal elections. States are required to transmit a validly requested absentee ballot to an absent uniformed services voter or overseas voter no later than 45 days before an election if the request is received at least 45 days before the election. A state can seek a hardship waiver from the requirement under certain circumstances. The presidential designee who administers the law (Secretary of Defense) is required to establish procedures to collect marked general election absentee ballots from absent overseas uniformed services voters for delivery to the appropriate election official. The use of the federal write-in absentee ballot for general elections has been broadened to include special, primary, and runoff elections as well. A state is prohibited from refusing to accept an otherwise valid voter registration application, absentee ballot application or marked absentee ballot from an absent uniformed services or overseas voter on the basis of notarization requirements or restrictions on paper or envelope type, including size and weight. The presidential designee is required to develop online portals of information to inform absent uniformed services voters about voter registration and absentee ballot procedures and make other improvements to the Federal Voting Assistance Program. The presidential designee is required to develop standards for states to report on the number of absentee ballots transmitted to and received from absent uniformed services and overseas voters and to develop standards to store such data. The act repeals subsections of the Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA) which required states to process an official post card form as an absentee ballot request for the next two regularly scheduled general elections, if requested by the voter. The act would retain the subsection that prohibits a state from refusing to accept or process an otherwise valid registration or absentee ballot application because it was submitted before the date on which the state accepts such applications from absentee voters who are not members of the armed services. The presidential designee is required to report to relevant committees in Congress on the implementation of the program to collect and deliver marked ballots from overseas uniformed services voters and to assess the Voting Assistance Officer program at the Department of Defense. The Attorney General is required to submit an annual report to Congress on any civil action brought with respect to UOCAVA during the preceding year. The act authorizes requirements payments under the Help America Vote Act to meet the new requirements of the act. The presidential designee may establish one or more pilot programs to test new election technology to assist absent uniformed services and overseas voters. Most of the provisions of the MOVE Act were effective as of the November 2, 2010, general election. According to the National Conference of State Legislatures (NCSL), 24 states enacted legislation to comply with the new law or certain provisions of it in 2010. A pressing issue for states that had late-occurring primaries was the requirement for absentee ballots to be mailed 45 days before a federal election. Hawaii's primary date was September 18, which was 45 days before the general election, and seven other states and the District of Columbia had primaries scheduled for the 14 th of September, 49 days before the election (Delaware, Maryland, Massachusetts, New Hampshire, New York, Rhode Island, and Wisconsin). Preparing and printing general election absentee ballots may take longer than several days for a number of reasons. Delays in tabulating results are not uncommon, and the results must often be certified or otherwise validated before the names of winning candidates can be included on general election ballots. Election contests can cause further delays. States that changed the primary date in order to achieve compliance with the 45-day ballot availability requirement include Minnesota (August 10) and Vermont (August 24). In Hawaii, a bill to move the primary to the second Saturday in August was approved and signed by the governor, but it did not become effective until January 2011. A state could obtain a waiver from the 45-day ballot availability requirement if (1) the primary date prevents the state from complying, (2) a legal contest results in a delay in generating the absentee ballots or, (3) the state constitution prevents compliance. Twelve jurisdictions applied for a waiver based on the date of the primary, including Alaska (August 24), Colorado (August 10), Delaware, the District of Columbia, Hawaii, Maryland, Massachusetts, New York, Rhode Island, the Virgin Islands (September 11), Wisconsin, and Washington (August 17). The Department of Defense issued a press release on August 27 announcing that waiver requests had been approved for five states (Delaware, Massachusetts, New York, Rhode Island, and Washington), and not approved for six jurisdictions (Alaska, Colorado, Hawaii, the Virgin Islands, Wisconsin, and the District of Columbia). Maryland withdrew its waiver application on August 25, 2010. A few days before the general election, the state was ordered by U.S. District Judge Roger Titus to extend the deadline for receiving marked ballots from November 12 to November 22. Maryland reportedly sent ballots that listed federal candidates only, in order to comply with the 45-day ballot availability deadline in the MOVE Act. A member of the Maryland National Guard sued the state board of elections, alleging that the state's actions denied overseas voters sufficient time to vote for state candidates (i.e., governor). With respect to enforcement, the Department of Justice filed lawsuits against a number of states to ensure that overseas military and civilian voters could fully participate in the November 2 election under the new MOVE Act provisions. The department also drew criticism with respect to its enforcement efforts, as some observers asserted that it had not moved quickly or forcefully enough to ensure that all states would be in compliance for the election. In September 2010, the department filed suit against Wisconsin, and it subsequently filed suit the following month against Guam, Illinois, New York, and New Mexico. Wisconsin and the department reached an agreement (at the same time as the lawsuit was filed) under which the state would accept absentee ballots until November 19 and local election officials would send ballots no later than October 1. The department filed suit against Guam in early October in federal district court in Hagatna, Guam, and also sought emergency relief to extend the deadline for accepting absentee ballots until November 15 and require officials to ensure email delivery of blank ballots. The suit went to trial and Guam was ordered by the federal judge to extend the deadline until November 15. In Illinois, various county election officials failed to send ballots by September 18 and also failed to send ballots electronically to voters who had requested that means of delivery; the ballots were instead sent by mail. The department reached an agreement with Illinois—announced on October 22—under which the state would extend the deadline for receiving voted ballots until November 16 (in six counties), extended the date such ballots must be postmarked from November 1 to November 2, and required counties to send ballots electronically to voters who had requested them. The department announced that it had reached an agreement with New Mexico on October 13; the lawsuit had alleged that election officials in six counties had violated federal law when they failed to send absentee ballots to military and overseas voters by September 18. The agreement extended the deadline for accepting ballots that were requested by September 18 from November 2 to November 6. New York had received a waiver on August 27, provided ballots were transmitted by October 1 and accepted for counting until November 15 for ballots postmarked by November 1. Thirteen counties failed to send ballots by October 1 and the department subsequently filed suit against the state, as well as the State Board of Elections. The parties subsequently signed a consent decree that required extending the deadline for receipt of ballots postmarked by November 1 until November 24. The state was also to make efforts to notify voters of these changes and that they could receive ballots electronically through the state's online ballot delivery wizard. A report on the number of ballots sent, returned, and counted must be filed after the election. With respect to other states that had difficulty meeting the requirement, Alaska, Colorado, the District of Columbia, Hawaii, Kansas, Mississippi, Nevada, North Dakota, and the Virgin Islands each entered into a memorandum of agreement with the Department of Justice concerning the requirement. Under a consent decree issued by the U.S. District Court for the Western District of Wisconsin, the state had agreed to certify the September 14 primary results by September 27 and ordered local election officials to transmit absentee ballots no later than October 1; the state would accept voted ballots that were executed and sent by November 2 and received by November 19 (Wisconsin's deadline for accepting UOCAVA ballots was 10 days after the general election). Alaska expedited its certification of results so that ballots could be prepared by September 18; requests from voters for ballots to be faxed to them would be sent on that day as well. Colorado agreed to "take all necessary actions" to ensure that each of its 64 counties transmitted ballots by September 18, to deploy staff from the Secretary of State's office to assist in that endeavor, and to notify the Department of Justice of any failure to do so. The District of Columbia agreed to complete certification of the September 14 primary results by September 24, to make ballots available for transmission to UOCAVA voters no later than October 4, and extended the deadline for accepting such ballots by seven days until November 19 (the District's deadline for accepting UOCAVA ballots is 10 days after the election). Hawaii agreed to send ballots no later than September 24 (barring election contests), and to use express delivery and return of ballots that had been requested by mail. In Kansas, seven counties failed to send ballots by September 18 and the state agreed to extend the deadline for accepting ballots to ensure a 45-day period to vote an absentee ballot. The state would also provide contact information for voters who needed assistance and would file a report on the number of ballots received and counted. Mississippi reached a similar agreement when 22 of its counties failed to send ballots in time to meet the requirement. Ballot acceptance deadlines were to be extended to November 8, in cases where the ballot request was received by September 18, and the state would notify voters of the extension and provide a post-election report. One county in Nevada failed to send ballots to 34 voters who had requested them by September 18, and the state agreed to extend the county deadline for accepting ballots until November 8, provided they were executed and sent by election day. The Virgin Islands had one federal office on the general election ballot, for which there was no primary election. These ballots were to be sent no later than September 18. A second ballot with local candidates was to be sent by October 2, after the primary results have been certified. A second issue concerned the new requirement for states to establish procedures to allow UOCAVA voters to request registration and absentee ballot applications electronically and by mail, and for states to transmit the materials to the voter in the same manner. It was unclear how many states either did not provide for electronic means of submission or delivery, or did so only under certain circumstances. With respect to returning marked ballots, 19 states, American Samoa, Guam, and Puerto Rico permitted voters to return ballots by mail only. Thirty one states and the Virgin Islands permitted voters to return ballots by mail and fax and, in some cases, by email as well. The Department of Justice enforces UOCAVA and the MOVE Act included a provision that requires the Attorney General to submit an annual report to Congress (by December 31) on any civil action pursued with respect to its enforcement of the law. In its 2010 report, the department outlined its enforcement efforts regarding the MOVE Act and noted that, in April 2010, it had "sent letters to all covered jurisdictions reminding them of the MOVE Act's requirements and requesting information about their plans for complying with the law." The Federal Voting Assistance Act of 1955 called for the President to designate the head of an executive department to be responsible for and coordinate the federal functions described in the law. President Eisenhower designated the Secretary of Defense, who delegated the responsibility to the Assistant Secretary of Defense for Public Affairs, as coordinator of the Federal Voting Assistance Program (FVAP). Under the current law, the director of the Federal Voting Assistance Program administers the FVAP for citizens covered by the Uniformed and Overseas Citizens Absentee Voting Act. This office publishes a print and online version of its Voting Assistance Guide , a compilation of state requirements and practices with respect to the federal law. The FVAP office also maintains a toll free phone number to provide assistance to voters and to military and federal government personnel who are responsible for implementing the law; the office also maintains a website at http://www.fvap.gov . The website includes a fully electronic system for uniformed services and overseas voters to register, request a ballot, and track the ballot for all voting jurisdictions in the country. In the 2000 presidential general election, some members of the military and citizens living abroad cast their votes via the Internet on November 7. Voters who were covered by the UOCAVA and whose legal residence was one of 14 counties participating in the project in Florida, South Carolina, Texas, and Utah were eligible to participate. The program, referred to as the Voting Over the Internet (VOI) pilot project, was limited to a total of 350 potential voters who could request and vote an absentee ballot via the Internet. The project was designed to explore the viability of using the Internet to assist UOCAVA voters, most of whom face unique challenges when registering and voting. To request a ballot, the voter would fill out an electronic version of the request form and sign it with a digital certificate. A local election official would then post an electronic version of the ballot to a secure server, where it would be retrieved by the voter. Once the ballot was completed by the voter, it was digitally signed and encrypted and placed on a FVAP server. The completed ballot could only be decrypted by the appropriate local election official, who printed the ballot and counted it with mail-in absentee ballots. A total of 91 persons used the system to register to vote and 84 (representing 21 states and territories, and 11 countries) cast ballots under the program. A report that evaluated the program was issued in June 2001 by FVAP and noted, among other conclusions, that "further development is needed before Internet remote registration and voting can be provided effectively, reliably, and securely on a large scale." An expanded version of the VOI project was to be used in the 2002 elections according to a provision in the Defense Authorization Act for FY2002 ( P.L. 107-107 ), and it was expected that more states than the four that participated in 2000 would be involved. The provision called for the Secretary of Defense to "carry out a demonstration project under which absent uniformed services voters are permitted to cast ballots in the regularly scheduled general election for federal office for November 2002 through an electronic voting system" called the Secure Electronic Registration and Voting Experiment (SERVE). But the law also included a provision under which the Secretary could delay the program until the 2004 general election if the Secretary determined that the demonstration project could "adversely affect the national security of the United States." The law was signed by the President on December 28, 2001. Without sufficient time to develop the project before the 2002 election, the Secretary of Defense sent a letter to the Senate and House Armed Services Committees in May 2002 to request approval to implement the project for the 2004 election. In October 2002, staff from a number of congressional committees were briefed on the SERVE program, which was to provide the capability to identify and authenticate voters and local election officials using unique digital signatures. The voters and officials had to register with SERVE in order to be assigned the digital identity, which would allow them to access servers hosted by the FVAP in order to register and vote. The program was expanded from four states that participated in the Voting Over the Internet project in 2000 to seven, with a target of 100,000 participants. The FVAP assembled a group in 2003, the Security Peer Review Group (SPRG), to review the SERVE program's security design. Several members of the group released their own, unofficial report in January 2004 that asserted that the program had fundamental security problems that made it vulnerable to "a variety of well-known cyber attacks (insider attacks, denial of service attacks, spoofing, automated vote buying, viral attacks on voter PCs, etc.), any one of which could be catastrophic." As a result, the group recommended the following: Because the danger of successful, large-scale attacks is so great, we reluctantly recommend shutting down the development of SERVE immediately and not attempting anything like it in the future until both the Internet and the world's home computer infrastructure have been fundamentally redesigned, or some other unforeseen security breakthroughs appear. The Secretary of Defense subsequently suspended the program later in the year, and the defense authorization act for FY2005, enacted on October 28, 2004, instructed the Secretary to wait until the Election Assistance Commission (EAC) issued guidelines for electronic absentee voting before pursuing another Internet voting project. The EAC has not yet developed guidelines, but issued a report in April 2010 on its objectives and progress to date. The FY2015 NDAA law repealed the section of the FY2002 NDAA authorizing the VOI demonstration project. DOD launched a new program in September 2004, apparently as a result of having to suspend the SERVE program, which allowed registered UOCAVA voters to request and receive absentee ballots over the Internet. Using the Interim Voting Assistance System (IVAS) website on an FVAP server, a previously registered voter in a state that volunteered to participate would request a ballot and the request would be forwarded to the appropriate election official. If the request was approved, the voter was notified by email to retrieve the absentee ballot using the IVAS secure connection. The voter was required to download the ballot, print and complete it, then return it by mail to the local election official. Under P.L. 109-234 , the Emergency Supplemental Appropriations Act for Defense, the Global War on Terror, and Hurricane Recovery, 2006 (enacted on June 15, 2006), the Secretary of Defense was instructed to continue the IVAS program for uniformed services voters, their dependents, and Department of Defense personnel. The Interim Voting Assistance System was subsequently reconfigured in September 2006, and the new system was called the Integrated Voting Alternative Site. It also required a voter to be previously registered and provided two means of requesting and receiving an absentee blank ballot: by email or through a secure server. Both methods relied on a unique identifier that uniformed services personnel, their family members, and DOD overseas personnel and contractors possessed. To use the email method, a previously registered voter would use the unique identifier to connect via the Internet to a tool on the FVAP website. The voter would complete an electronic version of the Federal Post Card Application (FPCA), save it as a PDF file (without an electronic or digital signature), and email the attached file to their local election official for processing. The website included information from the FVAP's Voting Assistance Guide which provided information on each state's acceptable procedures for requesting and receiving absentee ballots (email, facsimile, and postal mail) and local election official contact information. If the request was approved by the local official, a blank ballot was sent to the voter by whatever means the state allowed and the voter would complete and return the ballot. The second method required the voter to connect to a secure server using the unique identifier to complete an electronic version of the FPCA. A local election official would connect to the server to process the application and, if approved, post a PDF version of the blank ballot on the server. The voter would again connect to the server to access and print out the ballot. The voter could then complete and return the ballot to the election official. The IVAS system did not provide the means for the voter to return the completed ballot to the election official, but required the voter to send it by whatever means available in the particular voting jurisdiction (facsimile, email, and postal mail). In May 2011, the Federal Voting Assistance Program announced a grants program to support research and development of electronic voting options for UOCAVA voters. The program was designed to address the number one failure with respect to counting military and overseas citizen ballots: they were received by local election officials after the deadline for counting absentee ballots. The goal is that electronic innovations developed through the program will reduce the amount of time required by an individual to register to vote, send a ballot request, receive the ballot, and return it for counting. States, counties, cities, and townships are eligible to apply. Initially funded at $15.5 million, the amount disbursed to grants recipients was $25.4 million as of June 2012. The program represents the first time the Department of Defense has offered grant assistance to election officials. Thus far in the 114 th Congress, two bills have been introduced that would amend UOCAVA. First, H.R. 12 (a bill primarily related to other voting issues) would guarantee voting residency for family members of absent military personnel, require changes to reports on absentee ballot availability and transmission, revise the 45-day ballot transmission rule, and permit the use of a single absentee ballot application for subsequent elections. Second, two versions of the FY2017 NDAA bill propose UOCAVA amendments. Most substantially, a Senate version of the FY2017 NDAA bill ( S. 2814 ) introduced "by request" but that has not advanced, would have amended UOCAVA to, among other things: revise the 45-day ballot transmission rule, permit the use of a single absentee ballot application for subsequent elections, require expedited ballot delivery for late transmission and establish additional enforcement provisions and penalties for state noncompliance, and change some reporting requirements. Finally, although not otherwise substantially related to UOCAVA, the version of the FY2017 NDAA bill passed by the House ( H.R. 4909 ) would continue FVAP reports to Congress first authorized in FY2010. Those reports require annual summaries of FVAP activities and military and overseas citizens registration and voting participation. Six bills were introduced that concerned uniformed services and overseas voters. H.R. 12 and S. 123 , which were identical, included provisions that would have guaranteed voting residency for family members of absent military personnel, required changes to reports on absentee ballot availability and transmission, revised the 45-day absentee ballot transmission rule, and permitted the use of a single absentee ballot application for subsequent elections. H.R. 1655 would have prohibited a state from certifying general election results until ballots from uniformed services voters had been counted. H.R. 2168 would have required notification of the appropriate election official of a change of address for a servicemember who was deployed on active duty for more than 30 days or who was redeployed, would have repealed the waiver from the 45-day ballot availability deadline, would have required express delivery for a failure to meet the deadline, would have required establishing procedures to process military and overseas ballots in the event of a major disaster, and would have prohibited a state from accepting a voter registration and absentee ballot application from an overseas voter because of early submission. H.R. 3576 and S. 1728 , as introduced (see discussion of amended version below in this section), were identical and would have required states to submit a pre-election report 43 days before an election on whether absentee ballots were sent to absent uniformed services voters and overseas voters 46 days before an election; would have repealed the waiver from the 45-day ballot availability deadline, would have required express delivery for a failure to meet the deadline; would have permitted the use of a single absentee ballot application for subsequent elections; would have prohibited a state from accepting a voter registration and absentee ballot application from an overseas voter because of early submission; would have applied UOCAVA to the Northern Mariana Islands; would have required a biennial report on the performance of the Federal Voting Assistance Program, to be reviewed by the Comptroller General with a report to the oversight committees for election years 2014 through 2020; would have required providing active assistance to active duty members of the Armed Forces through an online system to facilitate voter registration, updating the voter registration record, and requesting an absentee ballot; would have repealed the voting demonstration project authorized by the National Defense Authorization Act for FY2002; and would have extended a guarantee of residency to family members of absent military personnel (see discussion of S. 1728 , as amended, immediately below). The Senate Committee on Rules and Administration held a hearing on S. 1728 on January 29, 2014. The committee reported the bill on April 10, 2014, with an amendment in the nature of a substitute that retained the provisions discussed above, except for the provision that would have extended a guarantee of residency to family members of absent military personnel, and made the following changes to the bill: it would have permitted sending absentee ballots after the deadline by electronic means, if the state allows for it, rather than by express delivery; it would have required a state to notify the Attorney General and take all necessary actions, including seeking judicial relief, to ensure absent uniformed services voters and overseas voters were provided a reasonable opportunity to vote if the state missed the ballot transmission deadline because of a natural disaster; it would have stipulated that a voter who registered to vote using the post card form would not be removed from the voter list except according to the provisions of the National Voter Registration Act of 1993; and it would have changed the effective date from November 2014 to January 1, 2015. Five bills were introduced in the 112 th Congress that would have affected UOCAVA voters. H.R. 702 would have amended UOCAVA to prohibit a state from certifying general election results until absentee ballots collected from uniformed services voters and delivered to election officials, as required by the MOVE Act amendments, had been counted. The bill would have delayed counting until the expiration of the 10-day period which begins on the date of the election or the date provided by state law, whichever is later. H.R. 5799 included provisions that would have guaranteed residency for voting to members of absent military personnel, amended UOCAVA to require express or electronic delivery of absentee ballots to voters if the state misses the 45 day ballot availability deadline, allowed for the use of a single absentee ballot application for all elections through the next general election, and applied UOCAVA to the Northern Mariana Islands. H.R. 5828 addressed a situation that resulted from the MOVE Act repeal of a provision of UOCAVA. Before the repeal, a voter registration and absentee ballot application from a UOCAVA voter effectively covered all elections for two general election cycles, if the voter so desired. As a result, local election officials were required to mail ballots to the voter for all primary, primary run-off, and general elections. One consequence was that ballots were mailed to voters—particularly military voters—who were no longer at the address, creating an additional expense to local governments and inflating the number of ballots sent to, but not returned by, UOCAVA voters. H.R. 5828 would have permitted an absentee ballot application to be treated as an application for subsequent elections in the state through the next regular general election. S. 331 would have ensured that military voters have the right to bring a civil action under the Uniformed and Overseas Citizens Absentee Voting Act to safeguard their right to vote. The National Defense Authorization Act for 2012, S. 1253 , included a provision that would have amended UOCAVA to prohibit a state from refusing to process a valid voter registration or absentee ballot application from an overseas voter because it was submitted before the date on which the state begins accepting such applications for the year. This would have extended to civilian overseas voters the same protection currently provided to uniformed services voters by UOCAVA. Congress passed a version that originated in the House, H.R. 1540 , which did not include such a provision. S. 3322 would have guaranteed residency for voting to members of absent military personnel, amended UOCAVA to require states to issue pre-election reports about the availability and timely transmission of absentee ballots, repealed the provision that allowed states to seek a waiver from transmission requirements, and established a private right of action with respect to the act. On February 15, 2011, the Committee on House Administration held a hearing on the effectiveness of the MOVE Act in the 2010 election. A number of bills that focused on military and overseas voting were introduced in the 111 th Congress. The Senate Rules Committee reported S. 1415 , the Military and Overseas Citizens Voter Empowerment Act, as amended, on July 15, 2009. The text of the bill was subsequently added as an amendment to the National Defense Authorization Act for Fiscal Year 2010 ( H.R. 2647 ), which was passed by the Senate on July 23. The House voted in favor of the conference report to the bill ( H.Rept. 111-288 ) on October 8 and the Senate approved it on October 22; President Obama signed the bill on October 28 ( P.L. 111-84 ). It established procedures for the use of email and facsimile transmittal for registration and absentee ballot applications, established procedures for the collection of marked absentee ballots from overseas uniformed services voters for delivery to the appropriate state election officials, and established additional procedures and requirements to improve UOCAVA voting (see the section of this report entitled " Provisions of the Military and Overseas Voter Empowerment Act "). The House Administration Committee also reported H.R. 2393 , the Military Voting Protection Act, on June 10, 2009. The bill would have required the Secretary of Defense to establish procedures for the collection of marked absentee ballots from overseas uniformed services voters for delivery to the appropriate state election officials; the new law, P.L. 111-84 , includes a similar provision. Both the Senate Rules and Administration and House Administration Committees had previously held hearings on UOCAVA voting. The hearings were convened on May 13 in the Senate and May 21 in the House. Other bills introduced in the 111 th Congress included two sponsored by Representative Maloney, H.R. 1659 and H.R. 1739 . The first would have amended UOCAVA to require that the presidential designee have experience in election administration that includes oversight of voter registration and absentee ballot distribution, and it would have established an Overseas Voting Advisory Board. H.R. 1739 was a more far-reaching proposal that would have amended UOCAVA to make a series of adjustments concerning balloting materials and related election administration procedures in the states, and would have established a grant program for voter outreach. H.R. 2082 would have amended UOCAVA to require states to accept ballots submitted by overseas voters using a provider of express mail service, as long as the ballot was submitted no later than the day before, and received within 10 days after, the election. The bill would also have required the presidential designee to reimburse the voter for the express mail cost. As noted above, H.R. 2393 would have amended UOCAVA to require the presidential designee to collect marked general election ballots from overseas uniformed services voters for delivery to the appropriate election officials before the polls close, using U.S. Postal Service express mail delivery. The bill would also have required a tracking system so the voter could determine whether the ballot was delivered. It was reported by the House Administration Committee on June 10. A companion measure, S. 1026 , was introduced in the Senate. Finally, H.R. 2823 would have required states to accept and process any otherwise valid voter registration application without any requirement for notarization and would have permitted electronic submission of the official post card form to register and request an absentee ballot. Several relevant election reform bills were introduced in the 110 th Congress, and two were acted on. On October 1, 2008, the Senate passed S. 3073 , which would have required the Secretary of Defense to collect ballots from overseas military voters and ensure their delivery to election officials using express mail services. On the House side, H.R. 6625 was passed on September 17, 2008; it would have allowed state election officials to designate facilities of the Department of Veterans Affairs as voter registration agencies under the National Voter Registration Act ( P.L. 103-31 , the "motor-voter" law). Other bills that were not acted on included H.R. 2835 , H.R. 4173 , H.R. 4237 , H.R. 5673 , and S. 1487 . H.R. 2835 would have extended UOCAVA law's provisions to cover legislative and gubernatorial elections in American Samoa. H.R. 4173 would have prohibited states from requiring notarization of absentee ballots, broadened the use of the federal write-in ballot, established a grant program to inform overseas citizens about absentee voting, and required that overseas federal employees be informed about UOCAVA and information about the law included in U.S. passports. H.R. 4237 would have prohibited states from refusing to accept registration or ballot applications because they do not meet nonessential requirements, clarified postage markings on balloting materials, and would have amended the law concerning individuals who never lived in the United States, notification of the rejection of registration or ballot applications, and the use of the diplomatic pouch to transmit absentee ballots. H.R. 5673 would have required the Secretary of Defense to collect marked absentee ballots from overseas uniformed services voters and to guarantee their delivery to the appropriate election officials before the polls close. The bill would also have encouraged the use of private providers of air transportation to deliver ballots, which would allow individual voters to track the progress of their voted ballot. S. 1487 would have prohibited states from refusing to accept registration or ballot applications because they do not meet nonessential requirements and would have permitted accepting a federal write-in ballot from an overseas voter if it is submitted from a location in the United States. The Overseas Vote Foundation's sixth post-election survey included 4,425 respondents from countries around the world. There were 37 respondents whose occupation was "active duty military personnel." The survey found that 60.1% of respondents used the Federal Post Card Application to register and request an absentee ballot, while 25.4% did not. Military and overseas voters should submit an FPCA every election cycle to receive an absentee ballot. Among those who tried, but did not complete, submitting an FPCA, most either missed the deadline (29.3%) or had technical difficulties (25.0%). Finally, 74.4% reported that they had received an official ballot, 23.2% said they had not, and 2.4% didn't know or remember whether they had received a ballot. The Election Assistance Commission released its biennial election report in July 2015. In previous years, both the EAC and FVAP conducted surveys to gather information from states and local jurisdictions on UOCAVA voting, but the 2014 report was based solely on the survey by the EAC in an effort to be less burdensome to election officials. The EAC survey—the Election Administration and Voting Survey, administered by the agency after each election—was expanded to include an additional 17 questions on UOCAVA voting from the FVAP survey. States transmitted 420,094 ballots to UOCAVA voters in the 2014 election, of which 51.4% were sent to overseas civilian voters and 46.0% were sent to uniformed services voters. Ballots were transmitted from all of the states, the District of Columbia, American Samoa, Guam, and the Virgin Islands. More than half (277,266) of the ballots transmitted were sent from just four states: California, Florida, New York, and Washington. The number of ballots submitted for counting by UOCAVA voters was 145,509; including Federal Write-in Ballots (FWAB, the fail-safe blank ballot that is used if a requested absentee ballot does not arrive). The rate of return for ballots sent to members of the uniformed services was 34.8% and for overseas civilians, the rate was 31.6%. The overall rate of return, 34.6%, was nearly the same as in the mid-term election of 2010 when 34.7% of transmitted ballots were returned for counting. Election officials in the states and territories counted 94.6% of the ballots returned by UOCAVA voters. Of the 5.4% of returned ballots not counted, nearly half that were rejected were not received in time to be counted (48.9%), while others were not counted because of some "other reason" (32.3%), there was a problem with the voter's signature (14.2%), the ballot lacked a postmark (3.3%), or the reason was not categorized (1.3%). In July 2012, the Election Assistance Commission issued its biennial report on voting by members of the uniformed services and overseas citizens. The states transmitted 876,362 ballots to UOCAVA voters for the 2012 general election, of which 606,425 were returned for counting. The disposition of the 270,000 unreturned ballots is unknown, because states "often lack the ability of resources to track transmitted ballots that are not returned." States counted 95.8% of returned ballots, an improvement over the 93.6% that were counted in the 2008 election. Most of the ballots that were rejected—40.4%—were returned too late to be counted, while others were rejected because there was a problem with the voter signature, or the ballot lacked a postmark, or for some other reason. Ballots were transmitted from all 50 states, the District of Columbia, American Samoa, Guam, and Puerto Rico, although more than half (456,363) were sent from seven states: California, Florida, New York, Pennsylvania, Texas, Virginia, and Washington. The report included numerous tables that provided detailed information by state for both uniformed services and overseas civilian voters, including statistics on transmitted ballots, ballots submitted for counting, rejected ballots by reason, and the number of counted ballots. The report was the fifth undertaken by the EAC since it was established in 2003. It noted that "[t]he quality of information regarding UOCAVA ballots continues to improve, and the 2012 survey data yielded a more complete picture of UOCAVA balloting than past surveys. States are generally making significant strides in designing their data management systems to produce the necessary data on UOCAVA voters. Gaps in State tracking of UOCAVA voters remain, however, and continued attention to data collection on UOCAVA voters and their ballots is needed." The Overseas Vote Foundation (OVF) issued its biennial election report in January 2013. The report for 2012 was based on post-election surveys that relied on OVF contact lists for UOCAVA voters, local election officials (LEOs), and domestic voters on the mailing list for OVF's newly launched U.S. Vote Foundation to facilitate absentee voting in the states. Among its findings the report noted that 34.9% of UOCAVA voters used an electronic method to submit the registration and ballot request form in comparison to 23% in 2010 and 18% in 2008. The MOVE Act of 2009 required that states adopt at least one electronic method to facilitate registration and requesting a ballot. With respect to receiving a ballot, those who sent the form by postal method fared slightly better (85.6% received a ballot) than those who submitted the form electronically (81.3%). Most voters returned the marked ballot by regular mail (63.3%), while 14.9% returned it by electronic means (fax, email, or uploading to an election website). From the perspective of election officials, the leading reasons for rejecting a registration and ballot request was that it arrived after the deadline (27.5%), it lacked a signature or date (19.3%), or it was incomplete (14.5%). Of the various electronic methods states used to transmit blank ballots, most were sent as a PDF attachment by email (90.5%). The use of electronic methods for transmission also introduced new problems, however. Among the problems encountered when using electronic means of transmission, LEOs reported that 53.4% of voters who had problems said they did not receive the ballot and 31.9% were unable to open the PDF files. The Inspector General of the Department of Defense issued a report on August 31, 2012, that assessed implementation of the MOVE Act by the Federal Voting Assistance Program. To determine whether UOCAVA voting assistance programs have been effective, the report assessed the most recent FVAP report to Congress in 2010 (discussed in detail below) and whether the MOVE Act requirement to establish voting assistance offices on all military installations was accomplished. FVAP's survey on military voting in 2010 was based on a 15% response rate, which the report noted should be improved. The main focus of the report was the MOVE Act imperative to establish a voting assistance office at every military installation worldwide, except for those in a warzone. Based on an attempt to contact the 224 installation voting assistance offices (IVAOs) listed on the FVAP website, the report authors noted that "about half the time, we were unable to contact the IVAOs the website identified." The report concluded that not all IVAOs had been established as required because no additional funding was provided for the initiative, estimated to cost in excess of $15 million-$20 million a year. As a solution, the report recommended that FVAP and the Under Secretary of Defense for Personnel and Readiness draft a legislative proposal to request relief from the MOVE Act requirement and to permit the Secretaries of the Military Departments to use their discretion in designating the IVAOs, with "the intent that the Services optimize voting assistance to military personnel and other overseas citizens." The Military Voter Protection Project (MVPP) issued a report in August 2012 that also discussed incomplete implementation of MOVE Act provisions and cited, as a consequence, the low number of absentee ballot requests from military voters in selected states. According to the report, the MOVE Act should have increased a voter's opportunity to request an absentee ballot, but "the 2012 pre-election data shows a remarkable decrease in such requests from military voters, especially when that data is compared to data from 2008." The report notes that the number of absentee ballot requests will increase in the lead-up to the election, but the number needed to reach 2008 levels is "staggering." On October 11, 2011, the Election Assistance Commission issued its fourth report to Congress on the number of ballots sent to and received by those persons covered by the UOCAVA. The Federal Voting Assistance Program (FVAP) also provides a regular report to Congress and the President on UOCAVA voting; the report that presented information on the 2010 election was issued on October 18, 2011. It was the first of these reports to cover a nonpresidential general election, as mandated by MOVE Act changes to the UOCAVA in 2009. FVAP's previous 18 reports were issued following a presidential election. The EAC report noted that states counted 93% of UOCAVA ballots that were submitted, a similar figure to what was reported in 2008. Of these, 49% were from uniformed services voters and 41% were from overseas civilians, with the rest identified as "other" or "non-categorized." States transmitted 611,058 ballots, of which 211,749 were submitted for counting and 197,390 were counted. As stated in the report, "[t]he fate of the approximately 400,000 remaining ballots is difficult to discern; unless ballots are returned as undeliverable or spoiled, which accounted for nearly an additional 47,000 ballots, States often lack the ability or resources to track them." The most common reason for rejecting a returned ballot was that it was not received by the election official on time. Thirty-two percent of ballots were rejected for this reason. Finally, the report noted a drop in the number of ballots transmitted to UOCAVA voters between 2008 and 2010, from 989,208 to 611,058, which might be expected when presidential and nonpresidential election participation is compared. The FVAP report was based on post-election surveys of active duty military voters, their spouses, overseas citizens, voting assistance officers in DOD and the Department of State, and local election officials. The FVAP adjusted the survey results for members of the active duty military (ADM) because the ADM is "more male and a much younger population than the overall citizen voting population," and both groups participate at lower rates than other groups in the voting population, which "drives down the voter participation rates of the military, all other things being equal." The adjusted results "allow for a direct comparison to the general voting population." The report noted that 85% of ADM were registered, in comparison to 65% of the civilian voting age population (CVAP). In terms of voter turnout, 45.5% of ADM voted, as compared to 46% of the CVAP. Data for overseas citizens are difficult to obtain because the number of overseas citizens is unknown and a random sample cannot be obtained. However, according to the responses of local election officials who were surveyed (53% of 7,296 total jurisdictions), 45% of registered overseas citizens voted in the election. Finally, the report noted that ADM voter registration was virtually the same for 2008 and 2010 (both nonpresidential elections), while a 21% increase in the unadjusted voter participation rate from 2006 to 2010 "may indicate that the 45-day prior ballot transmission, electronic ballot transmission, and expedited ballot return of overseas military ballot requirements of the MOVE Act have substantially improved the opportunity for active duty military voters to successfully cast a ballot." The Overseas Vote Foundation issued its report on the 2010 election on February 10, 2011, which found that 18% of UOCAVA voters in the survey reported that they did not receive a requested ballot and another 16.5% reported that they had received the ballot "late." The report was based on two separate surveys of 5,257 self-selected UOCAVA voters and 1,555 local election officials. Among its results, the survey found that 18% of voters did not receive a ballot and 16.5% of respondents received their ballot after the middle of October. With respect to the MOVE Act's requirement for electronic transmission of registration and ballot applications and blank ballots, the survey found that 80% of respondents used an electronic means to send an application, and 23% received a blank ballot electronically. The Overseas Vote Foundation published a report in February 2009 based on survey responses from approximately 24,000 UOCAVA voters and 1,000 local election officials. The report noted that there is "some evidence of overall progress" with respect to voting under UOCAVA, but that "progress is uneven, and the surveys point to numerous areas ripe for reform." For example, one in four respondents did not receive their requested absentee ballot; 8% of these voters used the federal write-in absentee ballot to vote, but 14% did not participate in the election (not all voters are aware that they may use the federal write-in ballot if they have requested a regular state ballot that does not arrive). Furthermore, more than half (52%) of those who tried to vote but failed to do so either received a late ballot or never received one at all. The Pew Center on the States issued a January 2009 report that examined the variety of state practices that can make casting a ballot difficult for UOCAVA voters and made recommendations for improving the voting process. Among its findings, the report noted that "25 states and Washington, D.C., need to improve their absentee balloting rules for military voters abroad," and "the other 25 states would better serve these voters by giving them additional time to request and return their ballots as well." The report recommended eliminating notarization requirements, expanding electronic transmission of election materials, expanding the use of the federal blank ballot if a regular ballot does not arrive in time, and providing for a period of at least 45 days to receive and return a ballot. In October 2007, the Overseas Vote Foundation first launched its website to assist UOCAVA voters by providing a means to electronically register and request a ballot. The OVF, a nonpartisan, nongovernmental entity, offered the necessary information to complete the application process for each of the states, including a database of local election officials to whom the applications would be delivered. Reports on military and overseas voting in the 2006 election highlighted continuing challenges faced by these voters, despite efforts in the previous several years to improve voting rates. The GAO issued an evaluation of federal efforts to facilitate electronic absentee voting in June 2007, and the EAC reported in September 2007 the results of its survey of military and overseas voters after the 2006 election. According to the EAC report, 33% of ballots requested by these voters were cast or counted in the election; of those that were not counted, nearly 70% were returned to election officials as undeliverable. GAO estimated that there were 6 million UOCAVA voters, and its report outlined a series of recommendations to DOD (the FVAP) and the EAC for electronic solutions to overcome the obstacles posed by time and distance. The inherent difficulties in ensuring the voting rights of Americans scattered around the world, particularly those on active duty in the Armed Forces during wartime, have resulted in frequent revisions to applicable voting laws. Congress has been especially vigilant in recent years, amending the current law—the Uniformed and Overseas Citizens Absentee Voting Act of 1986—multiple times since 2001. It is the only area of election administration law in which legislation has been enacted since passage of the Help America Vote Act of 2002 ( P.L. 107-252 ). Based on military and overseas citizen voting participation in the 2012 election, as reported by the Election Assistance Commission, further improvements to the law might be considered in the 114 th Congress. For example, the states counted 96% of ballots that were returned by uniformed services and overseas voters in that election, yet 31% of the ballots requested by and sent to these voters were not returned to the states for counting. In contrast, 16% of domestic absentee ballots transmitted were not returned for counting. In the 2014 midterm election, 34.6% of transmitted UOCAVA ballots were not returned to election officials. Such disparities provide an incentive to seek further improvements for UOCAVA voters and Congress has shown an abiding willingness to do so.
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Members of the uniformed services and U.S. citizens who live abroad are eligible to register and vote absentee in federal elections under the Uniformed and Overseas Citizens Absentee Voting Act (UOCAVA, P.L. 99-410) of 1986. The law was enacted to improve absentee registration and voting for this group of voters and to consolidate existing laws. Since 1942, a number of federal laws have been enacted to assist these voters: the Soldier Voting Act of 1942 (P.L. 77-712, amended in 1944), the Federal Voting Assistance Act of 1955 (P.L. 84-296), the Overseas Citizens Voting Rights Act of 1975 (P.L. 94-203; both the 1955 and 1975 laws were amended in 1978 to improve procedures), and the Uniformed and Overseas Citizens Absentee Voting Act of 1986. The law is administered by the Secretary of Defense, who delegates that responsibility to the director of the Federal Voting Assistance Program (FVAP) at the Department of Defense (DOD). Improvements to UOCAVA were necessary as the result of controversy surrounding ballots received in Florida from uniformed services and overseas voters in the 2000 presidential election. Both the National Defense Authorization Act for FY2002 (P.L. 107-107) and the Help America Vote Act of 2002 (P.L. 107-252) included provisions concerning uniformed services and overseas voting. The Ronald W. Reagan Defense Authorization Act for FY2005 (P.L. 108-375) amended UOCAVA as well, and the John Warner National Defense Authorization Act for FY2007 (P.L. 109-364) extended a DOD program to assist UOCAVA voters. In the 111th Congress, a major revision of UOCAVA was completed when President Obama signed the National Defense Authorization Act (NDAA) for FY2010 (P.L. 111-84) on October 28, 2009. It included an amendment (S.Amdt. 1764) that contained the provisions of S. 1415, the Military and Overseas Voter Empowerment Act (the MOVE Act). In July 2014, the Election Assistance Commission issued its Election Administration and Voting Survey report that included data on UOCAVA as well as domestic registration and voting in the 2014 election cycle. The biennial UOCAVA report is mandated by the Help America Vote Act and had previously been issued separately from the general survey report. According to the results, ballots were transmitted to UOCAVA voters by election officials in all 50 states and four of the territories, but more than half of all ballots were sent from California, Florida, New York, and Washington. The rate of ballots returned for counting was slightly lower than in the midterm election of 2010, and substantially lower than in the presidential election of 2012. States counted 94.6% of the ballots that were returned. The Overseas Vote Foundation released the results of its 2014 post-election survey in February 2015. Overall, 74% of those who requested an absentee ballot received it and 23% did not (slightly more than 2% did not know or remember whether a ballot was received). Two bills introduced in the 114th Congress would amend UOCAVA. These include H.R. 12 which is primarily related to other voting issues; and S. 2814, a version of the FY2017 NDAA bill introduced "by request" but that did not advance. In addition, a provision in the House-passed NDAA bill (H.R. 4909) would continue some UOCAVA reporting requirements, despite terminating some unrelated reports. In the 113th Congress, the Senate Committee on Rules and Administration held a hearing on S. 1728 on January 29, 2014, and reported the bill with an amendment in the nature of a substitute on April 10, 2014. It would have required states to report statistics on the number of absentee ballots sent to UOCAVA voters before the election, established online voter registration and updating for uniformed services voters, and made an absentee ballot request valid for the entire two-year federal election cycle. The legislation did not advance.
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Following several years of congressional debate over patent reform, P.L. 112-29 , the Leahy-Smith America Invents Act was passed in September 2011. This attention to patent policy reflects a recognition of the increasing importance of intellectual property to U.S. innovation. Patent ownership is perceived as an incentive to the technological advancement that leads to economic growth. As such, the number of patent applications and grants have grown significantly as have the type and breath of inventions that can be patented. In 1980, 104,329 utility patent applications were received at the U.S. Patent and Trademark Office (USPTO); by 2010, this number had more than quadrupled to 456,106 applications. During the same time period, the number of U.S. utility patents granted grew from 61,819 to 219,614. Along with the expansion in the number and range of patents, there were growing concerns over whether the patent system was working efficiently and effectively. Several recent studies (including those by the National Academy of Sciences and the Federal Trade Commission) recommended patent reform. While some experts maintained that major alterations in existing law were unnecessary and that, while not perfect, the patent process was adapting to technological progress, Congress arguably made the most significant changes to the patent statute since the 19 th century when it enacted P.L. 112-29 . Among other provisions, the Leahy-Smith America Invents Act introduces into U.S. law a first-inventor-to-file priority rule, an infringement defense based upon prior commercial use, and assignee filing. The legislation prevents patents from claiming or encompassing human organisms, limits the availability of patents claiming tax strategies, and restricts the best mode requirement. The statute also makes notable reforms to administrative patent challenge proceedings at the U.S. Patent and Trademark Office (USPTO) and to the law of patent marking. Along with numerous other changes to patent laws and procedures, these reforms were intended to modernize the U.S. patent system and to improve its fairness and effectiveness. The discussion of patent reform led to the emergence of several, often opposing, points of view. While the patent laws provide a system under which all inventions are treated the same regardless of the technical field, the varying experiences of companies in different industries often give rise to differing views concerning the importance and role of patents. Innovators in biomedical industries tend to see patent protection as critically important as a way to prohibit competitors from appropriating the results of a company's research and development efforts. Typically only a few, often one or two, patents cover a particular drug. In contrast, the nature of software development is such that inventions tend to be cumulative and new products generally embody numerous patentable inventions. Acknowledging these differences, this report explores the relationships between patents and innovation and looks at the role of intellectual property in the biomedical and software industries, two sectors where U.S. investment in research and development (R&D) has led to market leadership, a strong export position, and contributed to the Nation's economic growth. Patent law is based upon the Patent Act of 1952, codified in Title 35 of the United States Code. According to the statute, one who "invents or discovers any new and useful process, machine, manufacture, or any composition of matter, or any new and useful improvement thereof, may obtain a patent therefore, subject to the conditions and requirements of this title." Patents are issued by the United States Patent and Trademark Office (USPTO), generally for a term of 20 years from the date of filing. The patent grants its owner the right to exclude others from making, using, selling, offering to sell, or importing into the United States the patented invention. To be afforded patent rights, an invention must be judged to consist of patentable subject matter, possess utility, and be novel and nonobvious. The application must fully disclose and distinctly claim the invention for which protection is sought. The grant of a patent does not necessarily provide the owner with an affirmative right to market the patented invention. For example, pharmaceutical products are also subject to marketing approval by the Food and Drug Administration (FDA). Federal laws typically require that pharmaceutical manufacturers demonstrate that their products are safe and effective in order to bring these drugs to the marketplace. USPTO issuance of a patent and FDA marketing consent are distinct events that depend upon different criteria. Patent ownership is perceived to be an incentive to innovation, the basis for the technological advancement that contributes to economic growth. Patent title provides the recipient with a limited-time monopoly over the use of his discovery in exchange for the public dissemination of information contained in the patent application. Award of a patent is intended to stimulate the investment necessary to develop an idea and bring it to the marketplace embodied in a product or process, although it does not guarantee that the patent will generate commercial benefits. The requirement for publication of the patent is expected to stimulate additional innovation and other creative means to meet similar and expanded demands in the marketplace. Innovation produces new knowledge. However, innovation typically is costly and resource intensive. Studies demonstrate that the rate of return to society as a whole generated by investments in research and development leading to innovation is significantly larger than the benefits that can be captured by the person or organization financing the work. Some estimate that the social rate of return on R&D spending is over twice that of the rate of return to the inventor. Ideas often are easily imitated as the knowledge associated with an innovation is dispersed and adapted to other products and processes that, in turn, stimulate growth in the economy. Patents permit novel concepts or discoveries to become "property" when reduced to practice and therefore allow for control over their use. Issuance of a patent furnishes the inventor with a limited-time exclusive right, the benefits of which are mitigated by other factors, particularly the requirements for information disclosure, the length of the patent, and the scope of rights conferred. The process of obtaining a patent places the concept on which it is based in the public domain. In return for a monopoly right to the application of the knowledge generated, the inventor must publish the ideas covered in the patent. As a disclosure system, the patent can, and often does, stimulate other firms or individuals to invent "around" existing patents to provide for parallel technical developments or meet similar market needs. Patents may also provide a more socially desirable outcome than its chief legal alternative, trade secret protection. Trade secrecy guards against the improper appropriation of valuable, commercially useful information that is the subject of reasonable measures to preserve its secrecy. Taking the steps necessary to maintain secrecy, such as implementing physical security and enforcement, imposes costs that may ultimately be unproductive for society. Also, while the patent law obliges inventors to disclose their inventions to the public, trade secret protection requires firms to conceal them. The disclosure obligations of the patent system may better serve the objective of encouraging the diffusion of advanced technological knowledge. Patents may also prevent unproductive expenditures of time and money associated with R&D that duplicates other work. The patent system thus has dual policy goals—providing incentives for inventors to invent and encouraging inventors to disclose technical information. Disclosure requirements are factors in achieving a balance between current and future innovation through the patent process, as are limitations on scope, novelty mandates, and nonobviousness considerations. Patents often give rise to an environment of competitiveness with multiple sources of innovation, which is viewed by some experts as the basis for technological progress. This is important because, as Professors Robert Merges and Richard Nelson found in their studies, in a situation where only "a few organizations controlled the development of a technology, technical advance appeared sluggish." Not everyone agrees that the patent system is a particularly effective means to stimulate innovation. Some observers believe that the patent system encourages industry concentration and presents a barrier to entry in some markets. They suggest that the patent system often converts pioneering inventors into technological suppressors, who use their patents to block subsequent improvements and thereby impede technological progress. Others believe that the patent system too frequently attracts speculators who prefer to acquire and enforce patents rather than engage in socially productive activity such as bringing new products and processes to the marketplace. Some experts argue that patents do not work as well in reality as in theory because they do not confer perfect appropriability. In other words, they allow the inventor to obtain a larger portion of the returns on his investment but do not permit him to capture all the benefits. Patents can be circumvented and infringement cannot always be proven. Thus, patents are not the only way, nor necessarily the most efficient means, for the inventor to protect the benefits generated by his efforts. A study by Yale University's Richard Levin and his colleagues concluded that lead time, learning curve advantages (e.g., familiarity with the science and technology under consideration), and sales/service activities were typically more important in exploiting appropriability than were patents. That was true for both products and processes. However, patents were found to be better at protecting products than processes. The novel ideas associated with a product often can be determined through reverse engineering—taking the item apart to assess how it was made. That information then could be used by competitors if not covered by a patent. Because it is more difficult to identify the procedures related to a process, other means of appropriation are seen as preferable to patents, with the attendant disclosure requirements. An analysis of the literature in this area performed for the World Intellectual Property Organization highlights several conclusions concerning the use of patents that mirror much of the above discussion. The research surveyed indicates that "lead time and secrecy seem to be the most relevant appropriability devices for most sectors" and that while patents may not be the most effective means to protect inventions, they are still utilized by firms in all industries. There is a consensus that "disclosure and ease of inventing-around are the most important reasons for not patenting." At the same time, "patents are more relevant as an appropriability mechanism for product than for process innovations and for some sectors such as chemicals (especially pharmaceuticals), some machinery industries and biotechnology." Research demonstrates that the value of patents is differs across industries and between firms of different maturation levels within a sector. The pharmaceutical industry perceives patents as critical to protecting innovation. Several studies over the years have demonstrated the important role patents play in the pharmaceutical sector. Of the 18 major manufacturing industries analyzed by Richard Levin and his colleagues, only drug companies rated product patents the most effective means of insuring that firms can capture the profits associated with their innovations. Later research by Professor Wesley Cohen and his colleagues demonstrated that patents were considered the most effective method to protect inventions in the drug industry, particularly when biotechnology is included. A recent paper by several professors at the Berkeley School of Law, University of California, found that there were "substantial differences between the health-related sectors (biotechnology and medical devices), in which patents are more commonly used and considered important, and the software and Internet fields, in which patents are reported to be less useful." These studies reinforce earlier work by the late Professor Edwin Mansfield that indicated 65% of pharmaceutical inventions would not have been brought to market without patent protection in contrast to the 8% of innovations made in other industries. Patents may be particularly important in the pharmaceutical sector because of the relative ease of replicating the finished product. Imitation costs vary among industries. For example, while it is expensive, complicated, and time consuming to duplicate an airplane, it is relatively simple to chemically analyze a pill and reproduce it. The degree to which industry perceives patents as effective has been characterized as "positively correlated with the increase in duplication costs and time associated with patents." Early research in this area by Mansfield indicated that, in certain industries, patents significantly raise the costs incurred by nonpatent holders wishing to use the idea or invent around the patent—an estimated 40% in the pharmaceutical sector, 30% for major new chemical products, and 25% for typical chemical goods—and are thus viewed as significant. However, in other industries, patents have much smaller impact on the costs associated with imitation (e.g., in the 7%-15% range for electronics), and may be considered less successful in protecting resource investments. The costs associated with imitating pharmaceuticals "are extremely low relative to the innovator's costs for discovering and developing a new compound." Studies by Dr. Joseph DiMasi of Tufts University and others indicate that the capitalized cost of bringing a new drug (defined as a "new molecular entity" rather than a new formulation of an existing pharmaceutical product) to the point of marketing approval was $802 million (2000 dollars). Additional research done by analysts at the Federal Trade Commission found the costs to be even higher; between $839 million and $868 million (2000 dollars). Later work argues that it now takes over $1 billion to bring a new drug to market. At the same time, the total capitalized costs appear to be growing at an annual rate of 7.4% above general price inflation. A large portion of new drug costs (in terms of money and time) are associated with the size and breath of clinical trials necessary to obtain FDA marketing approval. According to a study supported by the Federal Reserve Bank of Boston, only 10% of potential drug candidates reach the human trial phase and only a small portion of these actually reach the market. In research presented at a conference sponsored by the Federal Reserve Bank of Dallas, Duke University's Henry Grabowski found that only 1% of drug compounds reach the human trial stage and 22% of those entering clinical trials receive FDA approval. Professor Iain Cockburn notes that "as drug discovery became more science-intensive, ... it became not just more expensive but also more difficult to manage." Furthermore, returns to new drug introductions vary widely and the median new drug does not bring in sufficient profits to cover the costs of bringing the product to the marketplace. According to research by Professors Grabowski, John Vernon, and DiMasi, only 34% of new drugs (new chemical entities) introduced generated profits that equaled the industry average R&D cost. The significant costs of pharmaceutical R&D, coupled with the uncertainty of the clinical trial process, lend consequence to patents in this area because "the disparity between the investments of innovators and those of imitators is particularly large in pharmaceuticals—almost as large as when software pirates simply copy the diskettes of an innovator." While the capitalized cost of developing a new drug to the point of market approval is about $1 billion, it takes only between $1 million and $2 million to obtain approval for a generic version of the pharmaceutical. This difference is a result of the costs associated with clinical trials needed to demonstrate the safety and efficacy of a new drug, data that could be utilized by generic companies if not protected by a patent. A generic company does not have to fund these studies to get FDA marketing approval; under the provisions of the Hatch-Waxman Act generic firms only have to prove that their product is "bioequivalent" to the innovator drug. While patents are designed to spur innovation, some experts maintain that certain patents, particularly those on research tools in biotechnology, hinder the innovation process. Professors Rebecca Eisenberg and Richard Nelson argue that ownership of research tools may "impose significant transaction costs" that result in delayed innovation and possible future litigation. It also can stand in the way of research by others: Broad claims on early discoveries that are fundamental to emerging fields of knowledge are particularly worrisome in light of the great value, demonstrated time and again in history of science and technology, of having many independent minds at work trying to advance a field. Public science has flourished by permitting scientists to challenge and build upon the work of rivals. Eisenberg and her colleague at the University of Michigan Law School, Michael Heller, contend that in the future scientists might need to obtain numerous patent licenses in order to undertake basic research. Similar concerns were expressed by Harold Varmus, President of Memorial Sloan-Kettering and formerly the Director of the National Institutes of Health. In July 2000 prepared testimony, he spoke to being "troubled by widespread tendencies to seek protection of intellectual property increasingly early in the process that ultimately leads to products of obvious commercial value, because such practices can have detrimental effects on science and its delivery of health benefits." However, other experts dispute this assertion. A study by Professors John Walsh, Ashish Arora, and Wesley Cohen found that although there are now more patents associated with biomedical research, and on more fundamental work, there is little evidence that work has been curtailed due to intellectual property issues associated with research tools. Scientists are able to continue their research by "licensing, inventing around patents, going offshore, the development and use of public databases and research tools, court challenges, and simply using the technology without a license (i.e., infringement)." According to the authors of the report, private sector owners of patents permitted such infringement in academia (with the exception of those associated with diagnostic tests in clinical trials) "partly because it can increase the value of the patented technology." Later research by Cohen, Walsh, and Charlene Cho found that "only 1% of academic researchers (i.e., those in universities, non-profits and government labs) report having to delay a project, and none abandoned a project due to others' patents, suggesting that neither anti-commons nor restrictions on access were seriously limiting academic research." In addition to finding that patents did not interfere with ongoing R&D, the authors found that patents had "significantly less" impact on what projects were actually pursued than lack of funding, time constraints, or scientific competition. However, "respondents doing research on drugs and therapies were ... somewhat more likely to report that unreasonable terms demanded for research inputs were an important reason for them not to pursue a project." Over the past 25 years, there has been a demonstrable and sustained increase in the number of software patents granted in the United States. Research by James Bessen and Robert Hunt for the Federal Reserve Bank of Philadelphia noted that the 1,000 software patents issued annually in the early 1980s had increased to an annual total of 5,000 by 1990. Today over 20,000 software patents are granted each year. While software patents comprised approximately 2% of all patents awarded in the early 1980s, they now account for approximately 15% of the total number of U.S. patent issued each year. Experts differ as to their assessment of the role of patents in promoting innovation in the computer software sector. This discussion centers around the issue of whether the increase in the number of patents is a result of inventive behavior generated by intellectual property protection or a result of changes in law during the 1980s and 1990s that made patents on software easier to obtain. Some experts argue that patent protection is not a significant factor in the development of computer software programs. Other analysts maintain that they play an important role in generating new technologies, particularly for small firms in the marketplace. The nature of software development is such that inventions often are cumulative and new products generally embody numerous patentable inventions. This has led to what has been described by some observers as a poor match between patents and products in the [software] industry: it is difficult to patent an entire product in the software industry because any particular product is likely to include dozens if not hundreds of separate technological ideas. This situation may be augmented by the multiplicity of patents often associated with a finished computer product that utilizes the software. It is not uncommon for thousands of different patents (relating to hardware and software) to be embodied in one single computer. In addition, ownership of these patents may well be fractured among hundreds or thousands of different individuals and firms. Studies by Bessen and Hunt explored the characteristics of software patents and determined that most are not owned by software companies but by large manufacturing companies. They found that Firms in just three manufacturing industries (machinery, electronics, and instruments) alone accounted for 66 percent of software patents [yet] ... Firms outside the manufacturing sector employed 90 percent of computer programmers, but together they accounted for only 25 percent of software patents. This data leads the authors to the conclusion that patents may not be closely tied to the development of new software technologies. Ownership of such patents is concentrated in sectors that have large patent portfolios and use them for strategic purposes. Instead, they believe that companies are utilizing patents as a means to protect or leverage their investments rather than to generate more innovation through R&D spending. In industries where innovation is sequential and complementary, as with software and computers, some experts argue that strong patents interfere with the innovation process. Inventions in these sectors typically are built upon earlier technologies and are integrated into existing systems. Commentators pose that patents inhibit or prevent enhancements to existing products because the patent owner may not have the interest or capability necessary to generate improvements at the same time that other firms cannot advance the technology without infringing on the original patent. Not everyone agrees with this assessment. Professor Robert Merges maintains that patents have not hindered innovation in the software industry and that the significant ownership of title to inventions by large companies in this sector has not resulted in the demise of small firms developing new technologies. Analysis of software companies by Professor Ronald Mann indicates the importance of software patents to small companies, particularly later-stage start-ups firms. He notes that the software industry is comprised primarily of small businesses and "the data suggests a different picture, one in which software R&D is impressively robust." Mann's research indicates that small firms spend proportionally more on software R&D than large companies. Research and development spending by software firms "tends to be relatively stable over time as a percentage of sales. Indeed, company size seems to be more important in explaining variations in R&D spending within the industry." Studies by Mann also indicate that the importance of software patents is dependent on where the firm is in its development process. Patents play a more significant role in later-stage start-up companies when firms can generate revenues through licensing. At that point, "patents are useful as "barter" in cross-licensing agreements that the firm enters if it reaches a sufficiently mature stage to be a significant player in the industry." Patents may allow a firm to differentiate its areas of expertise and innovative activity. Patents enable a company to transform ideas into a tangible form of property that can provide value. This can be useful in negotiations for the acquisition of the firm. While intellectual property is important to some investors but not to others, it is considered a significant factor when a company is involved in acquisition negotiations or in an IPO. It can prevent large companies from appropriating a small firm's technology. Bradford Smith and Susan Mann, writing in the University of Chicago Law Review, concur with the argument that patents are beneficial for small, software firms. They maintain that patents prevent larger companies from utilizing the technologies developed by small businesses while allowing these companies to attract venture capital. The multiplicity of patents involved in computer-related products has resulted in the extensive use of cross licensing in these industries such that one commentator argues: "licensing of software patents has become an industry unto itself." Instead of promoting innovation, some experts maintain that the ownership of intellectual property has become an obstacle to the development and application of new ideas. The expansion in the number of patents associated with software is a consequence of the changes in patent law that make these patents easier to obtain, rather than an indication of increased innovative activity. There are indications, according to Bessen and Hunt, that patents are being substituted for increases in R&D. The substitution occurs in industries that patent strategically but not in other sectors. The propensity to patent software appears to be related to the utilization of the software by companies rather than to the R&D resources expended in developing the product. This is of interest because a rationale behind the patent system is that it provides incentives for the additional investments necessary to bring a product to the marketplace. Concerns have been expressed in the academic community that the propensity to patent and the extensive use of cross licensing has resulted in a "patent thicket" where ownership of patent title is used to block others from innovating. According to Bessen and Hunt, "This may have increased the attractiveness of a strategy that emphasizes patent rights over a strategy based on R&D." However, other experts maintain that this might not be a true assessment of the situation. In an article for the Virginia Journal of Law and Technology, David Evans and Anne Layne-Farrar argue it is not clear that a patent thicket exists. "Other industries with long-standing histories of patenting could be categorized as having cumulative and sequential R&D, yet they do not display signs of innovation gridlock." There are additional ways to prevent the use of patents to block innovation including the use of pro-competitive patent pools and antitrust enforcement. Others agree that innovation in the software industry is not hindered by a patent thicket. In one study where actual software companies and investors were surveyed, the analyst found new companies were not concerned with existing patent portfolios as a barrier to their work as "none of the startup firms [interviewed] suggested a practice of doing prior art searches before beginning development of their products." Because the software industry is so diverse, it is "difficult for any single patent or group of patents to control a major part of the whole industry." Innovators in the biomedical and software industries tend to exhibit divergent views on the value of patents. Patent protection is critically important to the pharmaceutical and biotechnology sectors as a way to prohibit competitors from appropriating the results of a company's research and development efforts. However, patents are not among the key means used to protect innovations in either the computer or semiconductor industries. In those two industries, firms rely more heavily on secrecy, lead time and complementary capabilities to protect their inventions. A difference between the role of patents in the biomedical community and their role in the computer software sector lies with the dissimilar composition of the respective products. Typically only a few, often one or two, patents cover a particular drug. In contrast, the nature of software development is such that inventions often are cumulative and new products generally embody numerous patentable inventions. While few companies other than those that manufacture drugs need to deal with the relevant pharmaceutical patents, computers are ubiquitous—and as a result, so is software authorship ... Thus, a patent on a drug creates potential liability for those companies in the pharmaceutical business, while a software patent creates potential liability for any company with its own website or software customizations, regardless of its business. The patent laws provide a system under which all inventions are subject to the same requirements of patentability regardless of the technical field in which they arose. The reforms embodied in the Leahy-Smith America Invents Act continue this approach. As a consequence, inventors and innovative companies in different industries, with varying patent experiences, may display diverse opinions on the changes to the patent law. According to Professor Brian Kahin, these distinct views of the patent reform issue reflect the contrast between the discrete-product environment of pharmaceuticals and chemicals and the extreme complex-product environment associated with information technology.… In contract to the classic use of patents to exclude competitors in pharmaceuticals, … the large volume of patents relative to [information technology]products imposes a cost burden and makes the IT sector prone to inadvertent infringement and vulnerable to patent trolls. Thus, it remains to be seen how these identified differences might be affected by the patent reform legislation recently enacted by the U.S. Congress.
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The Leahy-Smith America Invents Act, P.L. 112-29, passed Congress following several years of legislative debate over patent reform. This attention to patent policy reflects a recognition of the increasing importance of intellectual property to U.S. innovation. Patent ownership is perceived as an incentive to the technological advancement that leads to economic growth. As such, the number of patent applications and grants has grown significantly, as have the type and breadth of inventions that can be patented. Along with the expansion in the number and range of patents, there were growing concerns over whether the current system was working efficiently and effectively. Several studies recommended patent reform and various bills were introduced in recent congresses that would make significant alterations in current patent law. Other experts maintained that major changes in existing law were unnecessary and that, while not perfect, the patent process was adapting to technological progress. The patent laws provide a system under which all inventions are subject to the same requirements of patentability regardless of the technical field in which they arose. However, inventors and innovative companies in different industries often hold divergent views concerning the importance of patents, reflecting varying experiences with the patent system. Innovators in the biomedical sector tend to see patent protection as a critically important way to prohibit competitors from appropriating the results of a company's research and development efforts. Typically only a few, often one or two, patents cover a particular drug. In contrast, the nature of software development is such that inventions often are cumulative and new products generally embody numerous patentable inventions. As a result, distinct industries may react differently to the patent reform legislation enacted by Congress.
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